You are on page 1of 316

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-56451 June 19, 1985
JUAN LAO and CANDELARIA C. LAO, petitioners,
vs.
HON. MELECIO A. GENATO, as Presiding Judge, Court of First Instance, Branch
1, Misamis Occidental, SOTERO A. DIONISIO, JR., as Administrator of the
Intestate Estate of ROSENDA ABUTON, SOTERO B. DIONISIO III, WILLIAM L. GO,
ERLINDA DIAZ, represented by RESTITUTO N. ABUTON Attorney-In-Fact, ESTER
AIDA D. BAS, Heirs of ROSALINDA D. BELLEZA, represented by FELICENDA D,
BELLEZA, Attorney- In-Fact, LUZMINDA D. DAJAO ADELAIDA D. NUEZA,
represented by Atty. MAURICIO O. BAS SR., Attorney-In-Fact, and FLORIDA A.
NUQUI, respondents.
Felipe G. Tac-an for petitioners.
Alaric P. Acosta for private respondent as Administrator.
Eligio O. Dajao for respondent Ester Aida D. Bas.
Ramon C. Berenquel for respondent William L. Go.

CUVEAS J .:
Petition for certiorari with prayer for the declaration of nullity of the Order
1

1
dated
February 18, 1981 of the then Court of First Instance of Misamis Occidental-Branch I
which confirmed and approved the two Deeds of Sale, both dated August 15, 1980,
involving a commercial property belonging to the estate of the deceased Rosenda
Abuton.
Petitioner spouses were promisees in a Mutual Agreement of Promise to Sell executed
between them and private respondent Sotero B. Dionisio III, son of respondent Sotero
A. Dionisio, Jr., heir and administrator of the intestate estate of the deceased, whereby
the promisor bound himself to sell the subject property to petitioners, Private
respondents, except Sotero Dionisio III and William Go, are the children and only
compulsory heirs of the deceased.
On June 25, 1980, respondent administrator Sotero Dionisio, Jr., with due notice to all
his co-heirs, filed with the Probate Court in Special Proceedings No. 842 a Motion for
Authority to Sell certain properties of the deceased to settle the outstanding obligations
of the estate.
On July 8, 1980, after hearing, there being no opposition, the lower court issued an
Order
2

2
authorizing the administrator to sell the therein described properties of the
estate and such other properties under his administration at the best price obtainable,
and directing him to submit to the court for approval the transaction made by him
On August 15, 1980, respondent-administrator pursuant to said authorization, sold to
his son, Sotero Dionisio III, the subject property for P75,000.00 per deed of sale
3

3

acknowledged before Notary Public Triumfo R. Velez. On the same date, Sotero
Dionisio III executed a deed of sale
4
of the same property in favor of respondent
William Go for a consideration of P80.000.00. On August 18, 1980, title was transferred
to respondent Go.
On August 27, 1980, respondent-heir Florida Nuqui, filed a Motion for
Annulment/Revocation of the Deeds of Absolute Sale for the reasons that the sale and
subsequent transfer of title of the property were made in violation of the court's order of
July 8, 1980 and that the consideration of the two sales were grossly inadequate as in
fact many are willing to buy the pr property for P400,000.00 since it is located along the
corner of two main streets in the commercial center of Oroquieta City.
The respondent-administrator filed an opposition to said motion of co-heir Nuqui
alleging that the actual consideration f the sale made by him is P200,000.00 and that it
is the agreement of the heirs that if any of the heirs or close relatives is interested in
buying the property, preference will be given to him or her in order to keep the property
within the family of the deceased.
On September 9, 1980, respondent Nuqui filed a Reply to said Opposition, stating that
the two sales were but a single transaction simultaneously hatched and consummated
in one occasion as shown by the Notary Public's document Nos. 56 & 57 and with the
same witnesses; that the sales were in reality a single deal between the administrator
and William Go, because Sotero Dionisio III is without means or income and so has no
capacity to buy the property; and that the transaction is an evidence of the
administrator's intent to defraud the estate and his co-heirs, for had it not been for the
Motion for Annulment, he would not have disclosed the true and actual consideration of
the sale.
On September 10, 1980, all the co-heirs of respondent-administrator filed a
Manifestation to Adopt the Motion for Annulment/Revocation of Deeds of Absolute Sale.
They likewise filed a Manifestation on February 5, 1981 alleging that the Court order
merely authorized the sale of the subject property but did not approve the same, Thus,
their prayer for the cancellation of the registration of sale transaction between
respondent- administrator and his son, and that between the latter and respondent
William Go.
Respondent Go filed a Motion for Leave to Intervene to protect his rights, manifesting
that he paid Sotero Dionisio III the actual consideration of P225,000.00 and being a
purchaser in good faith and for value, his title to the property is indefeasible pursuant to
law.
On February 6, 1981, petitioner spouses filed a "Manifestation In Intervention of Interest
to Purchase Property Authorized by the Court to be Sold", wherein they alleged that
respondent-administrator, without revealing that the property had already been sold to
William Go, entered into a Mutual Agreement of Promise to Sell
5

5
to herein petitioners,
for the amount of P270,000 which was reduced to P220,000.00; that immediately upon
the execution of the agreement, petitioners paid the earnest money in the amount of
P70,000.00 by IBAA Check No. OQT-40063026 drawn out in favor of Sotero Dionisio III,
as requested by respondent-administrator; that it was agreed upon that the balance of
P150,000.00 shall immediately be paid upon the production of the Transfer Certificate of
Title and the execution of the final Deed of Sale; that although the agreement was
executed in the name of Sotero Dionisio III the 'latter, was merely a nominal party, for
technically according to the administrator, he executed a Deed of Absolute Sale in favor
of his son, but the negotiation and transactions were directly and personally entered into
between the administrator and petitioners; that the contract of sale has been perfected
considering that the earnest money was already paid; that despite repeated demands
the administrator refused to execute a final Deed of Sale in favor of petitioners, who
later found out that the subject property was sold to William GO; that both contracts of
sale were made to defraud the estate and the other heirs; that assuming the
consideration of P200,000.00 supplied by William Go to Sotero Dionisio III who was not
gainfully employed, then the contract of sale to Go would be without consideration,
hence, it would become fictitious and simulated and there is no other recourse left to the
court but to declare the sale null and void. Petitioners also manifested that in the event
that the court should finally declare the sale null and void, they ares till interested to
purchase the property for the same amount of P200,000.00 as previously agreed.
At th hearing of the said incident involving the questioned sales petitioners submitted a
copy of the Contract of mortgage
66
dated July 18, 1980 executed by respondent-
administrator in favor of Juan Lao, one of the petitioners, whereby the former mortgaged
"all his undivided interest in the estate of his deceased mother, Rosenda Abuton Vda.
de Nuqui, subject matter of this intestate Estate No. 842, now pending before the Court
of First Instance of Oroquieta City, Branch I."
Respondent heir Florida A. Nuqui filed an Opposition to William Go's Motion to
Intervene averring therein that the deed of sale executed by Sotero Dionisio, Jr. in favor
of Sotero Dionisio III created no legal force and effect, since the validity of the sale
absolutely depended on its approval by the court; that it therefore follows that the
succeeding sale to Go and consequent issuance of the title to him are also null and void
from their inception and that the admission by William Go of the actual and true
consideration of the sale at his stage, hardly bespeaks of "innocence" or "good faith".
After several ,days of hearing, respondent Judge allowed all the interested parties to bid
for the property at the highest obtainable price pursuant to his Order of July 8, 1980.
On February 16, 1981, in open court, respondent Go offered to buy the property in the
amount of P280,000.00. Petitioners counter-offered at P282,000.00, spot cash. On that
same day, all the heirs, except the administrator, filed a Motion Ex Parte
77
stating
among other things, that the offer of William Go appears the highest obtainable price
and that the offer of petitioners is not well taken as the same has not been made within
a reasonable period of five (5) days from February 11, 1981.
On February 17, 1981, all the parties, with the exception. of the Lao spouses and
Sotero Dionisio III, submitted for approval an Amicable Settlement
88
stating:
xxx xxx xxx
That after the administrator, Sotero A. Dionisio, Jr., had accounted for the
actual price received by him out of the transaction between him and
Sotero B. Dionisio III in the amount of Two Hundred thousand
(P200,000.00) Pesos and that in the interest of a peaceful settlement
William L. Go has offered and is ready, able and to pay to the heirs an
additional amount of Eighty Thousand (P80,000.00 ) Pesos an
arrangement which is most advantageous to the heirs and which they
willingly accept to their satisfaction. the heirs of Rosenda Abuton hereby
declare that they have no objection to the confirmation and approval of the
sales/transactions executed by Sotero A. Dionisio, Jr., in favor of Sotero
B. Dionisio III and that executed by Sotero B. Dionisio III in favor of the
intervenor, William L. Go, and they likewise have no more objection to the
lifting and cancellation of the notice of lis pendens from TCT No. 8807.
WHEREFORE, it is most respectfully prayed that an order issued by this
Hon. Court confirming and approving the transaction executed by Sotero
A. Dionisio, Jr., in favor of Sotero B. Dionisio III and that between the latter
and William L. Go, and to direct the Register of Deeds of the Province of
Misamis Occidental at Oroquieta City, for the cancellation of the notice of
lis pendens annotated on Transfer Certificate of Title No. 8807, and to
finally consider the matter treated in the Motion of Florida A. Nuqui dated
August 27, 1980 and adopted by all the other heirs forever closed and
terminated.
Oroquieta City, February 17, 1981.
xxx xxx xxx
On February 18, 1981, petitioners filed an opposition to the approval of the Amicable
Settlement on the following grounds:
(a) They have an interest in the property as vendees in a promise to sell and as
Mortgagee, of an undivided share of one of the heirs but they were not signatories to
the amicable settlement, hence it is contrary to Article 2028 of the Civil Code providing
that "A compromise is a contract whereby the parties, by making reciprocal
concessions, avoid litigation or put an end to one already commenced";
(b) The Amicable Settlement seeks the confirmation and approval of the questioned
transactions but as borne out by the pleadings and oral arguments, the Deed of
Absolute Sale executed by the administrator in favor of his son is without consideration,
therefore, it is fictitious and simulated hence it cannot be confirmed or ratified pursuant
to Article 1409 of the New Civil Code;
(c) The Amicable Settlement is a device to defraud the Government of Capital Gains
Tax, charges and other fees because the Deeds of Sales do not reflect the true
consideration; and
(d) The Deeds of Sale sought to be confirmed included the undivided share of Sotero A.
Dionisio, Jr. which is presently mortgaged to herein' spouses, which was executed prior
to the sale, thus, if approved, the Court would abet the commission of the cri me of
estafa as the mortgage has not yet been paid and released.
Petitioners likewise pointed out in their opposition that respondent Judge had intimated
in open court that somebody offered to buy the property for the price of P300,000.00 but
since there was no formal offer in writing, they (petitioners) are ready and willing to buy
the property at that amount, which definitely is the best price obtainable in the market
and most beneficial to all the heirs.
Despite said opposition, respondent Judge issued an Order
99
on February 18, 1981
approving the Amicable Settlement, confirming and ratifying the two questioned Deeds
of Sale. Petitioners' motion for reconsideration having been denied, they now come
before Us through the instant petition raising the issue of whether or not respondent
Judge is guilty of grave abuse of discretion in 1) approving the amicable settlement and
confirming the two (2) Deeds of Sale in question; and 2) in not accepting the offer of the
petitioners in the amount of P300,000.00 for the purchase of the lot in question.
Sotero Dionisio, Jr. is the Administrator of the estate of his deceased mother Rosenda
Abuton. As such Administrator, he occupies a position of the highest trust and
confidence, He is required to exercise reasonable diligence and act in entire good faith
in the performance of that trust, Although he is not a guarantor or insurer of the safety of
the estate nor is he expected to be infallible yet the same degree of prudence, care and
judgment which a person of a fair average capacity and ability exercises in similar
transactions of his own, serves as the standard by which his conduct is to be judged.
In the discharge of his functions, the administrator should act with utmost
circumspection in order to preserve the estate and guard against its dissipation so as
not to prejudice its editors and the heirs of the decedents who are entitled to the net
residue thereof. In the case at bar, the sale was made necessary "in order to settle
other existing obligations of the estate. This purpose is clearly manifested in the Motion
for to Sell
1010
filed by Dionisio, Jr. The subsisting obligation referred to, although not
specified, must be those due and owing to the creditors of the estate and also the taxes
due the government. In order to guarantee faithful compliance with the authority granted
111
1 respondent Judge, through the aforesaid Order made it an emphatic duty on the
part of the administrator Dionisio." . . . to submit to this Court for approval the
transactions made by him."
The sale was made. But of all people, to his very son Sotero Dionisio III and for the
grossly low price of only P75,000,00, That sale was indubitably shown to be fictitious, it
clearly appearing that Dionisio III has no income whatsoever. In fact, he is still a
dependent of his father, administrator Dionisio, Jr. On top of that, not a single centavo,
of the P75,000.00 stated consideration was ever accounted for nor reported by Dionisio,
Jr. to the probate court. Neither did he submit said transaction as mandated by the
order authorizing him to sell, to the probate court for its approval and just so its validity
and fairness may be passed upon and resolved. It was only upon the filing by one of the
heirs, Florida A. Nuqui, of the "Motion for Annulment/Revocation of Deeds of Absolute
Sale"
12

12
questioning the genuineness aid validity of the transactions, that Dionisio, Jr.
was compelled to admit that the actual consideration for the sale made by him was
P200,000.00.
13

13
This sale is one of the illegal and irregular transactions that was
confirmed and legalized by His HONOR's approval of the assailed Amicable Settlement.
No doubt, respondent Judge's questioned approval violates Article 1409 of the New
Civil Code and cannot work to confirm nor serve to ratify a fictitious contract which is
non-existent and void from the very beginning. The fact that practically all the heirs are
parties-signatories to the said Compromise Agreement is of no moment. Their assent to
such an illegal scheme does not legalize the same nor does it impose any obligation
upon respondent Judge to approve the same to the prejudice not only of the creditors of
the estate, and the government by the non-payment of the correct amount of taxes
legally due from the estate.
The offer by the petitioner of P300,000.00 for the purchase of the property in question
does not appear seriously disputed on record. As against the price stated in the
assailed Compromise Agreement the former amount is decidedly more beneficial and
advantageous not only to the estate, the heirs of the descendants, but more importantly
to its creditors, for whose account and benefit the sale was made. No satisfactory and
convincing reason appeared given for the rejection and/or non-acceptance of said offer
thus giving rise to a well-grounded suspicion that a collusion of some sort exists
between the administrator and the heirs to defraud the creditors and the government.
IN VIEW OF THE FOREGOING CONSIDERATIONS, the assailed Order dated
February 18, 1981 of the respondent Judge approving the questioned Amicable
Settlement is declared NULL and VOID and hereby SET ASIDE. Consequently, the sale
in favor of Sotero Dionisio III and by the latter to William Go is likewise declared NULL
and VOID, The Transfer Certificate of Title issued to the latter is hereby CANCELLED.
The proper Regional trial Court of Misamis Occidental to whom this case is now
assigned is hereby ordered to conduct new proceedings for the sale of the property
involved in this case.
No pronouncement as to costs.
SO ORDERED.
Makasiar, Concepcion Jr., Abad Santos and Escolin JJ., Concur.
Aquino, J., concur in the result.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R.No. L-72306 January 24, 1989
DAVID P. FORNILDA, JUAN P. FORNILDA, EMILIA P. FORNILDA OLILI, LEOCADIA
P. FORNILDA LABAYEN and ANGELA P. FORNILDA GUTIERREZ, petitioners,
vs.
THE BRANCH 164, REGIONAL TRIAL COURT IVTH JUDICIAL REGION, PASIG,
JOAQUIN C. ANTONIA Deputy Sheriff, RTC, 4JR Tanay, Rizal and ATTY. SERGIO
AMONOY, respondents.
Irene C. Ishiwata for petitioner A. Gutierrez.
R E S O L U T I O N

MELENCIO-HERRERA, J .:
On 5 October 1988, this Court rendered a Decision, the dispositive portion of which
reads:
WHEREFORE, certiorari is granted; the Order of respondent Trial Court,
dated 25 July 1985, granting a Writ of Possession, as well as its orders,
dated 25 April 1986 and 16 May 1986, directing and authorizing
respondent Sheriff to demolish the houses of petitioners Angela and
Leocadia Fornilda are hereby set aside, and the Temporary Restraining
Order heretofore issued, is made permanent. The six (6) parcels of land
herein controverted are hereby ordered returned to petitioner unless some
of them have been conveyed to innocent third persons.
With respect to petitioners' prayer for disbarment by reason of malpractice
of Respondent Amonoy embodied in their pleading entitled "Mahigpit na
Musiyun para Papanagutin Kaugnay ng Paglalapastangan" and
"Masasamang Gawain (Mal-Practices)" and "Paninindigan
(Memorandum)" both filed on 16 June 1988, Respondent Sergio 1.
Amonoy is hereby required, within fifteen (15) days from notice hereof, to
submit an answer thereto. After receipt of the same, a new docket number
will be assigned to the case.
Costs against respondent, Sergio I. Amonoy. (pp. 497-498, Rollo)
The case for disbarment is dealt with in a separate Resolution of even date in AC No.
3277.
On 25 October 1988 respondent Amonoy filed his Motion for Reconsideration, followed
by his "Supplemental Arguments in Support of Motion for Reconsideration" dated 8
November 1988. In essence, he advances the following points:
1) The transaction involved herein being a mortgage, Article 1491[51 of
the Civil Code does not apply. Consequently, the mortgage contract
executed in favor of respondent Amonoy is valid;
2) Article 1491[5] does not apply to foreclosure sales in favor of judgment
creditors;
3) The instant petition is barred by res judicata;
4) The jurisdiction of the foreclosing court does not depend on the alleged
invalidity of the mortgage being foreclosed. Thus, the lower court had
jurisdiction over the foreclosure case, the alleged invalidity of the contract
merely serving as a ground for the dismissal of the petition due to lack of
cause of action;
5) Under BP 129, only the Court of Appeals has original and exclusive
jurisdiction over actions for annulment of judgment.
We find the foregoing submissions without merit.
Respondent Amonoy avers that at the time of the execution of the mortgage on 20
January 1965, subject properties were no longer "properties in litigation" since the
Project of Partition (as signed by the intestate heirs) covering said properties was
approved by the lower Court as early as 12 January 1965.
This argument must fail for the reason that while the Project of Partition was approved
on 12 January 1965, it was only on 6 August 1969, and after all charges against the
estate had been paid, that the estate was declared closed and terminated. In fact, by his
own admission, he had acted as counsel from 1959 until 1968 (Comment, p. 145,
Rollo). Thus, at the time of the execution of the mortgage contract, the Controverted
Parcels were still in litigation and a fiduciary relationship of lawyer and client, which
Article 1491[5] precisely seeks to protect, still existed between the parties. To state that
mortgages are not included within the prohibition is to open the door to an indirect
circumvention of that statutory injunction, acquisition of the property being merely
postponed till eventual foreclosure.
Respondent asserts further that Article 1491[5] does not apply to judgment creditors of
which, he claims, he was one. Under ordinary circumstances, the argument of
respondent could be considered plausible. Unfortunately, however, as heretofore
explained, the mortgage was executed in violation of Article 1491[5] so that this Article
has a direct bearing on this case and respondent can not escape its provision. Having
violated the same, he cannot be considered in the general run of a judgment creditor.
Respondent likewise stresses that res judicata should apply herein since it was a little
more than four (4) years from the 22 July 1981 Decision of the Court of Appeals in the
Annulment Case (CA-G.R. No. 63214-R) when this Petition was filed. Consequently, he
contends that this Petition should be dismissed since it merely raises the same issues
brought up and already resolved in the earlier case.
The question of res judicata and jurisdiction of the lower Court over the subject matter of
the Foreclosure Case had been amply discussed in the Decision sought to be
reconsidered, citing the case of Municipality of Antipolo vs. Zapanta (133 SCRA 822
[1984]), and we find no need to dwell on them again.
Neither of the cases cited by respondent to support his contention that the lower Court
had jurisdiction over the Foreclosure Case notwithstanding the invalidity of the
mortgage contract, viz., Florentino vs. Galera (5 SCRA 500 [1962] and Talosig vs. Vda.
de Nieba (43 SCRA 472 [1972]), refers to a void subject matter over which the Courts
involved could not acquire jurisdiction.
Finally, respondent movant submits that only the Court of Appeals has original and
exclusive jurisdiction over actions for annulment of judgments of the lower Court under
BP Blg. 129 so that the Supreme Court should not take cognizance of the instant case.
The focal issue raised herein, however, i.e., whether or not the acquisition by
respondent of the property in litigation is valid or not, is a pure question of law. As such,
this Court is vested with jurisdiction to take cognizance of this case.
ACCORDINGLY, private respondent's Motion for Reconsideration is hereby DENIED
and this denial is FINAL.
SO ORDERED.
Paras, Sarmiento and Regalado, JJ., concur.
Padilla, J., took no part.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-26096 February 27, 1979
THE DIRECTOR OF LANDS, petitioner,
vs.
SILVERETRA ABABA, ET AL., claimants, JUAN LARRAZABAL, MARTA C. DE
LARRAZABAL, MAXIMO ABAROQUEZ and ANASTACIA CABIGAS, petitioners-
appellants, ALBERTO FERNANDEZ, adverse claimant-appellee.
Juanito Ll. Abao for petitioners-appellants.
Alberto R Fernandez in his own behalf.

MAKASIAR, J .:
This is an appeal from the order of the Court of First Instance of Cebu dated March 19,
1966 denying the petition for the cancellation of an adverse claim registered by the
adverse claimant on the transfer certificate of title of the petitioners.
The adverse claimant, Atty. Alberto B. Fernandez was retained as counsel by petitioner,
Maximo Abarquez, in Civil Case No. R-6573 of the Court of First Instance of Cebu,
entitled "Maximo Abarquez vs. Agripina Abarquez", for the annulment of a contract of
sale with right of repurchase and for the recovery of the land which was the subject
matter thereof. The Court of First Instance of Cebu rendered a decision on May 29,
1961 adverse to the petitioner and so he appealed to the Court of Appeals.
Litigating as a pauper in the lower court and engaging the services of his lawyer on a
contingent basis, petitioner, liable to compensate his lawyer whom he also retained for
his appeal executed a document on June 10, 1961 in the Cebuano-Visayan dialect
whereby he obliged himself to give to his lawyer one-half (1/2) of whatever he might
recover from Lots 5600 and 5602 should the appeal prosper. The contents of the
document as translated are as follows:
AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
That I, MAXIMO ABARQUEZ, Plaintiff in Case No. R-6573 of the Court of
First Instance of Cebu, make known through this agreement that for the
services rendered by Atty. Alberto B. Fernandez who is my lawyer in this
case, if the appeal is won up to the Supreme Court, I Promise and will
guarantee that I win give to said lawyer one-half (1/2) of what I may
recover from the estate of my father in Lots No. 5600 and 5602 which are
located at Bulacao Pardo, City of Cebu. That with respect to any money
which may be adjudged to me from Agripina Abarquez, except 'Attorney's
Fees', the same shall pertain to me and not to said lawyer.
IN WITNESS WHEREOF, I have caused my right thumb. mark to be
affixed hereto this 10th of June, 1961, at the City of Cebu.
T
H
U
M
B
M
A
R
K

M
A
X
I
M
O

A
B
A
R
Q
U
E
Z

(p. 5, Petitioner-Appellant's Brief, p. 26, rec.)
The real Property sought to be recovered in Civil Case No. R6573 was actually the
share of the petitioner in Lots 5600 and 5602, which were part of the estate of his
deceased parents and which were partitioned the heirs which included petitioner
Maximo Abarquez and his elder sister Agripina Abarquez, the defendant in said civil
case.
This partition was made pursuant to a project of partition approved by the Court which
provided am other that Lots Nos. 5600 and 5602 were to be divided into three equal
Parts, one third of which shall be given to Maximo Abarquez. However, Agripina
Abarquez the share of her brother stating that the latter executed an instrument of pacto
de retro prior to the partition conveying to her any or all rights in the estate of their
parents. Petitioner discovered later that the claim of his sister over his share was based
on an instrument he was believe all along to be a mere acknowledgment of the receipt
of P700.00 which his sister gave to him as a consideration for g care of their father
during the latter's illness and never an instrument of pacto de retro. Hence, he instituted
an action to annul the alleged instrument of pacto de retro.
The Court of Appeals in a decision promulgated on August 27, 1963 reversed the
decision of the lower court and annulled the dead of pacto de retro. Appellee Agripina
Abarquez filed a motion for reconsideration but the same was denied in a resolution
dated January 7, 1964 (p. 66, Record on Appeal; p. 13, Rec.) and the judgment became
final and executory on January 22,1964.
Subsequently, Transfer Certificate of Title No. 31841 was issued on May 19,1965 in the
name of Maximo Abarquez, married to Anastacia Cabigas, over his adjudged share in
Lots Nos. 5600 and 5602 containing an area of 4,085 square meters (p. 110, ROA; p.
13, rec.). These parcels of land later by the subject matter of the adverse claim filed by
the claimant.
The case having been resolved and title having been issued to petitioner, adverse
claimant waited for petitioner to comply with ha obligation under the document executed
by him on June 10, 1961 by delivering the one-half () portion of the said parcels of
land.
Petitioner refused to comply with his obligation and instead offered to sell the whole
parcels of land covered by TCT No. 31841 to petitioner-spouses Juan Larrazabal and
Marta C. de Larrazabal. Upon being informed of the intention of the petitioner, adverse t
claimant immediately took stops to protect his interest by filing with the trial court a
motion to annotate Ins attorney's lien on TCT No. 31841 on June 10, 1965 and by
notifying the prospective buyers of his claim over the one-half portion of the parcels of
land.
Realizing later that the motion to annotate attorney's lien was a wrong remedy, as it was
not within the purview of Section 37, rule 138 of the Revised Rule of Court, but before
the same was by the trial court, adverse t by an affidavit of adverse claim on July 19,
1965 with the Register of Deeds of Cebu (p. 14, ROA; p. 13, rec.). By virtue of the
petition of mid affidavit the adverse claim for one-half () of the lots covered by the
June 10, 1961 document was annotated on TCT No. 31841.
Notwithstanding the annotation of the adverse claim, petitioner-spouse Maximo
Abarquez and Anastacia Cabigas conveyed by deed of absolute sale on July 29, 1965
two-thirds (2/3) of the lands covered by TCT No. 31841 to petitioner-spouses Juan
Larrazabal and Marta C. de Larrazabal. When the new transfer certificate of title No.
32996 was issued, the annotation of adverse claim on TCT No. 31841 necessarily had
to appear on the new transfer certificate of title. This adverse claim on TCT No. 32996
became the subject of cancellation proceedings filed by herein petitioner-spouses on
March 7, 1966 with the Court of First Instance of Cebu (p. 2 ROA; p. 13, rec.). The
adverse claimant, Atty. Alberto B. Fernandez, filed his opposition to the petition for
cancellation on March 18, 1966 (p. 20, ROA; p. 13 rec.). The trial court resolved the
issue on March 19, 1966, when it declared that:
...the petition to cancel the adverse claim should be denied. The
admission by the petitioners that the lawyers (Attys. Fernandez and
Batiguin) are entitled to only one-third of the lot described in Transfer
Certificate of Title No. 32966 is the best proof of the authority to maintain
said adverse claim (p. 57, ROA; p. 13, rec.).
Petitioner-spouses decided to appeal the order of dismissal to this Court and
correspondingly filed the notice of appeal on April 1, 1966 with the trial court. On April 2,
1966, petitioner-spouses filed the appeal bond and subsequently filed the record on
appeal on April 6, 1966. The records of the case were forwarded to this Court through
the Land Registration Commission of Manila and were received by this Court on May 5,
1966.
Counsel for the petitioner-spouses filed the printed record on appeal on July 12, 1966.
Required to file the appellants' brief, counsel filed one on August 29, 1966 while that of
the appellee was filed on October 1, 1966 after having been granted an extension to file
his brief.
The case was submitted for decision on December 1, 1966. Counsel for the petitioners
filed a motion to expunge appellees' brief on December 8, 1966 for having been filed
beyond the reglementary period, but the same was denied by this Court in a resolution
dated February 13, 1967.
The pivotal issue to be resolved in the instant case is the validity or nullity of the
registration of the adverse claim of Atty. Fernandez, resolution of which in turn hinges
on the question of whether or not the contract for a contingent fee, basis of the interest
of Atty. Fernandez, is prohibited by the Article 1491 of the New Civil Code and Canon
13 of the Canons of Professional Ethics.
Petitioners contend that a contract for a contingent fee violates Article 1491 because it
involves an assignment of a property subject of litigation. That article provides:
Article 1491. The following persons cannot acquire by purchase even at a
public or judicial auction, either in person or through the petition of
another.
xxx xxx xxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior
and other o and employees connected with the administration of justice,
the property and rights in litigation or levied upon an execution before the
court within whose jurisdiction or territory they exercise their respective
functions; this prohibition includes the act of acquiring by assignment and
shall apply to lawyers, with respect to the property and rights which may
be the object of any litigation in which they may take part by virtue of their
profession (Emphasis supplied).
This contention is without merit. Article 1491 prohibits only the sale or assignment
between the lawyer and his client, of property which is the subject of litigation. As WE
have already stated. "The prohibition in said article a only to applies stated: " The
prohibition in said article applies only to a sale or assignment to the lawyer by his client
of the property which is the subject of litigation. In other words, for the prohibition to
operate, the sale or t of the property must take place during the pendency of the
litigation involving the property" (Rosario Vda. de Laig vs. Court of Appeals, et al., L-
26882, November 21, 1978).
Likewise, under American Law, the prohibition does not apply to "cases where after
completion of litigation the lawyer accepts on account of his fee, an interest the assets
realized by the litigation" (Drinker, Henry S., Legal Ethics, p. 100 [1953], citing App. A,
280; N.Y. Ciu 714). "There is a clear distraction between such cases and one in which
the lawyer speculates on the outcome of the matter in which he is employed" (Drinker,
supra, p. 100 citing A.B.A. Op. 279).
A contract for a contingent fee is not covered by Article 1491 because the tranfer or
assignment of the property in litigation takes effect only after the finality of a favorable
judgment. In the instant case, the attorney's fees of Atty. Fernandez, consisting of one-
half (1/2) of whatever Maximo Abarquez might recover from his share in the lots in
question, is contingent upon the success of the appeal. Hence, the payment of the
attorney's fees, that is, the transfer or assignment of one-half (1/2) of the property in
litigation will take place only if the appeal prospers. Therefore, the tranfer actually takes
effect after the finality of a favorable judgment rendered on appeal and not during the
pendency of the litigation involving the property in question. Consequently, the contract
for a contingent fee is not covered by Article 1491.
While Spanish civilists differ in their views on the above issue whether or not a
contingent fee contract (quota litis agreement) is covered by Article 1491 with
Manresa advancing that it is covered, thus:
Se ha discutido si en la incapacidad de Ion Procumdam y Abogados asta
o el pecto de quota litis. Consiste este, como es sabido, en la estipulacion
de que el Abogado o el Procurador ban de hacer suyos una parte alicuota
de In cona que se li m la son es favorable. Con es te concepto a la vista,
es para nosortros que el articulo que comentamos no menciona ese
pacto; pero como la incapacidad de los Abogados y Procuradores se
extinede al acto de adquirir por cesion; y la efectividad del pacto de quota
litis implica necesariamente una cesion, estimamos que con solo el num.
5 del articulo 1459 podria con exito la nulidad de ese pacto
tradicionalmente considerado como ilicito.
xxx xxx xxx
Debe tenerse tambien en cuenta, respecto del ultimo parrafo del articulo
1459, la sentencia del Tribunal Supreme de 25 Enero de 1902, que
delcara que si bien el procurador no puede adquirir para si los bienes, en
cuanto a los cuales tiene incapacidad, puede adquirirlos para otra
persona en quien no concurra incapacidad alguna (Manresa, Comentarios
al Codigo Civil Espaol, Tomo X, p. 110 [4a ed., 1931] emphasis
supplied).
Castan, maintaining that it is not covered, opines thus;
C. Prohibiciones impuestas a las personas encargadas, mas o menos
directamente, de la administracion de justicia.El mismo art. 1,459 del
Codigo civil prohibe a los Magistrados, Jueces, individuos del Minesterio
fiscal, Secretarios de Tribunales y Juzgados y Oficiales de Justicia
adquirir por compra (aunque sea en subasta publica o judicial, por si ni
por persona alguna intermedia). 'Los bienes y derechos que estuviesen
en litigio ante el Tribunal en cuya jurisdicion on teritorio ejercieran sus
respectivas funciones, extendiendo se esta prohibicion al acto de adquirir
por cesion', y siendo tambien extensiva ' Alos Abogados y Procuradores
respecto a los bienes y derecho que fueran objeto del un litigio en que
intervengan pos su profession y oficio.'
El fundamento de esta prohibicion es clarismo. No solo se tratadice
Manresade quitar la ocasion al fraude; persiguese, ademas, el
proposito de rodear a las personas que intervienen en la administracion
de justicia de todos los prestigios que necesitan para ejercer su ministerio,
librando los de toda sospecha, que, aunque fuere infundada, redundaria
en descredito de la institucion.
Por no dor lugar a recelos de ninguna clase, admite el Codigo (en el
apartado penutimo del art. 1.459) algunos casos en que, por excepcion,
no se aplica el pricipio prohibitivo de que venimos hablando. Tales son los
de que se trate de acciones hereditarias entre coheredero, de cesion en
pago de creditos, o de garantia de los bienes que posean los funcionarios
de justicia.
Algunos autores (Goyena, Manresa, Valverde) creen que en
la prohibicion del art. 1.459 esta comprendido el pacto de
quota litis (o sea el convenio por el cual se concede al
Abogado o Procurador, para el caso de obtener sentencia
favorable una parte alicuota de la cosa o cantidad que se
litiga), porque dicho pacto supone la venta o cesion de una
parte de la cosa o drecho que es objecto del litigio. Pero
Mucius Scaevola oberva, conrazon, que en el repetido pacto
no hay propiamente caso de compraventa ni de cesion de
derechos, y bastan para estimario nulo otros preceptos del
Codigo como los relativos a la ilicitud de la causa (Castan,
Derecho Civil Espol, Tomo 4, pp. 68-69, [9a ed., 1956],
emphasis supplied).
The Supreme Court of Spain, in its sentencia of 12 November 1917, has ruled that
Article 1459 of the Spanish Civil Code (Article 1491 of our Civil Code) does not apply to
a contract for a contingent fee because it is not contrary to morals or to law, holding
that:
... que no es susceptible de aplicarse el precepto contenido en el num. 5
del art. 1.459 a un contrato en el que se restrigen los honorarios de un
Abogado a un tanto por ciento de lo que se obtuviera en el litigio, cosa no
repudiada por la moral ni por la ley (Tolentino, Civil Code of the
Philippines, p. 35, Vol. V [1959]; Castan, supra; Manresa, supra).
In the Philippines, among the Filipino commentators, only Justice Capistrano ventured
to state his view on the said issue, thus:
The incapacity to purchase or acquire by assignment, which the law also
extends to lawyers with t to the property and rights which may be the
object of any litigation in which they may take part by virtue of their
profession, also covers contracts for professional services quota litis. Such
contracts, however, have been declared valid by the Supreme Court"
(Capistrano, Civil Code of the Philippines, p. 44, Vol. IV [1951]).
Dr. Tolentino merely restated the views of Castan and Manresa as well as the state of
jurisprudence in Spain, as follows:
Attorneys-at-lawSome writers, like Goyena, Manresa and Valverde
believe that this article covers quota litis agreements, under which a
lawyer is to be given an aliquot part of the property or amount in litigation if
he should win the case for his client. Scaevola and Castan, however,
believe that such a contract does not involve a sale or assignment of right
but it may be void under other articles of the Code, such as those referring
to illicit cause- On the other hand the Spanish Supreme Court has held
that this article is not applicable to a contract which limits the fees of a
lawyer to a certain percentage of what may be recovered in litigation, as
this is not contrary to moral or to law. (Tolentino, Civil Code of the
Philippines, p. 35, Vol. V [1959]; Castan, supra, Emphasis supplied).
Petitioners her contend that a contract for a contingent fee violates the Canons of
Professional Ethics. this is likewise without merit This posture of petitioners overlooked
Canon 13 of the Canons which expressly contingent fees by way of exception to Canon
10 upon which petitioners relied. For while Canon 10 prohibits a lawyer from purchasing
...any interest in the subject matter of the litigation which he is conducting", Canon 13,
on the other hand, allowed a reasonable contingent fee contract, thus: "A contract for a
con. tangent fee where sanctioned by law, should be reasonable under all the
circumstances of the ca including the risk and uncertainty of the compensation, but
should always be subject to the supervision of a court, as to its reasonableness." As
pointed out by an authority on Legal Ethics:
Every lawyer is intensely interested in the successful outcome of his case,
not only as affecting his reputation, but also his compensation. Canon 13
specifically permits the lawyer to contract for a con tangent fee which of
itself, negatives the thought that the Canons preclude the lawyer's having
a stake in his litigation. As pointed out by Professor Cheatham on page
170 n. of his Case Book, there is an inescapable conflict of interest
between lawyer and client in the matter of fees. Nor despite some
statements to the con in Committee opinions, is it believed that,
particularly in view of Canon 13, Canon 10 precludes in every case an
arrangement to make the lawyer's fee payable only out of the results of
the litigation. The distinction is between buying an interest in the litigation
as a speculation which Canon 10 condemns and agreeing, in a case
which the lawyer undertakes primarily in his professional capacity, to
accept his compensation contingent on the outcome (Drinker, Henry S
Legal Ethics, p. 99, [1953], Emphasis supplied).
These Canons of Professional Ethics have already received "judicial recognition by
being cited and applied by the Supreme Court of the Philippines in its opinion" Malcolm,
Legal and Judicial Ethics, p. 9 [1949]). And they have likewise been considered sources
of Legal Ethics. More importantly, the American Bar Association, through Chairman
Howe of the Ethics Committee, opined that "The Canons of Professional Ethics are
legislative expressions of professional opinion ABA Op. 37 [1912])" [See footnote 25,
Drinker, Legal Ethics, p. 27]. Therefore, the Canons have some binding effect
Likewise, it must be noted that this Court has already recognized this type of a contract
as early as the case of Ulanday vs. Manila Railroad Co. (45 PhiL 540 [1923]), where
WE held that "contingent fees are not prohibited in the Philippines, and since impliedly
sanctioned by law 'Should be under the supervision of the court in order that clients may
be protected from unjust charges' (Canons of Profession 1 Ethics)". The same doctrine
was subsequently reiterated in Grey vs. Insular Lumber Co. (97 PhiL 833 [1955]) and
Recto vs. Harden (100 PhiL 427 [1956]).
In the 1967 case of Albano vs. Ramos (20 SCRA 171 [19671), the attorney was allowed
to recover in a separate action her attomey's fee of one-third (1/3) of the lands and
damages recovered as stipulated in the contingent fee contract. And this Court in the
recent case of Rosario Vda de Laig vs. Court of Appeals, et al. (supra), which involved a
contingent fee of one-half () of the property in question, held than ,contingent fees are
recognized in this i jurisdiction (Canon 13 of the Canons of Professional Ethics adopted
by the Philippine Bar association in 1917 [Appendix B, Revised Rules of Court)), which
contingent fees may be a portion of the property in litigation."
Contracts of this nature are permitted because they redound to the benefit of the poor
client and the lawyer "especially in cases where the client has meritorious cause of
action, but no means with which to pay for legal services unless he can, with the
sanction of law, make a contract for a contingent fee to be paid out of the proceeds of
the litigation" (Francisco, Legal Ethics, p. 294 [1949], citing Lipscomb vs. Adams 91
S.W. 1046, 1048 [1949]). Oftentimes, contingent fees are the only means by which the
poor and helpless can redress for injuries sustained and have their rights vindicated.
Thus:
The reason for allowing compensation for professional services based on
contingent fees is that if a person could not secure counsel by a promise
of large fees in case of success, to be derived from the subject matter of
the suit, it would often place the poor in such a condition as to amount to a
practical denial of justice. It not infrequently happens that person are
injured through the negligence or willful misconduct of others, but by
reason of poverty are unable to employ counsel to assert their rights. In
such event their only means of redress lies in gratuitous service, which is
rarely given, or in their ability to find some one who will conduct the case
for a contingent fee. That relations of this king are often abused by
speculative attorneys or that suits of this character are turned into a sort of
commercial traffic by the lawyer, does not destroy the beneficial result to
one who is so poor to employ counsel (id, at p. 293, citing Warvelle, Legal
Ethics, p. 92, Emphasis supplied).
Justice George Malcolm, writing on contingent fees, also stated that:
... the system of contingent compensation has the merit of affording to
certain classes of persons the opportunity to procure the prosecution of
their claims which otherwise would be beyond their means. In many cases
in the United States and the Philippines, the contingent fee is socially
necessary (Malcolm, Legal and Judicial Ethics, p. 55 [1949], emphasis
supplied).
Stressing further the importance of contingent fees, Professor Max Radin of the
University of California, said that:
The contingent fee certainly increases the possibility that vexatious and
unfounded suits will be brought. On the other hand, it makes possible the
enforcement of legitimate claims which otherwise would be abandoned
because of the poverty of the claimants. Of these two possibilities, the
social advantage seems clearly on the side of the contingent fee. It may in
fact be added by way of reply to the first objection that vexations and
unfounded suits have been brought by men who could and did pay
substantial attorney's fees for that purpose (Radin, Contingent Fees in
California, 28 Cal. L. Rev. 587, 589 [1940], emphasis supplied).
Finally, a contingent fee contract is always subject to the supervision of the courts with
respect to the stipulated amount and may be reduced or nullified. So that in the event
that there is any undue influence or fraud in the execution of the contract or that the fee
is excessive, the client is not without remedy because the court will amply protect him.
As held in the case of Grey vs. Insular Lumber Co., supra, citing the case of Ulanday vs.
Manila Railroad Co., supra:
Where it is shown that the contract for a contingent fee was obtained by
any undue influence of the attorney over the client, or by any fraud or
imposition, or that the compensation is so clearly excessive as to amount
to extortion, the court win in a proper case protect the aggrieved party.
In the present case, there is no iota of proof to show that Atty. Fernandez had exerted
any undue influence or had Perpetrated fraud on, or had in any manner taken
advantage of his client, Maximo Abarquez. And, the compensation of one-half of the lots
in question is not excessive nor unconscionable considering the contingent nature of the
attorney's fees.
With these considerations, WE find that the contract for a contingent fee in question is
not violative of the Canons of Professional Ethics. Consequently, both under the
provisions of Article 1491 and Canons 10 and 13 of the Canons of Profession Ethics, a
contract for a contingent fee is valid
In resolving now the issue of the validity or nullity for the registration of the adverse
claim, Section 110 of the Land Registration Act (Act 496) should be considered. Under
d section, an adverse claim may be registered only by..
Whoever claims any part or interest in registered land adverse to the
registered owner, arising subsequent to the date of the o registration ... if
no other provision is made in this Act for registering the same ...
The contract for a contingent fee, being valid, vested in Atty Fernandez an interest or
right over the lots in question to the extent of one-half thereof. Said interest became
vested in Atty. Fernandez after the case was won on appeal because only then did the
assignment of the one-half () portion of the lots in question became effective and
binding. So that when he filed his affidavit of adverse claim his interest was already an
existing one. There was therefore a valid interest in the lots to be registered in favor of
Atty. Fernandez adverse to Mo Abarquez.
Moreover, the interest or claim of Atty. Fernandez in the lots in question arose long after
the original petition which took place many years ago. And, there is no other provision of
the Land Registration Act under which the interest or claim may be registered except as
an adverse claim under Section 110 thereof. The interest or claim cannot be registered
as an attorney's charging lien. The lower court was correct in denying the motion to
annotate the attomey's lien. A charging lien under Section 37, Rule 138 of the Revised
Rules of Court is limited only to money judgments and not to judgments for the
annulment of a contract or for delivery of real property as in the instant case. Said
Section provides that:
Section 37. An attorney shall have a lien upon the funds, documents and
papers of his client which have lawfully come into his oppossession and
may retain the same until his lawful fees and disbursements have been
paid, and may apply such funds to the satisfaction thereof. He shall also
have a lien to the same extent upon all judgments, for the payment of
money, and executions issued in pursuance of such judgments, which he
has secured in a litigation of his client ... (emphasis supplied).
Therefore, as an interest in registered land, the only adequate remedy open to Atty.
Fernandez is to register such interest as an adverse claim. Consequently, there being a
substantial compliance with Section 110 of Act 496, the registration of the adverse claim
is held to be valid. Being valid, its registration should not be cancelled because as WE
have already stated, "it is only when such claim is found unmeritorious that the
registration thereof may be cancelled" (Paz Ty Sin Tei vs. Jose Lee Dy Piao 103 Phil.
867 [1958]).
The one-half () interest of Atty. Fernandez in the lots in question should therefore be
respected. Indeed, he has a better right than petitioner-spouses, Juan Larrazabal and
Marta C. de Larrazabal. They purchased their two-thirds (2/3) interest in the lots in
question with the knowledge of the adverse claim of Atty. Fernandez. The adverse claim
was annotated on the old transfer certificate of title and was later annotated on the new
transfer certificate of title issued to them. As held by this Court:
The annotation of an adverse claim is a measure designed to protect the
interest of a person over a piece of real property where the registration of
such interest or right is not otherwise provided for by the Land Registration
Act, and serves as a notice and warning to third parties dealing with said
property that someone is claiming an interest on the same or a better right
than the registered owner thereof (Sanchez, Jr. vs. Court of Appeals, 69
SCRA 332 [1976]; Paz Ty Sin Tei vs. Jose Le Dy Piao supra).
Having purchased the property with the knowledge of the adverse claim, they are
therefore in bad faith. Consequently, they are estopped from questioning the validity of
the adverse claim.
WHEREFORE, THE DECISION OF THE LOWER COURT DENYING THE PETITION
FOR THE CANCELLATION OF THE ADVERSE CLAIM SHOULD BE, AS IT IS
HEREBY AFFIRMED, WITH COSTS AGAINST PETITIONER-APPELLANTS JUAN
LARRAZABAL AND MARTA C. DE LARRAZABAL.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-33048 April 16, 1982
EPIFANIA SARSOSA VDA. DE BARSOBIA and PACITA W. VALLAR, petitioners,
vs.
VICTORIANO T. CUENCO, respondent.

MELENCIO-HERRERA, J .:
Sought to be reviewed herein is the judgment dated August 18, 1970, of the Court of
Appeals,
1
rendered in CA-G.R. No. 41318-R, entitled "Victoriano T. Cuenco, Plaintiff-
appellant, vs. Epifania Sarsosa Vda. de Barsobia and Pacita W. Vallar, Defendants-
appellees, " declaring Victoriano T. Cuenco (now the respondent) as the absolute owner
of the coconut land in question.
The lot in controversy is a one-half portion (on the northern side) of two adjoining
parcels of coconut land located at Barrio Mancapagao, Sagay, Camiguin, Misamis
Oriental (now Camiguin province), with an area of 29,150 square meters, more or less.
2

The entire land was owned previously by a certain Leocadia Balisado, who had sold it to
the spouses Patricio Barsobia (now deceased) and Epifania Sarsosa, one of the
petitioners herein. They are Filipino citizens.
On September 5, 1936, Epifania Sarsosa then a widow, sold the land in controversy to
a Chinese, Ong King Po, for the sum of P1,050.00 (Exhibit "B"). Ong King Po took
actual possession and enjoyed the fruits thereof.
On August 5, 1961, Ong King Po sold the litigated property to Victoriano T. Cuenco
(respondent herein), a naturalized Filipino, for the sum of P5,000.00 (Exhibit "A").
Respondent immediately took actual possession and harvested the fruits therefrom.
On March 6, 1962, Epifania "usurped" the controverted property, and on July 26, 1962,
Epifania (through her only daughter and child, Emeteria Barsobia), sold a one-half (1/2)
portion of the land in question to Pacita W. Vallar, the other petitioner herein (Exhibit
"2"). Epifania claimed that it was not her intention to sell the land to Ong King Po and
that she signed the document of sale merely to evidence her indebtedness to the latter
in the amount of P1,050.00. Epifania has been in possession ever since except for the
portion sold to the other petitioner Pacita.
On September 19, 1962, respondent filed a Forcible Entry case against Epifania before
the Municipal Court of Sagay, Camiguin. The case was dismissed for lack of jurisdiction
since, as the laws then stood, the question of possession could not be properly
determined without first settling that of ownership.
On December 27, 1966, respondent instituted before the Court of First Instance of
Misamis Oriental a Complaint for recovery of possession and ownership of the litigated
land, against Epifania and Pacita Vallar (hereinafter referred to simply as petitioners).
In their Answer below, petitioners insisted that they were the owners and possessors of
the litigated land; that its sale to Ong King Po, a Chinese, was inexistent and/or void ab
initio; and that the deed of sale between them was only an evidence of Epifania's
indebtedness to Ong King Po.
The trial Court rendered judgment:
1. Dismissing the complaint with costs against plaintiff (respondent
herein).
2. Declaring the two Deeds of Sale, Exhibits A and B, respectively,
inexistent and void from the beginning; and
3. Declaring defendant Pacita W. Vallar as the lawful owner and
possessor of the portion of land she bought from Emeteria Barsobia (pp.
57, 67, Record.)
3

On appeal, the Court of Appeals reversed the aforementioned Decision and decreed
instead that respondent was the owner of the litigated property, thus:
xxx xxx xxx
In view of all the foregoing considerations, the judgment appealed from is
hereby reversed. In lieu thereof, we render judgment:
(a) Declaring the plaintiff-appellant Victoriano T. Cuenco the absolute
owner of the land in question, with the right of possession thereof;
(b) Ordering the defendants-appellees to restore the possession of said
land to the plaintiff;
(c) Dismissing the defendants' counterclaim;
(d) Condemning the defendants to pay to the plaintiff the sum of
P10,000.00 representing the latter's share from the sale of copra which he
failed to receive since March, 1962 when he was deprived of his
possession over the land, and which defendants illegally appropriated it to
their own use and benefit, plus legal interest from the filing of the
complaint until fully paid; plus P2,000.00 representing expenses and
attorney's fees;
(e) Sentencing the defendants to pay the costs.
SO ORDERED.
4

Following the denial of their Motion for Reconsideration, petitioners filed the instant
Petition for Review on certiorari with this Court on January 21, 1971. Petitioners claim
that the Court of Appeals erred:
I. ... when it reversed the judgment of the trial court declaring petitioner
Pacita W. Vallar as the lawful possessor and owner of the portion of land
she purchased from Emeteria Barsobia, not a party to this case, there
being no evidence against her.
II ... when it included petitioner Pacita W. Vallar to pay P10,000.00, with
legal interest from the filing of the complaint, representing respondent's
share in the harvest and to pay the costs, there being no evidence against
her.
III. ... when it condemned petitioners to pay P2,000.00 representing
expenses and attorney's fees, there being no factual, legal and equitable
justification.
IV. ... in not applying the rule on pari delicto to the facts of the case or the
doctrine enunciated ... in the case of Philippine Banking Corporation vs.
Lui She, L-17587, September 12, 1967, to ... Petitioner Epifania Sarsosa
Vda. de Barsobia.
V. ... in denying, for lack of sufficient merits, petitioners' motion for
rehearing or reconsideration of its decision.
5

As the facts stand, a parcel of coconut land was sold by its Filipino owner, petitioner
Epifania, to a Chinese, Ong King Po, and by the latter to a naturalized Filipino,
respondent herein. In the meantime, the Filipino owner had unilaterally repudiated the
sale she had made to the Chinese and had resold the property to another Filipino. The
basic issue is: Who is the rightful owner of the property?
There should be no question that the sale of the land in question in 1936 by Epifania to
Ong King Po was inexistent and void from the beginning (Art. 1409 [7], Civil Code)
6

because it was a contract executed against the mandatory provision of the 1935
Constitution, which is an expression of public policy to conserve lands for the Filipinos.
Said provision reads:
Save in cases of hereditary succession, no private agricultural land shall
be transferred or assigned except to individuals, corporations, or
associations, qualified to acquire or hold lands of the public domain.
7

Had this been a suit between Epifania and Ong King Po, she could have been declared
entitled to the litigated land on the basis, as claimed, of the ruling in Philippine Banking
Corporation vs. Lui She,
8
reading:
... For another thing, and this is not only cogent but also important. Article
1416 of the Civil Code provides as an exception to the rule on pari delicto
that when the agreement is not illegal per se but is merely prohibited, and
the prohibition by the law is designed for the protection of the plaintiff, he
may, if public policy is thereby enhanced, recover what he has sold or
delivered. ...
But the factual set-up has changed. The litigated property is now in the hands of a
naturalized Filipino. It is no longer owned by a disqualified vendee. Respondent, as a
naturalized citizen, was constitutionally qualified to own the subject property. There
would be no more public policy to be served in allowing petitioner Epifania to recover
the land as it is already in the hands of a qualified person. Applying by analogy the
ruling of this Court in Vasquez vs. Giap and Li Seng Giap & Sons:
9

... if the ban on aliens from acquiring not only agricultural but also urban
lands, as construed by this Court in the Krivenko case, is to preserve the
nation's lands for future generations of Filipinos, that aim or purpose would
not be thwarted but achieved by making lawful the acquisition of real
estate by aliens who became Filipino citizens by naturalization.
While, strictly speaking, Ong King Po, private respondent's vendor, had no rights of
ownership to transmit, it is likewise inescapable that petitioner Epifania had slept on her
rights for 26 years from 1936 to 1962. By her long inaction or inexcusable neglect, she
should be held barred from asserting her claim to the litigated property (Sotto vs. Teves,
86 SCRA 157 [1978]).
Laches has been defined as the failure or neglect, for an unreasonable
and unexplained length of time, to do that which by exercising due
diligence could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or
declined to assert it. (Tijam, et al. vs. Sibonghanoy, et al., No. L-21450,
April 15, 1968, 23 SCRA 29, 35). (cited in Sotto vs. Teves, 86 SCRA 154
[1978]).
Respondent, therefore, must be declared to be the rightful owner of the property.
The award of actual damages in respondent's favor of P10,000.00, as well as of
attorney's fees and expenses of litigation of P2,000.00, is justified. Respondent was
deprived of the possession of his land and the enjoyment of its fruits from March, 1962.
The Court of Appeals fixed respondent's share of the sale of copra at P10,000.00 for
eight years at four (4) harvests a year. The accuracy of this finding has not been
disputed.
However, we find merit in the assigned error that petitioner, Pacita Vallar, should not be
held also liable for actual damages to respondent. In the absence of contrary proof, she,
too, must be considered as a vendee in good faith of petitioner Epifania.
The award of attorney's fees and litigation expenses in the sum of P2,000.00 in
respondent's favor is in order considering that both petitioners compelled respondent to
litigate for the protection of his interests. Moreover, the amount is reasonable.
10

WHEREFORE, except for that portion holding petitioner, Pacita W. Vallar, also liable for
damages of P10,000.00, the appealed judgment is hereby affirmed.
Costs against petitioners.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-17043 January 31, 1961
NATIVIDAD HERRERA, assisted by her husband EMIGDIO SALAZAR, plaintiffs-
appellants,
vs.
LUY KIM GUAN and LINO BANGAYAN, defendants-appellees.
T. de los Santos for plaintiffs-appellants.
Rafael C. Climaco and Abelardo S. Fernandez for defendants-appellees.
BARRERA, J .:
This is an appeal from the decision of the Court of First Instance of Zamboanga City (a)
dismissing plaintiff-appellant's complaint for the recovery of three (3) parcels of land and their
produce in the sum of P320,000.00; and (b) instead, sentencing plaintiff to pay P2,000.00 for
attorney's fees and P1,000.00 for expenses of litigation, to defendant Lino Bangayan, and
P2,000.00 as attorney's fees and P500.00 as expenses of litigation, to the other defendant Luy
Kim Guan.
The pertinent facts as found by the trial court and upon which its decision was predicated are set
forth in the following portion of the decision appealed from:
The Plaintiff Natividad Herrera is the legitimate daughter of Luis Herrera, now deceased
and who died in China sometime after he went to that country in the last part of 1931 or
early part of 1932. The said Luis Herrera in his lifetime was the owner of three (3)
parcels of land and their improvements, known as Lots 1740, 4465 and 4467 of
Expediente No. 5, G.L.R.O. Record 477 and the area, nature, improvements and bound of
each and every of these three (3) lots are sufficiently described in the complaint filed by
the plaintiffs.
Before leaving for China, however, Luis Herrera executed on December 1, 1931, a deed
of General Power of Attorney, Exhibit 'B', which authorized and empowered the
defendant Kim Guan, among others to administer and sell the properties of said Luis
Herrera.
Lot 1740 was originally covered by Original Certificate Title 8601 registered in the name
of Luis Herrera, married to GO Bang. This lot was sold by the defendant Luy Kim in his
capacity as attorney-in-fact of the deceased Luis Her to Luy Chay on September 11,
1939, as shown in Exhibit "2", corresponding deed of sale. Transfer Certificate of Title
3162, Exhibit "3", was issued to Luy Chay by virtue of deed of sale. On August 28, 1941,
to secure a loan of P2,00 a deed of mortgage to the Zamboanga Mutual Building and
Association was executed by Luy Chay, Exhibit "4". On January 31, 1947, the said Luy
Chay executed a deed of sale, Exhibit "E", in favor of Lino Bangayan. By virtue of this
Transfer Certificate of Title T-2567 was issued to Lino Bangayan on June 24, 1949,
Exhibit "1":
Lots 4465 and 4467 were originally registered in the of Luis Herrera, married to Go
Bang, under Original Certificate of Title No. 0-14360, Exhibit "5". On December 1,
1931, Luis Herrera sold one-half () undivided share and to Herrera and Go Bang, the
other half (), as shown by Exhibit "12" and Exhibit "12-A", the latter an annotation
made the Register of Deeds of the City of Zamboanga, in which stated as follows:
Cancelado el presente Certificado en virtud de una escritura de traspaso y en su lugar se
ha expedido el Certificado de T No. 494-(T-13045) del Tomo 2 del Libro de Certificado
de Transferencias.
(Fdo) R. D. MACROHON
Registrador de Titulos
Ciudad de Zamboanga
On July 23, 1937, Luis Herrera thru his attorney-in-fact Luy Kim Guan, one of the
defendants, sold to Nicomedes Salazar his one half () participation in these two (2) lots,
as shown in Exhibit "C", the corresponding deed of sale for P3,000.00 Transfer
Certificate of Title No. T-494-(T-13045) was is to Nicomedes Salazar and to the
defendant Luy Kim Guan, Exhibit '7'. On August 4, 1937, the defendant Luy Kim Guan
Nicomedes Salazar executed a deed of mortgage in favor of Bank of the Philippine
Islands to secure a loan of P3,500.00, Exhibit '6'. On August 17, 1937, the defendant Luy
Kim Guan and Nicomedes Salazar sold Lot 4465 to Carlos Eijansantos for the sum of
P100.00 as shown in Exhibit "9", the corresponding deed of sale, and Transfer Certificate
of Title No. T-2653 was issued on September 7, 1939 to Carlos Eijansantos, Exhibit "10".
Nicomedes Salazar sold his one half () interest on Lot 4467 to the defendant Lino
Bangayan for P3,000.00 on February 22, 1949, Exhibit 'B', and the corresponding
Transfer Certificate of Title T-2654 was issued to Lino Bangayan and to Luy Kim Guan,
both are co-owners in equal shares, Exhibit "8". Opinion of the City Attorney, Exhibit
"p", and an affidavit of Atty. Jose T. Atilano, Exhibit "O", state that Lino Bangayan is a
Filipino citizen.
As admitted by both parties (plaintiffs and defendants), Luis Herrera is now deceased, but
as to the specific and precise date of his death the evidence of both parties failed to show.
It is the contention of plaintiff-appellant that all the transactions mentioned in the preceding
quoted portion of the decision were fraudulent and were executed after the death of Luis Herrera
and, consequently, when the power of attorney was no longer operative. It is also claimed that
the defendants Lino Bangayan and Luy Kim Guan who now claim to be the owners of Lots Nos.
1740 and 4467 are Chinese by nationality and, therefore, are disqualified to acquire real
properties. Plaintiff-appellant, in addition, questions the supposed deed of sale allegedly
executed by Luis Herrera on December 1, 1931 in favor of defendant Luy Kim Guan, conveying
one-half interest on the two lots, Nos. 4465 and 4467, asserting that what was actually executed
on that date, jointly with the general power of attorney, was a lease contract over the same
properties for a period of 20 years for which Luy Kim Guan paid the sum of P2,000.00.
We find all the contentions of plaintiff-appellant untenable. Starting with her claim that the
second deed executed on December 1, 1931 by Luis Herrera was a lease contract instead of a
deed of sale as asserted by defendant Luy Kim Guan, we find that the only evidence in support
of her contention is her own testimony and that of her husband to the effect that the deceased
Luis Herrera showed the said document to them, and they remembered the same to be a lease
contract on the three properties for a period of 20 years in consideration of P2,000.00. Their
testimony was sought to be corroborated by the declaration of the clerk of Atty. Enrique A.
Fernandez, who allegedly notarized the document. Outside of this oral testimony, given more
than 23 years after the supposed instrument was read by them, no other evidence was adduced.
On the other hand, defendant Luy Kim Gua produced in evidence a certification
1
signed by the
Register of Deeds of Dipolog, Zamboanga (Exh. 11) to the effect that a deed of sale, dated
December 1, 1931, was execute by Luis Herrera in favor of Luy Kim Guan and entered in the
Primary Book No. 4 as duly registered on September 30, 1936 under Original Certificate of Title
No. 14360. It is to be noted that the deed of sale was registered shortly after the issuance in the
name of Luis Herrera of Origin Certificate of Title No. 14360 pursuant to Decree No. 59093,
covering the two lots, Nos. 4465 and 4467 (Exh. 5) dated April 7, 1936. In virtue of said deed of
sale of December 1, 1931, Original Certificate of Title No. 1436 was cancelled and Transfer
Certificate of Title No. 1304 (Exh. 12) in the names of the conjugal partnership of the spouses
Luis Herrera and Go Bang, one-half share, an Luy Kim Guan, single, one-half share, was issued
on September 30, 1936. Later, or on July 23, 1937, Luy Kim Guan, in his capacity as attorney-
in-fact of Luis Herrera, sold the half interest of the latter in the two parcels o land, in favor of
Nicomedes Salazar, whereupon TCT No. 13045 was cancelled and TCT No. RT-657 (494-T-
13045 (Exh. 7) was issued in the names of Luy Kim Guan an Nicomedes Salazar in undivided
equal shares. On August 4, 1937, both Luy Kim Guan and Nicomedes Salazar mortgaged the two
parcels in favor of the Bank of the Philippine Islands for the sum of P3,500.00 (Exh. 6). On
August 17, 1937, Nicomedes Salazar and Luy Kim Gua sold their respective shares in Lot No.
4465 to Carlo Eijansantos (Exh. 9), subject to the mortgage, resulting in the issuance of TCT No.
2653 (Exh. 10) covering the entire lot No. 4465 in the name of said Carlos Eijansantos. On
February 23, 1949, Nicomedes Salazar sold his shall share in Lot No. 4467 to Lino Bangayan, as
a consequence of which, TCT No. 2654 (Exh. B) was issued covering said Lot No. 4467 in the
names of Luy Kim Guan and Lino Bangayan in undivided equal shares.
With respect to Lot No. 1740, the same was sold by Luy Kim Guan, in his capacity as attorney-
in-fact of Luis Herrera, on September 11, 1939 to Luy Chay (See Exh. 2) who, in August, 1941,
mortgaged the same (Exh. 4) to the Zamboanga Mutual Loan and Building Association (See
TCT No. 3162 [Exh. 3] issued in the name of Luy Chay). Later on, Luy Chay sold the entire lot
to defendant Lino Bangayan by virtue of the deed of sale dated January 31, 1947 (Exh. E), and as
a consequence thereof, TCT No. 2567 was issued in the name of said vendee. (See Exh. 1). As a
result of these various transactions, duly recorded in the corresponding office of the Register of
Deeds, and covered by appropriate transfer certificates of title, the properties are now registered
in the following manner: Lot No. 1740, in the name of Lino Bangayan; Lot No. 4465, in the
name of Carlos Eijansantos; and Lot No. 4467, in the names of Lino Bangayan and Luy Kim
Guan in undivided equal shares.
In the face of these documentary evidence presented by the defendants, the trial court correctly
upheld the contention of the defendants as against that of plaintiff-appellant who claims that the
second deed executed by Luis Herrera in 1931 was a lease contract. It is pertinent to note what
the lower court stated in this regard, that is, if the second deed executed by Luis Herrera was a
lease contract covering, the 3 lots in question for a period of twenty (20) years, there would have
been no purpose for him to constitute Luy Kim Guan as. his attorney-in-fact to administer and
take charge of the same properties already covered by the lease contract.
Coming now to the contention that these transactions are null and void and of no effect because
they were executed by the attorney-in-fact after the death of his Principal, suffice it to say that as
found by the lower court, the date of death of Luis Herrera has not been satisfactorily proven.
The only evidence presented by the Plaintiff-appellant in this respect is a supposed letter
received from a certain "Candi", dated at Amoy in November, 1936, purporting to give
information that Luis Herrera (without mentioning his name) had died in August of that year.
This piece of evidence was properly rejected by the lower court for lack of identification. the
other hand, we have the testimony of the witness Chung Lian to the effect that when he was in
Amoy the year 1940, Luis Herrera visited him and had a conversation with him, showing that the
latter was still alive at the time. Since the documents had been executed the attorney-in-fact one
in 1937 and the other in 1939, it is evident, if we are to believe this testimony, that the
documents were executed during the lifetime of the principal. Be that as it may, even granting
arguendo that Luis Herrera did die in 1936, plaintiffs presented no proof and there is no
indication in the record, that the age Luy Kim Guan was aware of the death of his prince at the
time he sold the property. The death of the principal does not render the act of an agent
unenforceable, where the latter had no knowledge of such extinguishment the agency.
2

Appellants also raise the question of the legality of the titles acquired by Luy Chay and Lino
Bangayan, on ground that they are disqualified to acquire real properties in the Philippines. This
point is similarly without me because there is no evidence to support the claim. In fact, in the
deed of sale as well as in TCT No. 3162 issued to Luy Chay, the latter was referred to as a
citizen of the Philippines. Nevertheless, the lower court acknowledged the probability that Luy
Chay could have been actually a Chinese citizens.
3
At any rate, the property was subsequently
purchased by Lino Bangayan, as a result which TCT No. 3162 in the name of Luy Chay was
cancelled and another certificate (TCT No. T-2567) was issued in favor of said vendee.
As to Bangayan's qualification, the lower court held that said defendant had sufficiently
established his Philippine citizenship through Exhibit P, concurred in by the Secretary of Justice.
We find no reason to disturb such ruling.
With respect to Luy Kim Guan, while it is true that he is a Chinese citizen, nevertheless,
inasmuch as he acquired his one-half share in Lot No. 4467 in 1931, long before the Constitution
was adopted, his ownership can not be attacked on account of his citizenship.
Appellants, in this appeal, contest the judgment of the court a quo awarding defendants Lino
Bangayan and Luy Kim Guan attorney's fees in the sum of P2,000.00 each, and expenses of
litigation in the amounts of P1,000.00 and P500.00, respectively. We agree with the appellant in
this regard.
This Court has laid down the rule that in the absence of stipulation, a winning party may be
awarded attorney's fees only in case plaintiff's action or defendant's stand is so untenable as to
amount to gross and evident bad faith.
4
The same thing however, can not be said of the case at
bar. As a matter of fact, the trial court itself declared that the complaint was filed in good faith.
Attorney's fees, therefore, can not be awarded to defendants simply because the judgment was
favorable to them and adverse to plaintiff, for it may amount to imposing a premium on the right
to redress grievances in court. And so with expenses of litigation. A winning party may be
entitled to expenses of litigation only where he, by reason of plaintiff's clearly unjustifiable
claims or defendant's unreasonable refusal to his demands, was compelled to incur said
expenditures. Evidently, the facts of this case do not warrant the granting of such litigation
expenses to defendants. In the absence of proof that the action was intended for reasons other
than honest, we may agree with the trial court that the same must have been instituted by
plaintiffs in their belief that they have a valid cause against the defendants.
WHEREFORE, and with the above modification, the decision appealed from is hereby affirmed
in all other respects without prejudice to appellants' right to demand from the agent (Luy Kim
Guan) an accounting of proceeds of the agency, if such right is still available. No costs. So
ordered.
Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes
and Dizon, concur.

Footnotes
1
The corresponding deed in the office of the Register of Deeds was destroyed during the
war.
2
Art. 1738, old Civil Code; Buason, et al. v. Panuyas, 56 O.G. 6925.
3
At the date of the hearing, Luy Chay was believed to already dead, hence, he was not
presented in court.
4
Jimenez v. Bucoy, G.R. No. L-10221, February 28, 1958; Castillo V. Samonte, G.R.
No. L-13146, January 30, 1960.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-36731 January 27, 1983
VICENTE GODINEZ, ET AL., plaintiffs-appellants,
vs.
FONG PAK LUEN ET AL., defendants, TRINIDAD S. NAVATA, defendant-appellee.
Dominador Sobrevinas for plaintiffs-appellants.
Muss S. Inquerto for defendant-appellee

GUTIERREZ, JR., J .:
The plaintiffs filed this case to recover a parcel of land sold by their father, now
deceased, to Fong Pak Luen, an alien, on the ground that the sale was null and void ab
initio since it violates applicable provisions of the Constitution and the Civil Code.
The order of the Court of First Instance of Sulu dismissing the complaint was appealed
to the Court of Appeals but the latter court certified the appeal to us since only pure
questions of law were raised by the appellants.
The facts of the case were summarized by the Court of Appeals as follows:
On September 30, 1966, the plaintiffs filed a complaint in the Court of First
Instance of Sulu alleging among others that they are the heirs of Jose
Godinez who was married to Martina Alvarez Godinez sometime in 1910;
that during the marriage of their parents the said parents acquired a parcel
of land lot No. 94 of Jolo townsite with an area of 3,665 square meters as
evidenced by Original Certificate of Title No. 179 (D -155) in the name of
Jose Godinez; that their mother died sometime in 1938 leaving the
plaintiffs as their sole surviving heirs; that on November 27, 1941, without
the knowledge of the plaintiffs, the said Jose Godinez, for valuable
consideration, sold the aforesaid parcel of land to the defendant Fong Pak
Luen, a Chinese citizen, which transaction is contrary to law and in
violation of the Civil Code because the latter being an alien who is
inhibited by law to purchase real property; that Transfer Certificate Title
No. 884 was then issued by the Register of Deeds to the said defendant,
which is null and void ab initio since the transaction constituted a non-
existent contract; that on January 11, 1963, said defendant Fong Pak
Luen executed a power of attorney in favor of his co-defendant Kwan Pun
Ming, also an alien, who conveyed and sold the above described parcel of
land to co-defendant Trinidad S. Navata, who is aware of and with full
knowledge that Fong Pak Luen is a Chinese citizen as well as Kwan Pun
Ming, who under the law are prohibited and disqualified to acquire real
property in this jurisdiction; that defendant Fong Pak Luen has not
acquired any title or interest in said parcel of land as the purported
contract of sale executed by Jose Godinez alone was contrary to law and
considered non- existent, so much so that the alleged attorney-in-fact,
defendant Kwan Pun Ming had not conveyed any title or interest over said
property and defendant Navata had not acquired anything from said
grantor and as a consequence Transfer Certificate of Title No. 1322,
which was issued by the Register of Deeds in favor of the latter is null and
void ab initio,- that since one-half of the said property is conjugal property
inherited by the plaintiffs from their mother, Jose Godinez could -not have
legally conveyed the entire property; that notwithstanding repeated
demands on said defendant to surrender to plaintiffs the said property she
refused and still refuses to do so to the great damage and prejudice of the
plaintiffs; and that they were constrained to engage the services of
counsel in the sum of P2,000.00.1wph1.t The plaintiffs thus pray that
they be adjudged as the owners of the parcel of land in question and that
Transfer Certificate of Title RT-90 (T-884) issued in the name of defendant
Fong Pak Luen be declared null and void ab initio; and that the power of
attorney issued in the name of Kwan Pun Ming, as well as Transfer
Certificate of Title No. 'L322 issued in the name of defendant Navata be
likewise declared null and void, with costs against defendants.
On August 18, 1966, the defendant Register of Deeds filed an answer
claiming that he was not yet the register of deeds then; that it was only the
ministerial duty of his office to issue the title in favor of the defendant
Navata once he was determined the registerability of the documents
presented to his office.
On October 20, 1966, the defendant Navata filed her answer with the
affirmative defenses and counterclaim alleging among others that the
complaint does not state a cause of action since it appears from the
allegation that the property is registered in the name of Jose Godinez so
that as his sole property he may dispose of the same; that the cause of
action has been barred by the statute of limitations as the alleged
document of sale executed by Jose Godinez on November 27, 1941,
conveyed the property to defendant Fong Pak Luen as a result of which a
title was issued to said defendant; that under Article 1144 (1) of the Civil
Code, an action based upon a written contract must be brought within 10
years from the time the right of action accrues; that the right of action
accrued on November 27, 1941 but the complaint was filed only on
September 30, 1966, beyond the 10 year period provided for by law; that
the torrens title in the name of defendant Navata is indefeasible who
acquired the property from defendant Fong Pak Luen who had been in
possession of the property since 1941 and thereafter defendant Navata
had possessed the same for the last 25 years including the possession of
Fong Pak Luen; that the complaint is intended to harass the defendant as
a civic leader and respectable member of the community as a result of
which she suffered moral damages of P100,000.00, P2,500.00 for
attorney's fees and P500.00 expenses of litigation, hence, said defendant
prays that the complaint be dismissed and that her counterclaim be
granted, with costs against the plaintiffs. On November 24, 1967, the
plaintiffs filed an answer to the affirmative defenses and counter-claim. As
the defendants Fong Pak Luen and Kwan Pun Ming are residing outside
the Philippines, the trial court upon motion issued an order of April 17,
1967, for the service of summons on said defendants by publication. No
answer has been filed by said defendants.
On December 2, 196 7, the court issued an order as follows:
Both parties having agreed to the suggestion of the Court
that they submit their supplemental pleadings to support
both motion and opposition and after submittal of the same
the said motion to dismiss which is an affirmative defense
alleged in the complaint is deemed submitted. Failure of both
parties or either party to submit their supplemental pleadings
on or about December 9, the Court will resolve the case.
On November 29, 1968, the trial court issued an order missing the
complaint without pronouncement as to costs. (Record on Appeal, pp. 31-
37). A motion for reconsideration of this order was filed by the plaintiffs on
December 12, 196F, which was denied by the trial court in an order of July
11, 1969, (Rec. on Appeal, pp. 38, 43, 45, 47). The plaintiffs now
interpose this appeal with the following assignments of errors:
I. The trial court erred in dismissing plaintiffs-appellants'
complaint on the ground of prescription of action, applying
Art. 1144 (1) New Civil Code on the basis of defendant
Trinidad S. Navata's affirmative defense of prescription in
her answer treated as a motion to dismiss.
II. The trial court erred in denying plaintiffs-appellants' motion
for reconsideration of the order of dismissal.
III. The trial court erred in not ordering this case to be tried
on the merits."
The appellants contend that the lower court erred in dismissing the complaint on the
ground that their cause of action has prescribed. While the issue raised appears to be
only the applicability of the law governing prescription, the real question before us is
whether or not the heirs of a person who sold a parcel of land to an alien in violation of a
constitutional prohibition may recover the property if it had, in the meantime, been
conveyed to a Filipino citizen qualified to own and possess it.
The question is not a novel one. Judicial precedents indicate fairly clearly how the
question should be resolved.
There can be no dispute that the sale in 1941 by Jose Godinez of his residential lot
acquired from the Bureau of Lands as part of the Jolo townsite to Fong Pak Luen, a
Chinese citizen residing in Hongkong, was violative of Section 5, Article XIII of the 1935
Constitution which provided:
Sec. 5. Save in cases of hereditary succession, no private agricultural land
will be transferred or assigned except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain in the
Philippines.
The meaning of the above provision was fully discussed in Krivenko v. Register of
Deeds of Manila (79 Phil. 461) which also detailed the evolution of the provision in the
public land laws, Act No. 2874 and Commonwealth Act No. 141. The Krivenko ruling
that "under the Constitution aliens may not acquire private or agricultural lands,
including residential lands" is a declaration of an imperative constitutional policy.
Consequently, prescription may never be invoked to defend that which the Constitution
prohibits. However, we see no necessity from the facts of this case to pass upon the
nature of the contract of sale executed by Jose Godinez and Fong Pak Luen whether
void ab initio, illegal per se or merely pro-exhibited.** It is enough to stress that insofar
as the vendee is concerned, prescription is unavailing. But neither can the vendor or his
heirs rely on an argument based on imprescriptibility because the land sold in 1941 is
now in the hands of a Filipino citizen against whom the constitutional prescription was
never intended to apply. The lower court erred in treating the case as one involving
simply the application of the statute of limitations.
From the fact that prescription may not be used to defend a contract which the
Constitution prohibits, it does not necessarily follow that the appellants may be allowed
to recover the property sold to an alien. As earlier mentioned, Fong Pak Luen, the
disqualified alien vendee later sold the same property to Trinidad S. Navata, a Filipino
citizen qualified to acquire real property.
In Vasquez v. Li Seng Giap and Li Seng Giap & Sons (96 Phil. 447), where the alien
vendee later sold the property to a Filipino corporation, this Court, in affirming a
judgment dismissing the complaint to rescind the sale of real property to the defendant
Li Seng Giap on January 22, 1940, on the ground that the vendee was an alien and
under the Constitution incapable to own and hold title to lands, held:
In Caoile vs. Yu Chiao 49 Qff Gaz., 4321; Talento vs. Makiki 49 Off. Gaz.,
4331; Bautista vs. Uy 49 Off. Gaz., 4336; Rellosa vs. Gaw Chee 49 Off.
Gaz., 4345 and Mercado vs. Go Bio, 49 Off. Gaz., 5360, the majority of
this Court has ruled that in sales of real estate to aliens incapable of
holding title thereto by virtue of the provisions of the Constitution (Section
5, Article XIII Krivenko vs. Register of Deeds, 44 Off. Gaz., 471) both the
vendor and the vendee are deemed to have committed the constitutional
violation and being thus in pari delicto the courts will not afford protection
to either party. (Article 1305, old Civil Code; Article 1411, new Civil Code)
From this ruling three Justices dissented. (Mr. Justice Pablo, Mr. Justice
Alex. Reyes and the writer. See Caoile vs. Yu Chiao Talento vs. Makiki
Bautista us. Uy, Rellosa vs. Gaw Chee and Mercado vs. Go Bio). supra.
The action is not of rescission because it is not postulated upon any of the
grounds provided for in Article 1291 of the old Civil Code and because the
action of rescission involves lesion or damage and seeks to repair it. It is
an action for annulment under Chapter VI, Title II, Book 11, on nullity of
contracts, based on a defect in the contract which invalidates it
independently of such lesion or damages. (Manresa, Commentarios al
Codigo Civil Espanol Vol. VIII, p. 698, 4th ed.) It is very likely that the
majority of this Court proceeded upon that theory when it applied the in
pari delicto rule referred to above.
In the United States the rule is that in a sale of real estate to an alien
disqualified to hold title thereto the vendor divests himself of the title to
such real estate and has no recourse against the vendee despite the
latter's disability on account of alienage to hold title to such real estate and
the vendee may hold it against the whole world except as against the
State. It is only the State that is entitled by proceedings in the nature of
office found to have a forfeiture or escheat declared against the vendee
who is incapable of holding title to the real estate sold and conveyed to
him. Abrams vs. State, 88 Pac. 327; Craig vs. Leslie et al., 4 Law, Ed.
460; 3 Wheat, 563, 589590; Cross vs. Del Valle, 1 Wall, [U.S.] 513; 17
Law. Ed., 515; Governeur vs. Robertson, 11 Wheat, 332, 6 Law. Ed.,
488.)
However, if the State does not commence such proceedings and in the
meantime the alien becomes naturalized citizen, the State is deemed to
have waived its right to escheat the real property and the title of the alien
thereto becomes lawful and valid as of the date of its conveyance or
transfer to him. (Osterman vs. Baldwin, 6 Wall, 116, 18 Law. ed. 730;
Manuel vs. Wulff, 152 U.S. 505, 38 Law. ed. 532; Pembroke vs. Houston,
79, SW 470; Fioerella vs. Jones, 259 SW 782. The rule in the United
States that in a sale of real estate to an alien disqualified to hold title
thereto, the vendor divests himself of the title to such real estate and is not
permitted to sue for the annulment Of his Contract, is also the rule under
the Civil Code. ... Article 1302 of the old Civil Code provides: ... Persons
sui juris cannot, however, avail themselves of the incapacity of those with
whom they contracted; ...
xxx xxx xxx
. . . (I)f the ban on aliens from acquiring not only agricultural but, also
urban lands, as construed by this Court in the Krivenko case, is to
preserve the nation's land for future generations of Filipinos, that aim or
purpose would not be thwarted but achieved by making lawful the
acquisition of real estate by aliens who became Filipino citizens by
naturalization. The title to the parcel of land of the vendee, a naturalized
Filipino citizen, being valid that of the domestic corporation to which the
parcel of land has been transferred, must also be valid, 96.67 per cent of
its capital stock being owned by Filipinos.
Herrera v. Luy Kim Guan (SCRA 406) reiterated the above ruling by declaring that
where land is sold to a Chinese citizen, who later sold it to a Filipino, the sale to the
latter cannot be impugned.
The appellants cannot find solace from Philippine Banking Corporation v. Lui She (21
SCRA 52) which relaxed the pari delicto doctrine to allow the heirs or successors-in-
interest, in appropriate cases, to recover that which their predecessors sold to aliens.
Only recently, in Sarsosa vda. de Barsobia v. Cuenco (113 SCRA 547) we had
occasion to pass upon a factual situation substantially similar to the one in the instant
case. We ruled:
But the factual set-up has changed. The litigated property is now in the
hands of a naturalized Filipino. It is no longer owned by a disqualified
vendee. Respondent, as a naturalized citizen, was constitutionally
qualified to own the subject property. There would be no more public
policy to be served in allowing petitioner Epifania to recover the land as it
is already in the hands of a qualified person. Applying by analogy the
ruling of this Court in Vasquez vs. Giap & Sons: (.96 Phil. 447 [1955])
... if the ban on aliens from acquiring not only agricultural but also urban
lands, as construed by this Court in the Krivenko case, is to preserve the
nation's lands for future generations of Filipinos, that aim or purpose would
not be thwarted but achieved by making lawful the acquisition of real
estate by aliens who became Filipino citizens by naturalization.
While, strictly speaking, Ong King Po, private respondent's vendor, had no
rights of ownership to transmit, it is likewise in escapable that petitioner
Epifania had slept on her rights for 26 years from 1936 to 1962. By her
long inaction or inexcusable neglect, she should be held barred from
asserting her claim to the litigated property (Sotto vs. Teves, 86 SCRA
157 [1978])
Laches has been defined as the failure or neglect, for an unreasonable
and unexplained length of time, to do that which by exercising due
diligence could or should have been done earlier; it is negligence or
ommission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or
declined to assert it. (Tijam, et al. vs. Sibonghanoy, et al., No. L-21450,
April 15, 1968, 23 SCRA 29, 35).' (Cited in Sotto vs. Teves, 86 SCRA 154
[1978]).
Respondent, therefore, must be declared to be the rightful owner of the
property.
In the light of the above considerations, we find the second and third assignments of
errors without merit. Respondent Navata, the titled owner of the property is declared the
rightful owner.
WHEREFORE, the instant appeal is hereby denied. The orders dismissing the
complaint and denying the motion for reconsideration are affirmed.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Vasquez and Relova, JJ., concur.

Footnotes
** Under the facts in Sarsosa vda. de Barsobia v. Cuenco (113 SCRA
547), this Court stated that "(t)here should be no question that the sale of
the land in question in 1936 by Epifania Sarsosa to Ong King Po was non-
existent and void from the beginning (Art. 1409 [71, Civil Code) because it
was a contract executed against the mandatory provision of the 1935
Constitution, which is an expression of public policy to conserve lands for
the Filipinos." In Philippine Banking Corporation v. Lui She (21 SCRA 52)
the Court, however, applied Article 1416 of the Civil Code, which refers to
agreements not illegal se but merely prohibited, to justify the exception to
the rule on pari delicto.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 156364 September 3, 2007
JACOBUS BERNHARD HULST, petitioner,
vs.
PR BUILDERS, INC., respondent.
D E C I S I O N
AUSTRIA-MARTINEZ, J .:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of
Court assailing the Decision
1
dated October 30, 2002 of the Court of Appeals (CA) in CA-G.R.
SP No. 60981.
The facts:
Jacobus Bernhard Hulst (petitioner) and his spouse Ida Johanna Hulst-Van Ijzeren (Ida), Dutch
nationals, entered into a Contract to Sell with PR Builders, Inc. (respondent), for the purchase of
a 210-sq m residential unit in respondent's townhouse project in Barangay Niyugan, Laurel,
Batangas.
When respondent failed to comply with its verbal promise to complete the project by June 1995,
the spouses Hulst filed before the Housing and Land Use Regulatory Board (HLURB) a
complaint for rescission of contract with interest, damages and attorney's fees, docketed as
HLRB Case No. IV6-071196-0618.
On April 22, 1997, HLURB Arbiter Ma. Perpetua Y. Aquino (HLURB Arbiter) rendered a
Decision
2
in favor of spouses Hulst, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
complainant, rescinding the Contract to Sell and ordering respondent to:
1) Reimburse complainant the sum of P3,187,500.00, representing the purchase price
paid by the complainants to P.R. Builders, plus interest thereon at the rate of twelve
percent (12%) per annum from the time complaint was filed;
2) Pay complainant the sum of P297,000.00 as actual damages;
3) Pay complainant the sum of P100,000.00 by way of moral damages;
4) Pay complainant the sum of P150,000.00 as exemplary damages;
5) P50,000.00 as attorney's fees and for other litigation expenses; and
6) Cost of suit.
SO ORDERED.
3

Meanwhile, spouses Hulst divorced. Ida assigned her rights over the purchased property to
petitioner.
4
From then on, petitioner alone pursued the case.
On August 21, 1997, the HLURB Arbiter issued a Writ of Execution addressed to the Ex-Officio
Sheriff of the Regional Trial Court of Tanauan, Batangas directing the latter to execute its
judgment.
5

On April 13, 1998, the Ex-Officio Sheriff proceeded to implement the Writ of Execution.
However, upon complaint of respondent with the CA on a Petition for Certiorari and
Prohibition, the levy made by the Sheriff was set aside, requiring the Sheriff to levy first on
respondent's personal properties.
6
Sheriff Jaime B. Ozaeta (Sheriff) tried to implement the writ as
directed but the writ was returned unsatisfied.
7

On January 26, 1999, upon petitioner's motion, the HLURB Arbiter issued an Alias Writ of
Execution.
8

On March 23, 1999, the Sheriff levied on respondent's 15 parcels of land covered by 13 Transfer
Certificates of Title (TCT)
9
in Barangay Niyugan, Laurel, Batangas.
10

In a Notice of Sale dated March 27, 2000, the Sheriff set the public auction of the levied
properties on April 28, 2000 at 10:00 a.m..
11

Two days before the scheduled public auction or on April 26, 2000, respondent filed an Urgent
Motion to Quash Writ of Levy with the HLURB on the ground that the Sheriff made an overlevy
since the aggregate appraised value of the levied properties at P6,500.00 per sq m is
P83,616,000.00, based on the Appraisal Report
12
of Henry Hunter Bayne Co., Inc. dated
December 11, 1996, which is over and above the judgment award.
13

At 10:15 a.m. of the scheduled auction date of April 28, 2000, respondent's counsel objected to
the conduct of the public auction on the ground that respondent's Urgent Motion to Quash Writ
of Levy was pending resolution. Absent any restraining order from the HLURB, the Sheriff
proceeded to sell the 15 parcels of land. Holly Properties Realty Corporation was the winning
bidder for all 15 parcels of land for the total amount of P5,450,653.33. The sum of
P5,313,040.00 was turned over to the petitioner in satisfaction of the judgment award after
deducting the legal fees.
14

At 4:15 p.m. of the same day, while the Sheriff was at the HLURB office to remit the legal fees
relative to the auction sale and to submit the Certificates of Sale
15
for the signature of HLURB
Director Belen G. Ceniza (HLURB Director), he received the Order dated April 28, 2000 issued
by the HLURB Arbiter to suspend the proceedings on the matter.
16

Four months later, or on August 28, 2000, the HLURB Arbiter and HLURB Director issued an
Order setting aside the sheriff's levy on respondent's real properties,
17
reasoning as follows:
While we are not making a ruling that the fair market value of the levied properties is
PhP6,500.00 per square meter (or an aggregate value of PhP83,616,000.00) as indicated
in the Hunter Baynes Appraisal Report, we definitely cannot agree with the position of
the Complainants and the Sheriff that the aggregate value of the 12,864.00-square meter
levied properties is only around PhP6,000,000.00. The disparity between the two
valuations are [sic] so egregious that the Sheriff should have looked into the matter first
before proceeding with the execution sale of the said properties, especially when the
auction sale proceedings was seasonably objected by Respondent's counsel, Atty. Noel
Mingoa. However, instead of resolving first the objection timely posed by Atty. Mingoa,
Sheriff Ozaete totally disregarded the objection raised and, posthaste, issued the
corresponding Certificate of Sale even prior to the payment of the legal fees (pars. 7 & 8,
Sheriff's Return).
While we agree with the Complainants that what is material in an execution sale
proceeding is the amount for which the properties were bidded and sold during the public
auction and that, mere inadequacy of the price is not a sufficient ground to annul the sale,
the court is justified to intervene where the inadequacy of the price shocks the conscience
(Barrozo vs. Macaraeg, 83 Phil. 378). The difference between PhP83,616,000.00 and
Php6,000,000.00 is PhP77,616,000.00 and it definitely invites our attention to look into
the proceedings had especially so when there was only one bidder, the HOLLY
PROPERTIES REALTY CORPORATION represented by Ma, Chandra Cacho (par. 7,
Sheriff's Return) and the auction sale proceedings was timely objected by Respondent's
counsel (par. 6, Sheriff's Return) due to the pendency of the Urgent Motion to Quash the
Writ of Levy which was filed prior to the execution sale.
Besides, what is at issue is not the value of the subject properties as determined
during the auction sale, but the determination of the value of the properties levied
upon by the Sheriff taking into consideration Section 9(b) of the 1997 Rules of Civil
Procedure x x x.
x x x x
It is very clear from the foregoing that, even during levy, the Sheriff has to consider the
fair market value of the properties levied upon to determine whether they are sufficient to
satisfy the judgment, and any levy in excess of the judgment award is void (Buan v.
Court of Appeals, 235 SCRA 424).
x x x x
18
(Emphasis supplied).
The dispositive portion of the Order reads:
WHEREFORE, the levy on the subject properties made by the Ex-Officio Sheriff of the
RTC of Tanauan, Batangas, is hereby SET ASIDE and the said Sheriff is hereby directed
to levy instead Respondent's real properties that are reasonably sufficient to enforce its
final and executory judgment, this time, taking into consideration not only the value of
the properties as indicated in their respective tax declarations, but also all the other
determinants at arriving at a fair market value, namely: the cost of acquisition, the current
value of like properties, its actual or potential uses, and in the particular case of lands,
their size, shape or location, and the tax declarations thereon.
SO ORDERED.
19

A motion for reconsideration being a prohibited pleading under Section 1(h), Rule IV of the
1996 HLURB Rules and Procedure, petitioner filed a Petition for Certiorari and Prohibition with
the CA on September 27, 2000.
On October 30, 2002, the CA rendered herein assailed Decision
20
dismissing the petition. The
CA held that petitioner's insistence that Barrozo v. Macaraeg
21
does not apply since said case
stated that "when there is a right to redeem inadequacy of price should not be material" holds no
water as what is obtaining in this case is not "mere inadequacy," but an inadequacy that shocks
the senses; that Buan v. Court of Appeals
22
properly applies since the questioned levy covered 15
parcels of land posited to have an aggregate value of P83,616,000.00 which shockingly exceeded
the judgment debt of only around P6,000,000.00.
Without filing a motion for reconsideration,
23
petitioner took the present recourse on the sole
ground that:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
ARBITER'S ORDER SETTING ASIDE THE LEVY MADE BY THE SHERIFF ON
THE SUBJECT PROPERTIES.
24

Before resolving the question whether the CA erred in affirming the Order of the HLURB setting
aside the levy made by the sheriff, it behooves this Court to address a matter of public and
national importance which completely escaped the attention of the HLURB Arbiter and the CA:
petitioner and his wife are foreign nationals who are disqualified under the Constitution from
owning real property in their names.
Section 7 of Article XII of the 1987 Constitution provides:
Sec. 7. Save in cases of hereditary succession, no private lands shall be transferred or
conveyed except to individuals, corporations, or associations qualified to acquire or
hold lands of the public domain. (Emphasis supplied).
The capacity to acquire private land is made dependent upon the capacity to acquire or hold
lands of the public domain. Private land may be transferred or conveyed only to individuals or
entities "qualified to acquire lands of the public domain." The 1987 Constitution reserved the
right to participate in the disposition, exploitation, development and utilization of lands of the
public domain for Filipino citizens
25
or corporations at least 60 percent of the capital of which is
owned by Filipinos.
26
Aliens, whether individuals or corporations, have been disqualified from
acquiring public lands; hence, they have also been disqualified from acquiring private lands.
27

Since petitioner and his wife, being Dutch nationals, are proscribed under the Constitution from
acquiring and owning real property, it is unequivocal that the Contract to Sell entered into by
petitioner together with his wife and respondent is void. Under Article 1409 (1) and (7) of the
Civil Code, all contracts whose cause, object or purpose is contrary to law or public policy and
those expressly prohibited or declared void by law are inexistent and void from the beginning.
Article 1410 of the same Code provides that the action or defense for the declaration of the
inexistence of a contract does not prescribe. A void contract is equivalent to nothing; it produces
no civil effect.
28
It does not create, modify or extinguish a juridical relation.
29

Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as
they are, because they are deemed in pari delicto or "in equal fault."
30
In pari delicto is "a
universal doctrine which holds that no action arises, in equity or at law, from an illegal contract;
no suit can be maintained for its specific performance, or to recover the property agreed to be
sold or delivered, or the money agreed to be paid, or damages for its violation; and where the
parties are in pari delicto, no affirmative relief of any kind will be given to one against the
other."
31

This rule, however, is subject to exceptions
32
that permit the return of that which may have been
given under a void contract to: (a) the innocent party (Arts. 1411-1412, Civil Code);
33
(b) the
debtor who pays usurious interest (Art. 1413, Civil Code);
34
(c) the party repudiating the void
contract before the illegal purpose is accomplished or before damage is caused to a third
person and if public interest is subserved by allowing recovery (Art. 1414, Civil Code);
35
(d)
the incapacitated party if the interest of justice so demands (Art. 1415, Civil Code);
36
(e) the
party for whose protection the prohibition by law is intended if the agreement is not illegal per se
but merely prohibited and if public policy would be enhanced by permitting recovery (Art. 1416,
Civil Code);
37
and (f) the party for whose benefit the law has been intended such as in price
ceiling laws (Art. 1417, Civil Code)
38
and labor laws (Arts. 1418-1419, Civil Code).
39

It is significant to note that the agreement executed by the parties in this case is a Contract to Sell
and not a contract of sale. A distinction between the two is material in the determination of when
ownership is deemed to have been transferred to the buyer or vendee and, ultimately, the
resolution of the question on whether the constitutional proscription has been breached.
In a contract of sale, the title passes to the buyer upon the delivery of the thing sold. The vendor
has lost and cannot recover the ownership of the property until and unless the contract of sale is
itself resolved and set aside.
40
On the other hand, a contract to sell is akin to a conditional sale
where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated
to the happening of a future and uncertain event, so that if the suspensive condition does not take
place, the parties would stand as if the conditional obligation had never existed.
41
In other words,
in a contract to sell, the prospective seller agrees to transfer ownership of the property to the
buyer upon the happening of an event, which normally is the full payment of the purchase price.
But even upon the fulfillment of the suspensive condition, ownership does not automatically
transfer to the buyer. The prospective seller still has to convey title to the prospective buyer by
executing a contract of absolute sale.
42

Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the
petitioner when he filed the suit for rescission. While the intent to circumvent the constitutional
proscription on aliens owning real property was evident by virtue of the execution of the
Contract to Sell, such violation of the law did not materialize because petitioner caused the
rescission of the contract before the execution of the final deed transferring ownership.
Thus, exception (c) finds application in this case. Under Article 1414, one who repudiates the
agreement and demands his money before the illegal act has taken place is entitled to recover.
Petitioner is therefore entitled to recover what he has paid, although the basis of his claim for
rescission, which was granted by the HLURB, was not the fact that he is not allowed to acquire
private land under the Philippine Constitution. But petitioner is entitled to the recovery only of
the amount of P3,187,500.00, representing the purchase price paid to respondent. No damages
may be recovered on the basis of a void contract; being nonexistent, the agreement produces no
juridical tie between the parties involved.
43
Further, petitioner is not entitled to actual as well as
interests thereon,
44
moral and exemplary damages and attorney's fees.
The Court takes into consideration the fact that the HLURB Decision dated April 22, 1997 has
long been final and executory. Nothing is more settled in the law than that a decision that has
acquired finality becomes immutable and unalterable and may no longer be modified in any
respect even if the modification is meant to correct erroneous conclusions of fact or law and
whether it was made by the court that rendered it or by the highest court of the land.
45
The only
recognized exceptions to the general rule are the correction of clerical errors, the so-called nunc
pro tunc entries which cause no prejudice to any party, void judgments, and whenever
circumstances transpire after the finality of the decision rendering its execution unjust and
inequitable.
46
None of the exceptions is present in this case. The HLURB decision cannot be
considered a void judgment, as it was rendered by a tribunal with jurisdiction over the subject
matter of the complaint.
47

Ineluctably, the HLURB Decision resulted in the unjust enrichment of petitioner at the expense
of respondent. Petitioner received more than what he is entitled to recover under the
circumstances.
Article 22 of the Civil Code which embodies the maxim, nemo ex alterius incommode debet
lecupletari (no man ought to be made rich out of another's injury), states:
Art. 22. Every person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without just or
legal ground, shall return the same to him.
The above-quoted article is part of the chapter of the Civil Code on Human Relations, the
provisions of which were formulated as basic principles to be observed for the rightful
relationship between human beings and for the stability of the social order; designed to indicate
certain norms that spring from the fountain of good conscience; guides for human conduct that
should run as golden threads through society to the end that law may approach its supreme ideal
which is the sway and dominance of justice.
48
There is unjust enrichment when a person unjustly
retains a benefit at the loss of another, or when a person retains money or property of another
against the fundamental principles of justice, equity and good conscience.
49

A sense of justice and fairness demands that petitioner should not be allowed to benefit from his
act of entering into a contract to sell that violates the constitutional proscription.
This is not a case of equity overruling or supplanting a positive provision of law or judicial rule.
Rather, equity is exercised in this case "as the complement of legal jurisdiction [that] seeks to
reach and to complete justice where courts of law, through the inflexibility of their rules and
want of power to adapt their judgments to the special circumstances of cases, are incompetent to
do so."
50

The purpose of the exercise of equity jurisdiction in this case is to prevent unjust enrichment and
to ensure restitution. Equity jurisdiction aims to do complete justice in cases where a court of law
is unable to adapt its judgments to the special circumstances of a case because of the inflexibility
of its statutory or legal jurisdiction.
51

The sheriff delivered to petitioner the amount of P5,313,040.00 representing the net proceeds
(bidded amount is P5,450,653.33) of the auction sale after deducting the legal fees in the amount
of P137,613.33.
52
Petitioner is only entitled to P3,187,500.00, the amount of the purchase price
of the real property paid by petitioner to respondent under the Contract to Sell. Thus, the Court in
the exercise of its equity jurisdiction may validly order petitioner to return the excess amount of
P2,125,540.00.
The Court shall now proceed to resolve the single issue raised in the present petition: whether the
CA seriously erred in affirming the HLURB Order setting aside the levy made by the Sheriff on
the subject properties.
Petitioner avers that the HLURB Arbiter and Director had no factual basis for pegging the fair
market value of the levied properties at P6,500.00 per sq m or P83,616,000.00; that reliance on
the appraisal report was misplaced since the appraisal was based on the value of land in
neighboring developed subdivisions and on the assumption that the residential unit appraised had
already been built; that the Sheriff need not determine the fair market value of the subject
properties before levying on the same since what is material is the amount for which the
properties were bidded and sold during the public auction; that the pendency of any motion is not
a valid ground for the Sheriff to suspend the execution proceedings and, by itself, does not have
the effect of restraining the Sheriff from proceeding with the execution.
Respondent, on the other hand, contends that while it is true that the HLURB Arbiter and
Director did not categorically state the exact value of the levied properties, said properties cannot
just amount to P6,000,000.00; that the HLURB Arbiter and Director correctly held that the value
indicated in the tax declaration is not the sole determinant of the value of the property.
The petition is impressed with merit.
If the judgment is for money, the sheriff or other authorized officer must execute the same
pursuant to the provisions of Section 9, Rule 39 of the Revised Rules of Court, viz:
Sec. 9. Execution of judgments for money, how enforced.
(a) Immediate payment on demand. - The officer shall enforce an execution of a judgment
for money by demanding from the judgment obligor the immediate payment of the full
amount stated in the writ of execution and all lawful fees. x x x
(b) Satisfaction by levy. - If the judgment obligor cannot pay all or part of the obligation
in cash, certified bank check or other mode of payment acceptable to the judgment
obligee, the officer shall levy upon the properties of the judgment obligor of every
kind and nature whatsoever which may be disposed of for value and not otherwise
exempt from execution, giving the latter the option to immediately choose which
property or part thereof may be levied upon, sufficient to satisfy the judgment. If the
judgment obligor does not exercise the option, the officer shall first levy on the personal
properties, if any, and then on the real properties if the personal properties are insufficient
to answer for the judgment.
The sheriff shall sell only a sufficient portion of the personal or real property of the
judgment obligor which has been levied upon.
When there is more property of the judgment obligor than is sufficient to satisfy the
judgment and lawful fees, he must sell only so much of the personal or real property
as is sufficient to satisfy the judgment and lawful fees.
Real property, stocks, shares, debts, credits, and other personal property, or any interest
in either real or personal property, may be levied upon in like manner and with like
effect as under a writ of attachment (Emphasis supplied).
53

Thus, under Rule 39, in executing a money judgment against the property of the judgment
debtor, the sheriff shall levy on all property belonging to the judgment debtor as is amply
sufficient to satisfy the judgment and costs, and sell the same paying to the judgment creditor so
much of the proceeds as will satisfy the amount of the judgment debt and costs. Any excess in
the proceeds shall be delivered to the judgment debtor unless otherwise directed by the judgment
or order of the court.
54

Clearly, there are two stages in the execution of money judgments. First, the levy and then the
execution sale.
Levy has been defined as the act or acts by which an officer sets apart or appropriates a part or
the whole of a judgment debtor's property for the purpose of satisfying the command of the writ
of execution.
55
The object of a levy is to take property into the custody of the law, and thereby
render it liable to the lien of the execution, and put it out of the power of the judgment debtor to
divert it to any other use or purpose.
56

On the other hand, an execution sale is a sale by a sheriff or other ministerial officer under the
authority of a writ of execution of the levied property of the debtor.
57

In the present case, the HLURB Arbiter and Director gravely abused their discretion in setting
aside the levy conducted by the Sheriff for the reason that the auction sale conducted by the
sheriff rendered moot and academic the motion to quash the levy. The HLURB Arbiter lost
jurisdiction to act on the motion to quash the levy by virtue of the consummation of the auction
sale. Absent any order from the HLURB suspending the auction sale, the sheriff rightfully
proceeded with the auction sale. The winning bidder had already paid the winning bid. The legal
fees had already been remitted to the HLURB. The judgment award had already been turned over
to the judgment creditor. What was left to be done was only the issuance of the corresponding
certificates of sale to the winning bidder. In fact, only the signature of the HLURB Director for
that purpose was needed
58
a purely ministerial act.
A purely ministerial act or duty is one which an officer or tribunal performs in a given state of
facts, in a prescribed manner, in obedience to the mandate of a legal authority, without regard for
or the exercise of his own judgment upon the propriety or impropriety of the act done. If the law
imposes a duty upon a public officer and gives him the right to decide how or when the duty
shall be performed, such duty is discretionary and not ministerial. The duty is ministerial only
when the discharge of the same requires neither the exercise of official discretion nor
judgment.
59
In the present case, all the requirements of auction sale under the Rules have been
fully complied with to warrant the issuance of the corresponding certificates of sale.
And even if the Court should go into the merits of the assailed Order, the petition is meritorious
on the following grounds:
Firstly, the reliance of the HLURB Arbiter and Director, as well as the CA, on Barrozo v.
Macaraeg
60
and Buan v. Court of Appeals
61
is misplaced.
The HLURB and the CA misconstrued the Court's pronouncements in Barrozo. Barrozo
involved a judgment debtor who wanted to repurchase properties sold at execution beyond the
one-year redemption period. The statement of the Court in Barrozo, that "only where such
inadequacy shocks the conscience the courts will intervene," is at best a mere obiter dictum. This
declaration should be taken in the context of the other declarations of the Court in Barrozo, to
wit:
Another point raised by appellant is that the price paid at the auction sale was so
inadequate as to shock the conscience of the court. Supposing that this issue is open even
after the one-year period has expired and after the properties have passed into the hands
of third persons who may have paid a price higher than the auction sale money, the first
thing to consider is that the stipulation contains no statement of the reasonable value of
the properties; and although defendant' answer avers that the assessed value was P3,960 it
also avers that their real market value was P2,000 only. Anyway, mere inadequacy of
price which was the complaint' allegation is not sufficient ground to annul the
sale. It is only where such inadequacy shocks the conscience that the courts will
intervene. x x x Another consideration is that the assessed value being P3,960 and the
purchase price being in effect P1,864 (P464 sale price plus P1,400 mortgage lien which
had to be discharged) the conscience is not shocked upon examining the prices paid in the
sales in National Bank v. Gonzales, 45 Phil., 693 and Guerrero v. Guerrero, 57 Phil.,
445, sales which were left undisturbed by this Court.
Furthermore, where there is the right to redeem as in this case inadequacy of price
should not be material because the judgment debtor may re-acquire the property or
else sell his right to redeem and thus recover any loss he claims to have suffered by
reason of the price obtained at the execution sale.
x x x x (Emphasis supplied).
62

In other words, gross inadequacy of price does not nullify an execution sale. In an ordinary sale,
for reason of equity, a transaction may be invalidated on the ground of inadequacy of price, or
when such inadequacy shocks one's conscience as to justify the courts to interfere; such does not
follow when the law gives the owner the right to redeem as when a sale is made at public
auction,
63
upon the theory that the lesser the price, the easier it is for the owner to effect
redemption.
64
When there is a right to redeem, inadequacy of price should not be material
because the judgment debtor may re-acquire the property or else sell his right to redeem and thus
recover any loss he claims to have suffered by reason of the price obtained at the execution
sale.
65
Thus, respondent stood to gain rather than be harmed by the low sale value of the
auctioned properties because it possesses the right of redemption. More importantly, the subject
matter in Barrozo is the auction sale, not the levy made by the Sheriff.
The Court does not sanction the piecemeal interpretation of a decision. To get the true intent and
meaning of a decision, no specific portion thereof should be isolated and resorted to, but the
decision must be considered in its entirety.
66

As regards Buan, it is cast under an entirely different factual milieu. It involved the levy on two
parcels of land owned by the judgment debtor; and the sale at public auction of one was
sufficient to fully satisfy the judgment, such that the levy and attempted execution of the second
parcel of land was declared void for being in excess of and beyond the original judgment award
granted in favor of the judgment creditor.
In the present case, the Sheriff complied with the mandate of Section 9, Rule 39 of the Revised
Rules of Court, to "sell only a sufficient portion" of the levied properties "as is sufficient to
satisfy the judgment and the lawful fees." Each of the 15 levied properties was successively
bidded upon and sold, one after the other until the judgment debt and the lawful fees were fully
satisfied. Holly Properties Realty Corporation successively bidded upon and bought each of the
levied properties for the total amount of P5,450,653.33 in full satisfaction of the judgment award
and legal fees.
67

Secondly, the Rules of Court do not require that the value of the property levied be exactly the
same as the judgment debt; it can be less or more than the amount of debt. This is the
contingency addressed by Section 9, Rule 39 of the Rules of Court. In the levy of property, the
Sheriff does not determine the exact valuation of the levied property. Under Section 9, Rule 39,
in conjunction with Section 7, Rule 57 of the Rules of Court, the sheriff is required to do only
two specific things to effect a levy upon a realty: (a) file with the register of deeds a copy of the
order of execution, together with the description of the levied property and notice of execution;
and (b) leave with the occupant of the property copy of the same order, description and notice.
68

Records do not show that respondent alleged non-compliance by the Sheriff of said requisites.
Thirdly, in determining what amount of property is sufficient out of which to secure satisfaction
of the execution, the Sheriff is left to his own judgment. He may exercise a reasonable discretion,
and must exercise the care which a reasonably prudent person would exercise under like
conditions and circumstances, endeavoring on the one hand to obtain sufficient property to
satisfy the purposes of the writ, and on the other hand not to make an unreasonable and
unnecessary levy.
69
Because it is impossible to know the precise quantity of land or other
property necessary to satisfy an execution, the Sheriff should be allowed a reasonable margin
between the value of the property levied upon and the amount of the execution; the fact that the
Sheriff levies upon a little more than is necessary to satisfy the execution does not render his
actions improper.
70
Section 9, Rule 39, provides adequate safeguards against excessive levying.
The Sheriff is mandated to sell so much only of such real property as is sufficient to satisfy the
judgment and lawful fees.
In the absence of a restraining order, no error, much less abuse of discretion, can be imputed to
the Sheriff in proceeding with the auction sale despite the pending motion to quash the levy filed
by the respondents with the HLURB. It is elementary that sheriffs, as officers charged with the
delicate task of the enforcement and/or implementation of judgments, must, in the absence of a
restraining order, act with considerable dispatch so as not to unduly delay the administration of
justice; otherwise, the decisions, orders, or other processes of the courts of justice and the like
would be futile.
71
It is not within the jurisdiction of the Sheriff to consider, much less resolve,
respondent's objection to the continuation of the conduct of the auction sale. The Sheriff has no
authority, on his own, to suspend the auction sale. His duty being ministerial, he has no
discretion to postpone the conduct of the auction sale.
Finally, one who attacks a levy on the ground of excessiveness carries the burden of sustaining
that contention.
72
In the determination of whether a levy of execution is excessive, it is proper to
take into consideration encumbrances upon the property, as well as the fact that a forced sale
usually results in a sacrifice; that is, the price demanded for the property upon a private sale is
not the standard for determining the excessiveness of the levy.
73

Here, the HLURB Arbiter and Director had no sufficient factual basis to determine the value of
the levied property. Respondent only submitted an Appraisal Report, based merely on surmises.
The Report was based on the projected value of the townhouse project after it shall have been
fully developed, that is, on the assumption that the residential units appraised had already been
built. The Appraiser in fact made this qualification in its Appraisal Report: "[t]he property
subject of this appraisal has not been constructed. The basis of the appraiser is on the existing
model units."
74
Since it is undisputed that the townhouse project did not push through, the
projected value did not become a reality. Thus, the appraisal value cannot be equated with the
fair market value. The Appraisal Report is not the best proof to accurately show the value of the
levied properties as it is clearly self-serving.
Therefore, the Order dated August 28, 2000 of HLURB Arbiter Aquino and Director Ceniza in
HLRB Case No. IV6-071196-0618 which set aside the sheriff's levy on respondent's real
properties, was clearly issued with grave abuse of discretion. The CA erred in affirming said
Order.
WHEREFORE, the instant petition is GRANTED. The Decision dated October 30, 2002 of the
Court of Appeals in CA-G.R. SP No. 60981 is REVERSED and SET ASIDE. The Order dated
August 28, 2000 of HLURB Arbiter Ma. Perpetua Y. Aquino and Director Belen G. Ceniza in
HLRB Case No. IV6-071196-0618 is declared NULL and VOID. HLURB Arbiter Aquino and
Director Ceniza are directed to issue the corresponding certificates of sale in favor of the
winning bidder, Holly Properties Realty Corporation. Petitioner is ordered to return to
respondent the amount of P2,125,540.00, without interest, in excess of the proceeds of the
auction sale delivered to petitioner. After the finality of herein judgment, the amount of
P2,125,540.00 shall earn 6% interest until fully paid.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 149750 June 16, 2003
AURORA ALCANTARA-DAUS, Petitioner,
vs.
Spouses HERMOSO and SOCORRO DE LEON, Respondents.
D E C I S I O N
PANGANIBAN, J .:
While a contract of sale is perfected by mere consent, ownership of the thing sold is acquired
only upon its delivery to the buyer. Upon the perfection of the sale, the seller assumes the
obligation to transfer ownership and to deliver the thing sold, but the real right of ownership is
transferred only "by tradition" or delivery thereof to the buyer.
The Case
Before us is a Petition for Review
1
under Rule 45 of the Rules of Court, seeking to set aside the
February 9, 2001 Decision and the August 31, 2001 Resolution of the Court of Appeals
2
(CA) in
CA-GR CV No. 47587. The dispositive portion of the assailed Decision reads as follows:
"WHEREFORE, premises considered, the decision of the trial court is hereby REVERSED, and
judgment rendered:
1. Declaring null and void and of no effect, the [D]eed of [A]bsolute [S]ale dated December 6,
1975, the [D]eed of [E]xtra-judicial [P]artition and [Q]uitclaim dated July 1, 1985, and T.C.T.
No. T-31262;
2. Declaring T.C.T. No. 42238 as valid and binding;
3. Eliminating the award of P5,000.00 each to be paid to defendants-appellees."
3

The assailed Resolution
4
denied petitioners Motion for Reconsideration.
The Facts
The antecedents of the case were summarized by the Regional Trial Court (RTC) and adopted by
the CA as follows:
"This is a [C]omplaint for annulment of documents and title, ownership, possession, injunction,
preliminary injunction, restraining order and damages.
"[Respondents] alleged in their [C]omplaint that they are the owners of a parcel of land
hereunder described as follows, to wit:
A parcel of land (Lot No. 4786 of the Cadastral Survey of San Manuel) situated in the
Municipality of San Manuel, Bounded on the NW., by Lot No. 4785; and on the SE., by Lot
Nos. 11094 & 11096; containing an area of Four Thousand Two Hundred Twelve (4,212) sq. m.,
more or less. Covered by Original Certificate of Title No. 22134 of the Land Records of
Pangasinan.
which [Respondent] Hermoso de Leon inherited from his father Marcelino de Leon by virtue of a
[D]eed of [E]xtra-judicial [P]artition. Sometime in the early 1960s, [respondents] engaged the
services of the late Atty. Florencio Juan to take care of the documents of the properties of his
parents. Atty. Juan let them sign voluminous documents. After the death of Atty. Juan, some
documents surfaced and most revealed that their properties had been conveyed by sale or
quitclaim to [Respondent] Hermosos brothers and sisters, to Atty. Juan and his sisters, when in
truth and in fact, no such conveyances were ever intended by them. His signature in the [D]eed
of [E]xtra-judicial [P]artition with [Q]uitclaim made in favor of x x x Rodolfo de Leon was
forged. They discovered that the land in question was sold by x x x Rodolfo de Leon to
[Petitioner] Aurora Alcantara. They demanded annulment of the document and reconveyance but
defendants refused x x x.
x x x x x x x x x
"[Petitioner] Aurora Alcantara-Daus [averred] that she bought the land in question in good faith
and for value on December 6, 1975. [She] has been in continuous, public, peaceful, open
possession over the same and has been appropriating the produce thereof without objection from
anyone."
5

On August 23, 1994, the RTC (Branch 48) of Urdaneta, Pangasinan
6
rendered its Decision
7
in
favor of herein petitioner. It ruled that respondents claim was barred by laches, because more
than 18 years had passed since the land was sold. It further ruled that since it was a notarial
document, the Deed of Extrajudicial Partition in favor of Rodolfo de Leon was presumptively
authentic.
Ruling of the Court of Appeals
In reversing the RTC, the CA held that laches did not bar respondents from pursuing their
claim.1wphi1 Notwithstanding the delay, laches is a doctrine in equity and may not be invoked
to resist the enforcement of a legal right.
The appellate court also held that since Rodolfo de Leon was not the owner of the land at the
time of the sale, he could not transfer any land rights to petitioner. It further declared that the
signature of Hermoso de Leon on the Deed of Extrajudicial Partition and Quitclaim -- upon
which petitioner bases her claim -- was a forgery. It added that under the above circumstances,
petitioner could not be said to be a buyer in good faith.1wphi1
Hence, this Petition.
8

The Issues
Petitioner raises the following issues for our consideration:
"1. Whether or not the Deed of Absolute Sale dated December 6, 1975 executed by
Rodolfo de Leon (deceased) over the land in question in favor of petitioner was perfected
and binding upon the parties therein?
"2. Whether or not the evidentiary weight of the Deed of Extrajudicial Partition with
Quitclaim, executed by [R]espondent Hermoso de Leon, Perlita de Leon and Carlota de
Leon in favor of Rodolfo de Leon was overcome by more than [a] preponderance of
evidence of respondents?
"3. Whether or not the possession of petitioner including her predecessor-in-interest
Rodolfo de Leon over the land in question was in good faith?
"4. And whether or not the instant case initiated and filed by respondents on February 24,
1993 before the trial court has prescribed and respondents are guilty of laches?"
9

The Courts Ruling
The Petition has no merit.
First Issue:
Validity of the Deed of Absolute Sale
Petitioner argues that, having been perfected, the Contract of Sale executed on December 6, 1975
was thus binding upon the parties thereto.
A contract of sale is consensual. It is perfected by mere consent,
10
upon a meeting of the minds
11

on the offer and the acceptance thereof based on subject matter, price and terms of payment.
12
At
this stage, the sellers ownership of the thing sold is not an element in the perfection of the
contract of sale.
The contract, however, creates an obligation on the part of the seller to transfer ownership and to
deliver the subject matter of the contract.
13
It is during the delivery that the law requires the seller
to have the right to transfer ownership of the thing sold.
14
In general, a perfected contract of sale
cannot be challenged on the ground of the sellers non-ownership of the thing sold at the time of
the perfection of the contract.
15

Further, even after the contract of sale has been perfected between the parties, its consummation
by delivery is yet another matter. It is through tradition or delivery that the buyer acquires the
real right of ownership over the thing sold.
16

Undisputed is the fact that at the time of the sale, Rodolfo de Leon was not the owner of the land
he delivered to petitioner. Thus, the consummation of the contract and the consequent transfer of
ownership would depend on whether he subsequently acquired ownership of the land in
accordance with Article 1434 of the Civil Code.
17
Therefore, we need to resolve the issue of the
authenticity and the due execution of the Extrajudicial Partition and Quitclaim in his favor.
Second Issue:
Authenticity of the Extrajudicial Partition
Petitioner contends that the Extrajudicial Partition and Quitclaim is authentic, because it was
notarized and executed in accordance with law. She claims that there is no clear and convincing
evidence to set aside the presumption of regularity in the issuance of such public document. We
disagree.
As a general rule, the due execution and authenticity of a document must be reasonably
established before it may be admitted in evidence.
18
Notarial documents, however, may be
presented in evidence without further proof of their authenticity, since the certificate of
acknowledgment is prima facie evidence of the execution of the instrument or document
involved.
19
To contradict facts in a notarial document and the presumption of regularity in its
favor, the evidence must be clear, convincing and more than merely preponderant.
20

The CA ruled that the signature of Hermoso de Leon on the Extrajudicial Partition and Quitclaim
was forged. However, this factual finding is in conflict with that of the RTC. While normally this
Court does not review factual issues,
21
this rule does not apply when there is a conflict between
the holdings of the CA and those of the trial court,
22
as in the present case.
After poring over the records, we find no reason to reverse the factual finding of the appellate
court. A comparison of the genuine signatures of Hermoso de Leon
23
with his purported
signature on the Deed of Extrajudicial Partition with Quitclaim
24
will readily reveal that the latter
is a forgery. As aptly held by the CA, such variance cannot be attributed to the age or the
mechanical acts of the person signing.
25

Without the corroborative testimony of the attesting witnesses, the lone account of the notary
regarding the due execution of the Deed is insufficient to sustain the authenticity of this
document. He can hardly be expected to dispute the authenticity of the very Deed he notarized.
26

For this reason, his testimony was -- as it should be --minutely scrutinized by the appellate court,
and was found wanting.
Third Issue:
Possession in Good Faith
Petitioner claims that her possession of the land is in good faith and that, consequently, she has
acquired ownership thereof by virtue of prescription. We are not persuaded.
It is well-settled that no title to registered land in derogation of that of the registered owner shall
be acquired by prescription or adverse possession.
27
Neither can prescription be allowed against
the hereditary successors of the registered owner, because they merely step into the shoes of the
decedent and are merely the continuation of the personality of their predecessor in interest.
28

Consequently, since a certificate of registration
29
covers it, the disputed land cannot be acquired
by prescription regardless of petitioners good faith.
Fourth Issue:
Prescription of Action and Laches
Petitioner also argues that the right to recover ownership has prescribed, and that respondents are
guilty of laches. Again, we disagree.
Article 1141 of the New Civil Code provides that real actions over immovable properties
prescribe after thirty years. This period for filing an action is interrupted when a complaint is
filed in court.
30
Rodolfo de Leon alleged that the land had been allocated to him by his brother
Hermoso de Leon in March 1963,
31
but that the Deed of Extrajudicial Partition assigning the
contested land to the latter was executed only on September 16, 1963.
32
In any case, the
Complaint to recover the land from petitioner was filed on February 24, 1993,
33
which was
within the 30-year prescriptive period.
On the claim of laches, we find no reason to reverse the ruling of the CA. Laches is based upon
equity and the public policy of discouraging stale claims.
34
Since laches is an equitable doctrine,
its application is controlled by equitable considerations.
35
It cannot be used to defeat justice or to
perpetuate fraud and injustice.
36
Thus, the assertion of laches to thwart the claim of respondents
is foreclosed, because the Deed upon which petitioner bases her claim is a forgery.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioner.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-43059 October 11, 1979
SAMPAGUITA PICTURES, INC., plaintiff-appellant,
vs.
JALWINDOR MANUFACTURERS, INC., defendant-appellee.
DE CASTRO, J :
This case was certified to this Court by the Court of Appeals pursuant to the provisions
of Section 17, paragraph (6) in relation to Section 31 of the Judiciary Act of 1948.
Plaintiff-appellant Sampaguita Pictures, Inc. (hereinafter referred to as Sampaguita) is
the owner of the Sampaguita Pictures Building located at the corner of General Araneta
and General Roxas Streets, Cubao, Quezon City. The roofdeck of the building and all
existing improvements thereon were leased by Sampaguita to Capitol "300" Inc.
(Capitol for short), and it was agreed, among other things, that the premises shall be
used by said club for social purposes exclusively for its members and guests; that all
permanent improvements made by the lessee on the leased premises shall belong to
the lessor without any obligation on the part of the lessor to reimburse the lessee for the
sum spent for said improvements; that the improvements made by lessee have been
considered as part of the consideration of the monthly rental and said improvements
belong to the lessor; that any remodelling, alterations and/or addition to the premises
shall be at the expense of the lessee and such improvements belong to the lessor,
without any obligation to reimburse the lessee of any sum spent for said improvements.
(pp. 29-32, Record on Appeal).
Capitol "300" purchased on credit from defendant-appellee Jalwindor Manufacturers,
Inc. (hereinafter referred to as Jalwindor) glass and wooden jalousies which were
delivered and installed in the leased premises by Jalwindor replacing the existing
windows. On June 1, 1964, Jalwindor filed with the Court of First Instance of Rizal,
Quezon City, an action for collection of a sum of money with a petition for preliminary
attachment against Capitol for its failure to pay its purchases. The parties submitted to
the trial court a Compromise Agreement wherein Capitol acknowledged its
indebtedness to Jalwindor in the amount of P9,531.09, exclusive of attorney's fees and
interest, payable in monthly installments of at least P300.00 a month beginning
December 15, 1964; and pending liquidation of the said obligation, all the materials
purchased by Capitol will be considered as security for such undertaking. (p. 13, Record
on Appeal).
In the meantime, Capitol "300" was not able to pay rentals to Sampaguita from March 1,
1964 to April 30, 1965, water, electric and telephone services. Sampaguita filed a
complaint for ejectment and for collection of a sum of money against Capitol and on
June 8, 1965, the City Court of Quezon City rendered judgment ordering Capitol to
vacate the premises and to pay Sampaguita.
On the other hand, Capitol likewise failed to comply with the terms of the Compromise
Agreement, and on July 31, 1965, the Sheriff of Quezon City made levy on the glass
and wooden jalousies in question. Sampaguita filed a third party claim alleging that it is
the owner of said materials and not Capitol, Jalwindor however, filed an indemnity bond
in favor of the Sheriff and the items were sold et public auction on August 30, 1965 with
Jalwindor as the highest bidder for P6,000.00.
Sampaguita filed with the Court of First Instance of Rizal, Branch IV of Quezon City, an
action to nullify the Sheriff's Sale and for the issuance of a writ of preliminary injunction
against Jalwindor from detaching the glass and wooden jalousies. Jalwindor was
ordered to maintain the status quo pending final determination of the case. No actual
hearing was held and the parties submitted the following stipulation of facts for the
consideration of the court.
1. That plaintiff and defendant are both domestic corporations duly
organized and existing by and under the laws of the Philippines:
2. That plaintiff leased to the CAPITOL "300", Inc. the roofdeck of the
Sampaguita building and all the existing improvements thereon for a
monthly, rental of P650.00; that the parties to the lease contract agreed
that all permanent improvements made by the lessee on the leased
premises shall belong to the lessor without any obligation on the part of
the lessor to reimburse the lessee for the sum spent for said
improvements; that it was agreed upon by the parties that the
improvements made by the lessee have been considered as part of the
consideration of the monthly rental;
3. That CAPITOL "300", Inc. made alterations on the leased premises;
that it removed the then existing windows and replaced 'them with the
following items bought on credit from the JALWINDOR
MANUFACTURERS INC.. valued at P9,531.09, to wit:
J-21(lever-type) Solex Bluepane
Glass Jaluosies
11 Sets 15'-1 3/4" x 47-7/8" (5 units)
4 Sets 13'-5 3/4" x 47-7/8" (5 units)
3 Sets 10'-9 3/4" x 47-7/7" (4 units)
2 Sets 18'-1 3/3" x 56-3/8" (6 units)
1 Set 9'-1 3/4" x 65-3/8" (3 units)
115 Pcs. Roto Operators for J-21
MODEL J-21 (Roto-type) Glass
and Wood Jalousies
8 Sets 32-1/2" x 60" Solex Bluepane
19 Sets 31-1/4" x 48" Solex Bluepane
18 Sets 34" x 48" Wood
4. That after the CAPITOL "300", Inc. failed to pay the price of the items
mentioned in the preceding paragraph, JALWINDOR MANUFACTURERS,
Inc, filed a case for collection of a sum of money against CAPITOL "300",
Inc. with the Court of First Instance of Rizal (Branch IV Quezon City), Civil
Case No. Q-8040; that by virtue of a Compromise Agreement, CAPITOL
"300", Inc. acknowledged indebtedness in favor of JALWINDOR in the
amount of P9,531,09, with a stipulation in the said Compromise
Agreement, that the items forming part of the improvements will form as
security for such an undertaking;
5. That due to non-compliance by CAPITOL "300", Inc., JALWINDOR
executed judgment that the Sheriff of Quezon City made levy on the items
above-stated in paragraph 3 hereof and sold them at a public auction to
JALWINDOR MANUFACTURERS, INC. as the highest bidder, on August
30, 1965, for the total amount of P 6,000.00:
6. That after CAPITOL "300", Inc. failed to pay the rentals in arrears from
March 1, 1964 to April 30, 1965, water, electric and telephone services
amounting to P 10,772.90, the plaintiff SAMPAGUITA PICTURES, INC.
filed with the City Court of Quezon City, Civil Case No. 11-13161 for
ejectment and collection of a sum of money against the CAPITOL "300",
Inc,; that the City Court rendered judgment in favor of the Sampaguita
Pictures, Inc., on June 8, 1965, ordering the CAPITOL "300", Inc. to
vacate the premises located at the Sampaguita Building and to pay the
Sampaguita Pictures, Inc.;
7. That after the Sheriff of Quezon City made levy on the items above-
stated in paragraph 3 hereof situated on the roofdeck of the Sampaguita
Building, plaintiff filed a Third Party Claim stated in its affidavit on the
ground of its right and title to the possession of the items and that
CAPITOL "300", Inc. has no right or title whatsoever to the possession
over said items; that defendant filed a bond to indemnify the Sheriff
against the claim, and the Sheriff sold the items to the defendant; that the
JALWINDOR MANUFACTURERS, Inc., being the highest bidder and the
execution creditor, considered itself paid to the amount of P6,000.00;
8. That the parties herein agree that the matter of attorney's fees be left to
the sound discretion of the Court, which shall not be less than P500.00.
(Record on Appeal, pp. 11-14).
On October 20, 1967, based on said Stipulation of Facts, the lower court dismissed the
complaint and ordered Sampaguita to pay Jalwindor the amount of P500.00 as
attorney's fees. Sampaguita filed a motion for reconsideration which was likewise
denied, hence, the instant appeal.
Petitioner-appellant raised the following assignment of errors:
I
The lower court erred in holding that Capitol "300" Inc. could not legally
transfer or assign the glass and wooden jalousies in question to the
plaintiff-appellant.
II
The lower court erred in not holding that plaintiff-appellant was the rightful
owner of the glass and wooden jalousies when they were sold by the
Sheriff at the public auction,
III
The lower court erred in not declaring as null and void the levy on
execution and the Sheriff's sale at public auction of the glass and wooden
jalousies.
IV
The lower court erred in holding that defendant-appellee became the
rightful owner of the glass and wooden jalousies.
When the glass and wooden jalousies in question were delivered and installed in the
leased premises, Capitol became the owner thereof. Ownership is not transferred by
perfection of the contract but by delivery, either actual or constructive. This is true even
if the purchase has been made on credit, as in the case at bar. Payment of the
purchase price is not essential to the transfer of ownership as long as the property sold
has been delivered. Ownership is acquired from the moment the thing sold was
delivered to vendee, as when it is placed in his control and possession. (Arts. 1477,
1496 and 1497, Civil Code of the Phil.)
Capitol entered into a lease Contract with Sampaguita in 1964, and the latter became
the owner of the items in question by virtue of the agreement in said contract "that all
permanent improvements made by lessee shall belong to the lessor and that said
improvements have been considered as part of the monthly rentals." When levy or said
items was made on July 31, 1965, Capitol, the judgment debtor, was no longer the
owner thereof.
The action taken by Sampaguita to protect its interest is sanctioned by Section 17, Rule
39 of the Rules of Court, which reads:
Section 17, Proceedings where property claimed by third person.
... The officer is not liable for damages for the taking or keeping of the
property to any third-party claimant unless a claim is made by the latter
and unless an action for damages is brought by him against the officer
within one hundred twenty (120) days from the date of the filing of the
bond. But nothing herein contained shall prevent claimant from vindicating
his claim to the property by any action.
It is, likewise, recignized in the case of Bayer Phil., Inc. vs. Agana, et al., 63 SCRA 358,
wherein the Court declared, "that the rights of third party claimants over certain
properties levied upon by the sheriff to satisfy the judgment, may not be taken up in the
case where such claims are presented but in a separate and independent action
instituted by claimants. ... and should a third-party appear to claim is denied, the remedy
contemplated by the rules in the filing by said party of a reinvicatiry action against the
execution creditor or the purchaser of the property after the sale is completed or that a
complaint for damages to be charged against the bond filed by the creditor in favor of
the sheriff. ... Thus, when a property levied upon by the sheriff pursuant to a writ of
execution is claimed by a third person in a sworn statement of ownership thereof, as
prescribed by the rules, an entirely different matter calling for a new adjudication arises."
The items in question were illegally levied upon since they do not belong to the
judgemnt debtor. The power of the Court in execution of judgment extends only to
properties unquestionably belonging to the judgment debtor. The fact that Capitol failed
to pay Jalwindor the purchase price of the items levied upon did not prevent the transfer
of ownership to Capitol. The complaint of Sampaguita to nullify the Sheriff's sale well -
founded, and should prosper. Execution sales affect the rights of judgment debtor only,
and the purchaser in the auction sale acquires only the right as the debtor has at the
time of sale. Since the items already belong to Sampaguita and not to Capitol, the
judgment debtor, the levy and auction sale are, accordingly, null and void. It is well-
settled in this jurisdiction that the sheriff is not authorized to attach property not
belonging to the judgment debtor. (Arabay, Inc. vs. Salvador, et al., 3 PHILAJUR, 413
[1978], Herald Publishing vs. Ramos, 88 Phil. 94, 100).
WHEREFORE, the decision appealed from is hereby reversed, and plaintiff-appellant
Sampaguita is declared the lawful owner of the disputed glass and wooden jalousies.
Defendant-appellee Jalwindor is permanently enjoined from detaching said items from
the roofdeck of the Sampaguita Pictures Building, and is also ordered to pay plaintiff-
appellant the sum of P1,000.00 for and as attorney's fees, and costs.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-26937 October 5, 1927
PHILIPPINE NATIONAL BANK, plaintiff-appellee,
vs.
SEVERO EUGENIO LO, ET AL., defendants.
SEVERIO EUGENIO LO, NG KHEY LING and YEP SENG, appellants.
Jose Lopez Vito for appellants.
Roman Lacson for appellee.

VILLAMOR, J .:
On September 29, 1916, the appellants Severo Eugenio Lo and Ng Khey Ling, together with J.
A. Say Lian Ping, Ko Tiao Hun, On Yem Ke Lam and Co Sieng Peng formed a commercial
partnership under the name of "Tai Sing and Co.," with a capital of P40,000 contributed by said
partners. In the articles of copartnership, Exhibit A, it appears that the partnership was to last for
five years from after the date of its organization, and that its purpose was to do business in the
City of Iloilo, Province of Iloilo, or in any other part of the Philippine Islands the partners might
desire, under the name of "Tai Sing & Co.," for the purchase and sale of merchandise, goods, and
native, as well as Chinese and Japanese, products, and to carry on such business and speculations
as they might consider profitable. One of the partners, J. A. Say Lian Ping was appointed general
manager of the partnership, with the appointed general manager of the partnership, with the
powers specified in said articles of copartnership.
On June 4, 1917, general manager A. Say Lian Ping executed a power of attorney (Exhibit C-1)
in favor of A. Y. Kelam, authorizing him to act in his stead as manager and administrator of "Tai
Sing & Co.," on July 26, 1918, for, and obtained a loan of P8,000 in current account from the
plaintiff bank. (Exhibit C). As security for said loan, he mortgaged certain personal property of
"Tai Sing & Co., (Exhibit C.)
This credit was renew several times and on March 25, 1919, A. Y. Kelam, as attorney-in-fact of
"Tai Sing & Co., executed a chattel mortgage in favor of plaintiff bank as security for a loan of
P20,000 with interest (Exhibit D). This mortgage was again renewed on April 16, 1920 and A.
Y. Kelam, as attorney-in-fact of "Tai Sing & Co., executed another chattel mortgage for the said
sum of P20,000 in favor of plaintiff bank. (Exhibit E.) According to this mortgage contract, the
P20,000 loan was to earn 9 per cent interest per annum.
On April 20, 1920, Yap Seng, Severo Eugenio Lo, A. Y. Kelam and Ng Khey Ling, the latter
represented by M. Pineda Tayenko, executed a power of attorney in favor of Sy Tit by virtue of
which Sy Tit, representing "Tai Sing & Co., obtained a credit of P20,000 from plaintiff bank on
January 7, 1921, executing a chattel mortgage on certain personal property belonging to "Tai
Sing & Co.
Defendants had been using this commercial credit in a current account with the plaintiff bank,
from the year 1918, to May 22, 1921, and the debit balance of this account, with interest to
December 31, 1924, is as follows:
TAI SING & CO.
To your outstanding account (C. O. D.) with us on
June 30, 1922 P16,518.74
Interest on same from June 30, 1922 to December
31,1924, at 9 per cent per annum 3,720.86
Total

20, 239.00
=========
This total is the sum claimed in the complaint, together with interest on the P16,518.74 debt, at 9
per cent per annum from January 1, 1925 until fully paid, with the costs of the trial.
Defendant Eugenio Lo sets up, as a general defense, that "Tai Sing & Co. was not a general
partnership, and that the commercial credit in current account which "Tai Sing & Co. obtained
from the plaintiff bank had not been authorized by the board of directors of the company, nor
was the person who subscribed said contract authorized to make the same, under the article of
copartnership. The other defendants, Yap Sing and Ng Khey Ling, answered the complaint
denying each and every one of the allegations contained therein.
After the hearing, the court found:
(1) That defendants Eugenio Lo, Ng Khey Ling and Yap Seng Co., Sieng Peng indebted
to plaintiff Philippine National Bank in sum of P22,595.26 to July 29, 1926, with a daily
interest of P4.14 on the balance on account of the partnership "Tai Sing & Co. for the
sum of P16,518.74 until September 9, 1922;
(2) Said defendants are ordered jointly and severally to pay the Philippine National Bank
the sum of P22,727.74 up to August 31, 1926, and from the date, P4.14 daily interest on
the principal; and
(3) The defendants are furthermore ordered to pay the costs of the action.1awph!l.net
Defendants appealed, making the following assignments of error:
I. The trial court erred in finding that article 126 of the Code of Commerce at present in
force is not mandatory.
II. The trial court erred in finding that the partnership agreement of "Tai Sing & Co.,
(Exhibit A), is in accordance with the requirements of article 125 of the Code of
Commerce for the organization of a regular partnership.
III. The trial court erred in not admitting J. A. Sai Lian Ping's death in China in
November, 1917, as a proven fact.
IV. The trial court erred in finding that the death of J. A. Say Lian Ping cannot extinguish
the defendants' obligation to the plaintiff bank, because the last debt incurred by the
commercial partnership "Tai Sing & Co., was that evidence by Exhibit F, signed by Sy
Tit as attorney-in-fact of the members of "Tai Sing & Co., by virtue of Exhibit G.
V. The trial court erred in not finding that plaintiff bank was not able to collect its credit
from the goods of "Tai Sing & Co., given as security therefor through its own fault and
negligence; and that the action brought by plaintiff is a manifest violation of article 237
of the present Code of Commerce.
VI. The trial court erred in finding that the current account of "Tai Sing & Co. with
plaintiff bank shows a debit balance of P16,518.74, which in addition to interest at 9 per
cent per annum from July 29, 1926, amount to P16,595.26, with a daily interest of P4.14
on the sum of P16,518.74.
VII. The trial court erred in ordering the defendants appellants to pay jointly and
severally to the Philippine National Bank the sum of P22,727.74 up to August 31, 1926,
and interest on P16,518.74 from that date until fully paid, with the costs of the action.
VIII. The trial court erred in denying the motion for a new trial filed by defendants-
appellants.
Appellants admit, and it appears from the context of Exhibit A, that the defendant association
formed by the defendants is a general partnership, as defined in article 126 of the Code
Commerce. This partnership was registered in the mercantile register of the Province of Iloilo.
The only anomaly noted in its organization is that instead of adopting for their firm name the
names of all of the partners, of several of them, or only one of them, to be followed in the last
two cases, by the words "and to be followed in the last two cases, by the words "and company"
the partners agreed upon "Tai Sing & Co." as the firm name.
In the case of Hung-Man-Yoc, under the name of Kwong-Wo-Sing vs. Kieng-Chiong-Seng, cited
by appellants, this court held that, as the company formed by defendants had existed in fact,
though not in law due to the fact that it was not recorded in the register, and having operated and
contracted debts in favor of the plaintiff, the same must be paid by someone. This applies more
strongly to the obligations contracted by the defendants, for they formed a partnership which was
registered in the mercantile register, and carried on business contracting debts with the plaintiff
bank. The anomalous adoption of the firm name above noted does not affect the liability of the
general partners to third parties under article 127 of the Code of Commerce. And the Supreme
Court so held in the case of Jo Chung Cang vs. Pacific Commercial Co., (45 Phil., 142), in which
it said that the object of article 126 of the Code of Commerce in requiring a general partnership
to transact business under the name of all its members, of several of them, or of one only, is to
protect the public from imposition and fraud; and that the provision of said article 126 is for the
protection of the creditors rather than of the partners themselves. And consequently the doctrine
was enunciated that the law must be unlawful and unenforceable only as between the partners
and at the instance of the violating party, but not in the sense of depriving innocent parties of
their rights who may have dealt with the offenders in ignorance of the latter having violated the
law; and that contracts entered into by commercial associations defectively organized are valid
when voluntarily executed by the parties, and the only question is whether or not they complied
with the agreement. Therefore, the defendants cannot invoke in their defense the anomaly in the
firm name which they themselves adopted.
As to the alleged death of the manager of the company, Say Lian Ping, before the attorney-in-
fact Ou Yong Kelam executed Exhibits C, D and E, the trial court did not find this fact proven at
the hearing. But even supposing that the court had erred, such an error would not justify the
reversal of the judgment, for two reasons at least: (1) Because Ou Yong Kelam was a partner
who contracted in the name of the partnership, without any objection of the other partners; and
(2) because it appears in the record that the appellant-partners Severo Eugenio Lo, Ng Khey Ling
and Yap Seng, appointed Sy Tit as manager, and he obtained from the plaintiff bank the credit in
current account, the debit balance of which is sought to be recovered in this action.
Appellants allege that such of their property as is not included in the partnership assets cannot-be
seized for the payment of the debts contracted by the partnership until after the partnership
property has been exhausted. The court found that the partnership property described in the
mortgage Exhibit F no loner existed at the time of the filing of the herein complaint nor has its
existence been proven, nor was it offered to the plaintiff for sale. We find no just reason to
reverse this conclusion of the trial court, and this being so, it follows that article 237 of the Code
of Commerce, invoked by the appellant, can in no way have any application here.
Appellants also assign error to the action of the trial court in ordering them to pay plaintiff,
jointly and severally, the sums claimed with 9 per cent interest on P16,518.74, owing from them.
The judgment against the appellants is in accordance with article 127 of the Code of Commerce
which provides that all the members of a general partnership, be they managing partners thereof
or not, shall be personally and solidarily liable with all their property, for the results of the
transactions made in the name and for the account of the partnership, under the signature of the
latter, and by a person authorized to use it.
As to the amount of the interest suffice it to remember that the credit in current account sued on
in this case as been renewed by the parties in such a way that while it appears in the mortgage
Exhibit D executed on March 25, 1919 by the attorney-in-fact Ou Yong Kelam that the P20,000
credit would earn 8 per cent interest annually, yet from that executed on April 16, 1920, Exhibit
E, it appears that the P20,000 would earn 9 per cent interest per annum. The credit was renewed
in January, 1921, and in the deed of pledge, Exhibit F, executed by "Tai Sing & Co., represented
by the attorney-in-fact Sy Tit, it appears that this security is for the payment of the sums received
by the partnership, not to exceed P20,000 with interest and collection fees. There can be no
doubt that the parties agreed upon the rate of interest fixed in the document Exhibit E, namely 9
per cent per annum.
The judgment appealed from is in accordance with the law, and must therefore be, as it is hereby,
affirmed with costs against the appellants. So ordered.
Avancea, C.J., Johnson, Street, Malcolm, Johns and Romualdez, JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 91029 February 7, 1991
NORKIS DISTRIBUTORS, INC., petitioner,
vs.
THE COURT OF APPEALS & ALBERTO NEPALES, respondents.
Jose D. Palma for petitioner.
Public Attorney's Office for private respondent.

GRIO-AQUINO, J .:p
Subject of this petition for review is the decision of the Court of Appeals (Seventeenth
Division) in CA-G.R. No. 09149, affirming with modification the judgment of the Regional
Trial Court, Sixth (6th) Judicial Region, Branch LVI. Himamaylan, Negros Occidental, in
Civil Case No. 1272, which was private respondent Alberto Nepales' action for specific
performance of a contract of sale with damages against petitioner Norkis Distributors,
Inc.
The facts borne out by the record are as follows:
Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the distributor of Yamaha
motorcycles in Negros Occidental with office in Bacolod City with Avelino Labajo as its
Branch Manager. On September 20, 1979, private respondent Alberto Nepales bought
from the Norkis-Bacolod branch a brand new Yamaha Wonderbike motorcycle Model
YL2DX with Engine No.
L2-329401K Frame No. NL2-0329401, Color Maroon, then displayed in the Norkis
showroom. The price of P7,500.00 was payable by means of a Letter of Guaranty from
the Development Bank of the Philippines (DBP), Kabankalan Branch, which Norki s'
Branch Manager Labajo agreed to accept. Hence, credit was extended to Nepales for
the price of the motorcycle payable by DBP upon release of his motorcycle loan. As
security for the loan, Nepales would execute a chattel mortgage on the motorcycle in
favor of DBP. Branch Manager Labajo issued Norkis Sales Invoice No. 0120 (Exh.1)
showing that the contract of sale of the motorcycle had been perfected. Nepales signed
the sales invoice to signify his conformity with the terms of the sale. In the meantime,
however, the motorcycle remained in Norkis' possession.
On November 6, 1979, the motorcycle was registered in the Land Transportation
Commission in the name of Alberto Nepales. A registration certificate (Exh. 2) in his
name was issued by the Land Transportation Commission on November 6, 1979 (Exh.
2-b). The registration fees were paid by him, evidenced by an official receipt, Exhibit 3.
On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales who
was allegedly the agent of Alberto Nepales but the latter denies it (p. 15, t.s.n., August
2, 1984). The record shows that Alberto and Julian Nepales presented the unit to DBP's
Appraiser-Investigator Ernesto Arriesta at the DBP offices in Kabankalan, Negros
Occidental Branch (p. 12, Rollo). The motorcycle met an accident on February 3, 1980
at Binalbagan, Negros Occidental. An investigation conducted by the DBP revealed that
the unit was being driven by a certain Zacarias Payba at the time of the accident (p. 33,
Rollo). The unit was a total wreck (p. 36, t.s.n., August 2,1984; p. 13, Rollo), was
returned, and stored inside Norkis' warehouse.
On March 20, 1980, DBP released the proceeds of private respondent's motorcycle loan
to Norkis in the total sum of P7,500. As the price of the motorcycle later increased to
P7,828 in March, 1980, Nepales paid the difference of P328 (p. 13, Rollo) and
demanded the delivery of the motorcycle. When Norkis could not deliver, he filed an
action for specific performance with damages against Norkis in the Regional Trial Court
of Himamaylan, Negros Occidental, Sixth (6th) Judicial Region, Branch LVI, where it
was docketed as Civil Case No. 1272. He alleged that Norkis failed to deliver the
motorcycle which he purchased, thereby causing him damages.
Norkis answered that the motorcycle had already been delivered to private respondent
before the accident, hence, the risk of loss or damage had to be borne by him as owner
of the unit.
After trial on the merits, the lower court rendered a decision dated August 27, 1985
ruling in favor of private respondent (p. 28, Rollo.) thus:
WHEREFORE, judgment is rendered in favor of the plaintiff and against
the defendants. The defendants are ordered to pay solidarity to the
plaintiff the present value of the motorcycle which was totally destroyed,
plus interest equivalent to what the Kabankalan Sub-Branch of the
Development Bank of the Philippines will have to charge the plaintiff on fits
account, plus P50.00 per day from February 3, 1980 until full payment of
the said present value of the motorcycle, plus P1,000.00 as exemplary
damages, and costs of the litigation. In lieu of paying the present value of
the motorcycle, the defendants can deliver to the plaintiff a brand-new
motorcycle of the same brand, kind, and quality as the one which was
totally destroyed in their possession last February 3, 1980. (pp. 28-29,
Rollo.)
On appeal, the Court of appeals affirmed the appealed judgment on August 21, 1989,
but deleted the award of damages "in the amount of Fifty (P50.00) Pesos a day from
February 3, 1980 until payment of the present value of the damaged vehicle" (p35,
Rollo). The Court of Appeals denied Norkis' motion for reconsideration. Hence, this
Petition for Review.
The principal issue in this case is who should bear the loss of the motorcycle. The
answer to this question would depend on whether there had already been a transfer of
ownership of the motorcycle to private respondent at the time it was destroyed.
Norkis' theory is that:
. . . After the contract of sale has been perfected (Art. 1475) and even
before delivery, that is, even before the ownership is transferred to the
vendee, the risk of loss is shifted from the vendor to the vendee. Under
Art. 1262, the obligation of the vendor to deliver a determinate thing
becomes extinguished if the thing is lost by fortuitous event (Art. 1174),
that is, without the fault or fraud of the vendor and before he has incurred
in delay (Art. 11 65, par. 3). If the thing sold is generic, the loss or
destruction does not extinguish the obligation (Art. 1263). A thing is
determinate when it is particularly designated or physically segregated
from all others of the same class (Art. 1460). Thus, the vendor becomes
released from his obligation to deliver the determinate thing sold while the
vendee's obligation to pay the price subsists. If the vendee had paid the
price in advance the vendor may retain the same. The legal effect,
therefore, is that the vendee assumes the risk of loss by fortuitous event
(Art. 1262) after the perfection of the contract to the time of delivery. (Civil
Code of the Philippines, Ambrosio Padilla, Vol. 5,1987 Ed., p. 87.)
Norkis concedes that there was no "actual" delivery of the vehicle. However, it insists
that there was constructive delivery of the unit upon: (1) the issuance of the Sales
Invoice No. 0120 (Exh. 1) in the name of the private respondent and the affixing of his
signature thereon; (2) the registration of the vehicle on November 6, 1979 with the Land
Transportation Commission in private respondent's name (Exh. 2); and (3) the issuance
of official receipt (Exh. 3) for payment of registration fees (p. 33, Rollo).
That argument is not well taken. As pointed out by the private respondent, the issuance
of a sales invoice does not prove transfer of ownership of the thing sold to the buyer. An
invoice is nothing more than a detailed statement of the nature, quantity and cost of the
thing sold and has been considered not a bill of sale (Am. Jur. 2nd Ed., Vol. 67, p. 378).
In all forms of delivery, it is necessary that the act of delivery whether constructive or
actual, be coupled with the intention of delivering the thing. The act, without the
intention, is insufficient (De Leon, Comments and Cases on Sales, 1978 Ed., citing
Manresa, p. 94).
When the motorcycle was registered by Norkis in the name of private respondent,
Norkis did not intend yet to transfer the title or ownership to Nepales, but only to
facilitate the execution of a chattel mortgage in favor of the DBP for the release of the
buyer's motorcycle loan. The Letter of Guarantee (Exh. 5) issued by the DBP, reveals
that the execution in its favor of a chattel mortgage over the purchased vehicle is a pre-
requisite for the approval of the buyer's loan. If Norkis would not accede to that
arrangement, DBP would not approve private respondent's loan application and,
consequently, there would be no sale.
In other words, the critical factor in the different modes of effecting delivery, which gives
legal effect to the act, is the actual intention of the vendor to deliver, and its acceptance
by the vendee. Without that intention, there is no tradition (Abuan vs. Garcia, 14 SCRA
759).
In the case of Addison vs. Felix and Tioco (38 Phil. 404, 408), this Court held:
The Code imposes upon the vendor the obligation to deliver the thing sold.
The thing is considered to be delivered when it is "placed in the hands and
possession of the vendee." (Civil Code, Art. 1462). It is true that the same
article declares that the execution of a public instrument is equivalent to
the delivery of the thing which is the object of the contract, but, in order
that this symbolic delivery may produce the effect of tradition, it is
necessary that the vendor shall have had such control over the thing sold
that, at the moment of the sale, its material delivery could have been
made. It is not enough to confer upon the purchaser the ownership and
the right of possession. The thing sold must be placed in his control. When
there is no impediment whatever to prevent the thing sold passing into the
tenancy of the purchaser by the sole will of the vendor, symbolic delivery
through the execution of a public instrument is sufficient. But if
notwithstanding the execution of the instrument, the purchaser cannot
have the enjoyment and material tenancy of the thing and make use of it
himself or through another in his name, because such tenancy and
enjoyment are opposed by the interposition of another will, then fiction
yields to reality-the delivery has riot been effects .(Emphasis supplied.)
The Court of Appeals correctly ruled that the purpose of the execution of the sales
invoice dated September 20, 1979 (Exh. B) and the registration of the vehicle in the
name of plaintiff-appellee (private respondent) with the Land Registration Commission
(Exhibit C) was not to transfer to Nepales the ownership and dominion over the
motorcycle, but only to comply with the requirements of the Development Bank of the
Philippines for processing private respondent's motorcycle loan. On March 20, 1980,
before private respondent's loan was released and before he even paid Norkis, the
motorcycle had already figured in an accident while driven by one Zacarias Payba.
Payba was not shown by Norkis to be a representative or relative of private respondent.
The latter's supposed relative, who allegedly took possession of the vehicle from Norkis
did not explain how Payba got hold of the vehicle on February 3, 1980. Norkis' claim
that Julian Nepales was acting as Alberto's agent when he allegedly took delivery of the
motorcycle (p. 20, Appellants' Brief), is controverted by the latter. Alberto denied having
authorized Julian Nepales to get the motorcycle from Norkis Distributors or to enter into
any transaction with Norkis relative to said motorcycle. (p. 5, t.s.n., February 6, 1985).
This circumstances more than amply rebut the disputable presumption of delivery upon
which Norkis anchors its defense to Nepales' action (pp. 33-34, Rollo).
Article 1496 of the Civil Code which provides that "in the absence of an express
assumption of risk by the buyer, the things sold remain at seller's risk until the
ownership thereof is transferred to the buyer," is applicable to this case, for there was
neither an actual nor constructive delivery of the thing sold, hence, the risk of loss
should be borne by the seller, Norkis, which was still the owner and possessor of the
motorcycle when it was wrecked. This is in accordance with the well-known doctrine of
res perit domino.
WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-
G.R. No. 09149, we deny the petition for review and hereby affirm the appealed
decision, with costs against the petitioner.
SO ORDERED.
Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-19545 April 18, 1975
PHILIPPINE SUBURBAN DEVELOPMENT CORPORATION, petitioner,
vs.
THE AUDITOR GENERAL, PEDRO M. GIMENEZ, respondent.
Magno L. Dajao for petitioner.
First Assistant Solicitor General Esmeraldo Umali and Solicitor Sumilang V. Bernardo
for respondent.

ANTONIO, J .:+.wph!1
Appeal by certiorari from the decision dated December 11, 1961, of then Auditor
General Pedro M. Gimenez, disallowing the request of petitioner for the refund of real
estate tax in the amount of P30,460.90 paid to the Provincial Treasurer of Bulacan.
The facts of the case are as follows:
On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting
on the reports of the Committee created to survey suitable lots for relocating squatters
in Manila and suburbs, and of the Social Welfare Administrator together with the
recommendation of the Manager of the Government Service Insurance System,
approved in principle the acquisition by the People's Homesite and Housing Corporation
of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan for
relocating the squatters who desire to settle north of Manila, and of another area either
in Las Pias or Paraaque, Rizal, or Bacoor, Cavite for those who desire to settle south
of Manila. The project was to be financed through the flotation of bonds under the
charter of the PHHC in the amount of P4.5 million, the same to be absorbed by the
Government Service Insurance System. The President, through the Executive
Secretary, informed the PHHC of such approval by letter bearing the same date (Annex
"B").
On June 10, 1960, the Board of Directors of the PHHC passed Resolution No. 700
(Annex "C") authorizing the purchase of the unoccupied portion of the Sapang Palay
Estate at P0.45 per square meter "subject to the following conditions precedent:
t.hqw
1. That the confirmation by the OEC and the President of the purchase
price of P0.45 per sq. m. shall first be secured, pursuant to OEC
Memorandum Circular No. 114, dated May 6, 1957.
2. That the portion of the estate to be acquired shall first be defined and
delineated.
3. That the President of the Philippines shall first provide the PHHC with
the necessary funds to effect the purchase and development of this
property from the proposed P4.5 million bond issue to be absorbed by the
GSIS.
4. That the contract of sale shall first be approved by the Auditor General
pursuant to Executive Order dated February 3, 1959.
5. The vendor shall agree to the dismissal with prejudice of Civil Case No.
Q-3332 C.F.I. Quezon City, entitled "Phil. Suburban Dev. Corp. V. Ortiz, et
al."
On July 13, 1960, the President authorized the floating of bonds under Republic Act
Nos. 1000 and 1322 in the amount of P7,500,000.00 to be absorbed by the GSIS, in
order to finance the acquisition by the PHHC of the entire Sapang Palay Estate at a
price not to exceed P0.45 per sq. meter.
On December 29,1960, after an exchange of communications, Petitioner Philippine
Suburban Development Corporation, as owner of the unoccupied portion of the Sapang
Palay Estate (specifically two parcels covered by TCT Nos. T-23807 and T-23808), and
the People's Homesite and Housing Corporation, entered into a contract embodied in a
public instrument entitled "Deed of Absolute Sale" (Annex "F") whereby the former
conveyed unto the latter the two parcels of land abovementioned, under the following
terms and conditions, among others: t.hqw
1. That for and in consideration of the sum of THREE MILLION THREE
HUNDRED EIGHTY-SIX THOUSAND TWO HUNDRED TWENTY THREE
(P3,386,223.00) PESOS, Philippine currency, to be paid by the VENDEE
to the herein VENDOR in the manner outlined hereinbelow, the VENDOR
by these presents does hereby sell, transfer and convey by way of
absolute sale unto the VENDEE, its successors, administrators or assigns,
the above described two (2) parcels of land, together with all the
improvements existing thereon;
2. That the payment of the consideration mentioned in paragraph 1 above
shall be made as follows:
(a) The vendee is presently negotiating or securing from the
GOVERNMENT SERVICE INSURANCE SYSTEM, by virtue of a directive
of the President of the Philippines, a loan for the purchase of the above
described two (2) parcels of land in anticipation of the purchase by the
said GOVERNMENT SERVICE INSURANCE SYSTEM of the bonds to be
floated by the National Government to enable the VENDEE to make this
purchase, and from whatever amount may be granted as loan by the
GOVERNMENT SERVICE INSURANCE SYSTEM to the VENDEE, ONE
MILLION SEVEN HUNDRED TEN THOUSAND (P1,710,000.00) PESOS
shall be retained by the said VENDEE for the purpose of paying and
clearing the existing lien annotated at the back of the aforesaid Transfer
Certificates of Title Nos. T-23807 and T-23808, said payment to be made
directly to the MORTGAGEES and the difference shall be paid to the
VENDOR, provided that this first payment shall not be less than ONE
MILLION SEVEN HUNDRED TEN THOUSAND (P1,710,000.00) PESOS
and the VENDOR is hereby constituted as Attorney-in-fact and authorized
to receive from, and the GOVERNMENT SERVICE INSURANCE
SYSTEM is directed to pay the balance of the loan direct to the herein
VENDOR chargeable against VENDEE's loan from the GOVERNMENT
SERVICE INSURANCE SYSTEM; provided, however, That should this
amount be more than sufficient to cover the said mortgage lien, the
VENDEE shall pay the difference to the VENDOR; and provided, further,
That the VENDOR shall take charge of the preparation and registration of
the documents necessary in clearing the above referred to mortgage lien,
with the understanding that the expenses for preparation, notarization,
registration, including documentary stamps, and other expenses for the
cancellation of said mortgage lien shall be for the account of the VENDOR
and shall be advanced by the VENDEE to the VENDOR;
(b) That out of the sum of P1,710,000.00 to be retained by the VENDEE
mentioned in the immediately preceding paragraph 2(a) for the purpose of
discharging the said mortgage lien, the VENDEE shall deduct and further
retain or keep as a trust fund the amount of FORTY THOUSAND
(P40,000) PESOS, Philippine Currency, to answer for the remaining
Notice of Lis Pendens annotated at the back of Transfer Certificate of Title
Nos. T-23807 and T-23808 until such lien shall have been discharged or
cancelled, the VENDEE binding itself to deliver forthwith the said amount
of P40,000.00 unto the successful party involved in said Notice of Lis
Pendens;
(c) The remaining balance of the total consideration in the amount of ONE
MILLION SIX HUNDRED SEVENTY-SIX THOUSAND TWO HUNDRED
TWENTY-THREE PESOS (P1,676,223.00), Philippine Currency, or
whatever amount is not paid by virtue of the first payment mentioned in
paragraph (a) above, shall be paid by the VENDEE unto the VENDOR
immediately upon the VENDEE's obtaining sufficient funds from proceeds
of bonds floated by the VENDEE or the Government for the purchase of
the properties subject of this transaction; provided, however, That full and
complete payment of the balance mentioned in this particular paragraph
2(c) shall be made or paid by the VENDEE within a period of sixty (60)
days from date of delivery of title by the VENDOR in the name of the
VENDEE; and provided, further, That this sixty (60) days period may be
extended for another period of sixty (60) days upon written request by the
VENDEE at least five (5) days prior to the expiration of the said sixty (60)
days period. Should there be instituted any legal action, however, for the
collection of any amounts due from the VENDEE in favor of the VENDOR,
the VENDEE binds itself to pay unto the VENDOR a sum equivalent to
twenty-five (25%) per centum of the total balance due from the, VENDEE
in favor of the VENDOR as and by way of attorney's fees, and the costs of
suit;
3. That the VENDOR hereby warrants to defend the title and ownership of
the VENDEE to the two (2) parcels of land above described from any
claim or claims of third parties whomsoever;
(4.) That all expenses for the preparation and notarization of this
document shall be for the account of the VENDOR; provided, however,
That registration and issuance of certificates of title in the name of the
VENDEE shall be for the account of the VENDEE." (Annex "F")
The above document was not registered in the Office of the Register of Deeds until
March 14, 1961, due to the fact, petitioner claims, that the PHHC could not at once
advance the money needed for registration expenses. In the meantime, the Auditor
General, to whom a copy of the contract had been submitted for approval in conformity
with Executive Order No. 290, expressed objections thereto and requested a re-
examination of the contract, in view of the fact that from 1948 to December 20, 1960,
the entire hacienda was assessed at P131,590.00, and reassessed beginning
December 21, 1960 in the greatly increased amount of P4,898,110.00. Said objections
were embodied in a letter to the President, dated January 9, 1961, but this
notwithstanding, the President, through the Executive Secretary, approved the Deed of
Absolute Sale on February 1, 1961.
It appears that as early as the first week of June, 1960, prior to the signing of the deed
by the parties, the PHHC acquired possession of the property, with the consent of
petitioner, to enable the said PHHC to proceed immediately with the construction of
roads in the new settlement and to resettle the squatters and flood victims in Manila
who were rendered homeless by the floods or ejected from the lots which they were
then occupying (Annexes "D" and "D-1").
On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold
the amount of P30,099.79 from the purchase price to be paid by it to the Philippine
Suburban Development Corporation. Said amount represented the realty tax due on the
property involved for the calendar year 1961 (Annex "G").
Petitioner, through the PHHC, paid under protest the abovementioned amount to the
Provincial Treasurer of Bulacan and thereafter, or on June 13, 1961, by letter,
requested then Secretary of Finance Dominador Aytona to order a refund of the amount
so paid. Petitioner claimed that it ceased to be the owner of the land in question upon
the execution of the Deed of Absolute Sale on December 29, 1960. Upon
recommendation of the Provincial Treasurer of Bulacan, said request was denied by the
Secretary of Finance in a letter-decision dated August 22, 1961. Pertinent portions of
this decision are quoted hereunder: t.hqw
.... the records show that the deed of sale executed on December 29,
1960 ... was approved by the President upon favorable recommendation
of the Cabinet and the Committee created for the purpose of surveying
suitable lots which may be acquired for relocating squatters in Manila on
February 1, 1961 only and that said instrument of sale was registered with
the Register of Deeds on March 14, 1961.
That Corporation, as vendor, maintains that in view of the execution of the
deed of sale on December 29, 1960 it ceased to be the owner of the
property involved and that consequently it was under no obligation to pay
the real property tax thereon effective January 1, 1961. In support of its
stand, that Corporation cites Article 1498 of the New Civil Code of the
Philippines which provides that "when the sale is made through a public
instrument, the execution thereof shall be equivalent to the delivery of the
thing which is the object of the contract, if from the deed the contrary does
not appear or cannot clearly be inferred" and Article 1496 of the same
Code which states that "the ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in any of the ways specified
in Articles 1497 to 1501, or in any other manner signifying an agreement
that the possession is transferred from the vendor to the vendee." On the
other hand, the Provincial Treasurer contends that, as under the Land
Registration Act (Act No. 496) the Philippine Suburban Development
Corporation is still the owner of the property until the deed of sale covering
the same has been actually registered, the vendor is still liable to the
payment of real property tax for the calendar year 1961.
It is now claimed in this appeal that the Auditor General erred in disallowing the refund
of the real estate tax in the amount of P30,460.90 because aside from the presumptive
delivery of the property by the execution of the deed of sale on December 29, 1960, the
possession of the property was actually delivered to the vendee prior to the sale, and,
therefore, by the transmission of ownership to the vendee, petitioner has ceased to be
the owner of the property involved, and, consequently, under no obligation to pay the
real property tax for the year 1961.
Respondent, however, argues that the presumptive delivery of the property under
Article 1498 of the Civil Code does not apply because of the requirement in the contract
that the sale shall first be approved by the Auditor General, pursuant to the Executive
Order dated February 3, 1959 and later by the President, and that the petitioner should
register the deed and secure a new title in the name of the vendee before the
government can be compelled to pay the balance of P1,676,223.00 of the purchase
price. Respondent further contends that since the property involved is a land registered
under the Land Registration Act (Act No. 496), until the deed of sale has been actually
registered, the vendor remains as the owner of the said property, and, therefore, liable
for the payment of real property tax.
We find the petition meritorious.
I .
It cannot be denied that the President of the Philippines, on June 8, 1960, at his Cabinet
meeting, approved and authorized the purchase by the national government, through
the PHHC, of the unoccupied portion of the property of petitioner; that on June 10,
1960, the PHHC, acting pursuant to the aforecited approval of the President, passed its
Resolution No. 700 approving and authorizing the purchase of the unoccupied portion of
said property; and that after the PHHC took possession of the aforementioned property
on the first week of June, 1960 to use it as a resettlement area for squatters and flood
victims from Manila and suburbs, the President of the Philippines at his Cabinet meeting
on June 13, 1960, approved and authorized the purchase by the PHHC of the entire
property consisting of 752.4940 hectares, instead of only the unoccupied portion thereof
as was previously authorized.
Considering the aforementioned approval and authorization by the President of the
Philippines of the specific transaction in question, and the fact that the contract here
involved which is for a special purpose to meet a special situation was entered
into precisely to implement the Presidential directive, the prior approval by the Auditor
General envisioned by Administrative Order No. 290, dated February 3, 1959, would
therefore, not be necessary.
As We held in Federation of the United NAMARCO Distributors v. National Marketing
Corporation,
1
the approval by the Auditor General contemplated by Administrative
Order No. 290 dated February 3, 1959, refers to contracts in general, ordinarily entered
into by government offices and government-owned or controlled corporations, and not
to a contract for a special purpose, to meet a special situation and entered into in
implementation of a Presidential directive to solve and emergency. In other words,
where the contract already bears the approval of the President, the action of the Auditor
General would no longer be necessary because under the said Administrative Order,
the President has, at any rate, the final say.
II
Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe
actual (real tradition) or constructive (constructive tradition).
2
When the sale of real
property is made in a public instrument, the execution thereof is equivalent to the
delivery of the thing object of the contract, if from the deed the contrary does not appear
or cannot clearly be inferred.
3

In other words, there is symbolic delivery of the property subject of the sale by the
execution of the public instrument, unless from the express terms of the instrument, or
by clear inference therefrom, this was not the intention of the parties. Such would be the
case, for instance, when a certain date is fixed for the purchaser to take possession of
the property subject of the conveyance, or where, in case of sale by installments, it is
stipulated that until the last installment is made, the title to the property should remain
with the vendor, or when the vendor reserves the right to use and enjoy the properties
until the gathering of the pending crops,
4
or where the vendor has no control over the
thing sold at the moment of the sale, and, therefore, its material delivery could not have
been made.
5

In the case at bar, there is no question that the vendor had actually placed the vendee
in possession and control over the thing sold, even before the date of the sale. The
condition that petitioner should first register the deed of sale and secure a new title in
the name of the vendee before the latter shall pay the balance of the purchase price, did
not preclude the transmission of ownership. In the absence of an express stipulation to
the contrary, the payment of the purchase price of the good is not a condition,
precedent to the transfer of title to the buyer, but title passes by the delivery of the
goods.
6

III .
We fail to see the merit in respondent's insistence that, although possession was
transferred to the vendee and the deed of sale was executed in a public instrument on
December 29, l960, the vendor still remains as owner of the property until the deed of
sale is actually registered with the Office of the Register of Deeds, because the land
sold is registered under the Torrens System. In a long line of cases already decided by
this Court, the constant doctrine has been that, as between the parties to a contract of
sale, registration is not necessary to make it valid and effective, for actual notice is
equivalent to registration.
7
Indeed, Section 50 of the Land Registration Act provides
that, even without the act of registration, a deed purporting to convey or affect
registered land shall operate as a contract between the parties. The registration is
intended to protect the buyer against claims of third persons arising from subsequent
alienations by the vendor, and is certainly not necessary to give effect to the deed of
sale, as between the parties to the contract.
8

The case of Vargas v. Tancioco, 9 cited by respondent, refers to a case involving
conflicting rights over registered property and those of innocent transferees who relied
on the clean titles of the properties in question. It is, therefore, not relevant to the case
at bar.
In the case at bar, no rights of third persons are involved, much less is there any
subsequent alienation of the same property. It is undisputed that the property is in the
possession of the vendee, even as early as the first week of June, 1960, or six (6)
months prior to the execution of the Deed of Absolute Sale on December 29, 1960.
Since the delivery of possession, coupled with the execution of the Deed of Absolute
Sale, had consummated the sale and transferred the title to the purchaser,
10
We,
therefore, hold that the payment of the real estate tax after such transfer is the
responsibility of the purchaser. However, in the case at bar, the purchaser PHHC is a
government entity not subject to real property tax.
11

WHEREFORE, the appealed decision is hereby reversed, and the real property tax paid
under protest to the Provincial Treasurer of Bulacan by petitioner Philippine Suburban
Development Corporation, in the amount of P30,460,90, is hereby ordered refunded.
Without any pronouncement as to costs.
Makalintal, C.J., Fernando, Barredo and Aquino, JJ., concur.1wph1.t


Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-12342 August 3, 1918
A. A. ADDISON, plaintiff-appellant,
vs.
MARCIANA FELIX and BALBINO TIOCO, defendants-appellees.
Thos. D. Aitken for appellant.
Modesto Reyes and Eliseo Ymzon for appellees.
FISHER, J .:
By a public instrument dated June 11, 1914, the plaintiff sold to the defendant Marciana Felix,
with the consent of her husband, the defendant Balbino Tioco, four parcels of land, described in
the instrument. The defendant Felix paid, at the time of the execution of the deed, the sum of
P3,000 on account of the purchase price, and bound herself to pay the remainder in installments,
the first of P2,000 on July 15, 1914, and the second of P5,000 thirty days after the issuance to her
of a certificate of title under the Land Registration Act, and further, within ten years from the
date of such title P10, for each coconut tree in bearing and P5 for each such tree not in bearing,
that might be growing on said four parcels of land on the date of the issuance of title to her, with
the condition that the total price should not exceed P85,000. It was further stipulated that the
purchaser was to deliver to the vendor 25 per centum of the value of the products that she might
obtain from the four parcels "from the moment she takes possession of them until the Torrens
certificate of title be issued in her favor."
It was also covenanted that "within one year from the date of the certificate of title in favor of
Marciana Felix, this latter may rescind the present contract of purchase and sale, in which case
Marciana Felix shall be obliged to return to me, A. A. Addison, the net value of all the products
of the four parcels sold, and I shall obliged to return to her, Marciana Felix, all the sums that she
may have paid me, together with interest at the rate of 10 per cent per annum."
In January, 1915, the vendor, A. A. Addison, filed suit in Court of First Instance of Manila to
compel Marciana Felix to make payment of the first installment of P2,000, demandable in
accordance with the terms of the contract of sale aforementioned, on July 15, 1914, and of the
interest in arrears, at the stipulated rate of 8 per cent per annum. The defendant, jointly with her
husband, answered the complaint and alleged by way of special defense that the plaintiff had
absolutely failed to deliver to the defendant the lands that were the subject matter of the sale,
notwithstanding the demands made upon him for this purpose. She therefore asked that she be
absolved from the complaint, and that, after a declaration of the rescission of the contract of the
purchase and sale of said lands, the plaintiff be ordered to refund the P3,000 that had been paid
to him on account, together with the interest agreed upon, and to pay an indemnity for the losses
and damages which the defendant alleged she had suffered through the plaintiff's non-fulfillment
of the contract.
The evidence adduced shows that after the execution of the deed of the sale the plaintiff, at the
request of the purchaser, went to Lucena, accompanied by a representative of the latter, for the
purpose of designating and delivering the lands sold. He was able to designate only two of the
four parcels, and more than two-thirds of these two were found to be in the possession of one
Juan Villafuerte, who claimed to be the owner of the parts so occupied by him. The plaintiff
admitted that the purchaser would have to bring suit to obtain possession of the land (sten. notes,
record, p. 5). In August, 1914, the surveyor Santamaria went to Lucena, at the request of the
plaintiff and accompanied by him, in order to survey the land sold to the defendant; but he
surveyed only two parcels, which are those occupied mainly by the brothers Leon and Julio
Villafuerte. He did not survey the other parcels, as they were not designated to him by the
plaintiff. In order to make this survey it was necessary to obtain from the Land Court a writ of
injunction against the occupants, and for the purpose of the issuance of this writ the defendant, in
June, 1914, filed an application with the Land Court for the registration in her name of four
parcels of land described in the deed of sale executed in her favor by the plaintiff. The
proceedings in the matter of this application were subsequently dismissed, for failure to present
the required plans within the period of the time allowed for the purpose.
The trial court rendered judgment in behalf of the defendant, holding the contract of sale to be
rescinded and ordering the return to the plaintiff the P3,000 paid on account of the price, together
with interest thereon at the rate of 10 per cent per annum. From this judgment the plaintiff
appealed.
In decreeing the rescission of the contract, the trial judge rested his conclusion solely on the
indisputable fact that up to that time the lands sold had not been registered in accordance with
the Torrens system, and on the terms of the second paragraph of clause (h) of the contract,
whereby it is stipulated that ". . . within one year from the date of the certificate of title in favor
of Marciana Felix, this latter may rescind the present contract of purchase and sale . . . ."
The appellant objects, and rightly, that the cross-complaint is not founded on the hypothesis of
the conventional rescission relied upon by the court, but on the failure to deliver the land sold.
He argues that the right to rescind the contract by virtue of the special agreement not only did not
exist from the moment of the execution of the contract up to one year after the registration of the
land, but does not accrue until the land is registered. The wording of the clause, in fact,
substantiates the contention. The one year's deliberation granted to the purchaser was to be
counted "from the date of the certificate of title ... ." Therefore the right to elect to rescind the
contract was subject to a condition, namely, the issuance of the title. The record show that up to
the present time that condition has not been fulfilled; consequently the defendant cannot be heard
to invoke a right which depends on the existence of that condition. If in the cross-complaint it
had been alleged that the fulfillment of the condition was impossible for reasons imputable to the
plaintiff, and if this allegation had been proven, perhaps the condition would have been
considered as fulfilled (arts. 1117, 1118, and 1119, Civ. Code); but this issue was not presented
in the defendant's answer.
However, although we are not in agreement with the reasoning found in the decision appealed
from, we consider it to be correct in its result. The record shows that the plaintiff did not deliver
the thing sold. With respect to two of the parcels of land, he was not even able to show them to
the purchaser; and as regards the other two, more than two-thirds of their area was in the hostile
and adverse possession of a third person.
The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is
considered to be delivered when it is placed "in the hands and possession of the vendee." (Civ.
Code, art. 1462.) It is true that the same article declares that the execution of a public instruments
is equivalent to the delivery of the thing which is the object of the contract, but, in order that this
symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have
had such control over the thing sold that, at the moment of the sale, its material delivery could
have been made. It is not enough to confer upon the purchaser the ownership and the right of
possession. The thing sold must be placed in his control. When there is no impediment whatever
to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor,
symbolic delivery through the execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it himself or through another in his name, because
such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields
to reality the delivery has not been effected.
As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on article 1604 of the
French Civil code, "the word "delivery" expresses a complex idea . . . the abandonment of the
thing by the person who makes the delivery and the taking control of it by the person to whom
the delivery is made."
The execution of a public instrument is sufficient for the purposes of the abandonment made by
the vendor; but it is not always sufficient to permit of the apprehension of the thing by the
purchaser.
The supreme court of Spain, interpreting article 1462 of the Civil Code, held in its decision of
November 10, 1903, (Civ. Rep., vol. 96, p. 560) that this article "merely declares that when the
sale is made through the means of a public instrument, the execution of this latter is equivalent to
the delivery of the thing sold: which does not and cannot mean that this fictitious tradition
necessarily implies the real tradition of the thing sold, for it is incontrovertible that, while its
ownership still pertains to the vendor (and with greater reason if it does not), a third person may
be in possession of the same thing; wherefore, though, as a general rule, he who purchases by
means of a public instrument should be deemed . . . to be the possessor in fact, yet this
presumption gives way before proof to the contrary."
It is evident, then, in the case at bar, that the mere execution of the instrument was not a
fulfillment of the vendors' obligation to deliver the thing sold, and that from such non-fulfillment
arises the purchaser's right to demand, as she has demanded, the rescission of the sale and the
return of the price. (Civ. Code, arts. 1506 and 1124.)
Of course if the sale had been made under the express agreement of imposing upon the purchaser
the obligation to take the necessary steps to obtain the material possession of the thing sold, and
it were proven that she knew that the thing was in the possession of a third person claiming to
have property rights therein, such agreement would be perfectly valid. But there is nothing in the
instrument which would indicate, even implicitly, that such was the agreement. It is true, as the
appellant argues, that the obligation was incumbent upon the defendant Marciana Felix to apply
for and obtain the registration of the land in the new registry of property; but from this it cannot
be concluded that she had to await the final decision of the Court of Land Registration, in order
to be able to enjoy the property sold. On the contrary, it was expressly stipulated in the contract
that the purchaser should deliver to the vendor one-fourth "of the products ... of the aforesaid
four parcels from the moment when she takes possession of them until the Torrens certificate of
title be issued in her favor." This obviously shows that it was not forseen that the purchaser
might be deprived of her possession during the course of the registration proceedings, but that
the transaction rested on the assumption that she was to have, during said period, the material
possession and enjoyment of the four parcels of land.
Inasmuch as the rescission is made by virtue of the provisions of law and not by contractual
agreement, it is not the conventional but the legal interest that is demandable.
It is therefore held that the contract of purchase and sale entered into by and between the plaintiff
and the defendant on June 11, 1914, is rescinded, and the plaintiff is ordered to make restitution
of the sum of P3,000 received by him on account of the price of the sale, together with interest
thereon at the legal rate of 6 per annum from the date of the filing of the complaint until
payment, with the costs of both instances against the appellant. So ordered.
Torres, Johnson, Street, Malcolm and Avancea, JJ., concur.

THIRD DIVISION
[G.R. No. 151212. September 10, 2003]
TEN FORTY REALTY AND DEVELOPMENT CORP., Represented by its President,
VERONICA G. LORENZANA, petitioner, vs. MARINA CRUZ, respondent.
D E C I S I O N
PANGANIBAN, J.:
In an ejectment suit, the question of ownership may be provisionally ruled upon for the sole
purpose of determining who is entitled to possession de facto. In the present case, both parties
base their alleged right to possess on their right to own. Hence, the Court of Appeals did not err
in passing upon the question of ownership to be able to decide who was entitled to physical
possession of the disputed land.
The Case
Before us is a Petition for Review1[1] under Rule 45 of the Rules of Court, seeking to nullify the
August 31, 2001 Decision2[2] and December 19, 2001 Resolution3[3] of the Court of Appeals
(CA) in CA- GR SP No. 64861. The dispositive portion of the assailed Decision is as follows:
WHEREFORE, premises considered, the petition is hereby DISMISSED and the Decision
dated May 4, 2001 is hereby AFFIRMED.4[4]
The assailed Resolution denied petitioner's Motion for Reconsideration.
The Facts
The facts of the case are narrated by the CA as follows:
A complaint for ejectment was filed by [Petitioner Ten Forty Realty and Development
Corporation] against x x x [Respondent Marina Cruz] before the Municipal Trial Court in Cities
(MTCC) of Olongapo City, docketed as Civil Case 4269, which alleged that: petitioner is the





true and absolute owner of a parcel of lot and residential house situated in #71 18th Street,
E.B.B. Olongapo City, particularly described as:
A parcel of residential house and lot situated in the above-mentioned address containing an area
of 324 square meters more or less bounded on the Northeast by 041 (Lot 255, Ts-308); on the
Southeast by 044 (Lot 255, Ts-308); on the Southwest by 043 (Lot 226-A & 18th street) and on
the Northwest by 045 (Lot 227, Ts-308) and declared for taxation purposes in the name of
[petitioner] under T.D. No. 002-4595-R and 002-4596.
having acquired the same on December 5, 1996 from Barbara Galino by virtue of a Deed of
Absolute Sale; the sale was acknowledged by said Barbara Galino through a 'Katunayan';
payment of the capital gains tax for the transfer of the property was evidenced by a Certification
Authorizing Registration issued by the Bureau of Internal Revenue; petitioner came to know that
Barbara Galino sold the same property on April 24, 1998 to Cruz, who immediately occupied the
property and which occupation was merely tolerated by petitioner; on October 16, 1998, a
complaint for ejectment was filed with the Barangay East Bajac-Bajac, Olongapo City but for
failure to arrive at an amicable settlement, a Certificate to File Action was issued; on April 12,
1999 a demand letter was sent to [respondent] to vacate and pay reasonable amount for the use
and occupation of the same, but was ignored by the latter; and due to the refusal of [respondent]
to vacate the premises, petitioner was constrained to secure the services of a counsel for an
agreed fee of P5,000.00 as attorneys fee and P500.00 as appearance fee and incurred an expense
of P5,000.00 for litigation.
In respondents Answer with Counterclaim, it was alleged that: petitioner is not qualified to
own the residential lot in dispute, being a public land; according to Barbara Galino, she did not
sell her house and lot to petitioner but merely obtained a loan from Veronica Lorenzana; the
payment of the capital gains tax does not necessarily show that the Deed of Absolute Sale was at
that time already in existence; the court has no jurisdiction over the subject matter because the
complaint was filed beyond the one (1) year period after the alleged unlawful deprivation of
possession; there is no allegation that petitioner had been in prior possession of the premises and
the same was lost thru force, stealth or violence; evidence will show that it was Barbara Galino
who was in possession at the time of the sale and vacated the property in favor of respondent;
never was there an occasion when petitioner occupied a portion of the premises, before
respondent occupied the lot in April 1998, she caused the cancellation of the tax declaration in
the name of Barbara Galino and a new one issued in respondents name; petitioner obtained its
tax declaration over the same property on November 3, 1998, seven (7) months [after] the
respondent [obtained hers]; at the time the house and lot [were] bought by respondent, the house
was not habitable, the power and water connections were disconnected; being a public land,
respondent filed a miscellaneous sales application with the Community Environment and Natural
Resources Office in Olongapo City; and the action for ejectment cannot succeed where it
appears that respondent had been in possession of the property prior to the petitioner.5[5]


In a Decision6[6] dated October 30, 2000, the Municipal Trial Court in Cities (MTCC) ordered
respondent to vacate the property and surrender to petitioner possession thereof. It also directed
her to pay, as damages for its continued unlawful use, P500 a month from April 24, 1999 until
the property was vacated, P5,000 as attorneys fees, and the costs of the suit.
On appeal, the Regional Trial Court7[7] (RTC) of Olongapo City (Branch 72) reversed the
MTCC. The RTC ruled as follows: 1) respondents entry into the property was not by mere
tolerance of petitioner, but by virtue of a Waiver and Transfer of Possessory Rights and Deed of
Sale in her favor; 2) the execution of the Deed of Sale without actual transfer of the physical
possession did not have the effect of making petitioner the owner of the property, because there
was no delivery of the object of the sale as provided for in Article 1428 of the Civil Code; and 3)
being a corporation, petitioner was disqualified from acquiring the property, which was public
land.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioner had failed to make a case for unlawful detainer,
because no contract -- express or implied -- had been entered into by the parties with regard to
possession of the property. It ruled that the action should have been for forcible entry, in which
prior physical possession was indispensable -- a circumstance petitioner had not shown either.
The appellate court also held that petitioner had challenged the RTCs ruling on the question of
ownership for the purpose of compensating for the latters failure to counter such ruling. The
RTC had held that, as a corporation, petitioner had no right to acquire the property which was
alienable public land.
Hence, this Petition.8[8]
Issues
Petitioner submits the following issues for our consideration:
1. The Honorable Court of Appeals had clearly erred in not holding that
[r]espondents occupation or possession of the property in question was merely
through the tolerance or permission of the herein [p]etitioner;
[2.] The Honorable Court of Appeals had likewise erred in holding that the ejectment
case should have been a forcible entry case where prior physical possession is
indispensable; and




[3.] The Honorable Court of Appeals had also erred when it ruled that the herein
[r]espondents possession or occupation of the said property is in the nature of an
exercise of ownership which should put the herein [p]etitioner on guard.9[9]
The Courts Ruling
The Petition has no merit.
First Issue:
Alleged Occupation by Tolerance
Petitioner faults the CA for not holding that the former merely tolerated respondents occupation
of the subject property. By raising this issue, petitioner is in effect asking this Court to reassess
factual findings. As a general rule, this kind of reassessment cannot be done through a petition
for review on certiorari under Rule 45 of the Rules of Court, because this Court is not a trier of
facts; it reviews only questions of law.10[10] Petitioner has not given us ample reasons to depart
from the general rule.
On the basis of the facts found by the CA and the RTC, we find that petitioner failed to
substantiate its case for unlawful detainer. Admittedly, no express contract existed between the
parties. Not shown either was the corporations alleged tolerance of respondents possession.
While possession by tolerance may initially be lawful, it ceases to be so upon the owners
demand that the possessor by tolerance vacate the property.11[11] To justify an action for
unlawful detainer, the permission or tolerance must have been present at the beginning of the
possession.12[12] Otherwise, if the possession was unlawful from the start, an action for
unlawful detainer would be an improper remedy. Sarona v. Villegas13[13] elucidates thus:
A close assessment of the law and the concept of the word tolerance confirms our view
heretofore expressed that such tolerance must be present right from the start of possession sought
to be recovered, to categorize a cause of action as one of unlawful detainer not of forcible entry.
Indeed, to hold otherwise would espouse a dangerous doctrine. And for two reasons. First.
Forcible entry into the land is an open challenge to the right of the possessor. Violation of that
right authorizes the speedy redress in the inferior court provided for in the rules. If one year
from the forcible entry is allowed to lapse before suit is filed, then the remedy ceases to be
speedy; and the possessor is deemed to have waived his right to seek relief in the inferior court.






Second, if a forcible entry action in the inferior court is allowed after the lapse of a number of
years, then the result may well be that no action for forcible entry can really prescribe. No
matter how long such defendant is in physical possession, plaintiff will merely make a demand,
bring suit in the inferior court upon a plea of tolerance to prevent prescription to set in and
summarily throw him out of the land. Such a conclusion is unreasonable. Especially if we bear
in mind the postulates that proceedings of forcible entry and unlawful detainer are summary in
nature, and that the one year time bar to suit is but in pursuance of the summary nature of the
action.14[14]
In this case, the Complaint and the other pleadings do not recite any averment of fact that would
substantiate the claim of petitioner that it permitted or tolerated the occupation of the property by
Respondent Cruz. The Complaint contains only bare allegations that 1) respondent immediately
occupied the subject property after its sale to her, an action merely tolerated by petitioner;15[15]
and 2) her allegedly illegal occupation of the premises was by mere tolerance.16[16]
These allegations contradict, rather than support, petitioners theory that its cause of action is for
unlawful detainer. First, these arguments advance the view that respondents occupation of the
property was unlawful at its inception. Second, they counter the essential requirement in
unlawful detainer cases that petitioners supposed act of sufferance or tolerance must be present
right from the start of a possession that is later sought to be recovered.17[17]
As the bare allegation of petitioners tolerance of respondents occupation of the premises has
not been proven, the possession should be deemed illegal from the beginning. Thus, the CA
correctly ruled that the ejectment case should have been for forcible entry -- an action that had
already prescribed, however, when the Complaint was filed on May 12, 1999. The prescriptive
period of one year for forcible entry cases is reckoned from the date of respondents actual entry
into the land, which in this case was on April 24, 1998.
Second Issue:
Nature of the Case
Much of the difficulty in the present controversy stems from the legal characterization of the
ejectment Complaint filed by petitioner. Specifically, was it for unlawful detainer or for forcible
entry?
The answer is given in Section 1 of Rule 70 of the Rules of Court, which we reproduce as
follows:





SECTION 1. Who may institute proceedings, and when. - Subject to the provisions of the next
succeeding section, a person deprived of the possession of any land or building by force,
intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee, or other person against
whom the possession of any land or building is unlawfully withheld after the expiration or
termination of the right to hold possession, by virtue of any contract, express or implied, or the
legal representatives or assigns of any such lessor, vendor, vendee, or other person, may, at any
time within one (1) year after such unlawful deprivation or withholding of possession, bring an
action in the proper Municipal Trial Court against the person or persons unlawfully withholding
or depriving of possession, or any person or persons claiming under them, for the restitution of
such possession, together with damages and costs.
While both causes of action deal only with the sole issue of physical or de facto
possession,18[18] the two cases are really separate and distinct, as explained below:
x x x. In forcible entry, one is deprived of physical possession of land or building by means of
force, intimidation, threat, strategy, or stealth. In unlawful detainer, one unlawfully withholds
possession thereof after the expiration or termination of his right to hold possession under any
contract, express or implied. In forcible entry, the possession is illegal from the beginning and
the basic inquiry centers on who has the prior possession de facto. In unlawful detainer, the
possession was originally lawful but became unlawful by the expiration or termination of the
right to possess, hence the issue of rightful possession is decisive for, in such action, the
defendant is in actual possession and the plaintiffs cause of action is the termination of the
defendants right to continue in possession.
What determines the cause of action is the nature of defendants entry into the land. If the entry
is illegal, then the action which may be filed against the intruder within one year therefrom is
forcible entry. If, on the other hand, the entry is legal but the possession thereafter became
illegal, the case is one of unlawful detainer which must be filed within one year from the date of
the last demand.19[19]
It is axiomatic that what determines the nature of an action as well as which court has
jurisdiction over it are the allegations in the complaint20[20] and the character of the relief
sought.21[21]
In its Complaint, petitioner alleged that, having acquired the subject property from Barbara
Galino on December 5, 1996,22[22] it was the true and absolute owner23[23] thereof; that






Galino had sold the property to Respondent Cruz on April 24, 1998;24[24] that after the sale, the
latter immediately occupied the property, an action that was merely tolerated by petitioner;25[25]
and that, in a letter given to respondent on April 12, 1999,26[26] petitioner had demanded that
the former vacate the property, but that she refused to do so.27[27] Petitioner thereupon prayed
for judgment ordering her to vacate the property and to pay reasonable rentals for the use of the
premises, attorneys fees and the costs of the suit.28[28]
The above allegations appeared to show the elements of unlawful detainer. They also conferred
initiatory jurisdiction on the MTCC, because the case was filed a month after the last demand to
vacate -- hence, within the one-year prescriptive period.
However, what was actually proven by petitioner was that possession by respondent had been
illegal from the beginning. While the Complaint was crafted to be an unlawful detainer suit,
petitioners real cause of action was for forcible entry, which had already prescribed.
Consequently, the MTCC had no more jurisdiction over the action.
The appellate court, therefore, did not err when it ruled that petitioners Complaint for unlawful
detainer was a mere subterfuge or a disguised substitute action for forcible entry, which had
already prescribed. To repeat, to maintain a viable action for forcible entry, plaintiff must have
been in prior physical possession of the property; this is an essential element of the suit.29[29]
Third Issue:
Alleged Acts of Ownership
Petitioner next questions the CAs pronouncement that respondents occupation of the property
was an exercise of a right flowing from a claim of ownership. It submits that the appellate court
should not have passed upon the issue of ownership, because the only question for resolution in
an ejectment suit is that of possession de facto.
Clearly, each of the parties claimed the right to possess the disputed property because of alleged
ownership of it. Hence, no error could have been imputed to the appellate court when it passed








upon the issue of ownership only for the purpose of resolving the issue of possession de
facto.30[30] The CAs holding is moreover in accord with jurisprudence and the law.
Execution of a Deed of Sale
Not Sufficient as Delivery
In a contract of sale, the buyer acquires the thing sold only upon its delivery in any of the ways
specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the
possession is transferred from the vendor to the vendee.31[31] With respect to incorporeal
property, Article 1498 lays down the general rule: the execution of a public instrument shall be
equivalent to the delivery of the thing that is the object of the contract if, from the deed, the
contrary does not appear or cannot be clearly inferred.
However, ownership is transferred not by contract but by tradition or delivery. 32[32] Nowhere
in the Civil Code is it provided that the execution of a Deed of Sale is a conclusive presumption
of delivery of possession of a piece of real estate.33[33]
This Court has held that the execution of a public instrument gives rise only to a prima facie
presumption of delivery. Such presumption is destroyed when the delivery is not effected
because of a legal impediment.34[34] Pasagui v. Villablanca35[35] had earlier ruled that such
constructive or symbolic delivery, being merely presumptive, was deemed negated by the failure
of the vendee to take actual possession of the land sold.
It is undisputed that petitioner did not occupy the property from the time it was allegedly sold to
it on December 5, 1996 or at any time thereafter. Nonetheless, it maintains that Galinos
continued stay in the premises from the time of the sale up to the time respondents occupation
of the same on April 24, 1998, was possession held on its behalf and had the effect of delivery
under the law.36[36]
Both the RTC and the CA disagreed. According to the RTC, petitioner did not gain control and
possession of the property, because Galino had continued to exercise ownership rights over the








realty. That is, she had remained in possession, continued to declare it as her property for tax
purposes and sold it to respondent in 1998.
For its part, the CA found it highly unbelievable that petitioner -- which claims to be the owner
of the disputed property -- would tolerate possession of the property by respondent from April
24, 1998 up to October 16, 1998. How could it have been so tolerant despite its knowledge that
the property had been sold to her, and that it was by virtue of that sale that she had undertaken
major repairs and improvements on it?
Petitioner should have likewise been put on guard by respondents declaration of the property for
tax purposes on April 23, 1998,37[37] as annotated in the tax certificate filed seven months
later.38[38] Verily, the tax declaration represented an adverse claim over the unregistered
property and was inimical to the right of petitioner.
Indeed, the above circumstances derogated its claim of control and possession of the property.
Order of Preference in Double
Sale of Immovable Property
The ownership of immovable property sold to two different buyers at different times is governed
by Article 1544 of the Civil Code, which reads as follows:
Article 1544. x x x
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
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.
Galino allegedly sold the property in question to petitioner on December 5, 1996 and,
subsequently, to respondent on April 24, 1998. Petitioner thus argues that being the first buyer,
it has a better right to own the realty. However, it has not been able to establish that its Deed of
Sale was recorded in the Registry of Deeds of Olongapo City.39[39] Its claim of an unattested




and unverified notation on its Deed of Absolute Sale40[40] is not equivalent to registration. It
admits that, indeed, the sale has not been recorded in the Registry of Deeds.41[41]
In the absence of the required inscription, the law gives preferential right to the buyer who in
good faith is first in possession. In determining the question of who is first in possession, certain
basic parameters have been established by jurisprudence.
First, the possession mentioned in Article 1544 includes not only material but also symbolic
possession.42[42] Second, possessors in good faith are those who are not aware of any flaw in
their title or mode of acquisition.43[43] Third, buyers of real property that is in the possession of
persons other than the seller must be wary -- they must investigate the rights of the
possessors.44[44] Fourth, good faith is always presumed; upon those who allege bad faith on the
part of the possessors rests the burden of proof.45[45]
Earlier, we ruled that the subject property had not been delivered to petitioner; hence, it did not
acquire possession either materially or symbolically. As between the two buyers, therefore,
respondent was first in actual possession of the property.
Petitioner has not proven that respondent was aware that her mode of acquiring the property was
defective at the time she acquired it from Galino. At the time, the property -- which was public
land -- had not been registered in the name of Galino; thus, respondent relied on the tax
declarations thereon. As shown, the formers name appeared on the tax declarations for the
property until its sale to the latter in 1998. Galino was in fact occupying the realty when
respondent took over possession. Thus, there was no circumstance that could have placed the
latter upon inquiry or required her to further investigate petitioners right of ownership.
Disqualification from Ownership
of Alienable Public Land
Private corporations are disqualified from acquiring lands of the public domain, as provided
under Section 3 of Article XII of the Constitution, which we quote:
Sec. 3. Lands of the public domain are classified into agricultural, forest or timber, mineral
lands, and national parks. Agricultural lands of the public domain may be further classified by







law according to the uses to which they may be devoted. Alienable lands of the public domain
shall be limited to agricultural lands. Private corporations or associations may not hold such
alienable lands of the public domain except by lease, for a period not exceeding twenty-five
years, and not to exceed one thousand hectares in area. Citizens of the Philippines may not
lease not more than five hundred hectares, or acquire not more than twelve hectares thereof by
purchase, homestead, or grant. x x x. (Italics supplied)
While corporations cannot acquire land of the public domain, they can however acquire private
land.46[46] Hence, the next issue that needs to be resolved is the determination of whether the
disputed property is private land or of the public domain.
According to the certification by the City Planning and Development Office of Olongapo City,
the contested property in this case is alienable and disposable public land.47[47] It was for this
reason that respondent filed a miscellaneous sales application to acquire it.48[48]
On the other hand, petitioner has not presented proof that, at the time it purchased the property
from Galino, the property had ceased to be of the public domain and was already private land.
The established rule is that alienable and disposable land of the public domain held and occupied
by a possessor -- personally or through predecessors-in-interest, openly, continuously, and
exclusively for 30 years -- is ipso jure converted to private property by the mere lapse of
time.49[49]
In view of the foregoing, we affirm the appellate courts ruling that respondent is entitled to
possession de facto. This determination, however, is only provisional in nature.50[50] Well-
settled is the rule that an award of possession de facto over a piece of property does not
constitute res judicata as to the issue of its ownership.51[51]
WHEREFORE, this Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioner.
SO ORDERED










Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 176474 November 27, 2008
HEIRS OF ARTURO REYES, represented by Evelyn R. San Buenaventura, petitioners,
vs.
ELENA SOCCO-BELTRAN, respondent.
D E C I S I O N
CHICO-NAZARIO, J .:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Decision
1
dated 31 January 2006 rendered by the Court of Appeals in CA-G.R. SP No. 87066,
which affirmed the Decision
2
dated 30 June 2003 of the Office of the President, in O.P. Case No.
02-A-007, approving the application of respondent Elena Socco-Beltran to purchase the subject
property.
The subject property in this case is a parcel of land originally identified as Lot No. 6-B, situated
in Zamora Street, Dinalupihan, Bataan, with a total area of 360 square meters. It was originally
part of a larger parcel of land, measuring 1,022 square meters, allocated to the Spouses Marcelo
Laquian and Constancia Socco (Spouses Laquian), who paid for the same with Japanese money.
When Marcelo died, the property was left to his wife Constancia. Upon Constancias subsequent
death, she left the original parcel of land, along with her other property, with her heirs her
siblings, namely: Filomena Eliza Socco, Isabel Socco de Hipolito, Miguel R. Socco, and Elena
Socco-Beltran.
3
Pursuant to an unnotarized document entitled "Extrajudicial Settlement of the
Estate of the Deceased Constancia R. Socco," executed by Constancias heirs sometime in 1965,
the parcel of land was partitioned into three lotsLot No. 6-A, Lot No. 6-B, and Lot No. 6-C.
4

The subject property, Lot No. 6-B, was adjudicated to respondent, but no title had been issued in
her name.
On 25 June 1998, respondent Elena Socco-Beltran filed an application for the purchase of Lot
No. 6-B before the Department of Agrarian Reform (DAR), alleging that it was adjudicated in
her favor in the extra-judicial settlement of Constancia Soccos estate.
5

Petitioners herein, the heirs of the late Arturo Reyes, filed their protest to respondents petition
before the DAR on the ground that the subject property was sold by respondents brother, Miguel
R. Socco, in favor of their father, Arturo Reyes, as evidenced by the Contract to Sell, dated 5
September 1954, stipulating that:
6

That I am one of the co-heirs of the Estate of the deceased Constancia Socco; and
that I am to inherit as such a portion of her lot consisting of Four Hundred
Square Meters (400) more or less located on the (sic) Zamora St., Municipality of
Dinalupihan, Province of Bataan, bounded as follows:
x x x x
That for or in consideration of the sum of FIVE PESOS (P5.00) per square meter,
hereby sell, convey and transfer by way of this conditional sale the said 400
sq.m. more or less unto Atty. Arturo C. Reyes, his heirs, administrator and assigns
x x x. (Emphasis supplied.)
Petitioners averred that they took physical possession of the subject property in 1954 and had
been uninterrupted in their possession of the said property since then.
Legal Officer Brigida Pinlac of the DAR Bataan Provincial Agrarian Reform Office conducted
an investigation, the results of which were contained in her Report/ Recommendation dated 15
April 1999. Other than recounting the afore-mentioned facts, Legal Officer Pinlac also made the
following findings in her Report/Recommendation:
7

Further investigation was conducted by the undersigned and based on the
documentary evidence presented by both parties, the following facts were
gathered: that the house of [the] Reyes family is adjacent to the landholding in
question and portion of the subject property consisting of about 15 meters [were]
occupied by the heirs of Arturo Reyes were a kitchen and bathroom [were]
constructed therein; on the remaining portion a skeletal form made of hollow
block[s] is erected and according to the heirs of late Arturo Reyes, this was
constructed since the year (sic) 70s at their expense; that construction of the said
skeletal building was not continued and left unfinished which according to the
affidavit of Patricia Hipolito the Reyes family where (sic) prevented by Elena
Socco in their attempt of occupancy of the subject landholding; (affidavit of
Patricia Hipolito is hereto attached as Annex "F"); that Elena Socco cannot
physically and personally occupy the subject property because of the skeletal
building made by the Reyes family who have been requesting that they be paid for
the cost of the construction and the same be demolished at the expense of Elena
Socco; that according to Elena Socco, [she] is willing to waive her right on the
portion where [the] kitchen and bathroom is (sic) constructed but not the whole of
Lot [No.] 6-B adjudicated to her; that the Reyes family included the subject
property to the sworn statement of value of real properties filed before the
municipality of Dinalupihan, Bataan, copies of the documents are hereto attached
as Annexes "G" and "H"; that likewise Elena Socco has been continuously and
religiously paying the realty tax due on the said property.
In the end, Legal Officer Pinlac recommended the approval of respondents petition for issuance
of title over the subject property, ruling that respondent was qualified to own the subject property
pursuant to Article 1091 of the New Civil Code.
8
Provincial Agrarian Reform Officer (PARO)
Raynor Taroy concurred in the said recommendation in his Indorsement dated 22 April 1999.
9

In an Order dated 15 September 1999, DAR Regional Director Nestor R. Acosta, however,
dismissed respondents petition for issuance of title over the subject property on the ground that
respondent was not an actual tiller and had abandoned the said property for 40 years; hence, she
had already renounced her right to recover the same.
10
The dispositive part of the Order reads:
1. DISMISSING the claims of Elena Socco-Beltran, duly represented by Myrna
Socco for lack of merit;
2. ALLOCATING Lot No. 6-B under Psd-003-008565 with an area of 360 square
meters, more or less, situated Zamora Street, Dinalupihan, Bataan, in favor of the
heirs of Arturo Reyes.
3. ORDERING the complainant to refrain from any act tending to disturb the
peaceful possession of herein respondents.
4. DIRECTING the MARO of Dinalupihan, Bataan to process the pertinent
documents for the issuance of CLOA in favor of the heirs of Arturo Reyes.
11

Respondent filed a Motion for Reconsideration of the foregoing Order, which was denied by
DAR Regional Director Acosta in another Order dated 15 September 1999.
12

Respondent then appealed to the Office of the DAR Secretary. In an Order, dated 9 November
2001, the DAR Secretary reversed the Decision of DAR Regional Director Acosta after finding
that neither petitioners predecessor-in-interest, Arturo Reyes, nor respondent was an actual
occupant of the subject property. However, since it was respondent who applied to purchase the
subject property, she was better qualified to own said property as opposed to petitioners, who did
not at all apply to purchase the same. Petitioners were further disqualified from purchasing the
subject property because they were not landless. Finally, during the investigation of Legal
Officer Pinlac, petitioners requested that respondent pay them the cost of the construction of the
skeletal house they built on the subject property. This was construed by the DAR Secretary as a
waiver by petitioners of their right over the subject property.
13
In the said Order, the DAR
Secretary ordered that:
WHEREFORE, premises considered, the September 15, 1999 Order is hereby
SET ASIDE and a new Order is hereby issued APPROVING the application to
purchase Lot [No.] 6-B of Elena Socco-Beltran.
14

Petitioners sought remedy from the Office of the President by appealing the 9 November 2001
Decision of the DAR Secretary. Their appeal was docketed as O.P. Case No. 02-A-007. On 30
June 2003, the Office of the President rendered its Decision denying petitioners appeal and
affirming the DAR Secretarys Decision.
15
The fallo of the Decision reads:
WHEREFORE, premises considered, judgment appealed from is AFFIRMED
and the instant appeal DISMISSED.
16

Petitioners Motion for Reconsideration was likewise denied by the Office of the President in a
Resolution dated 30 September 2004.
17
In the said Resolution, the Office of the President noted
that petitioners failed to allege in their motion the date when they received the Decision dated 30
June 2003. Such date was material considering that the petitioners Motion for Reconsideration
was filed only on 14 April 2004, or almost nine months after the promulgation of the decision
sought to be reconsidered. Thus, it ruled that petitioners Motion for Reconsideration, filed
beyond fifteen days from receipt of the decision to be reconsidered, rendered the said decision
final and executory.
Consequently, petitioners filed an appeal before the Court of Appeals, docketed as CA-G.R. SP
No. 87066. Pending the resolution of this case, the DAR already issued on 8 July 2005 a
Certificate of Land Ownership Award (CLOA) over the subject property in favor of the
respondents niece and representative, Myrna Socco-Beltran.
18
Respondent passed away on 21
March 2001,
19
but the records do not ascertain the identity of her legal heirs and her legatees.
Acting on CA-G.R. SP No. 87066, the Court of Appeals subsequently promulgated its Decision,
dated 31 January 2006, affirming the Decision dated 30 June 2003 of the Office of the President.
It held that petitioners could not have been actual occupants of the subject property, since actual
occupancy requires the positive act of occupying and tilling the land, not just the introduction of
an unfinished skeletal structure thereon. The Contract to Sell on which petitioners based their
claim over the subject property was executed by Miguel Socco, who was not the owner of the
said property and, therefore, had no right to transfer the same. Accordingly, the Court of Appeals
affirmed respondents right over the subject property, which was derived form the original
allocatees thereof.
20
The fallo of the said Decision reads:
WHEREFORE, premises considered, the instant PETITION FOR REVIEW is
DISMISSED. Accordingly, the Decision dated 30 June 2003 and the Resolution
dated 30 December 2004 both issued by the Office of the President are hereby
AFFIRMED in toto.
21

The Court of Appeals denied petitioners Motion for Reconsideration of its Decision in a
Resolution dated 16 August 2006.
22

Hence, the present Petition, wherein petitioners raise the following issues:
I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
AFFIRMING THE FINDINGS OF THE OFFICE OF THE PRESIDENT THAT
THE SUBJECT LOT IS VACANT AND THAT PETITIONERS ARE NOT
ACTUAL OCCUPANTS THEREOF BY DENYING THE LATTERS CLAIM
THAT THEY HAVE BEEN IN OPEN, CONTINUOUS, EXCLUSIVE,
NOTORIOUS AND AVDERSE POSSESSION THEREOF SINCE 1954 OR
FOR MORE THAN THIRTY (30) YEARS.
II
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD
THAT PETITIONERS "CANNOT LEGALLY ACQUIRE THE SUBJECT
PROPERTY AS THEY ARE NOT CONSIDERED LANDLESS AS
EVIDENCED BY A TAX DECLARATION."
III
WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING
THAT "WHATEVER RESERVATION WE HAVE OVER THE RIGHT OF
MYRNA SOCCO TO SUCCEED WAS ALREADY SETTLED WHEN NO
LESS THAN MIGUEL SOCCO (PREDECESSOR-IN INTEREST OF HEREIN
PETITIONERS) EXECUTED HIS WAIVER OF RIGHT DATED APRIL 19,
2005 OVER THE SUBJECT PROPERTY IN FAVOR OF MYRNA SOCCO.
IV
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DENIED
PETITIONERS MOTION FOR NEW TRIAL THEREBY BRUSHING ASIDE
THE FACT THAT MYRNA V. SOCCO-ARIZO GROSSLY
MISREPRESENTED IN HER INFORMATION SHEET OF BENEFICIARIES
AND APPLICATION TO PURCHASE LOT IN LANDED ESTATES THAT
SHE IS A FILIPINO CITIZEN, WHEN IN TRUTH AND IN FACT, SHE IS
ALREADY AN AMERICAN NATIONAL.
23

The main issue in this case is whether or not petitioners have a better right to the subject property
over the respondent. Petitioners claim over the subject property is anchored on the Contract to
Sell executed between Miguel Socco and Arturo Reyes on 5 September 1954. Petitioners
additionally allege that they and their predecessor-in-interest, Arturo Reyes, have been in
possession of the subject lot since 1954 for an uninterrupted period of more than 40 years.
The Court is unconvinced.
Petitioners cannot derive title to the subject property by virtue of the Contract to Sell. It was
unmistakably stated in the Contract and made clear to both parties thereto that the vendor,
Miguel R. Socco, was not yet the owner of the subject property and was merely expecting to
inherit the same as his share as a co-heir of Constancias estate.
24
It was also declared in the
Contract itself that Miguel R. Soccos conveyance of the subject to the buyer, Arturo Reyes, was
a conditional sale. It is, therefore, apparent that the sale of the subject property in favor of Arturo
Reyes was conditioned upon the event that Miguel Socco would actually inherit and become the
owner of the said property. Absent such occurrence, Miguel R. Socco never acquired ownership
of the subject property which he could validly transfer to Arturo Reyes.
Under Article 1459 of the Civil Code on contracts of sale, "The thing must be licit and the
vendor must have a right to transfer ownership thereof at the time it is delivered." The law
specifically requires that the vendor must have ownership of the property at the time it is
delivered. Petitioners claim that the property was constructively delivered to them in 1954 by
virtue of the Contract to Sell. However, as already pointed out by this Court, it was explicit in the
Contract itself that, at the time it was executed, Miguel R. Socco was not yet the owner of the
property and was only expecting to inherit it. Hence, there was no valid sale from which
ownership of the subject property could have transferred from Miguel Socco to Arturo Reyes.
Without acquiring ownership of the subject property, Arturo Reyes also could not have conveyed
the same to his heirs, herein petitioners.
Petitioners, nevertheless, insist that they physically occupied the subject lot for more than 30
years and, thus, they gained ownership of the property through acquisitive prescription, citing
Sandoval v. Insular Government
25
and San Miguel Corporation v. Court of Appeals.
26

In Sandoval, petitioners therein sought the enforcement of Section 54, paragraph 6 of Act No.
926, otherwise known as the Land Registration Act, which required -- for the issuance of a
certificate of title to agricultural public lands -- the open, continuous, exclusive, and notorious
possession and occupation of the same in good faith and under claim of ownership for more than
ten years. After evaluating the evidence presented, consisting of the testimonies of several
witnesses and proof that fences were constructed around the property, the Court in the afore-
stated case denied the petition on the ground that petitioners failed to prove that they exercised
acts of ownership or were in open, continuous, and peaceful possession of the whole land, and
had caused it to be enclosed to the exclusion of other persons. It further decreed that whoever
claims such possession shall exercise acts of dominion and ownership which cannot be mistaken
for the momentary and accidental enjoyment of the property.
27

In San Miguel Corporation, the Court reiterated the rule that the open, exclusive, and undisputed
possession of alienable public land for the period prescribed by law creates the legal fiction
whereby land ceases to be public land and is, therefore, private property. It stressed, however,
that the occupation of the land for 30 years must be conclusively established. Thus, the evidence
offered by petitioner therein tax declarations, receipts, and the sole testimony of the applicant
for registration, petitioners predecessor-in-interest who claimed to have occupied the land
before selling it to the petitioner were considered insufficient to satisfy the quantum of proof
required to establish the claim of possession required for acquiring alienable public land.
28

As in the two aforecited cases, petitioners herein were unable to prove actual possession of the
subject property for the period required by law. It was underscored in San Miguel Corporation
that the open, continuous, exclusive, and notorious occupation of property for more than 30 years
must be no less than conclusive, such quantum of proof being necessary to avoid the erroneous
validation of actual fictitious claims of possession over the property that is being claimed.
29

In the present case, the evidence presented by the petitioners falls short of being conclusive.
Apart from their self-serving statement that they took possession of the subject property, the only
proof offered to support their claim was a general statement made in the letter
30
dated 4 February
2002 of Barangay Captain Carlos Gapero, certifying that Arturo Reyes was the occupant of the
subject property "since peace time and at present." The statement is rendered doubtful by the fact
that as early as 1997, when respondent filed her petition for issuance of title before the DAR,
Arturo Reyes had already died and was already represented by his heirs, petitioners herein.
Moreover, the certification given by Barangay Captain Gapero that Arturo Reyes occupied the
premises for an unspecified period of time, i.e., since peace time until the present, cannot prevail
over Legal Officer Pinlacs more particular findings in her Report/Recommendation. Legal
Officer Pinlac reported that petitioners admitted that it was only in the 1970s that they built the
skeletal structure found on the subject property. She also referred to the averments made by
Patricia Hipolito in an Affidavit,
31
dated 26 February 1999, that the structure was left unfinished
because respondent prevented petitioners from occupying the subject property. Such findings
disprove petitioners claims that their predecessor-in-interest, Arturo Reyes, had been in open,
exclusive, and continuous possession of the property since 1954. The adverted findings were the
result of Legal Officer Pinlacs investigation in the course of her official duties, of matters within
her expertise which were later affirmed by the DAR Secretary, the Office of the President, and
the Court of Appeals. The factual findings of such administrative officer, if supported by
evidence, are entitled to great respect.
32

In contrast, respondents claim over the subject property is backed by sufficient evidence. Her
predecessors-in-interest, the spouses Laquian, have been identified as the original allocatees who
have fully paid for the subject property. The subject property was allocated to respondent in the
extrajudicial settlement by the heirs of Constancias estate. The document entitled "Extra-judicial
Settlement of the Estate of the Deceased Constancia Socco" was not notarized and, as a private
document, can only bind the parties thereto. However, its authenticity was never put into
question, nor was its legality impugned. Moreover, executed in 1965 by the heirs of Constancia
Socco, or more than 30 years ago, it is an ancient document which appears to be genuine on its
face and therefore its authenticity must be upheld.
33
Respondent has continuously paid for the
realty tax due on the subject property, a fact which, though not conclusive, served to strengthen
her claim over the property.
34

From the foregoing, it is only proper that respondents claim over the subject property be upheld.
This Court must, however, note that the Order of the DAR Secretary, dated 9 November 2001,
which granted the petitioners right to purchase the property, is flawed and may be assailed in the
proper proceedings. Records show that the DAR affirmed that respondents predecessors-in-
interest, Marcelo Laquian and Constancia Socco, having been identified as the original allocatee,
have fully paid for the subject property as provided under an agreement to sell. By the nature of a
contract or agreement to sell, the title over the subject property is transferred to the vendee upon
the full payment of the stipulated consideration. Upon the full payment of the purchase price, and
absent any showing that the allocatee violated the conditions of the agreement, ownership of the
subject land should be conferred upon the allocatee.
35
Since the extrajudicial partition
transferring Constancia Soccos interest in the subject land to the respondent is valid, there is
clearly no need for the respondent to purchase the subject property, despite the application for
the purchase of the property erroneously filed by respondent. The only act which remains to be
performed is the issuance of a title in the name of her legal heirs, now that she is deceased.
Moreover, the Court notes that the records have not clearly established the right of respondents
representative, Myrna Socco-Arizo, over the subject property. Thus, it is not clear to this Court
why the DAR issued on 8 July 2005 a CLOA
36
over the subject property in favor of Myrna
Socco-Arizo. Respondents death does not automatically transmit her rights to the property to
Myrna Socco-Beltran. Respondent only authorized Myrna Socco-Arizo, through a Special Power
of Attorney
37
dated 10 March 1999, to represent her in the present case and to administer the
subject property for her benefit. There is nothing in the Special Power of Attorney to the effect
that Myrna Socco-Arizo can take over the subject property as owner thereof upon respondents
death. That Miguel V. Socco, respondents only nephew, the son of the late Miguel R. Socco,
and Myrna Socco-Arizos brother, executed a waiver of his right to inherit from respondent, does
not automatically mean that the subject property will go to Myrna Socco-Arizo, absent any proof
that there is no other qualified heir to respondents estate. Thus, this Decision does not in any
way confirm the issuance of the CLOA in favor of Myrna Socco-Arizo, which may be assailed in
appropriate proceedings.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of
the Court of Appeals in CA-G.R. SP No. 87066, promulgated on 31 January 2006, is
AFFIRMED with MODIFICATION. This Court withholds the confirmation of the validity of
title over the subject property in the name of Myrna Socco-Arizo pending determination of
respondents legal heirs in appropriate proceedings. No costs.
SO ORDERED.

SECOND DIVISION

RUDOLF LIETZ, INC., G.R. No. 122463
Petitioner,
Present:

- versus- PUNO, J.,
Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
THE COURT OF APPEALS, TINGA, and
AGAPITO BURIOL, TIZIANA CHICO-NAZARIO, JJ.
TURATELLO & PAOLA SANI,
Respondents. Promulgated:

December 19, 2005

x --------------------------------------------------------------------x

D E C I S I O N

TINGA, J.:

This is a petition for review on certiorari under Rule 45 of the Revised
Rules of Court, praying for the annulment of the Decision[1] dated April 17,
1995 and the Resolution[2] dated October 25, 1995 of the Court of Appeals in
CA-G.R. CV No. 38854. The Court of Appeals affirmed the Decision[3] in Civil
Case No. 2164 of the Regional Trial Court (RTC), Branch 48, of Palawan and
Puerto Princesa City with the modification that herein respondents Tiziana
Turatello and Paola Sani are entitled to damages, attorneys fees, and litigation
expenses.

The dispositive portion of the RTC Decision reads:

WHEREFORE, in view of the foregoing and as prayed for by
the defendants, the instant complaint is hereby DISMISSED.
Defendants counterclaim is likewise DISMISSED. Plaintiff,
however, is ordered to pay defendant Turatello and Sanis counsel
the sum of P3,010.38 from August 9, 1990 until fully paid
representing the expenses incurred by said counsel when the trial
was cancelled due to the non-appearance of plaintiffs witnesses.
With costs against the plaintiff.

SO ORDERED.[4]

As culled from the records, the following antecedents appear:

Respondent Agapito Buriol previously owned a parcel of unregistered land
situated at Capsalay Island, Port Barton, San Vicente, Palawan. On August 15,
1986, respondent Buriol entered into a lease agreement with Flavia Turatello
and respondents Turatello and Sani, all Italian citizens, involving one (1)
hectare of respondent Buriols property. The lease agreement was for a period
of 25 years, renewable for another 25 years. The lessees took possession of the
land after paying respondent Buriol a down payment of P10,000.00.[5] The
lease agreement, however, was reduced into writing only in January 1987.

On November 17, 1986, respondent Buriol sold to petitioner Rudolf Lietz,
Inc. the same parcel of land for the amount of P30,000.00. The Deed of
Absolute Sale embodying the agreement described the land as follows:

A parcel of land, consisting of FIVE (5) hectares, more or
less, a portion of that parcel of land declared in the name of
Agapito Buriol, under Tax Declaration No. 0021, revised in the year
1985, together with all improvements thereon, situated at the
Island of Capsalay, Barangay Port Barton, municipality of San
Vicente, province of Palawan which segregated from the whole
parcel described in said tax declaration, has the following
superficial boundaries: NORTH, Sec. 01-017; and remaining
property of the vendor; EAST, by Seashore; SOUTH, 01-020; and
WEST, by 01-018 (now Elizabeth Lietz).[6]


Petitioner later discovered that respondent Buriol owned only four (4)
hectares, and with one more hectare covered by lease, only three (3) hectares
were actually delivered to petitioner. Thus, petitioner instituted on April 3,
1989 a complaint for Annulment of Lease with Recovery of Possession with
Injunction and Damages against respondents and Flavia Turatello before the
RTC. The complaint alleged that with evident bad faith and malice, respondent
Buriol sold to petitioner five (5) hectares of land when respondent Buriol knew
for a fact that he owned only four (4) hectares and managed to lease one more
hectare to Flavia Turatello and respondents Tiziana Turatello and Paola Sani.
The complaint sought the issuance of a restraining order and a writ of
preliminary injunction to prevent Flavia Turatello and respondents Turatello
and Sani from introducing improvements on the property, the annulment of
the lease agreement between respondents, and the restoration of the amount
paid by petitioner in excess of the value of the property sold to him. Except for
Flavia Turatello, respondents filed separate answers raising similar defenses of
lack of cause of action and lack of jurisdiction over the action for recovery of
possession. Respondents Turatello and Sani also prayed for the award of
damages and attorneys fees.[7]

After trial on the merits, the trial court rendered judgment on May 27,
1992, dismissing both petitioners complaint and respondents counterclaim for
damages. Petitioner and respondents Turatello and Sani separately appealed
the RTC Decision to the Court of Appeals, which affirmed the dismissal of
petitioners complaint and awarded respondents Turatello and Sani damages
and attorneys fees. The dispositive portion of the Court of Appeals Decision
reads:

WHEREFORE, the decision appealed from is hereby
AFFIRMED, with the following modification:

Plaintiff-appellant Rudolf Lietz, Inc. is hereby (1) ordered to
pay defendants-appellants Turatello and Sani, the sum of
P100,000.00 as moral damages; (2) P100,000.00 as exemplary
damages; (3) P135,728.73 as attorneys fees; and (4) P10,000.00 as
litigation expenses.

SO ORDERED.[8]

Petitioner brought to this Court the instant petition after the denial of its
motion for reconsideration of the Court of Appeal Decision. The instant petition
imputes the following errors to the Court of Appeals.

I. IN DEFENDING AGAPITO BURIOLS GOOD FAITH AND
IN STATING THAT ASSUMING THAT HE (BURIOL) WAS IN
BAD FAITH PETITIONER WAS SOLELY RESPONSIBLE FOR
ITS INEXCUSABLE CREDULOUSNESS.

II. IN ASSERTING THAT ARTICLES 1542 AND 1539 OF
THE NEW CIVIL CODE ARE, RESPECTIVELY, APPLICABLE
AND INAPPLICABLE IN THE CASE AT BAR.

III. IN NOT GRANTING PETITIONERS CLAIM FOR ACTUAL
AND EXEMPLARY DAMAGES.

IV. IN GRANTING RESPONDENTS TIZIANA TURATELLO
AND PAOLA SANI EXHORBITANT [sic] AMOUNTS AS
DAMAGES WHICH ARE EVEN BEREFT OF EVIDENTIARY
BASIS.[9]


Essentially, only two main issues confront this Court, namely: (i) whether
or not petitioner is entitled to the delivery of the entire five hectares or its
equivalent, and (ii) whether or not damages may be awarded to either party.
Petitioner contends that it is entitled to the corresponding reduction of the purchase price because
the agreement was for the sale of five (5) hectares although respondent Buriol owned only four
(4) hectares. As in its appeal to the Court of Appeals, petitioner anchors its argument on the
second paragraph of Article 1539 of the Civil Code, which provides:

Art. 1539. The obligation to deliver the thing sold includes
that of placing in the control of the vendee all that is mentioned in
the contract, in conformity with the following rules:

If the sale of real estate should be made with a statement of
its area, at the rate of a certain price for a unit of measure or
number, the vendor shall be obliged to deliver to the vendee, if the
latter should demand it, all that may have been stated in the
contract; but, should this be not possible, the vendee may choose
between a proportional reduction of the price and the rescission of
the contract, provided that, in the latter case, the lack in the area
be not less than one-tenth of that stated.

. . . .


The Court of Appeals Decision, however, declared as inapplicable the
abovequoted provision and instead ruled that petitioner is no longer entitled to
a reduction in price based on the provisions of Article 1542 of the Civil Code,
which read:

Art. 1542. In the sale of real estate, made for a lump sum
and not at the rate of a certain sum for a unit of measure or
number, there shall be no increase or decrease of the price,
although there be a greater or lesser area or number than that
stated in the contract.

The same rule shall be applied when two or more
immovables are sold for a single price; but if, besides mentioning
the boundaries, which is indispensable in every conveyance of real
estate, its area or number should be designated in the contract,
the vendor shall be bound to deliver all that is included within said
boundaries, even when it exceeds the area or number specified in
the contract; and, should he not be able to do so, he shall suffer a
reduction in the price, in proportion to what is lacking in the area
or number, unless the contract is rescinded because the vendee
does not accede to the failure to deliver what has been stipulated.


Article 1539 governs a sale of immovable by the unit, that is, at a stated
rate per unit area. In a unit price contract, the statement of area of immovable
is not conclusive and the price may be reduced or increased depending on the
area actually delivered. If the vendor delivers less than the area agreed upon,
the vendee may oblige the vendor to deliver all that may be stated in the
contract or demand for the proportionate reduction of the purchase price if
delivery is not possible. If the vendor delivers more than the area stated in the
contract, the vendee has the option to accept only the amount agreed upon or
to accept the whole area, provided he pays for the additional area at the
contract rate.[10]

In some instances, a sale of an immovable may be made for a lump sum
and not at a rate per unit. The parties agree on a stated purchase price for an
immovable the area of which may be declared based on an estimate or where
both the area and boundaries are stated.

In the case where the area of the immovable is stated in the contract
based on an estimate, the actual area delivered may not measure up exactly
with the area stated in the contract. According to Article 1542[11] of the Civil
Code, in the sale of real estate, made for a lump sum and not at the rate of a
certain sum for a unit of measure or number, there shall be no increase or
decrease of the price although there be a greater or lesser area or number than
that stated in the contract. However, the discrepancy must not be substantial.
A vendee of land, when sold in gross or with the description more or less with
reference to its area, does not thereby ipso facto take all risk of quantity in the
land. The use of more or less or similar words in designating quantity covers
only a reasonable excess or deficiency.[12]

Where both the area and the boundaries of the immovable are declared,
the area covered within the boundaries of the immovable prevails over the
stated area. In cases of conflict between areas and boundaries, it is the latter
which should prevail. What really defines a piece of ground is not the area,
calculated with more or less certainty, mentioned in its description, but the
boundaries therein laid down, as enclosing the land and indicating its limits. In
a contract of sale of land in a mass, it is well established that the specific
boundaries stated in the contract must control over any statement with respect
to the area contained within its boundaries. It is not of vital consequence that a
deed or contract of sale of land should disclose the area with mathematical
accuracy. It is sufficient if its extent is objectively indicated with sufficient
precision to enable one to identify it. An error as to the superficial area is
immaterial.[13] Thus, the obligation of the vendor is to deliver everything
within the boundaries, inasmuch as it is the entirety thereof that distinguishes
the determinate object.[14]

As correctly noted by the trial court and the Court of Appeals, the sale
between petitioner and respondent Buriol involving the latters property is one
made for a lump sum. The Deed of Absolute Sale shows that the parties agreed
on the purchase price on a predetermined area of five hectares within the
specified boundaries and not based on a particular rate per area. In accordance
with Article 1542, there shall be no reduction in the purchase price even if the
area delivered to petitioner is less than that stated in the contract. In the
instant case, the area within the boundaries as stated in the contract shall
control over the area agreed upon in the contract.

The Court rejects petitioners contention that the propertys boundaries
as stated in the Deed of Absolute Sale are superficial and unintelligible and,
therefore, cannot prevail over the area stated in the contract. First, as pointed
out by the Court of Appeals, at an ocular inspection prior to the perfection of
the contract of sale, respondent Buriol pointed to petitioner the boundaries of
the property. Hence, petitioner gained a fair estimate of the area of the
property sold to him. Second, petitioner cannot now assail the contents of the
Deed of Absolute Sale, particularly the description of the boundaries of the
property, because petitioners subscription to the Deed of Absolute Sale
indicates his assent to the correct description of the boundaries of the
property.

Petitioner also asserts that respondent Buriol is guilty of misleading
petitioner into believing that the latter was buying five hectares when he knew
prior to the sale that he owned only four hectares. The review of the
circumstances of the alleged misrepresentation is factual and, therefore,
beyond the province of the Court. Besides, this issue had already been raised
before and passed upon by the trial court and the Court of Appeals. The factual
finding of the courts below that no sufficient evidence supports petitioners
allegation of misrepresentation is binding on the Court.

The Court of Appeals reversed the trial courts dismissal of respondents
Turatello and Sanis counterclaim for moral and exemplary damages, attorneys
fees and litigation expenses. In awarding moral damages in the amount of
P100,000 in favor of Turatello and Sani, the Court of Appeals justified the
award to alleviate the suffering caused by petitioners unfounded civil action.
The filing alone of a civil action should not be a ground for an award of moral
damages in the same way that a clearly unfounded civil action is not among
the grounds for moral damages.[15]

Exemplary or corrective damages are imposed, by way of example or
correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages.[16] With the deletion of the award for moral damages,
there is no basis for the award of exemplary damages.

WHEREFORE, the instant petition for review on certiorari is GRANTED
in PART. The Court of Appeals Decision in CA-G.R. CV No. 38854 is AFFIRMED
with the MODIFICATION that the award of moral and exemplary damages is
DELETED.

SO ORDERED.

DANTE O. TINGA
Associate Justice




WE CONCUR:


Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
DOLORES SALINAS, assisted by her
husband, JUAN CASTILLO,
Petitioner,
- versus -
SPS. BIENVENIDO S. FAUSTINO
and ILUMINADA G. FAUSTINO,
Respondents.
G.R. No. 153077
Present:
QUISUMBING, J., Chairperson,
CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.
Promulgated:
September 19, 2008
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
D E C I S I O N
CARPIO MORALES, J.:
It appears that respondent Bienvenido S. Faustino (Faustino), by a Deed of Absolute Sale (Deed
of Sale)
1
dated June 27, 1962, purchased from his several co-heirs, including his first cousins
Benjamin Salinas and herein petitioner Dolores Salinas, their respective shares to a parcel of land
covered by Tax Declaration No. 14687, in the name of their grandmother Carmen Labitan,
located in Subic, Zambales, with a "superficial area of 300.375 square meters [sq. m.] more or
less," and with boundaries "in the North: Carmen Labitan; in the South: Calle, in the East:
Callejon and in the West: Roque Demetrio."
On March 15, 1982, respondent Faustino, joined by his wife, filed before the then Court of First
Instance of Zambales a complaint for recovery of possession with damages against petitioner,
assisted by her husband, docketed as Civil Case No. 3382-0, alleging that the parcel of land he
bought via the June 27, 1962 Deed of Sale from his co-heirs consisted of 1,381 sq. m. and is
more particularly described as follows:
A residential land located at Barrio Matain, Subic, Zambales now know as Lot 3, Block 5-K,
Psd-8268 bounded on the NORTH by Road Lot 1, Block 5-1, PSD-8268; on the SOUTH by
Road Lot 2, Block 5-1, Psd-8268; on the EAST by Road Lot 2, Block 5-1, Psd-8286; and, on the
WEST by the property of Roque Demetrio Lot 2, Block 5-k, Psd 8268; containing an area of
ONE THOSUAND THREE HUNDRED EIGHTY-ONE (1,381) SQUARE METERS, more or
less. Declared for taxation purposes under Tax Declaration No. 1896 in the name of Spouses
Bienvenido S. Faustino and Iluminada G. Faustino.
2
(Emphasis and underscoring supplied)
Respondent spouses further alleged that they allowed petitioner and co-heirs to occupy and build
a house on a 627 sq. m. portion of the land, particularly described as follows:
The northeastern portion of the land of the plaintiffs described in Paragraph 2 of this complaint;
bounded on the NORTH by Road Lot 1, Block 5-1, Psd-8268; on the East by Road Lot 2, Block
5-1, Psd-8268; and on the SOUTH and WEST by the remaining portion of Lot 5, Block 5-1,
PSD-8268 of herein plaintiffs which is the land described in Paragraph 2 of this complaint
owned by the plaintiffs and that this portion in question has an area of SIX HUNDRED
TWENTY-SEVEN (627) SQUARE METERS, more or less;
3
(Emphasis and underscoring
supplied),
on the condition that they would voluntarily and immediately remove the house and vacate that
portion of the land should they (respondents) need the land; and that when they asked petitioner
and her co-heir-occupants to remove the house and restore the possession of the immediately-
described portion of the land, they refused, hence, the filing of the complaint.
In her Answer,
4
petitioner claimed that she is the owner of a 628 sq. m. lot covered by Tax
Declaration No. 1017 in her name, particularly described as follows:
A residential lot, together with the two (2) storey house thereon constructed, and all existing
improvements thereon, situated at Matain, Subic, Zambales, containing an area of 628 square
meters, more or less. Bounded on the North, by Lot 12313 [sic]; on the East, by Lot 12413 (Road
Lot); on the South, by Lot 12005-Cecilia Salinas; and on the West, by Lot 12006, Loreto Febre.
Declared under Tax No. 1017, in the name of Dolores Salinas Castillo. (Emphasis and
underscoring supplied);
that if respondents refer to the immediately described lot, then they have no right or interest
thereon;
5
and that her signature in the June 27, 1962 Deed of Sale is forged.
After trial, Branch 73 of the Regional Trial Court (RTC) of Olongapo City, by Decision of
August 31, 1993, found petitioners claim of forgery unsupported. It nevertheless dismissed the
complaint,
6
it holding that, inter alia, the Deed of Sale indicated that only 300.375 sq. m. was
sold to petitioner.
. . . [I]n the . . . Deed of Sale [dated June 27, 1962] (Exhibit "B"), the area of the land sold was
only 300.375 square meters while the plaintiffs[-herein respondents] in their complaint claim
1,381 square meters or the whole of the lot shown by exhibit "A" (Lot 3, Block 5-A, Psd-8268).
Since the document is the best evidence, and the deed of sale indicates only 300.375 square
meters, so then, only the area as stated in the Deed of Sale should be owned by the plaintiffs. The
allegations [sic] that there might be a typographical error is again mere conjecture and not really
supported by evidence.
The boundaries of the land indicated in the Deed of Sale (Exhibit "B") [are] different from that of
Exhibit "A" claimed by the plaintiff[s-herein respondents] to be the plan of the lot which they
allegedly bought. The Deed of Sale states [that the boundary of the lot in the] North is the lot of
Carmen Labitan while Exhibit "A" indicated that North of the land is Lot 3, Block 5-A, Psd-8268
(Exhibit "A") is a Road Lot (Lot 1, Block 5-1, Psd-8268). This Court believes that after
examining the documents presented, that the land bought by the plaintiff is only a portion of the
land appearing in Exhibit "A" and not the whole lot. The land bought being situated at the
southern portion of Lot 3, Block 5-K, Psd-8268. This explains why the northern portion of the lot
sold indicated in the Deed of Sale is owned by Carmen Labitan, the original owner of the whole
Lot 3, Block 5-K, Psd-8268 (Exhibit "C-1").
Even the tax declaration submitted by the plaintiff indicates different boundaries with that of the
land indicated in the Deed of Sale. The law states in Art. 434 of the Civil Code:
"Art. 434. In an action to recover, the property must be identified, and the plaintiff must rely on
the weakness of the defendants claim."
x x x x
Herein plaintiffs[-respondents] only own the area of 300.375 square meters of the said lot and
not the whole area of 1,381 square meters as claimed by them. There is no evidence to
substantiate the plaintiffs claim for the area of 1,381 square meters.
x x x x
7
(Emphasis and underscoring supplied)
On respondents appeal,
8
the Court of Appeals, by Decision of December 20, 2001,
9
modified
the RTC decision. It held that since respondents are claiming the whole lot containing 1,381 sq.
m. but that petitioner is claiming 628 sq. m. thereof, then respondents are "entitled to the
remaining portion . . . of 753 square meters." The appellate court explained:
x x x [T]he Court agrees with the court a quo that only a portion of the whole lot was indeed sold
to the plaintiffs-appellants by the heirs of deceased Isidro Salinas and Carmen Labitan. What
remains to be determined is the particular portion of the area that was sold to the plaintiffs-
appellants.
x x x [W]hat really defines a piece of land is not the area calculated with more or less certainty
mentioned in the description but the boundaries therein laid down as enclosing the land and
indicating its limits. Where the land is sold for a lump sum and not so much per unit of measure
or number, the boundaries of the land stated in the contract determine the effects and scope of the
sale not the area thereof.
Based on these rules, plaintiffs-appellants are not strictly bound by the area stated in the Deed of
Sale which is merely 300.375 square meters, but by the metes and bounds stated therein. As
found by the court a quo, the land bought by the plaintiffs-appellants is a portion of the land
appearing in Exhibit "A", situated at the southern portion of Lot 3, Block 5-K, Psd 8268 where
the northern portion of the land sold as indicated in the Deed of Sale is owned by Carmen
Labitan, the original owner of the whole Lot 3, Block 5-K, Psd-8268 (Exhibit "C-1".) None of
the other heirs questioned the sale of the property as described in the Deed of Sale.
Considering the foregoing, this Court believes that plaintiffs-appellants[-herein respondents] own
more than 300.375 square meters of the land in question. However, said ownership does not
extend to the northern portion of the land being claimed by the defendants-appellees, consisting
of 628 (erroneously stated in the decision of the court a quo as 268) square meters and covered
by Tax Declaration No. 1017 in the name of defendant-appellee[-herein petitioner] Dolores
Salinas. Plaintiffs-appellants are[,] however, entitled to the remaining portion of the property
consisting of seven hundred fifty-three (753) square meters, more or less. (Emphasis and
underscoring supplied)
The appellate court thus disposed:
WHEREFORE, based on the foregoing premises, the judgment appealed from is hereby
MODIFIED, as follows:
1. Plaintiffs-appellants Bienvenido S. Faustino and Iluminada G. Faustin[o] are declared owners
of seven hundred fifty-three (753) square meters, more or less, of the parcel of land subject of
this case.
2. Plaintiffs-appellants and defendants-appellees are directed to cause the segregation of their
respective shares in the property as determined by this Court, with costs equally shared between
them.
x x x x
10
(Underscoring supplied)
Petitioners motion for reconsideration having been denied,
11
she filed the present petition
12

faulting the Court of Appeals
a. x x x IN MODIFYING THE DECISION OF THE COURT A QUO DISMISSING THE
COMPLAINT FOR INSUFFICIENCY OF EVIDENCE;
b. x x x IN DECLARING THE PRIVATE RESPONDENTS OWNERS OF 753 SQUARE
METERS, MORE OR LESS, OF THE PARCEL OF LAND SUBJECT OF THE CASE[;]
c. x x x IN NOT AFFIRMING THE DECISION OF THE COURT A QUO AND XXX IN NOT
DECLARING THE PETITIONER AS OWNER OF HER PROPERTY WHICH, SINCE THEN
UP TO THE PRESENT, SHE HAD BEEN OCCUPYING AND DESPITE PREPONDERANCE
OF EVIDENCE OF HER OWNERSHIP THERETO.
13
(Underscoring in the original)
The petition is meritorious.
Indeed, in a contract of sale of land in a mass, the specific boundaries stated in the contract must
control over any statement with respect to the area contained within its boundaries.
14
Thus, it is
the boundaries indicated in a deed of absolute sale, and not the area in sq. m. mentioned therein
300.375 sq. m. in the Deed of Sale in respondents favor that control in the determination of
which portion of the land a vendee acquires.
In concluding that respondents acquired via the June 27, 1962 Deed of Sale the total land area of
753 sq. m., the Court of Appeals subtracted from the total land area of 1,381 sq. m. reflected in
Exh. "A," which is "Plan of Lot 3, Block 5-k, Psd-8268, as prepared for Benjamin R. Salinas"
containing an area of 1,381 sq. m. and which was prepared on February 10, 1960 by a private
land surveyor, the 628 sq. m. area of the lot claimed by petitioner as reflected in Tax Declaration
No. 1017 in her name. As will be shown shortly, however, the basis of the appellate courts
conclusion is erroneous.
As the immediately preceding paragraph reflects, the "Plan of Lot 3, Bk 5-K, Psd-82" was
prepared for respondent Faustinos and petitioners first cousin co-heir Benjamin Salinas on
February 10, 1960.
Why the appellate court, after excluding the 628 sq. m. lot covered by a Tax Declaration in the
name of petitioner from the 1,381 sq. m. lot surveyed for Benjamin P. Salinas in 1960, concluded
that what was sold via the 1962 Deed of Sale to respondent Faustino was the remaining 753 sq.
m., despite the clear provision of said Deed of Sale that what was conveyed was 300.375 sq. m.,
escapes comprehension. It defies logic, given that respondents base their claim of ownership of
the questioned 628 sq. m. occupied by petitioner on that June 27, 1962 Deed of Sale covering a
300.375 sq. m. lot.
The trial court in fact noted in its Pre-trial Order that "the parties cannot agree as to the identity
of the property sought to be recovered by the plaintiff."
15
(Emphasis and underscoring supplied.)
Indeed, in her Answer to the Complaint, petitioner alleged "[t]hat if the plaintiffs refer to [the lot
covered by Tax Declaration No. 1017], then they have no right or interest or participation
whatsoever over the same x x x."
16
(Emphasis and italics supplied.)
Even the boundaries of the 628 sq. m. area covered by Tax Declaration No. 1017 in petitioners
name and those alleged by respondents to be occupied by petitioner are different. Thus, the
boundaries of the lot covered by Tax Declaration No. 1017 are: Lot No. 12302 on the North; Lot
No. 12005 (Cecilia Salinas) on the South; Lot No. 12413 (road lot) on the East; and Lot No.
12006 (Loreto Febre) on the West.
17
Whereas, following respondents claim, the 627 sq. m. area
occupied by petitioner has the following boundaries, viz:
The northeastern portion of the land of the plaintiffs described in Paragraph 2 of this complaint;
bounded on the NORTH by Road Lot 1, Block 5-1, Psd-8268; on the EAST by Road Lot 2,
Block 5-1, Psd-8268; and on the SOUTH and WEST by the remaining portion of Lot 5, Block
5-1, PSD-8268 of herein plaintiffs which is the land described in Paragraph 2 of this complaint
owned by the plaintiffs and that this portion in question has an area of SIX HUNDRED
TWENTY-SEVEN (627) SQUARE METERS, more or less.
18
(Emphasis and underscoring
supplied)
The Court of Appeals thus doubly erred in concluding that 1) what was sold to respondents via
the June 27, 1962 Deed of Sale was the 1,381 sq. m. parcel of land reflected in the Plan-Exh. "A"
prepared in 1960 for Benjamin Salinas, and 2) petitioner occupied 628 sq. m. portion thereof,
hence, respondents own the remaining 753 sq. m.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated
December 20, 2001 is REVERSED and SET ASIDE, and the Decision of Branch 73 of the
Regional Trial Court of Olongapo City dated August 31, 1993 DISMISSING Civil Case No.
3382-0 is REINSTATED.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 170405 February 2, 2010
RAYMUNDO S. DE LEON, Petitioner,
vs.
BENITA T. ONG.
1
Respondent.
D E C I S I O N
CORONA, J .:
On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land
2
with
improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these properties were
mortgaged to Real Savings and Loan Association, Incorporated (RSLAI), petitioner and
respondent executed a notarized deed of absolute sale with assumption of mortgage
3
stating:
x x x x x x x x x
That for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND
PESOS (P1.1 million), Philippine currency, the receipt whereof is hereby acknowledged from
[RESPONDENT] to the entire satisfaction of [PETITIONER], said [PETITIONER] does
hereby sell, transfer and convey in a manner absolute and irrevocable, unto said
[RESPONDENT], his heirs and assigns that certain real estate together with the buildings and
other improvements existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the
following terms and conditions:
1. That upon full payment of [respondent] of the amount of FOUR HUNDRED FIFTEEN
THOUSAND FIVE HUNDRED (P415,000), [petitioner] shall execute and sign a deed of
assumption of mortgage in favor of [respondent] without any further cost whatsoever;
2. That [respondent] shall assume payment of the outstanding loan of SIX HUNDRED
EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS (P684,500) with REAL
SAVINGS AND LOAN,
4
Cainta, Rizal (emphasis supplied)
x x x x x x x x x
Pursuant to this deed, respondent gave petitioner P415,500 as partial payment. Petitioner, on the
other hand, handed the keys to the properties and wrote a letter informing RSLAI of the sale and
authorizing it to accept payment from respondent and release the certificates of title.
Thereafter, respondent undertook repairs and made improvements on the properties.
5
Respondent
likewise informed RSLAI of her agreement with petitioner for her to assume petitioners
outstanding loan. RSLAI required her to undergo credit investigation.
Subsequently, respondent learned that petitioner again sold the same properties to one Leona
Viloria after March 10, 1993 and changed the locks, rendering the keys he gave her useless.
Respondent thus proceeded to RSLAI to inquire about the credit investigation. However, she was
informed that petitioner had already paid the amount due and had taken back the certificates of
title.
Respondent persistently contacted petitioner but her efforts proved futile.
On June 18, 1993, respondent filed a complaint for specific performance, declaration of nullity
of the second sale and damages
6
against petitioner and Viloria in the Regional Trial Court (RTC)
of Antipolo, Rizal, Branch 74. She claimed that since petitioner had previously sold the
properties to her on March 10, 1993, he no longer had the right to sell the same to Viloria. Thus,
petitioner fraudulently deprived her of the properties.
Petitioner, on the other hand, insisted that respondent did not have a cause of action against him
and consequently prayed for the dismissal of the complaint. He claimed that since the transaction
was subject to a condition (i.e., that RSLAI approve the assumption of mortgage), they only
entered into a contract to sell. Inasmuch as respondent did apply for a loan from RSLAI, the
condition did not arise. Consequently, the sale was not perfected and he could freely dispose of
the properties. Furthermore, he made a counter-claim for damages as respondent filed the
complaint allegedly with gross and evident bad faith.
Because respondent was a licensed real estate broker, the RTC concluded that she knew that the
validity of the sale was subject to a condition. The perfection of a contract of sale depended on
RSLAIs approval of the assumption of mortgage. Since RSLAI did not allow respondent to
assume petitioners obligation, the RTC held that the sale was never perfected.
In a decision dated August 27, 1999,
7
the RTC dismissed the complaint for lack of cause of
action and ordered respondent to pay petitioner P100,000 moral damages, P20,000 attorneys
fees and the cost of suit.
Aggrieved, respondent appealed to the Court of Appeals (CA),
8
asserting that the court a quo
erred in dismissing the complaint.
The CA found that the March 10, 2003 contract executed by the parties did not impose any
condition on the sale and held that the parties entered into a contract of sale. Consequently,
because petitioner no longer owned the properties when he sold them to Viloria, it declared the
second sale void. Moreover, it found petitioner liable for moral and exemplary damages for
fraudulently depriving respondent of the properties.
In a decision dated July 22, 2005,
9
the CA upheld the sale to respondent and nullified the sale to
Viloria. It likewise ordered respondent to reimburse petitioner P715,250 (or the amount he paid
to RSLAI). Petitioner, on the other hand, was ordered to deliver the certificates of titles to
respondent and pay her P50,000 moral damages and P15,000 exemplary damages.
Petitioner moved for reconsideration but it was denied in a resolution dated November 11,
2005.
10
Hence, this petition,
11
with the sole issue being whether the parties entered into a contract
of sale or a contract to sell.
Petitioner insists that he entered into a contract to sell since the validity of the transaction was
subject to a suspensive condition, that is, the approval by RSLAI of respondents assumption of
mortgage. Because RSLAI did not allow respondent to assume his (petitioners) obligation, the
condition never materialized. Consequently, there was no sale.
Respondent, on the other hand, asserts that they entered into a contract of sale as petitioner
already conveyed full ownership of the subject properties upon the execution of the deed.
We modify the decision of the CA.
Contract of Sale or Contract to Sell?
The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The RTC ruled
that it was a contract to sell while the CA held that it was a contract of sale.
In a contract of sale, the seller conveys ownership of the property to the buyer upon the
perfection of the contract. Should the buyer default in the payment of the purchase price, the
seller may either sue for the collection thereof or have the contract judicially resolved and set
aside. The non-payment of the price is therefore a negative resolutory condition.
12

On the other hand, a contract to sell is subject to a positive suspensive condition. The buyer does
not acquire ownership of the property until he fully pays the purchase price. For this reason, if
the buyer defaults in the payment thereof, the seller can only sue for damages.
13

The deed executed by the parties (as previously quoted) stated that petitioner sold the properties
to respondent "in a manner absolute and irrevocable" for a sum of P1.1 million.
14
With regard to
the manner of payment, it required respondent to pay P415,500 in cash to petitioner upon the
execution of the deed, with the balance
15
payable directly to RSLAI (on behalf of petitioner)
within a reasonable time.
16
Nothing in said instrument implied that petitioner reserved ownership
of the properties until the full payment of the purchase price.
17
On the contrary, the terms and
conditions of the deed only affected the manner of payment, not the immediate transfer of
ownership (upon the execution of the notarized contract) from petitioner as seller to respondent
as buyer. Otherwise stated, the said terms and conditions pertained to the performance of the
contract, not the perfection thereof nor the transfer of ownership.
Settled is the rule that the seller is obliged to transfer title over the properties and deliver the
same to the buyer.
18
In this regard, Article 1498 of the Civil Code
19
provides that, as a rule, the
execution of a notarized deed of sale is equivalent to the delivery of a thing sold.
In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent.
Moreover, not only did petitioner turn over the keys to the properties to respondent, he also
authorized RSLAI to receive payment from respondent and release his certificates of title to her.
The totality of petitioners acts clearly indicates that he had unqualifiedly delivered and
transferred ownership of the properties to respondent. Clearly, it was a contract of sale the parties
entered into.
Furthermore, even assuming arguendo that the agreement of the parties was subject to the
condition that RSLAI had to approve the assumption of mortgage, the said condition was
considered fulfilled as petitioner prevented its fulfillment by paying his outstanding obligation
and taking back the certificates of title without even notifying respondent. In this connection,
Article 1186 of the Civil Code provides:
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment.
Void Sale Or Double Sale?
Petitioner sold the same properties to two buyers, first to respondent and then to Viloria on two
separate occasions.
20
However, the second sale was not void for the sole reason that petitioner
had previously sold the same properties to respondent. On this account, the CA erred.
This case involves a double sale as the disputed properties were sold validly on two separate
occasions by the same seller to the two different buyers in good faith.
Article 1544 of the Civil Code provides:
Article 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. (emphasis supplied)
This provision clearly states that the rules on double or multiple sales apply only to purchasers in
good faith. Needless to say, it disqualifies any purchaser in bad faith.
A purchaser in good faith is one who buys the property of another without notice that some other
person has a right to, or an interest in, such property and pays a full and fair price for the same at
the time of such purchase, or before he has notice of some other persons claim or interest in the
property.
21
The law requires, on the part of the buyer, lack of notice of a defect in the title of the
seller and payment in full of the fair price at the time of the sale or prior to having notice of any
defect in the sellers title.
Was respondent a purchaser in good faith? Yes.
Respondent purchased the properties, knowing they were encumbered only by the mortgage to
RSLAI. According to her agreement with petitioner, respondent had the obligation to assume the
balance of petitioners outstanding obligation to RSLAI. Consequently, respondent informed
RSLAI of the sale and of her assumption of petitioners obligation. However, because petitioner
surreptitiously paid his outstanding obligation and took back her certificates of title, petitioner
himself rendered respondents obligation to assume petitioners indebtedness to RSLAI
impossible to perform.
Article 1266 of the Civil Code provides:
Article 1266. The debtor in obligations to do shall be released when the prestation become
legally or physically impossible without the fault of the obligor.
Since respondents obligation to assume petitioners outstanding balance with RSLAI became
impossible without her fault, she was released from the said obligation. Moreover, because
petitioner himself willfully prevented the condition vis--vis the payment of the remainder of the
purchase price, the said condition is considered fulfilled pursuant to Article 1186 of the Civil
Code. For purposes, therefore, of determining whether respondent was a purchaser in good faith,
she is deemed to have fully complied with the condition of the payment of the remainder of the
purchase price.
Respondent was not aware of any interest in or a claim on the properties other than the mortgage
to RSLAI which she undertook to assume. Moreover, Viloria bought the properties from
petitioner after the latter sold them to respondent. Respondent was therefore a purchaser in good
faith. Hence, the rules on double sale are applicable.
Article 1544 of the Civil Code provides that when neither buyer registered the sale of the
properties with the registrar of deeds, the one who took prior possession of the properties shall be
the lawful owner thereof.
In this instance, petitioner delivered the properties to respondent when he executed the notarized
deed
22
and handed over to respondent the keys to the properties. For this reason, respondent took
actual possession and exercised control thereof by making repairs and improvements thereon.
Clearly, the sale was perfected and consummated on March 10, 1993. Thus, respondent became
the lawful owner of the properties.
Nonetheless, while the condition as to the payment of the balance of the purchase price was
deemed fulfilled, respondents obligation to pay it subsisted. Otherwise, she would be unjustly
enriched at the expense of petitioner.
Therefore, respondent must pay petitioner P684,500, the amount stated in the deed. This is
because the provisions, terms and conditions of the contract constitute the law between the
parties. Moreover, the deed itself provided that the assumption of mortgage "was without any
further cost whatsoever." Petitioner, on the other hand, must deliver the certificates of title to
respondent. We likewise affirm the award of damages.
WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the Court of
Appeals in CA-G.R. CV No. 59748 are hereby AFFIRMED with MODIFICATION insofar as
respondent Benita T. Ong is ordered to pay petitioner Raymundo de Leon P684,500 representing
the balance of the purchase price as provided in their March 10, 1993 agreement.
Costs against petitioner.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 167195 May 8, 2009
ASSET PRIVATIZATION TRUST, Petitioner,
vs.
T.J. ENTERPRISES, Respondent.
D E C I S I O N
TINGA, J .:
This is a Rule 45 petition
1
which seeks the reversal of the Court of Appeals decision
2
and
resolution
3
affirming the RTCs decision
4
holding petitioner liable for actual damages for breach
of contract.
Petitioner Asset Privatization Trust
5
(petitioner) was a government entity created for the purpose
to conserve, to provisionally manage and to dispose assets of government institutions.
6
Petitioner
had acquired from the Development Bank of the Philippines (DBP) assets consisting of
machinery and refrigeration equipment which were then stored at Golden Cit y compound, Pasay
City. The compound was then leased to and in the physical possession of Creative Lines, Inc.,
(Creative Lines). These assets were being sold on an as-is-where-is basis.
On 7 November 1990, petitioner and respondent entered into an absolute deed of sale over
certain machinery and refrigeration equipment identified as Lots Nos. 2, 3 and 5. Respondent
paid the full amount of P84,000.00 as evidenced by petitioners Receipt No. 12844. After two (2)
days, respondent demanded the delivery of the machinery it had purchased. Sometime in March
1991, petitioner issued Gate Pass No. 4955. Respondent was able to pull out from the compound
the properties designated as Lots Nos. 3 and 5. However, during the hauling of Lot No. 2
consisting of sixteen (16) items, only nine (9) items were pulled out by respondent. The seven (7)
items that were left behind consisted of the following: (1) one (1) Reefer Unit 1; (2) one (1)
Reefer Unit 2; (3) one (1) Reefer Unit 3; (4) one (1) unit blast freezer with all accessories; (5)
one (1) unit chest freezer; (6) one (1) unit room air-conditioner; and (7) one (1) unit air
compressor. Creative Lines employees prevented respondent from hauling the remaining
machinery and equipment.
Respondent filed a complaint for specific performance and damages against petitioner and
Creative Lines.
7
During the pendency of the case, respondent was able to pull out the remaining
machinery and equipment. However, upon inspection it was discovered that the machinery and
equipment were damaged and had missing parts.
Petitioner argued that upon the execution of the deed of sale it had complied with its obligation
to deliver the object of the sale since there was no stipulation to the contrary. It further argued
that being a sale on an as-is-where-is basis, it was the duty of respondent to take possession of
the property. Petitioner claimed that there was already a constructive delivery of the machinery
and equipment.
The RTC ruled that the execution of the deed of absolute sale did not result in constructive
delivery of the machinery and equipment. It found that at the time of the sale, petitioner did not
have control over the machinery and equipment and, thus, could not have transferred ownership
by constructive delivery. The RTC ruled that petitioner is liable for breach of contract and should
pay for the actual damages suffered by respondent.
On petitioners appeal, the Court of Appeals affirmed in toto the decision of the RTC.
Hence this petition.
Before this Court, petitioner raises issues by attributing the following errors to the Court of
Appeals, to wit:
I.
The Court of Appeals erred in not finding that petitioner had complied with its obligation to
make delivery of the properties subject of the contract of sale.
II.
The Court of Appeals erred in not considering that the sale was on an "as-is-where-is" basis
wherein the properties were sold in the condition and in the place where they were located.
III.
The Court of Appeals erred in not considering that respondents acceptance of petitioners
disclaimer of warranty forecloses respondents legal basis to enforce any right arising from the
contract.
IV.
The reason for the failure to make actual delivery of the properties was not attributable to the
fault and was beyond the control of petitioner. The claim for damages against petitioner is
therefore bereft of legal basis.
8

The first issue hinges on the determination of whether there was a constructive delivery of the
machinery and equipment upon the execution of the deed of absolute sale between petitioner and
respondent.
The ownership of a thing sold shall be transferred to the vendee upon the actual or constructive
delivery thereof.
9
The thing sold shall be understood as delivered when it is placed in the control
and possession of the vendee.
10

As a general rule, when the sale is made through a public instrument, the execution thereof shall
be equivalent to the delivery of the thing which is the object of the contract, if from the deed the
contrary does not appear or cannot clearly be inferred. And with regard to movable property, its
delivery may also be made by the delivery of the keys of the place or depository where it is
stored or kept.
11
In order for the execution of a public instrument to effect tradition, the purchaser
must be placed in control of the thing sold.
12

However, the execution of a public instrument only gives rise to a prima facie presumption of
delivery. Such presumption is destroyed when the delivery is not effected because of a legal
impediment.
13
It is necessary that the vendor shall have control over the thing sold that, at the
moment of sale, its material delivery could have been made.
14
Thus, a person who does not have
actual possession of the thing sold cannot transfer constructive possession by the execution and
delivery of a public instrument.
15

In this case, there was no constructive delivery of the machinery and equipment upon the
execution of the deed of absolute sale or upon the issuance of the gate pass since it was not
petitioner but Creative Lines which had actual possession of the property. The presumption of
constructive delivery is not applicable as it has to yield to the reality that the purchaser was not
placed in possession and control of the property.
On the second issue, petitioner posits that the sale being in an as-is-where-is basis, respondent
agreed to take possession of the things sold in the condition where they are found and from the
place
where they are located. The phrase as-is where-is basis pertains solely to the physical condition
of the thing sold, not to its legal situation.
16
It is merely descriptive of the state of the thing sold.
Thus, the as-is where-is basis merely describes the actual state and location of the machinery and
equipment sold by petitioner to respondent. The depiction does not alter petitioners
responsibility to deliver the property to respondent.1awphi1.zw+
Anent the third issue, petitioner maintains that the presence of the disclaimer of warranty in the
deed of absolute sale absolves it from all warranties, implied or otherwise. The position is
untenable.
The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which
is the object of the sale.
17
Ownership of the thing sold is acquired by the vendee from the
moment it its delivered to him in any of the ways specified in articles 1497 to 1501, or in any
other manner signifying an agreement that the possession is transferred from the vendor to the
vendee.
18
A perusal of the deed of absolute sale shows that both the vendor and the vendee
represented and warranted to each other that each had all the requisite power and authority to
enter into the deed of absolute sale and that they shall perform each of their respective
obligations under the deed of absolute in accordance with the terms thereof.
19
As previously
shown, there was no actual or constructive delivery of the things sold. Thus, petitioner has not
performed its obligation to transfer ownership and possession of the things sold to respondent.
As to the last issue, petitioner claims that its failure to make actual delivery was beyond its
control. It posits that the refusal of Creative Lines to allow the hauling of the machinery and
equipment was unforeseen and constituted a fortuitous event.
The matter of fortuitous events is governed by Art. 1174 of the Civil Code which provides that
except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or
when the nature of the obligation requires assumption of risk, no person shall be responsible for
those events which could not be foreseen, or which though foreseen, were inevitable. The
elements of a fortuitous event are: (a) the cause of the unforeseen and unexpected occurrence,
must have been independent of human will; (b) the event that constituted the caso fortuito must
have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must
have been such as to render it impossible for the debtors to fulfill their obligation in a normal
manner, and; (d) the obligor must have been free from any participation in the aggravation of the
resulting injury to the creditor.
20

A fortuitous event may either be an act of God, or natural occurrences such as floods or
typhoons, or an act of man such as riots, strikes or wars.
21
However, when the loss is found to be
partly the result of a persons participationwhether by active intervention, neglect or failure to
actthe whole occurrence is humanized and removed from the rules applicable to a fortuitous
event.
22

We quote with approval the following findings of the Court of Appeals, to wit:
We find that Creative Lines refusal to surrender the property to the vendee does not constitute
force majeure which exculpates APT from the payment of damages. This event cannot be
considered unavoidable or unforeseen. APT knew for a fact that the properties to be sold were
housed in the premises leased by Creative Lines. It should have made arrangements with
Creative Lines beforehand for the smooth and orderly removal of the equipment. The principle
embodied in the act of God doctrine strictly requires that the act must be one occasioned
exclusively by the violence of nature and all human agencies are to be excluded from creating or
entering into the cause of the mischief. When the effect, the cause of which is to be considered,
is found to be in part the result of the participation of man, whether it be from active intervention
or neglect, or failure to act, the whole occurrence is thereby humanized, as it were, and removed
from the rules applicable to the acts of God.
23

Moreover, Art. 1504 of the Civil Code provides that where actual delivery has been delayed
through the fault of either the buyer or seller the goods are at the risk of the party in fault. The
risk of loss or deterioration of the goods sold does not pass to the buyer until there is actual or
constructive delivery thereof. As previously discussed, there was no actual or constructive
delivery of the machinery and equipment. Thus, the risk of loss or deterioration of property is
borne by petitioner. Thus, it should be liable for the damages that may arise from the
delay.1avvphi1
Assuming arguendo that Creative Lines refusal to allow the hauling of the machinery and
equipment is a fortuitous event, petitioner will still be liable for damages. This Court agrees with
the appellate courts findings on the matter of damages, thus:
Article 1170 of the Civil Code states: "Those who in the performance of their obligations are
guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof
are liable for damages." In contracts and quasi-contracts, the damages for which the obligor who
acted in good faith is liable shall be those that are the natural and probable consequences of the
breach of the obligation, and which the parties have foreseen or could have reasonably foreseen
at the time the obligation was constituted.
24
The trial court correctly awarded actual damages as
pleaded and proven during trial.
25

WHEREFORE, the Court AFFIRMS in toto the Decision of the Court of Appeals dated 31
August 2004. Cost against petitioner.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-15155 December 29, 1960
BOARD OF LIQUIDATORS, petitioner-appellant,
vs.
EXEQUIEL FLORO, ET AL., oppositors-appellees.
Godofredo Zandueta for appellant.
Isidero A. Vera for appellee.

REYES, J.B.L., J .:
From the order of the Court of First Instance of Manila, dated August 10, 1955, denying its
petition to exclude certain pieces of steel matting from the assets of the insolvent M. P.
Malabanan, the Board of Liquidators appealed to the Court of Appeals. The latter certified the
case to this Court on the ground that only questions of law are involved.
The Board of Liquidators (hereinafter referred to as the Board) is an agency of the Government
created under Executive Order No. 372 (November 24, 1950), and, pursuant to Executive Order
No. 377 (December 1, 1950), took over the functions of the defunct Surplus Property Liquidating
Committee.
On June 14, 1952 Melecio Malabanan entered into an agreement with the Board for the salvage
of surplus properties sunk in territorial waters off the provinces of Mindoro, La Union, and
Batangas (Exhibit "A"). By its terms, Malabanan was to commence operations within 30 days
from execution of said contract, which was to be effective for a period of one (1) year from the
start of operations, extendible for a total period of not more than six (6) months. On June 10,
1953, Malabanan requested for an extension of one (1) year for the salvage in waters of Mindoro
and Batangas; and the Board extended the contract up to November 30, 1953. On November 18,
1953, Malabanan requested a second extension of one more year for the waters of Occidental
Mindoro, and Board again extended the contract up to August 31, 1954. Malabanan submitted a
recovery report dated July 26, 1954, wherein it is stated that he had recovered a total of 13,107
pieces of steel mattings, as follows:
1. December, 1953-April 30, 1954 2,5552

2. May 1, 1954-June 30, 1954 10,552



13,107 (pieces)
Four months previously, Malabanan had entered into an agreement with Exequiel Floro, dated
March 31, 1954 (Exhibit 1, Floro), in which, among other things, it was agreed that Floro would
advance to Malabanan certain sums of money, not to exceed P25,000.00, repayment, thereof
being secured by quantities of steel mattings which Malabanan would consign to Floro; that said
advances were to paid within a certain period, and upon default at the expiration thereof, Floro
was, authorized to sell whatever steel mattings were in his possession under said contract, in
amount sufficient to satisfy the advances. Pursuant thereto, Floro claims to have made total
advances to the sum of P24,224.50.
It appears that as Malabanan was not able to repay Floro's advances, the latter, by a document
dated August 4, 1954, sold 11,047 pieces of steel mattings to Eulalio Legaspi for the sum of
P24,803.40.
Seventeen days later, on August 21, 1954, Malabanan filed in the Court of First Instance of
Manila a petition for voluntary insolvency, attaching thereto a Schedule of Accounts, in which
the Board was listed as one of the creditors for P10,874.46, and Exequiel Floro for P24,220.50,
the origin of the obligations being described as "Manila Royalty" and "Salvaging Operations",
respectively. Also attached was an Inventory of Properties, listing certain items of personal
property allegedly aggregating P33,707.00 in value. In this list were included 11,167 pieces of
steel mattings with an alleged estimated value of P33,501.00.
Soon after, the Board, claiming to be the owner of the listed steel matting, filed a petition to
exclude them from the inventory; and to make the insolvent account for a further 1,940 pieces of
steel matting, the difference between the number stated in the insolvent's recovery report of July
26, 1954 and that stated in the inventory. Exequiel Floro opposed the Board's petition and
claimed that the steel matting listed had become the property of Eulalio Legaspi by virtue of a
deed of sale in his favor, executed by Floro pursuant to the latter's contract with Malabanan on
March 31, 1954. The court below, after reception of evidence as to the genuineness and due
execution of the deed of sale to Legaspi, as well as of the contract between Malabanan and Floro,
denied the Board's petition, declaring that Malabanan had acquired ownership over the steel
mattings under his contract with the Board; that Exequiel Floro was properly authorized to
dispose of the steel mattings under Floro's contract with Malabanan; and that the sale to Eulalio
Legaspi was valid and not contrary to the Insolvency Law.
In this appeal, the Board contends that Malabanan did not acquire ownership over the steel
mattings due to his failure to comply with the terms of the contract, allegedly constituting
conditions precedent for the transfer of title, namely: payment of the price; audit and check as to
the nature, quantity and value of properties salvaged; weighing of the salvaged properties to be
conducted jointly by representatives of the Board and of Malabanan; determination of the site for
storage; audit and verification of the recovery reports by government auditors; and firing of
performance bond.
We are of the opinion, and so hold, that the contract (Exhibit "A") between Malabanan and the
Board had effect of vesting Malabanan with title to, or ownership of the steel mattings in
question as soon as they were brought up from the bottom of the sea. This is shown by pertinent
provisions of the contract as follows:
10. For and in consideration of the assignment by the BOARD OF LIQUIDATORS to
the CONTRACTOR (Malabanan) of all right, title and interest in and to all surplus
properties salvaged by the CONTRACTOR under this contract, the CONTRACTOR
shall pay to the Government Ninety Pesos (P90.00) per long ton(2,240 lbs.) of surplus
properties recovered.
11. Payment of the agreed price shall be made monthly during the first ten (10) days of
every month on the basis of recovery reports of sunken surplus properties salvaged
during the preceding month, duly verified and audited by the authorized representative of
the BOARD OF LIQUIDATORS.
That Malabanan was required under the contract to post a bond of P10,000.00 to guarantee
compliance with the terms and conditions of the contract; that the operation for salvage were
entirely at Malabanan's expense and risks; that gold, silver, copper, coins, currency, jewelry,
precious stones, etc. were excepted from the contract, and were instead required to be turned
over to the Board for disposition; that the expenses for storage, including guard service, were for
Malabanan's account all these circumstances indicated that ownership of the goods passed to
Malabanan as soon as they were recovered or salvaged (i.e., as soon as the salvor had gained
effective possession of the goods), and not only after payment of the stipulated price. .
While there can be reservation of title in the seller until full payment of the price (Article 1478,
N.C.C.), or, until fulfillment of a condition (Article 1505, N.C.C.); and while execution of a
public instrument amounts to delivery only when from the deed the contrary does not appear or
cannot clearly be inferred (Article 1498, supra), there is nothing in the said contract which may
be deemed a reservation of title, or from which it may clearly be inferred that delivery was not
intended.
The contention that there was no delivery is incorrect. While there was no physical tradition,
there was one by agreement (traditio longa manu) in conformity with Article 1499 of the Civil
Code.lawphil.net
Art. 1499 The delivery of movable property may likewise be made by the mere
consent or agreement of the contracting parties, if the thing sold cannot be transferred to
the possession of the vendee at the time of the sale. . . .
As observed earlier, there is nothing in the terms of the public instrument in question from which
an intent to withhold delivery or transfer of title may be inferred.
The Board also contends that as no renewal of the bond required was filed for the extension of
the contract, it ceased to have any force and effect; and, as the steel mattings were recovered
during the extended period of the contract, Malabanan did not acquire any rights thereto. The
pertinent portion of the contract provides:
12. Jointly with the execution of this contract, the CONTRACTOR shall file a bond in
the amount of TEN THOUSAND (P10,000.00) PESOS to guarantee his faithful
compliance with the terms and conditions herein; Provided, that this contract shall not be
considered to have been executed notwithstanding the signing hereof by the parties until
said bond shall have been properly filed.
Malabanan filed a bond dated June 10, 1952, effective for one (1) year, or up to June 10, 1953.
The principal contract, executed on June 14, 1952, was first extended to November 30, 1953, and
finally, to August 31, 1954. As can be seen, there was no longer any bond from June 11, 1953 to
August 31, 1954.
The lapse of the bond did not extinguish the contract between Malabanan and the Board. The
requirement that a bond be posted was already complied with when Malabanan filed the bond
dated June 10, 1952. A bond merely stands as guaranty for a principal obligation which exist
independently of said bond, the latter being an accessory contract (Valencia vs. RFC & C.A., 103
Phil., 444). Significantly, its purpose, as per the terms of the contract, was "to guarantee his
(Malabanan's) faithful compliance with the terms and conditions herein" and, for violation of the
contract, the Board may declare "the bond forfeited" (par. 13). Being for its benefit, the Board
could legally waive the bond requirement (Valencia vs. RFC, et al., supra.), and it did so when,
the bond already having expired, it extended the contract not only once, but twice. In none of the
resolutions extending contract (Annexes "C" & "E", pp. 108-112, Record on Appeal) was there a
requirement that the bond be renewed, in the face of the first indorsement by the Executive
Officer recommending that Malabanan's request for a second extension be granted "provided the
bond be originally posted should continue."
There is no merit to the suggestion that there being a novation, Article 1299 of the Civil Code
should govern. Novation is never presumed, it being required that the intent to novate be
expressed clearly and unequivocally, or that the terms of the new agreement be incompatible
with the old contract (Article 1292, N.C.C.; Martinez vs. Cavives, 25 Phil. 581; Tiu Siuce vs.
Habaa, 45 Phil. 707; Pablo vs. Sapungan, 71 Phil. 145; Young vs. Villa, 93 Phil., 21; 49 Off.
Gaz., [5] 1818.) Here there was neither express novation nor incompatibility from which it could
be implied. Moreover, a mere extension of the term (period) for payment or performance is not
novation (Inchausti vs. Yulo, 34 Phil. 978; Zapanta vs. De Rotaeche, 21 Phil. 154; Pablo vs.
Sapungan, Supra); and, while the extension covered only some of the areas originally agreed
upon, this change did not alter the essence of the contract (cf. Ramos vs. Gibbon, 67 Phil., 371;
Bank of P.I. vs. Herridge, 47 Phil., 57).
It is next contended that the sale by Floro to Legaspi on August 4, 1954 (within 30 days prior to
petition for insolvency) was void as a fraudulent transfer under Section 70 of the Insolvency
Law. The court below held that the sale to Legaspi was valid and not violative of Section 70; but
there having been no proceedings to determine whether the sale was fraudulent, we think it was
premature for the court below to decide this point, especially because under section 36, No. 8. of
the Insolvency Act, all proceedings to set aside fraudulent transfers should be brought and
prosecuted by the assignee, who can legally represent all the creditors of the insolvent (Maceda,
et al., vs. Hernandez, et al., 70 Phil., 261). To allow a single creditor to bring such a proceeding
would invite a multiplicity of suits, since the resolution of his case would not bind the other
creditors, who may refile the same claim independently, with diverse proofs, and possibly give
rise to contradictory rulings by the courts.
The order appealed from is hereby affirmed in so far as it declares the disputed goods to be the
property of the insolvent; but without prejudice to the right of the assignee in insolvency to take
whatever action may be proper to attack the alleged fraudulent transfer of the steel matting to
Eulalio Legaspi, and to make the proper parties account for the difference between the number of
pieces of steel matting stated in the insolvent's recovery report, Annex "B" (13,107), and that
stated in his inventory (11,167). Costs against appellant.
Paras, C.J., Bengzon, Bautista Angelo, Labrador, Barrera, Gutierrez David, Paredes and Dizon,
JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 124242 January 21, 2005
SAN LORENZO DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA
ZAVALLA LU, respondents.
D E C I S I O N
TINGA, J .:
From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita
Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa,
Laguna covered by TCT No. T-39022 and TCT No. T-39023 both measuring 15,808 square
meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo
Babasanta, (hereinafter, Babasanta) for the price of fifteen pesos (P15.00) per square meter.
Babasanta made a downpayment of fifty thousand pesos (P50,000.00) as evidenced by a
memorandum receipt issued by Pacita Lu of the same date. Several other payments totaling two
hundred thousand pesos (P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final
deed of sale in his favor so that he could effect full payment of the purchase price. In the same
letter, Babasanta notified the spouses about having received information that the spouses sold the
same property to another without his knowledge and consent. He demanded that the second sale
be cancelled and that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to
sell the property to him at fifteen pesos (P15.00) per square meter. She, however, reminded
Babasanta that when the balance of the purchase price became due, he requested for a reduction
of the price and when she refused, Babasanta backed out of the sale. Pacita added that she
returned the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court (RTC),
Branch 31, of San Pedro, Laguna, a Complaint for Specific Performance and Damages
1
against
his co-respondents herein, the Spouses Lu. Babasanta alleged that the lands covered by TCT No.
T- 39022 and T-39023 had been sold to him by the spouses at fifteen pesos (P15.00) per square
meter. Despite his repeated demands for the execution of a final deed of sale in his favor,
respondents allegedly refused.
In their Answer,
2
the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and when
the total advances of Pacita reached fifty thousand pesos (P50,000.00), the latter and Babasanta,
without the knowledge and consent of Miguel Lu, had verbally agreed to transform the
transaction into a contract to sell the two parcels of land to Babasanta with the fifty thousand
pesos (P50,000.00) to be considered as the downpayment for the property and the balance to be
paid on or before 31 December 1987. Respondents Lu added that as of November 1987, total
payments made by Babasanta amounted to only two hundred thousand pesos (P200,000.00) and
the latter allegedly failed to pay the balance of two hundred sixty thousand pesos (P260,000.00)
despite repeated demands. Babasanta had purportedly asked Pacita for a reduction of the price
from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter and when the Spouses Lu
refused to grant Babasantas request, the latter rescinded the contract to sell and declared that the
original loan transaction just be carried out in that the spouses would be indebted to him in the
amount of two hundred thousand pesos (P200,000.00). Accordingly, on 6 July 1989, they
purchased Interbank Managers Check No. 05020269 in the amount of two hundred thousand
pesos (P200,000.00) in the name of Babasanta to show that she was able and willing to pay the
balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 1990
3
wherein he prayed for the
issuance of a writ of preliminary injunction with temporary restraining order and the inclusion of
the Register of Deeds of Calamba, Laguna as party defendant. He contended that the issuance of
a preliminary injunction was necessary to restrain the transfer or conveyance by the Spouses Lu
of the subject property to other persons.
The Spouses Lu filed their Opposition
4
to the amended complaint contending that it raised new
matters which seriously affect their substantive rights under the original complaint. However, the
trial court in its Order dated 17 January 1990
5
admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a
Motion for Intervention
6
before the trial court. SLDC alleged that it had legal interest in the
subject matter under litigation because on 3 May 1989, the two parcels of land involved, namely
Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale with Mortgage.
7
It
alleged that it was a buyer in good faith and for value and therefore it had a better right over the
property in litigation.
In his Opposition to SLDCs motion for intervention,
8
respondent Babasanta demurred and
argued that the latter had no legal interest in the case because the two parcels of land involved
herein had already been conveyed to him by the Spouses Lu and hence, the vendors were without
legal capacity to transfer or dispose of the two parcels of land to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene. SLDC
filed its Complaint-in-Intervention on 19 April 1990.
9
Respondent Babasantas motion for the
issuance of a preliminary injunction was likewise granted by the trial court in its Order dated 11
January 1991
10
conditioned upon his filing of a bond in the amount of fifty thousand pesos
(P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu
executed in its favor an Option to Buy the lots subject of the complaint. Accordingly, it paid an
option money in the amount of three hundred sixteen thousand one hundred sixty pesos
(P316,160.00) out of the total consideration for the purchase of the two lots of one million two
hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After the Spouses Lu
received a total amount of six hundred thirty-two thousand three hundred twenty pesos
(P632,320.00) they executed on 3 May 1989 a Deed of Absolute Sale with Mortgage in its favor.
SLDC added that the certificates of title over the property were delivered to it by the spouses
clean and free from any adverse claims and/or notice of lis pendens. SLDC further alleged that it
only learned of the filing of the complaint sometime in the early part of January 1990 which
prompted it to file the motion to intervene without delay. Claiming that it was a buyer in good
faith, SLDC argued that it had no obligation to look beyond the titles submitted to it by the
Spouses Lu particularly because Babasantas claims were not annotated on the certificates of title
at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the
property to SLDC. It ordered the Spouses Lu to pay Babasanta the sum of two hundred thousand
pesos (P200,000.00) with legal interest plus the further sum of fifty thousand pesos (P50,000.00)
as and for attorneys fees. On the complaint-in-intervention, the trial court ordered the Register
of Deeds of Laguna, Calamba Branch to cancel the notice of lis pendens annotated on the
original of the TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and
SLDC did not register the respective sales in their favor, ownership of the property should
pertain to the buyer who first acquired possession of the property. The trial court equated the
execution of a public instrument in favor of SLDC as sufficient delivery of the property to the
latter. It concluded that symbolic possession could be considered to have been first transferred to
SLDC and consequently ownership of the property pertained to SLDC who purchased the
property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals alleging in the
main that the trial court erred in concluding that SLDC is a purchaser in good faith and in
upholding the validity of the sale made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the
trial court erred in failing to consider that the contract to sell between them and Babasanta had
been novated when the latter abandoned the verbal contract of sale and declared that the original
loan transaction just be carried out. The Spouses Lu argued that since the properties involved
were conjugal, the trial court should have declared the verbal contract to sell between Pacita Lu
and Pablo Babasanta null and void ab initio for lack of knowledge and consent of Miguel Lu.
They further averred that the trial court erred in not dismissing the complaint filed by Babasanta;
in awarding damages in his favor and in refusing to grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision
11
which set aside the judgment of
the trial court. It declared that the sale between Babasanta and the Spouses Lu was valid and
subsisting and ordered the spouses to execute the necessary deed of conveyance in favor of
Babasanta, and the latter to pay the balance of the purchase price in the amount of two hundred
sixty thousand pesos (P260,000.00). The appellate court ruled that the Absolute Deed of Sale
with Mortgage in favor of SLDC was null and void on the ground that SLDC was a purchaser in
bad faith. The Spouses Lu were further ordered to return all payments made by SLDC with legal
interest and to pay attorneys fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate court.
12

However, in a Manifestation dated 20 December 1995,
13
the Spouses Lu informed the appellate
court that they are no longer contesting the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,
14
the appellate court considered as withdrawn the motion
for reconsideration filed by the Spouses Lu in view of their manifestation of 20 December 1995.
The appellate court denied SLDCs motion for reconsideration on the ground that no new or
substantial arguments were raised therein which would warrant modification or reversal of the
courts decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A
BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER PACITA ZAVALLA LU
OBTAINED FROM IT THE CASH ADVANCE OF P200,000.00, SAN LORENZO WAS PUT
ON INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED
FACT THAT THE ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN
POSSESSION OF THE DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND
TOOK POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN,
ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT
RESPONDENT BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN
LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN THE DISPUTED
PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL
CONCURRENCE ON THE FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED
AND SET ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF
SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH.
15

SLDC contended that the appellate court erred in concluding that it had prior notice of
Babasantas claim over the property merely on the basis of its having advanced the amount of
two hundred thousand pesos (P200,000.00) to Pacita Lu upon the latters representation that she
needed the money to pay her obligation to Babasanta. It argued that it had no reason to suspect
that Pacita was not telling the truth that the money would be used to pay her indebtedness to
Babasanta. At any rate, SLDC averred that the amount of two hundred thousand pesos
(P200,000.00) which it advanced to Pacita Lu would be deducted from the balance of the
purchase price still due from it and should not be construed as notice of the prior sale of the land
to Babasanta. It added that at no instance did Pacita Lu inform it that the lands had been
previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took
possession of the property and asserted its rights as new owner as opposed to Babasanta who has
never exercised acts of ownership. Since the titles bore no adverse claim, encumbrance, or lien at
the time it was sold to it, SLDC argued that it had every reason to rely on the correctness of the
certificate of title and it was not obliged to go beyond the certificate to determine the condition
of the property. Invoking the presumption of good faith, it added that the burden rests on
Babasanta to prove that it was aware of the prior sale to him but the latter failed to do so. SLDC
pointed out that the notice of lis pendens was annotated only on 2 June 1989 long after the sale
of the property to it was consummated on 3 May 1989.1awphi1.nt
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu
informed the Court that due to financial constraints they have no more interest to pursue their
rights in the instant case and submit themselves to the decision of the Court of Appeals.
16

On the other hand, respondent Babasanta argued that SLDC could not have acquired ownership
of the property because it failed to comply with the requirement of registration of the sale in
good faith. He emphasized that at the time SLDC registered the sale in its favor on 30 June 1990,
there was already a notice of lis pendens annotated on the titles of the property made as early as
2 June 1989. Hence, petitioners registration of the sale did not confer upon it any right.
Babasanta further asserted that petitioners bad faith in the acquisition of the property is evident
from the fact that it failed to make necessary inquiry regarding the purpose of the issuance of the
two hundred thousand pesos (P200,000.00) managers check in his favor.
The core issue presented for resolution in the instant petition is who between SLDC and
Babasanta has a better right over the two parcels of land subject of the instant case in view of the
successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a document
signed by Pacita Lu acknowledging receipt of the sum of fifty thousand pesos (P50,000.00) as
partial payment for 3.6 hectares of farm lot situated at Barangay Pulong, Sta. Cruz, Sta. Rosa,
Laguna.
17
While the receipt signed by Pacita did not mention the price for which the property
was being sold, this deficiency was supplied by Pacita Lus letter dated 29 May 1989
18
wherein
she admitted that she agreed to sell the 3.6 hectares of land to Babasanta for fifteen pesos
(P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by the parties,
irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses Lu is a
contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,
19
which is manifested by the meeting of the
offer and the acceptance upon the thing which are to constitute the contract. The offer must be
certain and the acceptance absolute.
20
Moreover, contracts shall be obligatory in whatever form
they may have been entered into, provided all the essential requisites for their validity are
present.
21

The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos
(P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa,
Laguna. While there is no stipulation that the seller reserves the ownership of the property until
full payment of the price which is a distinguishing feature of a contract to sell, the subsequent
acts of the parties convince us that the Spouses Lu never intended to transfer ownership to
Babasanta except upon full payment of the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite his
repeated requests for the execution of the final deed of sale in his favor so that he could effect
full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta himself
recognized that ownership of the property would not be transferred to him until such time as he
shall have effected full payment of the price. Moreover, had the sellers intended to transfer title,
they could have easily executed the document of sale in its required form simultaneously wit h
their acceptance of the partial payment, but they did not. Doubtlessly, the receipt signed by
Pacita Lu should legally be considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane. In a contract of
sale, title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell,
by agreement the ownership is reserved in the vendor and is not to pass until the full payment of
the price.
22
In a contract of sale, the vendor has lost and cannot recover ownership until and
unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the
vendor until the full payment of the price, such payment being a positive suspensive condition
and failure of which is not a breach but an event that prevents the obligation of the vendor to
convey title from becoming effective.
23

The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the
purchase price. There being an obligation to pay the price, Babasanta should have made the
proper tender of payment and consignation of the price in court as required by law. Mere sending
of a letter by the vendee expressing the intention to pay without the accompanying payment is
not considered a valid tender of payment.
24
Consignation of the amounts due in court is essential
in order to extinguish Babasantas obligation to pay the balance of the purchase price. Glaringly
absent from the records is any indication that Babasanta even attempted to make the proper
consignation of the amounts due, thus, the obligation on the part of the sellers to convey title
never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not a contract
to sell, Babasantas claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent
25
and from that moment, the
parties may reciprocally demand performance.
26
The essential elements of a contract of sale, to
wit: (1) consent or meeting of the minds, that is, to transfer ownership in exchange for the price;
(2) object certain which is the subject matter of the contract; (3) cause of the obligation which is
established.
27

The perfection of a contract of sale should not, however, be confused with its consummation. In
relation to the acquisition and transfer of ownership, it should be noted that sale is not a mode,
but merely a title. A mode is the legal means by which dominion or ownership is created,
transferred or destroyed, but title is only the legal basis by which to affect dominion or
ownership.
28
Under Article 712 of the Civil Code, "ownership and other real rights over property
are acquired and transmitted by law, by donation, by testate and intestate succession, and in
consequence of certain contracts, by tradition." Contracts only constitute titles or rights to the
transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing the
same.
29
Therefore, sale by itself does not transfer or affect ownership; the most that sale does is
to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale,
that actually transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from
the moment it is delivered to him in any of the ways specified in Article 1497 to 1501.
30
The
word "delivered" should not be taken restrictively to mean transfer of actual physical possession
of the property. The law recognizes two principal modes of delivery, to wit: (1) actual delivery;
and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the vendee.
31

Legal or constructive delivery, on the other hand, may be had through any of the following ways:
the execution of a public instrument evidencing the sale;
32
symbolical tradition such as the
delivery of the keys of the place where the movable sold is being kept;
33
traditio longa manu or
by mere consent or agreement if the movable sold cannot yet be transferred to the possession of
the buyer at the time of the sale;
34
traditio brevi manu if the buyer already had possession of the
object even before the sale;
35
and traditio constitutum possessorium, where the seller remains in
possession of the property in a different capacity.
36

Following the above disquisition, respondent Babasanta did not acquire ownership by the mere
execution of the receipt by Pacita Lu acknowledging receipt of partial payment for the property.
For one, the agreement between Babasanta and the Spouses Lu, though valid, was not embodied
in a public instrument. Hence, no constructive delivery of the lands could have been effected. For
another, Babasanta had not taken possession of the property at any time after the perfection of
the sale in his favor or exercised acts of dominion over it despite his assertions that he was the
rightful owner of the lands. Simply stated, there was no delivery to Babasanta, whether actual or
constructive, which is essential to transfer ownership of the property. Thus, even on the
assumption that the perfected contract between the parties was a sale, ownership could not have
passed to Babasanta in the absence of delivery, since in a contract of sale ownership is
transferred to the vendee only upon the delivery of the thing sold.
37

However, it must be stressed that the juridical relationship between the parties in a double sale is
primarily governed by Article 1544 which lays down the rules of preference between the two
purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of double sale of immovable property. When the thing sold twice is an
immovable, the one who acquires it and first records it in the Registry of Property, both made in
good faith, shall be deemed the owner.
38
Verily, the act of registration must be coupled with
good faith that is, the registrant must have no knowledge of the defect or lack of title of his
vendor or must not have been aware of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of his vendor.
39

Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge
of Babasantas claim. Babasanta, however, strongly argues that the registration of the sale by
SLDC was not sufficient to confer upon the latter any title to the property since the registration
was attended by bad faith. Specifically, he points out that at the time SLDC registered the sale on
30 June 1990, there was already a notice of lis pendens on the file with the Register of Deeds, the
same having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis pendens obliterate the
effects of delivery and possession in good faith which admittedly had occurred prior to SLDCs
knowledge of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to Buy
in favor of SLDC upon receiving P316,160.00 as option money from SLDC. After SLDC had
paid more than one half of the agreed purchase price of P1,264,640.00, the Spouses Lu
subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC. At the time
both deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses Lu
with Babasanta. Simply stated, from the time of execution of the first deed up to the moment of
transfer and delivery of possession of the lands to SLDC, it had acted in good faith and the
subsequent annotation of lis pendens has no effect at all on the consummated sale between
SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of another without notice that some other
person has a right to, or interest in, such property and pays a full and fair price for the same at the
time of such purchase, or before he has notice of the claim or interest of some other person in the
property.
40
Following the foregoing definition, we rule that SLDC qualifies as a buyer in good
faith since there is no evidence extant in the records that it had knowledge of the prior
transaction in favor of Babasanta. At the time of the sale of the property to SLDC, the vendors
were still the registered owners of the property and were in fact in possession of the
lands.l^vvphi1.net Time and again, this Court has ruled that a person dealing with the owner of
registered land is not bound to go beyond the certificate of title as he is charged with notice of
burdens on the property which are noted on the face of the register or on the certificate of title.
41

In assailing knowledge of the transaction between him and the Spouses Lu, Babasanta apparently
relies on the principle of constructive notice incorporated in Section 52 of the Property
Registration Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land shall, if registered,
filed, or entered in the office of the Register of Deeds for the province or city where the land to
which it relates lies, be constructive notice to all persons from the time of such registering, filing,
or entering.
However, the constructive notice operates as suchby the express wording of Section 52from
the time of the registration of the notice of lis pendens which in this case was effected only on 2
June 1989, at which time the sale in favor of SLDC had long been consummated insofar as the
obligation of the Spouses Lu to transfer ownership over the property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the
annotation of the notice of lis pendens cannot help Babasantas position a bit and it is irrelevant
to the good or bad faith characterization of SLDC as a purchaser. A notice of lis pendens, as the
Court held in Natao v. Esteban,
42
serves as a warning to a prospective purchaser or
incumbrancer that the particular property is in litigation; and that he should keep his hands off
the same, unless he intends to gamble on the results of the litigation." Precisely, in this case
SLDC has intervened in the pending litigation to protect its rights. Obviously, SLDCs faith in
the merit of its cause has been vindicated with the Courts present decision which is the ultimate
denouement on the controversy.
The Court of Appeals has made capital
43
of SLDCs averment in its Complaint-in-Intervention
44

that at the instance of Pacita Lu it issued a check for P200,000.00 payable to Babasanta and the
confirmatory testimony of Pacita Lu herself on cross-examination.
45
However, there is nothing in
the said pleading and the testimony which explicitly relates the amount to the transaction
between the Spouses Lu and Babasanta for what they attest to is that the amount was supposed to
pay off the advances made by Babasanta to Pacita Lu. In any event, the incident took place after
the Spouses Lu had already executed the Deed of Absolute Sale with Mortgage in favor of SLDC
and therefore, as previously explained, it has no effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted by the prior
notice of lis pendens and assuming further for the same nonce that this is a case of double sale,
still Babasantas claim could not prevail over that of SLDCs. In Abarquez v. Court of Appeals,
46

this Court had the occasion to rule that if a vendee in a double sale registers the sale after he has
acquired knowledge of a previous sale, the registration constitutes a registration in bad faith and
does not confer upon him any right. If the registration is done in bad faith, it is as if there is no
registration at all, and the buyer who has taken possession first of the property in good faith shall
be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only after the second
vendee, Abarquez, registered their deed of sale with the Registry of Deeds, but the Israels were
first in possession. This Court awarded the property to the Israels because registration of the
property by Abarquez lacked the element of good faith. While the facts in the instant case
substantially differ from that in Abarquez, we would not hesitate to rule in favor of SLDC on the
basis of its prior possession of the property in good faith. Be it noted that delivery of the property
to SLDC was immediately effected after the execution of the deed in its favor, at which time
SLDC had no knowledge at all of the prior transaction by the Spouses Lu in favor of
Babasanta.1a\^/phi1.net
The law speaks not only of one criterion. The first criterion is priority of entry in the registry of
property; there being no priority of such entry, the second is priority of possession; and, in the
absence of the two priorities, the third priority is of the date of title, with good faith as the
common critical element. Since SLDC acquired possession of the property in good faith in
contrast to Babasanta, who neither registered nor possessed the property at any time, SLDCs
right is definitely superior to that of Babasantas.
At any rate, the above discussion on the rules on double sale would be purely academic for as
earlier stated in this decision, the contract between Babasanta and the Spouses Lu is not a
contract of sale but merely a contract to sell. In Dichoso v. Roxas,
47
we had the occasion to rule
that Article 1544 does not apply to a case where there was a sale to one party of the land itself
while the other contract was a mere promise to sell the land or at most an actual assignment of
the right to repurchase the same land. Accordingly, there was no double sale of the same land in
that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals
appealed from is REVERSED and SET ASIDE and the decision of the Regional Trial Court,
Branch 31, of San Pedro, Laguna is REINSTATED. No costs.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-20091 July 30, 1965
PERPETUA ABUAN, ET AL., plaintiffs-appellants,
vs.
EUSTAQUIO S. GARCIA, ET AL., defendants-appellees.
Emilio R. Gombio for plaintiffs-appellants.
Ruperto G. Martin and Associates for defendants-appellees.
BENGZON, C.J .:
This is an action for legal redemption under Section 119 of the Public Land Law
1
which
provides that:
Every conveyance of land acquired under the free patient or homestead provisions, when
proper, shall be subject to re-purchase by the applicant, his widow, or legal heirs, for a
period of five years from the date of conveyance.
Acquired by Laureano Abuan the homestead passed after his death to his legal heirs, the
plaintiffs herein. Consequently, the Original Certificate of Title in his name was cancelled, and
in lieu thereof, Transfer Certificate of Title No. T-5486 was issued in their names.
On August 7, 1953, plaintiffs sold the parcel of land to defendants, the sale being evidenced by a
public instrument entitled "Deed of Absolute Sale"; and by virtue thereof, Transfer Certificate of
Title No. T-5906 was issued to defendants.
Later, plaintiffs filed an action to recover the land, alleging that the deed of absolute sale had
been executed through fraud, without consideration. However, the case was subsequently settled
amicably, when the parties entered into an "Agreement" dated February 28, 1955, under the
terms of which defendants paid P500.00 on that day as partial payment of the purchase price of
the land, and promised to pay the balance of P1,500.00 on or before April 30, 1955, with a grace
period of thirty days. The parties also stipulated in said Agreement that it "shall supersede all
previous agreements or contracts heretofore entered into and executed by and between plaintiff
and defendants, involving the same parcel of riceland ... .
Claiming that full payment had been effected only sometime in May, 1955, plaintiffs instituted
the present action on March 4, 1960.
Defendants moved to dismiss, on the ground that plaintiffs' right of action was already barred,
because the five-year redemption period had already expired.
Sustaining the motion, the Nueva Vizcaya court dismissed the complaint.
Plaintiffs appealed to the Court of Appeals, which certified the case to this Court because only a
legal issue remains to be determined.
The sole question is: When did the five-year period (within which plaintiffs may exercise their
right of repurchase) begin to run? Should it be August 7, 1953, when the Deed of Absolute Sale
was executed, or February 28, 1955, when the compromise "Agreement" was entered into; or
should it be in May, 1955, upon full payment of the purchase price? It is obvious that counted
from either of the first two dates more than five years had elapsed when this action for
redemption was brought (March 1960); whereas the action would be well within the period, if
computed from the date of full payment of the purchase price.
The lower court, in dismissing plaintiffs' complaint, fixed the starting date as February 28, 1955,
when the Agreement (Annex "B") was entered into. It is plaintiffs' contention, on the other hand,
that the prescriptive period should be counted from the full payment of the purchase price, that is,
from May, 1955, since it was on this date that the contract was consummated.
Plaintiffs' contention is untenable. The law speaks of "five years from date of conveyance."
Conveyance means transfer of ownership; it means the date when the title to the land is
transferred from one person to another.
2
The five-year period should, therefore, be reckoned
with from the date that defendants acquired ownership of the land. Now, when did defendants
legally acquire ownership over the land?
Art. 1477 of the New Civil Code provides that ownership of the thing sold shall be transferred to
the vendee upon the actual or constructive delivery thereof; and Art. 1496 points out that
ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in
any of the ways specified in articles 1497 to 1501. Under Art. 1498, When the sale is made
through a public instrument as in this case the execution thereof shall be equivalent to the
delivery of the thing which is the object of the contract, if from the deed the contrary does not
appear or cannot be clearly inferred.
3
This manner of delivery of the thing through the execution
of a public document is common to personal as well as real property.
4

It is clear, therefore, that defendants acquired ownership to the land in question upon the
execution of the deed of sale. The deed of sale was executed on August 7, 1953, which was
"superseded" by the Agreement of February 28, 1955, as to the terms and conditions of payment
of the purchase price. The latter agreement did not operate to revest the ownership of the land in
the plaintiffs.
5

It is apparent that five years had elapsed since the execution of the deed of sale at the time
plaintiffs filed this action for redemption. Our view finds support in a long line of decisions
holding, that the five-year period starts from the date of the execution of the instrument of
conveyance.
6

But assuming arguendo that Annex "A" is null and void, as plaintiffs aver, and did not serve to
effectuate delivery of the property, we can consider the date of the Agreement (Annex "B"), at
the latest, as the time within which ownership is vested in the defendants. True, Annex "B" is a
private instrument the execution of which could not be construed as constructive delivery under
Art. 1498 of the New Civil Code. But Art. 1496 explicitly provides that ownership of the thing
sold is acquired by the vendee from the moment it is delivered to him "in any other manner
signifying an agreement that the possession is transferred from the vendor to the vendee." The
intention to give possession (and ownership) is manifest in the agreement (Annex "B") entered
into by the parties, specially considering the following circumstances: (1) the payment of part of
the purchase price, there being no stipulation in the agreement that ownership will not vest in the
vendees until full payment of the price; and (2) the fact that the agreement was entered into in
consideration of plaintiffs' desistance, as in fact they did desist, in prosecuting their
reivindicatory action, thereby leaving the property in the hands of the then and now defendants
as owners thereof, necessarily. This was delivery brevi manu permissible under Articles 1499
and 1501 of the New Civil Code.
The circumstance that full payment was made only, as plaintiffs allege, in May, 1955, does not
alter the fact that ownership of the land passed to defendants upon the execution of the
agreement with the intention of letting them hold it as owners. In the absence of an express
stipulation to the contrary, the payment of the price is not a condition precedent to the transfer of
ownership, which passes by delivery of the thing to the buyer.
7

IN VIEW OF THE FOREGOING, the order of the court a quo dismissing the complaint is
hereby affirmed, with costs against plaintiffs-appellants.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 92989 July 8, 1991
PERFECTO DY, JR. petitioner,
vs.
COURT OF APPEALS, GELAC TRADING INC., and ANTONIO V. GONZALES,
respondents.
Zosa & Quijano Law Offices for petitioner.
Expedito P. Bugarin for respondent GELAC Trading, Inc.

GUTIERREZ, JR., J .:p
This is a petition for review on certiorari seeking the reversal of the March 23, 1990
decision of the Court of Appeals which ruled that the petitioner's purchase of a farm
tractor was not validly consummated and ordered a complaint for its recovery
dismissed.
The facts as established by the records are as follows:
The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979, Wilfredo
Dy purchased a truck and a farm tractor through financing extended by Libra Finance
and Investment Corporation (Libra). Both truck and tractor were mortgaged to Libra as
security for the loan.
The petitioner wanted to buy the tractor from his brother so on August 20, 1979, he
wrote a letter to Libra requesting that he be allowed to purchase from Wilfredo Dy the
said tractor and assume the mortgage debt of the latter.
In a letter dated August 27, 1979, Libra thru its manager, Cipriano Ares approved the
petitioner's request.
Thus, on September 4, 1979, Wilfredo Dy executed a deed of absolute sale in favor of
the petitioner over the tractor in question.
At this time, the subject tractor was in the possession of Libra Finance due to Wilfredo
Dy's failure to pay the amortizations.
Despite the offer of full payment by the petitioner to Libra for the tractor, the immediate
release could not be effected because Wilfredo Dy had obtained financing not only for
said tractor but also for a truck and Libra insisted on full payment for both.
The petitioner was able to convince his sister, Carol Dy-Seno, to purchase the truck so
that full payment could be made for both. On November 22, 1979, a PNB check was
issued in the amount of P22,000.00 in favor of Libra, thus settling in full the
indebtedness of Wilfredo Dy with the financing firm. Payment having been effected
through an out-of-town check, Libra insisted that it be cleared first before Libra could
release the chattels in question.
Meanwhile, Civil Case No. R-16646 entitled "Gelac Trading, Inc. v. Wilfredo Dy", a
collection case to recover the sum of P12,269.80 was pending in another court in Cebu.
On the strength of an alias writ of execution issued on December 27, 1979, the
provincial sheriff was able to seize and levy on the tractor which was in the premises of
Libra in Carmen, Cebu. The tractor was subsequently sold at public auction where
Gelac Trading was the lone bidder. Later, Gelac sold the tractor to one of its
stockholders, Antonio Gonzales.
It was only when the check was cleared on January 17, 1980 that the petitioner learned
about GELAC having already taken custody of the subject tractor. Consequently, the
petitioner filed an action to recover the subject tractor against GELAC Trading with the
Regional Trial Court of Cebu City.
On April 8, 1988, the RTC rendered judgment in favor of the petitioner. The dispositive
portion of the decision reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
against the defendant, pronouncing that the plaintiff is the owner of the
tractor, subject matter of this case, and directing the defendants Gelac
Trading Corporation and Antonio Gonzales to return the same to the
plaintiff herein; directing the defendants jointly and severally to pay to the
plaintiff the amount of P1,541.00 as expenses for hiring a tractor; P50,000
for moral damages; P50,000 for exemplary damages; and to pay the cost.
(Rollo, pp. 35-36)
On appeal, the Court of Appeals reversed the decision of the RTC and dismissed the
complaint with costs against the petitioner. The Court of Appeals held that the tractor in
question still belonged to Wilfredo Dy when it was seized and levied by the sheriff by
virtue of the alias writ of execution issued in Civil Case No. R-16646.
The petitioner now comes to the Court raising the following questions:
A.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
MISAPPREHENDED THE FACTS AND ERRED IN NOT AFFIRMING
THE TRIAL COURT'S FINDING THAT OWNERSHIP OF THE FARM
TRACTOR HAD ALREADY PASSED TO HEREIN PETITIONER WHEN
SAID TRACTOR WAS LEVIED ON BY THE SHERIFF PURSUANT TO
AN ALIAS WRIT OF EXECUTION ISSUED IN ANOTHER CASE IN
FAVOR OF RESPONDENT GELAC TRADING INC.
B.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
EMBARKED ON MERE CONJECTURE AND SURMISE IN HOLDING
THAT THE SALE OF THE AFORESAID TRACTOR TO PETITIONER
WAS DONE IN FRAUD OF WILFREDO DY'S CREDITORS, THERE
BEING NO EVIDENCE OF SUCH FRAUD AS FOUND BY THE TRIAL
COURT.
C.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
MISAPPREHENDED THE FACTS AND ERRED IN NOT SUSTAINING
THE FINDING OF THE TRIAL COURT THAT THE SALE OF THE
TRACTOR BY RESPONDENT GELAC TRADING TO ITS CO-
RESPONDENT ANTONIO V. GONZALES ON AUGUST 2, 1980 AT
WHICH TIME BOTH RESPONDENTS ALREADY KNEW OF THE FILING
OF THE INSTANT CASE WAS VIOLATIVE OF THE HUMAN
RELATIONS PROVISIONS OF THE CIVIL CODE AND RENDERED
THEM LIABLE FOR THE MORAL AND EXEMPLARY DAMAGES
SLAPPED AGAINST THEM BY THE TRIAL COURT. (Rollo, p. 13)
The respondents claim that at the time of the execution of the deed of sale, no
constructive delivery was effected since the consummation of the sale depended upon
the clearance and encashment of the check which was issued in payment of the subject
tractor.
In the case of Servicewide Specialists Inc. v. Intermediate Appellate Court. (174 SCRA
80 [1989]), we stated that:
xxx xxx xxx
The rule is settled that the chattel mortgagor continues to be the owner of
the property, and therefore, has the power to alienate the same; however,
he is obliged under pain of penal liability, to secure the written consent of
the mortgagee. (Francisco, Vicente, Jr., Revised Rules of Court in the
Philippines, (1972), Volume IV-B Part 1, p. 525). Thus, the instruments of
mortgage are binding, while they subsist, not only upon the parties
executing them but also upon those who later, by purchase or otherwise,
acquire the properties referred to therein.
The absence of the written consent of the mortgagee to the sale of the
mortgaged property in favor of a third person, therefore, affects not the
validity of the sale but only the penal liability of the mortgagor under the
Revised Penal Code and the binding effect of such sale on the mortgagee
under the Deed of Chattel Mortgage.
xxx xxx xxx
The mortgagor who gave the property as security under a chattel mortgage did not part
with the ownership over the same. He had the right to sell it although he was under the
obligation to secure the written consent of the mortgagee or he lays himself open to
criminal prosecution under the provision of Article 319 par. 2 of the Revised Penal
Code. And even if no consent was obtained from the mortgagee, the validity of the sale
would still not be affected.
Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor can not sell the
subject tractor. There is no dispute that the consent of Libra Finance was obtained in
the instant case. In a letter dated August 27, 1979, Libra allowed the petitioner to
purchase the tractor and assume the mortgage debt of his brother. The sale between
the brothers was therefore valid and binding as between them and to the mortgagee, as
well.
Article 1496 of the Civil Code states that the ownership of the thing sold is acquired by
the vendee from the moment it is delivered to him in any of the ways specified in
Articles 1497 to 1501 or in any other manner signing an agreement that the possession
is transferred from the vendor to the vendee. We agree with the petitioner that Articles
1498 and 1499 are applicable in the case at bar.
Article 1498 states:
Art. 1498. When the sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of the thing which is
the object of the contract, if from the deed the contrary does not appear or
cannot clearly be inferred.
xxx xxx xxx
Article 1499 provides:
Article 1499. The delivery of movable property may likewise be made by
the mere consent or agreement of the contracting parties, if the thing sold
cannot be transferred to the possession of the vendee at the time of the
sale, or if the latter already had it in his possession for any other reason.
(1463a)
In the instant case, actual delivery of the subject tractor could not be made. However,
there was constructive delivery already upon the execution of the public instrument
pursuant to Article 1498 and upon the consent or agreement of the parties when the
thing sold cannot be immediately transferred to the possession of the vendee. (Art.
1499)
The respondent court avers that the vendor must first have control and possession of
the thing before he could transfer ownership by constructive delivery. Here, it was Libra
Finance which was in possession of the subject tractor due to Wilfredo's failure to pay
the amortization as a preliminary step to foreclosure. As mortgagee, he has the right of
foreclosure upon default by the mortgagor in the performance of the conditions
mentioned in the contract of mortgage. The law implies that the mortgagee is entitled to
possess the mortgaged property because possession is necessary in order to enable
him to have the property sold.
While it is true that Wilfredo Dy was not in actual possession and control of the subject
tractor, his right of ownership was not divested from him upon his default. Neither could
it be said that Libra was the owner of the subject tractor because the mortgagee can not
become the owner of or convert and appropriate to himself the property mortgaged.
(Article 2088, Civil Code) Said property continues to belong to the mortgagor. The only
remedy given to the mortgagee is to have said property sold at public auction and the
proceeds of the sale applied to the payment of the obligation secured by the mortgagee.
(See Martinez v. PNB, 93 Phil. 765, 767 [1953]) There is no showing that Libra Finance
has already foreclosed the mortgage and that it was the new owner of the subject
tractor. Undeniably, Libra gave its consent to the sale of the subject tractor to the
petitioner. It was aware of the transfer of rights to the petitioner.
Where a third person purchases the mortgaged property, he automatically steps into the
shoes of the original mortgagor. (See Industrial Finance Corp. v. Apostol, 177 SCRA
521 [1989]). His right of ownership shall be subject to the mortgage of the thing sold to
him. In the case at bar, the petitioner was fully aware of the existing mortgage of the
subject tractor to Libra. In fact, when he was obtaining Libra's consent to the sale, he
volunteered to assume the remaining balance of the mortgage debt of Wilfredo Dy
which Libra undeniably agreed to.
The payment of the check was actually intended to extinguish the mortgage obligation
so that the tractor could be released to the petitioner. It was never intended nor could it
be considered as payment of the purchase price because the relationship between
Libra and the petitioner is not one of sale but still a mortgage. The clearing or
encashment of the check which produced the effect of payment determined the full
payment of the money obligation and the release of the chattel mortgage. It was not
determinative of the consummation of the sale. The transaction between the brothers is
distinct and apart from the transaction between Libra and the petitioner. The contention,
therefore, that the consummation of the sale depended upon the encashment of the
check is untenable.
The sale of the subject tractor was consummated upon the execution of the public
instrument on September 4, 1979. At this time constructive delivery was already
effected. Hence, the subject tractor was no longer owned by Wilfredo Dy when it was
levied upon by the sheriff in December, 1979. Well settled is the rule that only properties
unquestionably owned by the judgment debtor and which are not exempt by law from
execution should be levied upon or sought to be levied upon. For the power of the court
in the execution of its judgment extends only over properties belonging to the judgment
debtor. (Consolidated Bank and Trust Corp. v. Court of Appeals, G.R. No. 78771,
January 23, 1991).
The respondents further claim that at that time the sheriff levied on the tractor and took
legal custody thereof no one ever protested or filed a third party claim.
It is inconsequential whether a third party claim has been filed or not by the petitioner
during the time the sheriff levied on the subject tractor. A person other than the
judgment debtor who claims ownership or right over levied properties is not precluded,
however, from taking other legal remedies to prosecute his claim. (Consolidated Bank
and Trust Corp. v. Court of Appeals, supra) This is precisely what the petitioner did
when he filed the action for replevin with the RTC.
Anent the second and third issues raised, the Court accords great respect and weight to
the findings of fact of the trial court. There is no sufficient evidence to show that the sale
of the tractor was in fraud of Wilfredo and creditors. While it is true that Wilfredo and
Perfecto are brothers, this fact alone does not give rise to the presumption that the sale
was fraudulent. Relationship is not a badge of fraud (Goquiolay v. Sycip, 9 SCRA 663
[1963]). Moreover, fraud can not be presumed; it must be established by clear
convincing evidence.
We agree with the trial court's findings that the actuations of GELAC Trading were
indeed violative of the provisions on human relations. As found by the trial court,
GELAC knew very well of the transfer of the property to the petitioners on July 14, 1980
when it received summons based on the complaint for replevin filed with the RTC by the
petitioner. Notwithstanding said summons, it continued to sell the subject tractor to one
of its stockholders on August 2, 1980.
WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals
promulgated on March 23, 1990 is SET ASIDE and the decision of the Regional Trial
Court dated April 8, 1988 is REINSTATED.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 66140 January 21, 1993
INDUSTRIAL TEXTILE MANUFACTURING COMPANY OF THE PHILIPPINES, INC.,
petitioner,
vs.
LPJ ENTERPRISES, INC., respondent.
Bengzon, Zarraga, Narciso, Cudala, Pecson, Azcuna & Bengzon Law Office for
petitioner.

MELO, J .:
Before Us is a petition for review on certiorari seeking the reversal of the November 9,
1983 decision of the then Intermediate Appellate Court in
CA-G.R. CV No. 68281, penned by the Honorable Justice Eduardo P. Caguioa, with
Justices Gaviola and Quetulio-Losa concurring, which dismissed petitioner's complaint
and absolved herein respondent from any liability to the former.
It appears on record that respondent LPJ Enterprises, Inc. had a contract to supply
300,000 bags of cement per year to Atlas Consolidated Mining and Development
Corporation (Atlas for short), a member of the Soriano Group of Companies. The
cement was delivered packed in kraft paper bags, then as now, in common use.
Sometime in October, 1970, Cesar Campos, a Vice-President of petitioner Industrial
Textile Manufacturing Company of the Philippines (or Itemcop, for brevity), asked Lauro
Panganiban, Jr., President of respondent corporation, if he would like to cooperate in an
experiment to develop plastic cement bags. Panganiban acquiesced, principally
because Itemcop is a sister corporation of Atlas, respondent's major client. A few weeks
later, Panganiban accompanied Paulino Ugarte, another Vice-President of Itemcop, to
the factory of respondent's supplier, Luzon Cement Corporation in Norzagaray,
Bulacan, to test fifty (50) pieces of plastic cement bags. The experiment, however, was
unsuccessful. Cement dust oozed out under pressure through the small holes of the
woven plastic bags and the loading platform was filled with dust. The second batch of
plastic bags subjected to trial was likewise a failure. Although the weaving of the plastic
bags was already tightened, cement dust still spilled through the gaps. Finally, with
three hundred (300) "improved bags", the seepage was substantially reduced. Ugarte
then asked Panganiban to send 180 bags of cement to Atlas via commercial shipping.
Campos, Ugarte, and two other officials of petitioner company followed the 180 bags to
the plant of Atlas in Sangi, Toledo, Cebu where they professed satisfaction at the
performance of their own plastic bags. On December 29, 1970, Campos sent
Panganiban a letter proclaiming dramatic results in the experiment. Consequently,
Panganiban agreed to use the plastic cement bags. Four purchase orders (P.O.s) were
thereafter issued, to wit:
DATE NUMBER OF BAGS UNIT COST AMOUNT
5 January 1971 53,800 P .83 P44,654.00
24 February 1971 11,000 .90 9,900.00
March 1971 41,000 .92 37,720.00
6 April 1971 10,000 .92 9,200.00

TOTAL: P101,474.00
Petitioner delivered the above orders consecutively on January 12, February 17, March
19, and April 17, 1971 (p. 74, Rollo). Respondent, on the other hand, remitted the
amounts of P1,640.00, P2,480.00. and P13,230.00 on March 31, April 31, and May 3,
1971 respectively, thereby leaving a balance of P84,123.80 (p. 58, Ibid.). No other
payments were made, thus prompting A. Soriano y Cia of petitioner's Legal Department
to send demand letters to respondent corporation. Reiterations thereof were later sent
by petitioner's counsel. A collection suit was filed on April 11, 1973 when the demands
remained unheeded.
At the trial on the merits, respondent admitted its liability for the 53,800 polypropylene
lime bags covered by the first purchase order. (TSN, January 5, 1971, p. 131). With
respect to the second, third, and fourth purchase orders, respondent, however, denied
full responsibility therefor. Respondent said that it will pay, as it did pay for, only the
15,000 plastic bags it actually used in packing cement. As for the remaining 47,000
bags, the workers of Luzon Cement strongly objected to the use thereof due to the
serious health hazards posed by the continued seepage of cement dust.
Notwithstanding the measures adopted by respondent such as the use of masks,
gloves. and conveyor system, the workers still refused to utilize the plastic bags.
Respondent was, therefore, constrained to revert to the use of kraft paper bags in
packing cement. Thereafter, petitioner was asked to take back the unused plastic bags.
Considering however, that the bags were in the cement factory of respondent's supplier,
petitioner maintained that it was respondent's obligation to return the bags to them.
Apparently, this was not done and so petitioner demanded payment for the said bags.
On May 25, 1981, the trial court rendered its decision, the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered sentencing the defendant to
pay the sum of P84,123.80 with l2% interest per annum from May, 1971
plus 15% of the total obligation as attorney's fees, and the costs.
SO ORDERED. (p. 80, Ibid.)
Respondent corporation's appeal was upheld by the appellate court when it reversed
the trial court's decision and dismissed the case with costs against petitioner. (p. 28,
Ibid.). Hence, the present recourse.
The first issue to be resolved is the propriety of this petition as it calls for a re-
examination of the factual findings of the appellate court.
As asserted by herein respondent, it is well-entrenched in Our jurisprudence that this
Court is not a trier of facts (Valdez v. CA, 194 SCRA 360 [1991]). As a rule, it is also
settled that the factual findings of the appellate court are final and conclusive
(Bustamante v. CA, 193 SCRA 603 [1991]; Radiowealth Finance Company v. Palileo,
197 SCRA 245 [1991]). However, in a long line of cases, We have pronounced certain
exceptions, as when the inference made is manifestly mistaken or when the judgment is
based on misapprehension of facts or when the appellate court overlooked relevant
facts not disputed by the parties and which if properly considered, would justify a
different conclusion (Aquino v. CA, 204 SCRA 247 [1991]; Manlapaz v. CA, 147 SCRA
236 [1987]; Sacay v. Sandiganbayan, 142 SCRA 593, [1986]; Moran v. CA, 133 SCRA
88 [1984]).
A review of the record instantly reveals that the case at bar falls under the last
exception. As earlier adverted to, respondent has repeatedly admitted its liability for the
53,800 plastic lime bags amounting to P44,654.00 yet the appellate court disregarded
this fact and totally cleared respondent from all responsibility. On this point alone, the
decision of the appellate court may be overturned, or at least modified.
Let Us now turn to the crux of the controversy, which is whether or not respondent may
be held liable for the 47,000 plastic bags which were not actually used for packing
cement as originally intended.
It is beyond dispute that prior to respondent's transaction with petitioner, the bags were
already tested and the results thereof, albeit initially unsuccessful, were nevertheless
favorably considered after due alterations were made. Verily, it is on the basis of such
experimental findings that respondent agreed to use the plastic cement bags and
thereafter issued the purchase orders heretofore mentioned. Significantly, the quantity
of bags ordered by respondent also negates its position that the bags were still under
experimentation. Indeed, if it were so, the bags ordered should have been considerably
lesser in number and would normally increase as the suitability of the plastic bags
became more definite. Likewise, it is worthy to note that as of the date of petitioner's
third delivery on March 19, 1971, respondent has received a total of 52,000 bags. By
then, it was very probable that the problems alluded to by respondent could no longer
be resolved, thus, only 15,000 bags were actually used and 37,000 bags were already
considered unfit for packing cement. Under such predicament, it was but logical for
respondent to cancel then the fourth purchase order for another 10,000 bags.
Surprisingly, respondent still accepted the same upon delivery on April 17, 1971 and
remitted its payments until May 3, 1971. When petitioner sent letters demanding the full
payment of the bags, respondent simply declared that it did not receive any because it
transferred its offices to another place. In the meantime, the bags remained in the
custody of Luzon Cement, respondent's supplier and virtually a stranger as far as
petitioner is concerned. It is for this reason that petitioner may not be expected to just
pull out its bags from Luzon Cement.
Not to be overlooked also is the fact that Panganiban, respondent corporation's
president, also collected due commissions for the four purchase orders issued in favor
of petitioner. (p. 79, Rollo).
Finally, the conditions which allegedly govern the transaction according to respondent
may not be considered. The trial court correctly observed that such conditions should
have been distinctly specified in the purchase orders and respondent's failure to do so is
fatal to its cause. We find that Article 1502 of the Civil Code, invoked by both parties
herein, has no application at all to this case. The provision in the Uniform Sales Act and
the Uniform Commercial Code from which Article 1502 was taken, clearly requires an
express written agreement to make a sales contract either a "sale or return" or a "sale
on approval". Parol or extrinsic testimony could not be admitted for the purpose of
showing that an invoice or bill of sale that was complete in every aspect and purporting
to embody a sale without condition or restriction constituted a contract of sale or return.
If the purchaser desired to incorporate a stipulation securing to him the right of return,
he should have done so at the time the contract was made. On the other hand, the
buyer cannot accept part and reject the rest of the goods since this falls outside the
normal intent of the parties in the "on approval" situation. (67 Am Jur 2d, pp. 733, 748).
In the light of these principles, We hold that the transaction between respondent and
petitioner constituted an absolute sale. Accordingly, respondent is liable for the plastic
bags delivered to it by petitioner.
WHEREFORE, premises considered, the decision appealed from is hereby SET ASIDE
and the decision of the trial court REINSTATED.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-34697 March 26, 1932
JESUS TERAN, plaintiff-appellee,
vs.
FRANCISCA VILLANUEVA, VIUDA DE RIOSA, ET AL., defendants-appellants.
Domingo Imperial for appellants.
Bonto & Gutierrez Lora for appellee.
VILLAMOR, J .:
On October 6, 1928, the parties in this case executed the deed of sale Exhibit A, whereby the
defendants sold to the plaintiff for P4,000 the parcel of land therein described as containing an
area of 34 hectares, 52 ares, and 43 centares.
The plaintiff brought this action for rescission of the contract, with damages, upon discovering
that the parcel of land contained only about then hectares.
The trial court found no evidence of bad faith on the part of the defendants, and we agree with
this finding. This land, with the same area stated in the contract, was inherited by the defendants
from their late father, Mariano Villanueva; and the same area appears in the tax declaration given
to the plaintiff by an agent of the defendants, named Rafael Villanueva. The latter, accompanied
by the plaintiff, inspected the land. Villanueva pointed out some of the boundaries, as they did
not go over all of them. Without further investigating the area of the land, the plaintiff agreed to
purchase it for the sum of four thousand pesos, paying the amount and taking possession thereof.
The plaintiff alleges that after the 1928 harvest he discovered that the boundaries pointed out to
him by Rafael Villanueva were not the real ones, and, in order to ascertain the exact area of the
land, he went to the cadastral office in Malinao and got a sketch of the property (Exh. B), which
shows that the land in question contains only ten hectares, and not thirty-four, as appears in the
deed of sale.
In view of these facts, the plaintiff now seeks to rescind the contract on the ground that the
property contains a smaller area than that stated in the deed of sale. Evidently this is a sale of real
estate with area and boundaries given, for a lump sum and not so much per unit of measure,
provided for in article 1471 of the Civil Code.
The plaintiff's allegation that Rafael Villanueva did not point out to him the real boundaries, is
but a half-truth; for, as has been stated, when the property was inspected, Villanueva did not go
over all the boundaries of the land, as testified to by Leopoldo Teran. It is true that the owners of
the adjoining lands mentioned in Exhibit B are different from those mentioned in Exhibit A; but
there is nothing in the record to show that the property described in the deed Exhibit A was not
delivered to the plaintiff. The names of the adjoining landowners may of then change, for
obvious reasons; but the plaintiff's evidence does not establish that outside the boundaries
mentioned in the deed Exhibit A there are portions of the property not yet delivered to him, or
that all the land included within those boundaries have not been delivered to the vendee.
According to Manresa and Scaevola, illustration commentators of the Civil Code, whenever a
certain real estate is sold for a lump sum (case 1, article 1471) the rule in law is that there shall
be no increase or decreased in price even if the area or extent is found to be more or less than
that stated in the contract; but, if the vendor cannot deliver to the vendee all that is included
within the boundaries stated in the contract the latter has the option either to reduce the price in
proportion to the deficiency, or to set aside the contract. (See Comm. Civ. Code. Manresa, ed. of
1905, vol. 10, pp. 146-148; Scaevola, vol. 23, pp. 500-503.) In this case the Civil Code presumes
that the purchaser had in mind a determined piece of land, and that he ascertained its area and
quality before the contract was perfected. If he did not do so, or it, having done so, he made no
objection and consented to the transaction, he can blame no one but himself; and, because, as
Professor Antonio Gomez says, it is presumed that he intended to buy a determined object, any
proof of misrepresentation will not avail him, neither will it vitiate the transaction. (Scaevola,
supra.)
Manresa expresses himself in similar terms, saying that, "if the sale was made for a lump sum,
the cause of the contract is the thing sold, irrespective of area or quantity, the real estate as
defined by the stipulated boundaries, known in law as the cuerpo cierto. . . . If all that is included
within the stipulated boundaries is not delivered, then the object of the contract, its cause so far
as the vendee is concerned, is not delivered: hence, he is entitled to rescind it. He may however
think (and of this there can be no judge but himself), that although he did not receive the land
within the stipulated boundaries, he would like to have it: hence, his right to enforce the contract
with the corresponding decrease in price as provided in article 1471."
Furthermore, in Azarraga vs. Gay (52 Phil., 599), it was held:
When the purchaser proceeds to make investigations by himself, and the vendor does
nothing to prevent such investigation from being as complete as the former might made
false representations to him.
One who contracts for the purchase of real estate is reliance on the representations and
statements of the vendor as to its character and value, but after he has visited and
examined it for himself, and has had the means and opportunity of verifying such
statements, cannot avoid the contract on the ground that they were false or exaggerate.
In Songco vs. Sellner (37 Phil., 254), the court said:
The law allows considerable latitude to seller's statements, or dealer's talk; and
experience teaches that it is exceedingly risky to accept it at its face value. . . .
Assertions concerning the property which is the subject of a contract of sale, or in regard
to its qualities and characteristics, are the usual and ordinary means used by sellers to
obtain a high price and are always understood as affording to buyers no ground for
omitting to make inquiries. A man who relies upon such an affirmation made by a person
whose interest might so readily prompted him to exaggerate the value of his property
does so at his peril, and must take the consequences of his own imprudence.
The plaintiff had ample opportunity to investigate the conditions of the land he was purchasing,
without the defendant's doing anything to prevent him from making as many inquiries as he
deemed expedient, for which reason he cannot now allege that the vendors made false
representations. (National Cash Register Co. vs. Townsend, 137 N. C., 515.) The same doctrine
is upheld by the courts of the United States, in the following case among others:
"Misrepresentation by a vendor of real property with reference to its area are not actionable,
where a correct description of the property was given in the deed and recorded chain of title,
which the purchaser's agent undertook to investigate and report upon, and the vendor made no
effort to prevent a full investigation." (Shappirio vs. Goldberg, 48 Law. ed., 419.)
The Spanish cases decided the matter in the same way.
Doa Dolores Amoros Soler brought suit against Francisco Gisbert Richart to recover two
parcels of land which, she alleged, were lacking from the property her brother Francisco sold her.
The civil branch of the Valencia Audencia decided against the plaintiff, who appealed to the
Supreme Court. In dismissing the appeal, the Supreme Court held that, "since the vendee has all
the land included within the boundaries mentioned in the titles shown to the bidders at the
auction sale, the trial court must be held to have rightly applied article 1471 of the Civil Code in
its decision, if the stipulated price was fixed in relation to the area of the land or cuerpo cierto
which had to be, or was delivered to the vendee." (Decision of the Supreme Court of April 20th,
published June 2, 1913.)
Francisco Fernandez Parra filed a complaint against Pedro Joaquin del Portillo to recover some
parcels of land which formed part of those which he had sold to the latter. The civil branch of the
Albacete Audience decided against the plaintiff, and on appeal this judgment was affirmed by
the Supreme Court, which held that, "as the court found that the parcels of land which the
plaintiff sought to recover were within the boundaries of the property sold as a cuerpo cierto, and
that the sale was made for a lump sum, and not at a certain price for each unit of measure, it did
not violate article 1471 of the Civil Code in absolving the vendee from the complaint." (Decision
of the Supreme Court of July 2, 1914, published January 4, 1915.)
Martinez Ruiz (El Codigo Civil, 2d ed., vol. XV, pp. 298- 299) proposes the following question:
If real estate is sold for a lump sum and not at so much per unit of measure, may the vendee
allege error in giving consent, based upon its inferior quality or deficiency in area?
The Supreme Court decided this question negatively in its decision dated May 9, 1914.
By deed of August 21, 1901, Mariano de Cieza sold a piece of property 204 fanegas in area for
35,000 pesetas to Bernardino Rodriguez. Several years later Rodriguez brought suit against the
Cieza heirs to annul the contract on the ground of misrepresentation in the deed of sale, with
reference to the area, which was less than that stated, and not of the first-class quality, so that the
price fixed was exorbitant and unjust according to the data obtained, it should have been less
than one-third of that shown in the contract. An answer was filed and the Audience of Valladolid
absolved the defendants, whereupon Rodriguez appealed, invoking articles 1265 and 1266 of the
Civil Code which, he contended, under the first assignment of error, had been violated, in that
the trial court had not held the contract of sale void due to error in the subject matter and
principal conditions of the transaction; for the vendee had believed, upon the strength of
statements made by the vendor and other persons connected with the sale, and of the deed of
sale, that he was getting a piece of land of good quality from which, by employing capital and
labor, he would reap a legitimate return, which however, he failed to realize. The Supreme Court
dismissed the appeal, "inasmuch as the error which invalidates contractual consent must, in order
to effect nullity, necessarily relate to the very substance or the essential qualities of the thing
agreed upon, according to a correct understanding of articles 1265 and 1266 of the Civil Code;
and this being granted, the first and second grounds are untenable, inasmuch as when the court a
quo held, from the evidence adduced, that there was no such error, against the contention of the
appellant, who had the burden of proof to show the contrary, it acted correctly because the
property appears to have been sold for a lump sum, thereby excluding every argument about
quality and area."
In Irureta Goyena vs. Tambunting (1 Phil., 490), the matter dealt with was the sale of a piece of
land and the building thereon, situated at No. 20 San Jose Street, Ermita, Manila. This land
contained 152.46 square meters. The vendee signed a private document stating that he had
purchased of Francisco Irureta Goyena a lot at No. 20 San Jose Street, Ermita, for the sum of
three thousand pesos, payable as soon as the deed of sale was signed. The proper notarial
document was drawn up, setting the price of the realty at P3,200. The vendee requested a
reduction because the land did not have the area that the plaintiff had, through a broker, told him
it contained. The vendor would not reduce the price, and hence the litigation between the parties,
decided by the trial court in favor of the plaintiff. Upon appeal, the Supreme court, applying
article 1471 of the Civil Code, affirmed the judgement appealed from on the ground that the sale
was made for a lump sum and not at so much per unit of measure.
In Azarraga vs. Gay (52 Phil., 599), Leodegario Azarraga sold two parcels of land to Maria Gay
for the lump sum of P47,000 to be paid as provided aid the contract. The contract recites that the
parties agreed upon the sale of two parcels of land, the first containing 102 hectares, 67 ares, and
32 centares, and the second, 98 hectares, more or less, for the lump sum of P47,000 payable,
partly in cash and partly in installments. Said two parcels are defined by means of the boundaries
given in the contract. The defendant refused to pay the full stipulated price, alleging that the
second parcel with an area of 98 hectares according to the deed of sale, had only 70 hectares, and
therefore asked for a reduction of the price. The plaintiff refused to grant the request, and
brought suit against the vendee to recover the whole price agreed upon. The court rendered
judgment in favor of the plaintiff. On appeal, the Supreme Court, applying article 1471 of the
Civil Code, affirmed the judgment appealed from, on the ground that the rule given in the second
paragraph of article 1471 was not applicable to the case, because all the land contained within
the given boundaries of the two parcels sold had been delivered to the vendee; the land contained
within the boundaries of the property sold had not been broken up and the cuerpo cierto which is
the object of the contract had all been delivered by the vendor, as he had undertaken to do.
Wherefore, the vendor cannot claim anything should the area turn out to be greater than that
stated in the deed; neither can the vendee, should the area of the second parcel prove to be much
smaller.
In the case of Asiain vs. Jalandoni (45 Phil., 296), when the parties agreed upon the sale of the
land there in question, they had in mind chiefly the area and quality of the land, the subject of the
contract, as will be seen from the letter of Asiain dated May 6, 1920, in which, among other
things, he said:
"DEAR BENJAMIN: I am in receipt of your letter and with regard to your statement that
that parcel does not contain 21 hectares I do not believe. I bet anything that that part only
which is planted with cane contains more than 20 hectares, I bet 2 against 1.
"If you agree, I would bet that you pay only one half, I am not a surveyor, but these days
I had the pleasure to survey the land and I know more or less its area.
"Here we are not to deceive each other. If you like that parcel and if you want to buy it I
will give you good propositions. I don't know where and how they learned that I was
selling the hacienda and they made me a good offer, but as we do not want to part but
with that parcel, hence my propositions are the following, in view of the time that has
elapsed and the progress of the cane.
"I assure (aseguro) that there are 2,000 piculs and sell on that basis, provided that the
case is milled in due time. In case the sugar does not amount to 2,000 piculs, I will pay in
sugar all such amount as will be necessary to complete the 2,000 but if after milling the
cane, as I say, there is an excess over 2,000 piculs, all the excess shall be mine. So that if
you like, I make the sale for the same price that we talked about and the same conditions,
not a dime more or less."
And also from the written memorandum signed by both contracting parties, containing among
other things the following:
"Purchase of land of Mr. Luis Asiain and his wife Maria Cadenas, by B. Jalandoni,
containing 25 hectares more or less of land bounded by property of the purchaser, with its
corresponding crop, estimated at 2,000 piculs, the total value of which is 55 thousand.
The price is to be paid by paying 30 thousand at the signing of the document, and 25
thousand within one year with interest at the rate of 10 per cent."
In accordance with the foregoing memorandum the deed of sale was executed in the City of
Iloilo, the parties stipulating among other things, the following:
"(1) That Luis Asiain does hereby promise and bind himself to sell to Benjamin Jalandoni
a parcel of land of the hacienda "Maria" of the aforesaid Luis Asiain, situated in the
municipality of La Carlota, Province of Occidental Negros, P.I.
"(2) That Benjamin Jalandoni does hereby promise and bind himself to purchase the
aforesaid parcel of land in the sum of P55,000 upon certain conditions specified in a
memorandum signed by the parties which is in the hands of Attorneys Padilla & Treas."
Jalandoni then took possession of the land, milled the cane at La Carlota Central, from which he
realized 800 piculs and 23 cates of the centrifugal sugar. And after he had secured from Asiain
the certificate of title, he had a surveyor measure the land, which was found to contain only 18
hectares, 54 ares, and 22 centares. Jalandoni had paid P30,000 leaving an unpaid balance of
P25,000 of the purchase price of P55,000 stipulated in the contract. Asiain sued to recover the
balance from Jalandoni. The competent court declared the deed of sale void, absolved the
defendant from paying P25,000 and ordered the parties to return what they had received under
the contract.
Upon appeal to the Supreme Court, the judgment was affirmed on the ground that both parties
had acted by a mutual mistake.
Comparing the facts in that case of Asiain with those before us now, we note a fundamental
difference: In that case the vendor undertook to deliver to the vendee a parcel of land some 25
hectares in area and of such a quality as to be able to produce 2,000 piculs of centrifugal sugar.
The vendee, in turn, agreed to buy said parcel of land with the understanding that it contained
that area and was of the quality guaranteed by the vendor. Inasmuch as the land had neither the
area nor the quality the vendor had assured the vendee it had, it is clear the latter was entitled to
rescind the contract, upon the strength of the authorities cited in the opinion of the court. We
believe that Jalandoni was entitled to rescind that contract, inasmuch as the vendor did not
deliver a parcel of land of the area and quality stipulated in the contract.
In the present case the parties did not consider the area as an essential element of the contract.
There is no evidence of the negotiation leading up to the sale of the land, except that the parties
executed the deed Exhibit A. There is no evidence of record that the parties fixed the price at so
much per hectare. If the plaintiff wanted to but the land at so much per unit of measure, he
should have so stated in the contract. The plaintiff testified that one of the defendants, Francisca
Villanueva, signified her willingness to set aside the contract in case there was a considerable
difference in area. But in her letter Exhibit E-1, this defendant stated that she had to wait for the
decision of her sister or the latter's husband before acting upon the plaintiff's claim. We believe
that he most that can be inferred from such a statement is that she was disposed to settle the case
with a view to avoiding litigation; but this does not mean that the parties agreed to fix the price
of the land at so much per unit of measure.
For the foregoing considerations, the judgment appealed from is reversed, and it is held that the
contract Exhibit A between the parties is valid and binding upon them. Wherefore, the
defendants are absolved from the complaint without special pronouncement of costs. So ordered.
Avancea, C.J., Johnson, Street, Malcolm, Ostrand, Romualdez and Villa-Real, JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 132161 January 17, 2005
CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS and HEIRS OF TEODORO DELA CRUZ,
respondents.
D E C I S I O N
TINGA, J .:
Petitioner Consolidated Rural Bank, Inc. of Cagayan Valley filed the instant Petition for
Certiorari
1
under Rule 45 of the Revised Rules of Court, seeking the review of the Decision
2
of
the Court of Appeals Twelfth Division in CA-G.R. CV No. 33662, promulgated on 27 May
1997, which reversed the judgment
3
of the lower court in favor of petitioner; and the Resolution
4

of the Court of Appeals, promulgated on 5 January 1998, which reiterated its Decision insofar as
respondents Heirs of Teodoro dela Cruz (the Heirs) are concerned.
From the record, the following are the established facts:
Rizal, Anselmo, Gregorio, Filomeno and Domingo, all surnamed Madrid (hereafter the Madrid
brothers), were the registered owners of Lot No. 7036-A of plan Psd-10188, Cadastral Survey
211, situated in San Mateo, Isabela per Transfer Certificate of Title (TCT) No. T-8121 issued by
the Register of Deeds of Isabela in September 1956.
5

On 23 and 24 October 1956, Lot No. 7036-A was subdivided into several lots under subdivision
plan Psd- 50390. One of the resulting subdivision lots was Lot No. 7036-A-7 with an area of
Five Thousand Nine Hundred Fifty-Eight (5,958) square meters.
6

On 15 August 1957, Rizal Madrid sold part of his share identified as Lot No. 7036-A-7, to Aleja
Gamiao (hereafter Gamiao) and Felisa Dayag (hereafter, Dayag) by virtue of a Deed of Sale,
7
to
which his brothers Anselmo, Gregorio, Filomeno and Domingo offered no objection as
evidenced by their Joint Affidavit dated 14 August 1957.
8
The deed of sale was not registered
with the Office of the Register of Deeds of Isabela. However, Gamiao and Dayag declared the
property for taxation purposes in their names on March 1964 under Tax Declaration No. 7981.
9

On 28 May 1964, Gamiao and Dayag sold the southern half of Lot No. 7036-A-7, denominated
as Lot No. 7036-A-7-B, to Teodoro dela Cruz,
10
and the northern half, identified as Lot No.
7036-A-7-A,
11
to Restituto Hernandez.
12
Thereupon, Teodoro dela Cruz and Restituto Hernandez
took possession of and cultivated the portions of the property respectively sold to them.
13

Later, on 28 December 1986, Restituto Hernandez donated the northern half to his daughter,
Evangeline Hernandez-del Rosario.
14
The children of Teodoro dela Cruz continued possession of
the southern half after their fathers death on 7 June 1970.
In a Deed of Sale
15
dated 15 June 1976, the Madrid brothers conveyed all their rights and
interests over Lot No. 7036-A-7 to Pacifico Marquez (hereafter, Marquez), which the former
confirmed
16
on 28 February 1983.
17
The deed of sale was registered with the Office of the
Register of Deeds of Isabela on 2 March 1982.
18

Subsequently, Marquez subdivided Lot No. 7036-A-7 into eight (8) lots, namely: Lot Nos. 7036-
A-7-A to 7036-A-7-H, for which TCT Nos. T-149375 to T-149382 were issued to him on 29
March 1984.
19
On the same date, Marquez and his spouse, Mercedita Mariana, mortgaged Lots
Nos. 7036-A-7-A to 7036-A-7-D to the Consolidated Rural Bank, Inc. of Cagayan Valley
(hereafter, CRB) to secure a loan of One Hundred Thousand Pesos (P100,000.00).
20
These deeds
of real estate mortgage were registered with the Office of the Register of Deeds on 2 April 1984.
On 6 February 1985, Marquez mortgaged Lot No. 7036-A-7-E likewise to the Rural Bank of
Cauayan (RBC) to secure a loan of Ten Thousand Pesos (P10,000.00).
21

As Marquez defaulted in the payment of his loan, CRB caused the foreclosure of the mortgages
in its favor and the lots were sold to it as the highest bidder on 25 April 1986.
22

On 31 October 1985, Marquez sold Lot No. 7036-A-7-G to Romeo Calixto (Calixto).
23

Claiming to be null and void the issuance of TCT Nos. T-149375 to T-149382; the foreclosure
sale of Lot Nos. 7036-A-7-A to 7036-A-7-D; the mortgage to RBC; and the sale to Calixto, the
Heirs-now respondents herein-represented by Edronel dela Cruz, filed a case
24
for reconveyance
and damages the southern portion of Lot No. 7036-A (hereafter, the subject property) against
Marquez, Calixto, RBC and CRB in December 1986.
Evangeline del Rosario, the successor-in-interest of Restituto Hernandez, filed with leave of
court a Complaint in Intervention
25
wherein she claimed the northern portion of Lot No. 7036-A-
7.
In the Answer to the Amended Complaint,
26
Marquez, as defendant, alleged that apart from being
the first registrant, he was a buyer in good faith and for value. He also argued that the sale
executed by Rizal Madrid to Gamiao and Dayag was not binding upon him, it being
unregistered. For his part, Calixto manifested that he had no interest in the subject property as he
ceased to be the owner thereof, the same having been reacquired by defendant Marquez.
27

CRB, as defendant, and co-defendant RBC insisted that they were mortgagees in good faith and
that they had the right to rely on the titles of Marquez which were free from any lien or
encumbrance.
28

After trial, the Regional Trial Court, Branch 19 of Cauayan, Isabela (hereafter, RTC) handed
down a decision in favor of the defendants, disposing as follows:
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered:
1. Dismissing the amended complaint and the complaint in intervention;
2. Declaring Pacifico V. Marquez the lawful owner of Lots 7036-A-7 now Lots 7036-A-
7-A to 7036-A-7-H, inclusive, covered by TCT Nos. T-149375 to T-149382, inclusive;
3. Declaring the mortgage of Lots 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-
D in favor of the defendant Consolidated Rural Bank (Cagayan Valley) and of Lot 7036-
A-7-E in favor of defendant Rural Bank of Cauayan by Pacifico V. Marquez valid;
4. Dismissing the counterclaim of Pacifico V. Marquez; and
5. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the lots covered by
TCT Nos. T-33119, T-33220 and T-7583.
No pronouncement as to costs.
SO ORDERED.
29

In support of its decision, the RTC made the following findings:
With respect to issues numbers 1-3, the Court therefore holds that the sale of Lot 7036-A-7 made
by Rizal Madrid to Aleja Gamiao and Felisa Dayag and the subsequent conveyances to the
plaintiffs and intervenors are all valid and the Madrid brothers are bound by said contracts by
virtue of the confirmation made by them on August 14, 1957 (Exh. B).
Are the defendants Pacifico V. Marquez and Romeo B. Calixto buyers in good faith and for
value of Lot 7036-A-7?
It must be borne in mind that good faith is always presumed and he who imputes bad faith has
the burden of proving the same (Art. 527, Civil Code). The Court has carefully scrutinized the
evidence presented but finds nothing to show that Marquez was aware of the plaintiffs and
intervenors claim of ownership over this lot. TCT No. T-8121 covering said property, before the
issuance of Marquez title, reveals nothing about the plaintiffs and intervenors right thereto for
it is an admitted fact that the conveyances in their favor are not registered.
The Court is therefore confronted with two sales over the same property. Article 1544 of the
Civil Code provides:
"ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property. x x x " (Underscoring supplied).
From the foregoing provisions and in the absence of proof that Marquez has actual or
constructive knowledge of plaintiffs and intervenors claim, the Court has to rule that as the
vendee who first registered his sale, Marquez ownership over Lot 7036-A-7 must be upheld.
30

The Heirs interposed an appeal with the Court of Appeals. In their Appellants Brief,
31
they
ascribed the following errors to the RTC: (1) it erred in finding that Marquez was a buyer in
good faith; (2) it erred in validating the mortgage of the properties to RBC and CRB; and (3) it
erred in not reconveying Lot No. 7036-A-7-B to them.
32

Intervenor Evangeline del Rosario filed a separate appeal with the Court of Appeals. It was,
however, dismissed in a Resolution dated 20 September 1993 for her failure to pay docket fees.
Thus, she lost her standing as an appellant.
33

On 27 May 1997, the Court of Appeals rendered its assailed Decision
34
reversing the RTCs
judgment. The dispositive portion reads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE.
Accordingly, judgment is hereby rendered as follows:
1. Declaring the heirs of Teodoro dela Cruz the lawful owners of the southern half
portion and Evangeline Hernandez-del Rosario the northern half portion of Lot No. 7036-
A-7, now covered by TCT Nos. T-149375 to T-149382, inclusive;
2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V.
Marquez and the Madrid brothers covering said Lot 7036-A-7;
3. Declaring null and void the mortgage made by defendant Pacifico V. Marquez of Lot
Nos. 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-D in favor of the defendant
Consolidated Rural Bank and of Lot 7036-A-7-E in favor of defendant Rural Bank of
Cauayan; and
4. Ordering Pacifico V. Marquez to reconvey Lot 7036-A-7 to the heirs of Teodoro dela
Cruz and Evangeline Hernandez-del Rosario.
No pronouncement as to costs.
SO ORDERED.
35

In upholding the claim of the Heirs, the Court of Appeals held that Marquez failed to prove that
he was a purchaser in good faith and for value. It noted that while Marquez was the first
registrant, there was no showing that the registration of the deed of sale in his favor was coupled
with good faith. Marquez admitted having knowledge that the subject property was "being taken"
by the Heirs at the time of the sale.
36
The Heirs were also in possession of the land at the time.
According to the Decision, these circumstances along with the subject propertys attractive
locationit was situated along the National Highway and was across a gasoline stationshould
have put Marquez on inquiry as to its status. Instead, Marquez closed his eyes to these matters
and failed to exercise the ordinary care expected of a buyer of real estate.
37

Anent the mortgagees RBC and CRB, the Court of Appeals found that they merely relied on the
certificates of title of the mortgaged properties. They did not ascertain the status and condition
thereof according to standard banking practice. For failure to observe the ordinary banking
procedure, the Court of Appeals considered them to have acted in bad faith and on that basis
declared null and void the mortgages made by Marquez in their favor.
38

Dissatisfied, CRB filed a Motion for Reconsideration
39
pointing out, among others, that the
Decision promulgated on 27 May 1997 failed to establish good faith on the part of the Heirs.
Absent proof of possession in good faith, CRB avers, the Heirs cannot claim ownership over the
subject property.
In a Resolution
40
dated 5 January 1998, the Court of Appeals stressed its disbelief in CRBs
allegation that it did not merely rely on the certificates of title of the properties and that it
conducted credit investigation and standard ocular inspection. But recalling that intervenor
Evangeline del Rosario had lost her standing as an appellant, the Court of Appeals accordingly
modified its previous Decision, as follows:
WHEREFORE, the decision dated May 27, 1997, is hereby MODIFIED to read as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE insofar as
plaintiffs-appellants are concerned. Accordingly, judgment is hereby rendered as follows:
1. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the southern half
portion of Lot No. 7036-A-7;
2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V.
Marquez and the Madrid brothers insofar as the southern half portion of Lot NO. (sic)
7036-A-7 is concerned;
3. Declaring the mortgage made by defendant Pacifico V. Marquez in favor of defendant
Consolidated Rural Bank (Cagayan Valley) and defendant Rural Bank of Cauayan as null
and void insofar as the southern half portion of Lot No. 7036-A-7 is concerned;
4. Ordering defendant Pacifico V. Marquez to reconvey the southern portion of Lot No.
7036-A-7 to the Heirs of Teodoro dela Cruz.
No pronouncement as to costs.
SO ORDERED.
41

Hence, the instant CRB petition. However, both Marquez and RBC elected not to challenge the
Decision of the appellate court.
Petitioner CRB, in essence, alleges that the Court of Appeals committed serious error of law in
upholding the Heirs ownership claim over the subject property considering that there was no
finding that they acted in good faith in taking possession thereof nor was there proof that the first
buyers, Gamiao and Dayag, ever took possession of the subject property. CRB also makes issue
of the fact that the sale to Gamiao and Dayag was confirmed a day ahead of the actual sale,
clearly evincing bad faith, it adds. Further, CRB asserts Marquezs right over the property being
its registered owner.
The petition is devoid of merit. However, the dismissal of the petition is justified by reasons
different from those employed by the Court of Appeals.
Like the lower court, the appellate court resolved the present controversy by applying the rule on
double sale provided in Article 1544 of the Civil Code. They, however, arrived at different
conclusions. The RTC made CRB and the other defendants win, while the Court of Appeals
decided the case in favor of the Heirs.
Article 1544 of the Civil Code reads, thus:
ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.
The provision is not applicable in the present case. It contemplates a case of double or multiple
sales by a single vendor. More specifically, it covers a situation where a single vendor sold one
and the same immovable property to two or more buyers.
42
According to a noted civil law
author, it is necessary that the conveyance must have been made by a party who has an existing
right in the thing and the power to dispose of it.
43
It cannot be invoked where the two different
contracts of sale are made by two different persons, one of them not being the owner of the
property sold.
44
And even if the sale was made by the same person, if the second sale was made
when such person was no longer the owner of the property, because it had been acquired by the
first purchaser in full dominion, the second purchaser cannot acquire any right.
45

In the case at bar, the subject property was not transferred to several purchasers by a single
vendor. In the first deed of sale, the vendors were Gamiao and Dayag whose right to the subject
property originated from their acquisition thereof from Rizal Madrid with the conformity of all
the other Madrid brothers in 1957, followed by their declaration of the property in its entirety for
taxation purposes in their names. On the other hand, the vendors in the other or later deed were
the Madrid brothers but at that time they were no longer the owners since they had long before
disposed of the property in favor of Gamiao and Dayag.
Citing Manresa, the Court of Appeals in 1936 had occasion to explain the proper application of
Article 1473 of the Old Civil Code (now Article 1544 of the New Civil Code) in the case of
Carpio v. Exevea,
46
thus:
In order that tradition may be considered performed, it is necessary that the requisites which it
implies must have been fulfilled, and one of the indispensable requisites, according to the most
exact Roman concept, is that the conveyor had the right and the will to convey the thing. The
intention to transfer is not sufficient; it only constitutes the will. It is, furthermore, necessary that
the conveyor could juridically perform that act; that he had the right to do so, since a right which
he did not possess could not be vested by him in the transferee.
This is what Article 1473 has failed to express: the necessity for the preexistence of the right on
the part of the conveyor. But even if the article does not express it, it would be understood, in our
opinion, that that circumstance constitutes one of the assumptions upon which the article is
based.
This construction is not repugnant to the text of Article 1473, and not only is it not contrary to it,
but it explains and justifies the same. (Vol. 10, 4th ed., p. 159)
47

In that case, the property was transferred to the first purchaser in 1908 by its original owner, Juan
Millante. Thereafter, it was sold to plaintiff Carpio in June 1929. Both conveyances were
unregistered. On the same date that the property was sold to the plaintiff, Juan Millante sold the
same to defendant Exevea. This time, the sale was registered in the Registry of Deeds. But
despite the fact of registration in defendants favor, the Court of Appeals found for the plaintiff
and refused to apply the provisions of Art. 1473 of the Old Civil Code, reasoning that "on the
date of the execution of the document, Exhibit 1, Juan Millante did not and could not have any
right whatsoever to the parcel of land in question."
48

Citing a portion of a judgment dated 24 November 1894 of the Supreme Court of Spain, the
Court of Appeals elucidated further:
Article 1473 of the Civil Code presupposes the right of the vendor to dispose of the thing sold,
and does not limit or alter in this respect the provisions of the Mortgage Law in force, which
upholds the principle that registration does not validate acts or contracts which are void, and that
although acts and contracts executed by persons who, in the Registry, appear to be entitled to do
so are not invalidated once recorded, even if afterwards the right of such vendor is annulled or
resolved by virtue of a previous unrecorded title, nevertheless this refers only to third parties.
49

In a situation where not all the requisites are present which would warrant the application of Art.
1544, the principle of prior tempore, potior jure or simply "he who is first in time is preferred in
right,"
50
should apply.
51
The only essential requisite of this rule is priority in time; in other
words, the only one who can invoke this is the first vendee. Undisputedly, he is a purchaser in
good faith because at the time he bought the real property, there was still no sale to a second
vendee.
52
In the instant case, the sale to the Heirs by Gamiao and Dayag, who first bought it from
Rizal Madrid, was anterior to the sale by the Madrid brothers to Marquez. The Heirs also had
possessed the subject property first in time. Thus, applying the principle, the Heirs, without a
scintilla of doubt, have a superior right to the subject property.
Moreover, it is an established principle that no one can give what one does not havenemo dat
quod non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the
buyer can acquire no more than what the seller can transfer legally.
53
In this case, since the
Madrid brothers were no longer the owners of the subject property at the time of the sale to
Marquez, the latter did not acquire any right to it.
In any event, assuming arguendo that Article 1544 applies to the present case, the claim of
Marquez still cannot prevail over the right of the Heirs since according to the evidence he was
not a purchaser and registrant in good faith.
Following Article 1544, in the double sale of an immovable, the rules of preference are:
(a) the first registrant in good faith;
(b) should there be no entry, the first in possession in good faith; and
(c) in the absence thereof, the buyer who presents the oldest title in good faith.
54

Prior registration of the subject property does not by itself confer ownership or a better right over
the property. Article 1544 requires that before the second buyer can obtain priority over the first,
he must show that he acted in good faith throughout (i.e., in ignorance of the first sale and of the
first buyers rights)from the time of acquisition until the title is transferred to him by
registration or failing registration, by delivery of possession.
55

In the instant case, the actions of Marquez have not satisfied the requirement of good faith from
the time of the purchase of the subject property to the time of registration. Found by the Court of
Appeals, Marquez knew at the time of the sale that the subject property was being claimed or
"taken" by the Heirs. This was a detail which could indicate a defect in the vendors title which
he failed to inquire into. Marquez also admitted that he did not take possession of the property
and at the time he testified he did not even know who was in possession. Thus, he testified on
direct examination in the RTC as follows:
ATTY. CALIXTO
Q Can you tell us the circumstances to your buying the land in question?
A In 1976 the Madrid brothers confessed to me their problems about their lots in San
Mateo that they were being taken by Teodoro dela Cruz and Atty. Teofilo A. Leonin; that
they have to pay the lawyers fee of P10,000.00 otherwise Atty. Leonin will confiscate
the land. So they begged me to buy their properties, some of it. So that on June 3, 1976,
they came to Cabagan where I was and gave them P14,000.00, I think. We have talked
that they will execute the deed of sale.
Q Why is it, doctor, that you have already this deed of sale, Exh. 14, why did you find it
necessary to have this Deed of Confirmation of a Prior Sale, Exh. 15?
A Because as I said a while ago that the first deed of sale was submitted to the Register of
Deeds by Romeo Badua so that I said that because when I became a Municipal Health
Officer in San Mateo, Isabela, I heard so many rumors, so many things about the land and
so I requested them to execute a deed of confirmation.
56

. . .
ATTY. CALIXTO-
Q At present, who is in possession on the Riceland portion of the lot in question?
A I can not say because the people working on that are changing from time to time.
Q Why, have you not taken over the cultivation of the land in question?
A Well, the Dela Cruzes are prohibiting that we will occupy the place.
Q So, you do not have any possession?
A None, sir.
57

One who purchases real property which is in actual possession of others should, at least, make
some inquiry concerning the rights of those in possession. The actual possession by people other
than the vendor should, at least, put the purchaser upon inquiry. He can scarcely, in the absence
of such inquiry, be regarded as a bona fide purchaser as against such possessions.
58
The rule of
caveat emptor requires the purchaser to be aware of the supposed title of the vendor and one who
buys without checking the vendors title takes all the risks and losses consequent to such
failure.
59

It is further perplexing that Marquez did not fight for the possession of the property if it were
true that he had a better right to it. In our opinion, there were circumstances at the time of the
sale, and even at the time of registration, which would reasonably require a purchaser of real
property to investigate to determine whether defects existed in his vendors title. Instead,
Marquez willfully closed his eyes to the possibility of the existence of these flaws. For failure to
exercise the measure of precaution which may be required of a prudent man in a like situation, he
cannot be called a purchaser in good faith.
60

As this Court explained in the case of Spouses Mathay v. Court of Appeals:
61

Although it is a recognized principle that a person dealing on a registered land need not go
beyond its certificate of title, it is also a firmly settled rule that where there are circumstances
which would put a party on guard and prompt him to investigate or inspect the property being
sold to him, such as the presence of occupants/tenants thereon, it is, of course, expected from the
purchaser of a valued piece of land to inquire first into the status or nature of possession of the
occupants, i.e., whether or not the occupants possess the land en concepto de dueo, in concept
of owner. As is the common practice in the real estate industry, an ocular inspection of the
premises involved is a safeguard a cautious and prudent purchaser usually takes. Should he find
out that the land he intends to buy is occupied by anybody else other than the seller who, as in
this case, is not in actual possession, it would then be incumbent upon the purchaser to verify the
extent of the occupants possessory rights. The failure of a prospective buyer to take such
precautionary steps would mean negligence on his part and would thereby preclude him from
claiming or invoking the rights of a "purchaser in good faith."
62

This rule equally applies to mortgagees of real property. In the case of Crisostomo v. Court of
Appeals,
63
the Court held:
It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should
put a reasonable man upon his guard, and then claim that he acted in good faith under the belief
that there was no defect in the title of the vendor or mortgagor. His mere refusal to believe that
such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect
in the vendors or mortgagors title, will not make him an innocent purchaser or mortgagee for
value, if it afterwards develops that the title was in fact defective, and it appears that he had such
notice of the defects as would have led to its discovery had he acted with the measure of a
prudent man in a like situation.
64

Banks, their business being impressed with public interest, are expected to exercise more care
and prudence than private individuals in their dealings, even those involving registered lands.
Hence, for merely relying on the certificates of title and for its failure to ascertain the status of
the mortgaged properties as is the standard procedure in its operations, we agree with the Court
of Appeals that CRB is a mortgagee in bad faith.
In this connection, Marquezs obstention of title to the property and the subsequent transfer
thereof to CRB cannot help the latters cause. In a situation where a party has actual knowledge
of the claimants actual, open and notorious possession of the disputed property at the time of
registration, as in this case, the actual notice and knowledge are equivalent to registration,
because to hold otherwise would be to tolerate fraud and the Torrens system cannot be used to
shield fraud.
65

While certificates of title are indefeasible, unassailable and binding against the whole world, they
merely confirm or record title already existing and vested. They cannot be used to protect a
usurper from the true owner, nor can they be used for the perpetration of fraud; neither do they
permit one to enrich himself at the expense of others.
66

We also find that the Court of Appeals did not err in awarding the subject property to the Heirs
absent proof of good faith in their possession of the subject property and without any showing of
possession thereof by Gamiao and Dayag.
As correctly argued by the Heirs in their Comment,
67
the requirement of good faith in the
possession of the property finds no application in cases where there is no second sale.
68
In the
case at bar, Teodoro dela Cruz took possession of the property in 1964 long before the sale to
Marquez transpired in 1976 and a considerable length of timeeighteen (18) years in
factbefore the Heirs had knowledge of the registration of said sale in 1982. As Article 526 of
the Civil Code aptly provides, "(H)e is deemed a possessor in good faith who is not aware that
there exists in his title or mode of acquisition any flaw which invalidates it." Thus, there was no
need for the appellate court to consider the issue of good faith or bad faith with regard to
Teodoro dela Cruzs possession of the subject property.
Likewise, we are of the opinion that it is not necessary that there should be any finding of
possession by Gamiao and Dayag of the subject property. It should be recalled that the regularity
of the sale to Gamiao and Dayag was never contested by Marquez.
69
In fact the RTC upheld the
validity of this sale, holding that the Madrid brothers are bound by the sale by virtue of their
confirmation thereof in the Joint Affidavit dated 14 August 1957. That this was executed a day
ahead of the actual sale on 15 August 1957 does not diminish its integrity as it was made before
there was even any shadow of controversy regarding the ownership of the subject property.
Moreover, as this Court declared in the case of Heirs of Simplicio Santiago v. Heirs of Mariano
E. Santiago ,
70
tax declarations "are good indicia of possession in the concept of an owner, for no
one in his right mind would be paying taxes for a property that is not in his actual or constructive
possession."
71

WHEREFORE, the Petition is DENIED. The dispositive portion of the Court of Appeals
Decision, as modified by its Resolution dated 5 January 1998, is AFFIRMED. Costs against
petitioner.
SO ORDERED.



Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 123547 May 21, 2001
REV. FR. DANTE MARTINEZ, petitioner,
vs.
HONORABLE COURT OF APPEALS, HONORABLE JUDGE JOHNSON BALLUTAY,
PRESIDING JUDGE, BRANCH 25, REGIONAL TRIAL COURT OF CABANA TUAN
CITY, HONORABLE JUDGE ADRIANO TUAZON, JR., PRESIDING JUDGE,
BRANCH 28, REGIONAL TRIAL COURT OF CABANATUAN CITY, SPOUSES
REYNALDO VENERACION and SUSAN VENERACION, SPOUSES MAXIMO
HIPOLITO and MANUELA DE LA PAZ and GODOFREDO DE LA PAZ, respondents.
MENDOZA, J .:
This is a petition for review on certiorari of the decision, dated 7, 1995, and resolution, dated
January 31, 1996, of the Court of Appeals, which affirmed the decisions of the Regional Trial
Court, Branches 25
1
and 28,
2
Cabanatuan City, finding private respondents spouses Reynaldo
and Susan Veneracion owners of the land in dispute, subject to petitioner's rights as a builder in
good faith.
The facts are as follows:
Sometime in February 1981, private respondents Godofredo De la Paz and his sister Manuela De
la Paz, married to Maximo Hipolito, entered into an oral contract with petitioner Rev. Fr. Dante
Martinez, then Assistant parish priest of Cabanatuan City, for the sale of Lot No. 1337-A-3 at the
Villa Fe Subdivision in Cabanatuan City for the sum of P15,000.00. The lot is located along
Maharlika Road near the Municipal Hall of Cabanatuan City. At the time of the sale, the lot was
still registered in the name of Claudia De la Paz, mother of private respondents, although the
latter had already sold it to private respondent Manuela de la Paz by virtue of a Deed of Absolute
Sale dated May 26, 1976 (Exh. N/Exh. 2-Veneracion).
3
Private respondent Manuela
subsequently registered the sale in her name on October 22, 1981 and was issued TCT No. T-
40496 (Exh. 9).
4
When the land was offered for sale to petitioner, private respondents De la Paz
were accompanied by their mother, since petitioner dealt ' with the De la Fazes as a family and
not individually. He was assured by them that the lot belonged to Manuela De la Paz. It was
agreed that petitioner would give a downpayment of P3,000.00 to private respondents De la Paz
and that the balance would be payable by installment. After giving the P3,000.00 downpayment,
petitioner started the construction of a house on the lot after securing a building permit from the
City Engineer's Office on April 23, 1981, with the written consent of the then registered owner,
Claudia de la Paz (Exh. B/Exh, 1).
5
Petitioner likewise began paying the real estate taxes on said
property (Exh. D, D-l, D-2).
6
Construction on the house was completed on October 6, 1981 (Exh.
V).
7
Since then, petitioner and his family have maintained their residence there.
8

On January 31, 1983, petitioner completed payment of the lot for which private respondents De
la Paz executed two documents. The first document (Exh. A) read:
1-31-83
Ang halaga ng Lupa sa Villa Fe Subdivision na ipinagbili kay Fr. Dante Martinez
ay P15,000.00 na pinangangako namin na ibibigay ang Deed of Sale sa ika-25 ng
Febrero 1983.
[SGD.] METRING HIPOLITO
[SGD.] JOSE GODOFREDO DE
LA PAZ
9

The second writing (Exh. O) read:
Cabanatuan City
March 19, 1986
TO WHOM IT MAY CONCERN:
This is to certify that Freddie dela Paz has agreed to sign tomorrow (March 20)
the affidavit of sale of lot located at Villa Fe Subdivision sold to Fr. Dante
Martinez.
[Sgd.] Freddie dela Paz
FREDDIE DELA PAZ
10

However, private respondents De la Paz never delivered the Deed of Sale they promised to
petitioner.
In the meantime, in a Deed of. Absolute Sale with Right to Repurchase dated October 28, 1981
(Exh. 10),
11
private respondents De la Paz sold three lots with right to repurchase the same
within one year to private respondents spouses Reynaldo and Susan Veneracion for the sum of
P150,000.00. One of the lots sold was the lot previously sold to petitioner.
12

Reynaldo Veneracion had been a resident of Cabanatuan City since birth. He used to pass along
Maharlika Highway in going to the Municipal Hall or in going to and from Manila. Two of the
lots subject of the sale were located along Maharlika Highway, one of which was the lot sold
earlier by the De la Pazes to petitioner. The third lot (hereinafter referred to as the Melencio lot)
was occupied by private respondents De la Paz. Private respondents Veneracion never took
actual possession of any of these lots during the period of redemption, but all titles to the lots
were given to him.
13

Before the expiration of the one year period, private respondent Godofredo De la Paz informed
private respondent Reynaldo Veneracion that he was selling the three lots to another person for
P200,000.00. Indeed, private respondent Veneracion received a call from a Mr. Tecson verifying
if he had the titles to the properties, as private respondents De la Paz were offering to sell the two
lots along Maharlika Highway to him (Mr. Tecson) for P180,000.00 The offer included the lot
purchased by petitioner in February, 1981. Private respondent Veneracion offered to purchase
the same two lots from the De la razes for the same amount, The offer was accepted by private
respondents De la Paz. Accordingly, on June 2, 1983, a Deed of Absolute Sale was executed
over the two lots (Exh. I/Exh. 5-Veneracion).
14
Sometime in January, 1984, private respondent
Reynaldo Veneracion asked a certain Renato Reyes, petitioner's neighbor, who the owner of the
building erected on the subject lot was. Reyes told him that it was Feliza Martinez, petitioner's
mother, who was in possession of the property. Reynaldo Veneracion told private respondent
Godofredo about the matter and was assured that Godofredo would talk to Feliza. Based on that
assurance, private respondents Veneracion registered the lots with the Register of Deeds of
Cabanatuan on March 5, 1984. The lot in dispute was registered under TCT No. T-44612 (Exh.
L/Exh. 4-Veneracion).
15

Petitioner discovered that the lot he was occupying with his family had been sold to the spouses
Veneracion after receiving a letter, (Exh. P/Exh. 6-Veneracion) from private respondent
Reynaldo Veneracion on March 19, 1986, claiming ownership of the land and demanding that
they vacate the property and remove their improvements thereon.
16
Petitioner, in turn, demanded
through counsel the execution of the deed of sale from private respondents De la Paz and
informed Reynaldo Veneracion that he was the owner of the property as he had previously
purchased the same from private respondents De la Paz.
17

The matter was then referred to the Katarungang Pambarangay of San Juan, Cabanatuan City for
conciliation, but the parties failed to reach an agreement (Exh. M/Exh. 13).
18
As a consequence,
on May 12, 1986, private respondent Reynaldo Veneracion brought an action for ejectment in the
Municipal Trial Court, Branch III, Cabanatuan City against petitioner and his mother (Exh. 14).
19

On the other hand, on June 10, 1986, petitioner caused a notice of lis pendens to be recorded on
TCT No. T-44612 with the Register of Deeds of Cabanatuan City (Exh. U).
20

During the pre-trial conference, the parties agreed to have the case decided under the Rules on
Summary Procedure and defined the issues as follows:
1. Whether of not defendant (now petitioner) may be judicially ejected.
2. Whether or not the main issue in this case is ownership.
3. Whether or not damages may be awarded.
21

On January 29, 1987, the trial court rendered its decision, pertinent portions of which are quoted
as follows:
With the foregoing findings of the Court, defendants [petitioner Rev. Fr. Dante
Martinez and his mother] are the rightful possessors and in good faith and in
concept of owner, thus cannot be ejected from the land in question. Since the
main issue is ownership, the better remedy of the plaintiff [herein private
respondents Veneracion] is Accion Publiciana in the Regional Trial Court, having
jurisdiction to adjudicate on ownership.
Defendants' counterclaim will not be acted upon it being more than P20,000.00 is
beyond this Court's power to adjudge.
WHEREFORE, judgment is hereby rendered, dismissing plaintiff's complaint and
ordering plaintiff to pay Attorney's fee of P5,000.00 and cost of suit.
SO ORDERED.
22

On March 3, 1987, private respondents Veneracion filed a notice of appeal with the Regional
Trial Court, but failed to pay the docket fee. On June 6, 1989, or over two years after the filing of
the notice of appeal, petitioner filed a Motion for Execution of the Judgment, alleging finality of
judgment for failure of private respondents Veneracion to perfect their appeal and failure to
prosecute the appeal for an unreasonable length of time.
Upon objection of private respondents Veneracion, the trial court denied on June 28, 1989 the
motion for execution and ordered the records of the case to be forwarded to the appropriate
Regional Trial Court. On July 11, 1989, petitioner appealed from this order. The appeal of
private respondents Veneracion from the decision of the MTC and the appeal of petitioner from
the order denying petitioner's motion for execution were forwarded to the Regional Trial Court,
Branch 28, Cabanatuan City. The cases were thereafter consolidated under Civil Case No. 670-
AF.
On February 20, 1991, the Regional Trial Court rendered its decision finding private respondents
Veneracion as the true owners of the lot in dispute by virtue of their prior registration with the
Register of Deeds, subject to petitioner's rights as builder in good faith, and ordering petitioner
and his privies to Vacate the lot after receipt of the cost of the construction of the house, as well
as to pay the sum of P5,000.00 as attorney's fees and the costs of the suit. It, however, failed to
rule on petitioner's appeal of the Municipal Trial Court's order denying their Motion for
Execution of Judgment.
Meanwhile, on May 30, 1986, while the ejectment case was pending before the Municipal Trial
Court, petitioner Martinez filed a complaint for annulment of sale with damages against the
Veneracions and De la Pazes with the Regional Trial Court, Branch 25, Cabanatuan City. On
March 5, 1990, the trial court rendered its decision finding private respondents Veneracion
owners of the land in dispute, subject to the rights of petitioner as a builder in good faith, and
ordering private respondents De la Paz to pay petitioner the sum of P50,000.00 as moral
damages and P10,000.00 as attorney's fees, and for private respondents to pay the costs of the
suit.
On March 20, 1991, petitioner then filed a petition for review with the Court of Appeals of the
RTC's decision in Civil Case No. 670-AF (for ejectment). Likewise, on April 2, 1991, petitioner
appealed the trial court's decision in Civil Case No. 44-[AF]-8642-R (for annulment of sale and
damages) to the Court of Appeals. The cases were designated as CA G.R. SP. No. 24477 and CA
G.R. CY No. 27791, respectively, and were subsequently consolidated. The Court of Appeals
affirmed the trial courts' decisions, without ruling on petitioner's appeal from the Municipal Trial
Court's order denying his Motion for Execution of Judgment. It declared the Veneracions to be
owners of the lot in dispute as they were the first registrants in good faith, in accordance with
Art. 1544 of the Civil Code. Petitioner Martinez failed to overcome the presumption of good
faith for the following reasons:
1. when private respondent Veneracion discovered the construction on the lot, he
immediately informed private respondent Godofredo about it and relied on the
latter's assurance that he will take care of the matter.
2. the sale between petitioner Martinez and private respondents De la Paz was not
notarized, as required by Arts. 1357 and 1358 of the Civil Code, thus it cannot be
said that the private respondents Veneracion had knowledge of the first sale.
23

Petitioner's motion for reconsideration was likewise denied in a resolution dated January 31,
1996.
24
Hence this petition for review. Petitioner raises the following assignment of errors:
I THE PUBLIC RESPONDENTS HONORABLE COURT OF APPEALS AND
REGIONAL TRIAL COURT JUDGES JOHNSON BALLUTAY AND
ADRIANO TUAZON ERRED IN HOLDING THAT PRIVATE
RESPONDENTS REYNALDO VENERACION AND WIFE ARE BUYERS
AND REGISTRANTS IN GOOD FAITH IN RESOLVING THE ISSUE OF
OWNERSHIP AND POSSESSION OF THE LAND IN DISPUTE.
II THAT PUBLIC RESPONDENTS ERRED IN NOT RESOLVING AND
DECIDING THE APPLICABILITY OF THE DECISION OF THIS
HONORABLE COURT IN THE CASES OF SALVORO VS. TANEGA, ET
AL., G. R. NO. L 32988 AND IN ARCENAS VS. DEL ROSARIO, 67 PHIL
238, BY TOTALLY IGNORING THE SAID DECISIONS OF THIS
HONORABLE COURT IN THE ASSAILED DECISIONS OF THE PUBLIC
RESPONDENTS.
III THAT THE HONORABLE COURT OF APPEALS ERRED IN NOT
GIVING DUE COURSE TO THE PETITION FOR REVIEW IN CA G. R. SP.
NO. 24477.
IV THAT THE HONORABLE COURT OF APPEALS IN DENYING
PETITIONER'S PETITION FOR REVIEW AFORECITED INEVITABLY
SANCTIONED AND/OR WOULD ALLOW A VIOLATION OF LAW AND
DEPARTURE FROM THE USUAL COURSE OF JUDICIAL PROCEEDINGS
BY PUBLIC RESPONDENT HONORABLE JUDGE ADRIANO TUAZON
WHEN THE LATTER RENDERED A DECISION IN CIVIL CASE NO. 670-
AF [ANNEX "D"] REVERSING THE DECISION OF THE MUNICIPAL
TRIAL COURT JUDGE SENDON DELIZO IN CIVIL CASE NO. 9523
[ANNEX "C"] AND IN NOT RESOLVING IN THE SAME CASE THE
APPEAL INTERPOSED BY DEFENDANTS ON THE ORDER OF THE SAME
COURT DENYING THE MOTION FOR EXECUTION.
V THAT THE RESOLUTION [ANNEX "B"] (OF THE COURT OF APPEALS)
DENYING PETITIONER'S MOTION FOR RECONSIDERATION [ANNEX
"1"] WITHOUT STATING CLEARLY THE FACTS AND THE LAW ON
WHICH SAID RESOLUTION WAS BASED, (IS ERRONEOUS).
These assignment of errors raise the following issues:
1. Whether or not private respondents Veneracion are buyers in good faith of the
lot in dispute as to make them the absolute owners thereof in accordance with Art.
1544 of the Civil Code on double sale of immovable property.
2. Whether or not payment of the appellate docket fee within the period to appeal
is not necessary for the perfection of the appeal after a notice of appeal has been
filed within such period.
3. Whether or not the resolution of the Court of Appeals denying petitioner's
motion for reconsideration is contrary to the constitutional requirement that a
denial of a motion for reconsideration must state the legal reasons on which it is
based.
First. It is apparent from the first and second assignment of errors that petitioner is assailing the
findings of fact and the appreciation of the evidence made by the trial courts and later affirmed
by the respondent court. While, as a general rule, only questions of law may be raised in a
petition for review under Rule 45 of the Rules of Court, review may nevertheless be granted
under certain exceptions, namely: (a) when the conclusion is a finding grounded entirely on
speculation, surmises, or conjectures; (b) when the inference made is manifestly mistaken,
absurd, or impossible; (c) where there is a grave abuse of discretion; (d) when the judgment is
based on a misapprehension of facts; (e) when the findings of fact are conflicting; (f) when the
Court of Appeals, in making its findings, went beyond the issue of the case and the same is
contrary to the admissions of both appellant and appellee; (g) when the findings of the Court of
Appeals are contrary to those of the trial court; (h) when the findings of fact are conclusions
without citation of specific evidence on which they are based; (I) 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; (j)
when the finding of fact of the Court of Appeals is premised on the supposed absence of
evidence but is contradicted by the evidence on record; and (k) when the Court of Appeals
manifestly overlooked certain relevant facts not disputed by the parties and which, if properly
considered, would justify a different conclusion.
25

In this case, the Court of Appeals based its ruling that private respondents Veneracion are the
owners of the disputed lot on their reliance on private respondent Godofredo De la Paz's
assurance that he would take care of the matter concerning petitioner's occupancy of the disputed
lot as constituting good faith. This case, however, involves double sale and, on this matter, Art.
1544 of the Civil Code provides that where immovable property is the subject of a double sale,
ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it to
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.
26
The
requirement of the law, where title to the property is recorded in the Register of Deeds, is two-
fold: acquisition in good faith and recording in good faith. To be entitled to priority, the second
purchaser must not only prove prior recording of his title but that he acted in good faith, i.e.,
without knowledge or notice of a prior sale to another. The presence of good faith should be
ascertained from the circumstances surrounding the purchase of the land.
27

1. With regard to the first sale to private respondents Veneracion, private respondent Reynaldo
Veneracion testified that on October 10, 1981, 18 days before the execution of the first Deed of
Sale with Right to Repurchase, he inspected the premises and found it vacant.
28
However, this is
belied by the testimony of Engr. Felix D. Minor, then building inspector of the Department of
Public Works and Highways, that he conducted on October 6, 1981 an ocular inspection of the
lot in dispute in the performance of his duties as a building inspector to monitor the progress of
the construction of the building subject of the building permit issued in favor of petitioner on
April 23, 1981, and that he found it 100 % completed (Exh. V).
29
In the absence of contrary
evidence, he is to be presumed to have regularly performed his official duty.
30
Thus, as early as
October, 1981, private respondents Veneracion already knew that there was construction being
made on the property they purchased.
2. The Court of Appeals failed to determine the nature of the first contract of sale between the
private respondents by considering their contemporaneous and subsequent acts.
31
More
specifically, it overlooked the fact that the first contract of sale between the private respondents
shows that it is in fact an equitable mortgage.
The requisites for considering a contract of sale with a right of repurchase as an equitable
mortgage are (1) that the parties entered into a contract denominated as a contract of sale and (2)
that their intention was to secure an existing debt by way of mortgage.
32
A contract of sale with
right to repurchase gives rise to the presumption that it is an equitable mortgage in any of the
following cases: (1) when the price of a sale with a right to repurchase is unusually inadequate;
(2) when the vendor remains in possession as lessee or otherwise; (3) when, upon or after the
expiration of the right to repurchase, another instrument extending the period of redemption or
granting a new period is executed; (4) when the purchaser retains for himself a part of the
purchase price; (5) when the vendor binds himself to pay the taxes on the thing sold; (6) in any
other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.
33
In
case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an
equitable mortgage.
34

In this case, the following circumstances indicate that the private respondents intended the
transaction to be an equitable mortgage and not a contract of sale: (1) Private respondents
Veneracion never took actual possession of the three lots; (2) Private respondents De la Paz
remained in possession of the Melencio lot which was co-owned by them and where they
resided; (3) During the period between the first sale and the second sale to private respondents
Veneracion, they never made any effort to take possession of the properties; and (4) when the
period of redemption had expired and private respondents Veneracion were informed by the De
la Pazes that they are offering the lots for sale to another person for P200,000.00, they never
objected. To the contrary, they offered to purchase the two lots for P180,000.00 when they found
that a certain Mr. Tecson was prepared to purchase it for the same amount. Thus, it is clear from
these circumstances that both private respondents never intended the first sale to be a contract of
sale, but merely that of mortgage to secure a debt of P150,000.00.
With regard to the second sale, which is the true contract of sale between the parties, it should be
noted that this Court in several cases,
35
has ruled that a purchaser who is aware of facts which
should put a reasonable man upon his guard cannot turn a blind eye and later claim that he acted
in good faith. Private respondent Reynaldo himself admitted during the pre-trial conference in
the MTC in Civil Case No. 9523 (for ejectment) that petitioner was already in possession of the
property in dispute at the time the second Deed of Sale was executed on June 1, 1983 and
registered on March 4, 1984. He, therefore, knew that there were already occupants on the
property as early as 1981. The fact that there are persons, other than the vendors, in actual
possession of the disputed lot should have put private respondents on inquiry as to the nature of
petitioner's right over the property. But he never talked to petitioner to verify the nature of his
right. He merely relied on the assurance of private respondent Godofredo De la Paz, who was not
even the owner of the lot in question, that he would take care of the matter. This does not meet
the standard of good faith.
3. The appellate court's reliance on Arts. 1357 and 1358 of the Civil Code to determine private
respondents Veneracion's lack of knowledge of petitioner's ownership of the disputed lot is
erroneous.
Art. 1357
36
and Art. 1358,
37
in relation to Art. 1403(2)
38
of the Civil Code, requires that the sale
of real property must be in writing for it to be enforceable. It need not be notarized. If the sale
has not been put in writing, either of the contracting parties can compel the other to observe such
requirement.
39
This is what petitioner did when he repeatedly demanded that a Deed of Absolute
Sale be executed in his favor by private respondents De la Paz. There is nothing in the above
provisions which require that a contract of sale of realty must be executed in a public document.
In any event, it has been shown that private respondents Veneracion had knowledge of facts
which would put them on inquiry as to the nature of petitioner's occupancy of the disputed lot.
Second. Petitioner contends that the MTC in Civil Case No. 9523 (for ejectment) erred in
denying petitioner's Motion for Execution of the Judgment, which the latter filed on June 6,
1989, two years after private respondents Veneracion filed a notice of appeal with the MTC on
March 3, 1987 without paying the appellate docket fee. He avers that the trial court's denial of
his motion is contrary to this Court's ruling in the cases of Republic v. Director of Lands,
40
and
Aranas v. Endona
41
in which it was held that where the appellate docket fee is not paid in full
within the reglementary period, the decision of the MTC becomes final and unappealable as the
payment of docket fee is not only a mandatory but also a jurisdictional requirement.
Petitioner's contention has no merit. The case of Republic v. Director of Lands deals with the
requirement for appeals from the Courts of First Instance, the Social Security Commission, and
the Court of Agrarian Relations to the Court of Appeals. The case of Aranas v. Endona, on the
other hand, was decided under the 1964 Rules of Court and prior to the enactment of the
Judiciary Reorganization Act of 1981 (B. P. Blg. 129) and the issuance of its Interim Rules and
Guidelines by this Court on January 11, 1983. Hence, these cases are not applicable to the matter
at issue.1wphi1.nt
On the other hand, in Santos v. Court of Appeals,
42
it was held that although an appeal fee is
required to be paid in case of an appeal taken from the municipal trial court to the regional trial
court, it is not a prerequisite for the perfection of an appeal under 20
43
and 23
44
of the Interim
Rules and Guidelines issued by this Court on January 11, 1983 implementing the Judiciary
Reorganization Act of 1981 (B.P. Blg. 129). Under these sections, there are only two
requirements for the perfection of an appeal, to wit: (a) the filing of a notice of appeal within the
reglementary period; and (b) the expiration of the last day to appeal by any party. Even in the
procedure for appeal to the regional trial courts,
45
nothing is mentioned about the payment of
appellate docket fees.
Indeed, this Court has ruled that, in appealed cases, the failure to pay the appellate docket fee
does not automatically result in the dismissal of the appeal, the dismissal being discretionary on
the part of the appellate court.
46
Thus, private respondents Veneracions' failure to pay the
appellate docket fee is not fatal to their appeal.
Third. Petitioner contends that the resolution of the Court of Appeals denying his motion for
reconsideration was rendered in violation of the Constitution because it does not state the legal
basis thereof.
This contention is likewise without merit.
Art. VIII, Sec. 14 of the Constitution provides that "No petition for review or motion for
reconsideration of a decision of the court shall be refused due course or denied without stating
the basis therefor." This requirement was fully complied with when the Court of Appeals, in
denying. reconsideration of its decision, stated in its resolution that it found no reason to change
its ruling because petitioner had not raised anything new.
47
Thus, its resolution denying
petitioner's motion for reconsideration states:
For resolution is the Motion for Reconsideration of Our Decision filed by the
petitioners.
Evidently, the motion poses nothing new. The points and arguments raised by the
movants have been considered and passed upon in the Decision sought to be
reconsidered. Thus, We find no reason to disturb the same.
WHEREFORE, the motion is hereby DENIED.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 171008 September 13, 2007
CARMELITA FUDOT, Petitioner,
vs.
CATTLEYA LAND, INC., VELASCO, JR., JJ. Respondent.
D E C I S I O N
TINGA, J .:
For resolution is a petition that seeks to nullify the Decision
1
and Resolution
2
of the Court of
Appeals dated 28 April 2005 and 11 January 2006, respectively, in C.A.G.R. CV No. 73025
which declared respondent as having a better right over a parcel of land located in Doljo,
Panglao, Bohol.
The facts, as culled from the records, follow.
Sometime in July 1992, Cattleya Land, Inc. (hereinafter referred to as respondent) asked
someone to check, on its behalf, the titles of nine (9) lots, the subject land included, which it
intended to buy from the spouses Troadio and Asuncion Tecson. Finding no defect on the titles,
respondent purchased the nine lots through a Deed of Conditional Sale on 6 November 1992.
Subsequently, on 30 August 1993, respondent and the Tecsons executed a Deed of Absolute Sale
over the same properties. The Deed of Conditional Sale and the Deed of Absolute Sale were
registered with the Register of Deeds on 06 November 1992 and 04 October 1993, respectively.
3

The Register of Deeds, Atty. Narciso dela Serna, refused to actually annotate the deed of sale on
the titles because of the existing notice of attachment in connection with Civil Case No. 3399
pending before the Regional Trial Court of Bohol.
4
The attachment was eventually cancelled by
virtue of a compromise agreement between the Tecsons and their attaching creditor which was
brokered by respondent. Titles to six (6) of the nine (9) lots were issued, but the Register of
Deeds refused to issue titles to the remaining three (3) lots , because the titles covering the same
were still unaccounted for.
On 23 January 1995, petitioner presented for registration before the Register of Deeds the
owners copy of the title of the subject property, together with the deed of sale purportedly
executed by the Tecsons in favor of petitioner on 19 December 1986. On the following day,
respondent sent a letter of protest/opposition to petitioners application. Much to its surprise,
respondent learned that the Register of Deeds had already registered the deed of sale in favor of
petitioner and issued a new title in her name.
5

On 5 May 1995, respondent filed its Complaint
6
for Quieting Of Title &/Or Recovery Of
Ownership, Cancellation Of Title With Damages before the Regional Trial Court of Tagbilaran
City.
7
On 26 June 1995, Asuncion filed a complaint-in-intervention, claiming that she never
signed any deed of sale covering any part of their conjugal property in favor of petitioner. She
averred that her signature in petitioners deed of sale was forged thus, said deed should be
declared null and void.
8
She also claimed that she has discovered only recently that there was an
amorous relationship between her husband and petitioner.
9

Petitioner, for her part, alleged in her answer
10
that the spouses Tecson had sold to her the
subject property for P20,000.00 and delivered to her the owners copy of the title on 26
December 1986. She claims that she subsequently presented the said title to the Register of
Deeds but the latter refused to register the same because the property was still under attachment.
On 31 October 2001, the trial court rendered its decision:
11
(i) quieting the title or ownership of
the subject land in favor of respondent; (ii) declaring the deed of sale between petitioner and
spouses Tecson invalid; (iii) ordering the registration of the subject land in favor of respondent;
(iv) dismissing respondents claim for damages against the Register of Deeds for insufficiency of
evidence; (v) dismissing Asuncions claim for damages against petitioner for lack of factual
basis; and (vi) dismissing petitioners counterclaim for lack of the required preponderance of
evidence.
12

According to the trial court, respondent had recorded in good faith the deed of sale in its favor
ahead of petitioner. Moreover, based on Asuncions convincing and unrebutted testimony, the
trial court concluded that the purported signature of Asuncion in the deed of sale in favor of
petitioner was forged, thereby rendering the sale void.
13

Petitioner sought recourse to the Court of Appeals, arguing in the main that the rule on double
sale was applicable to the case. The appellate court, however, dismissed her appeal, holding that
there was no double sale because the alleged sale to petitioner was null and void in view of the
forgery of Asuncions purported signature in the deed. The appellate court noted that petitioner
failed to rebut Asuncions testimony despite opportunities to do so.
14
Moreover, even if there
was double sale, according to the appellate court, respondents claim would still prevail since it
was able to register the second sale in its favor in good faith, had made inquiries before it
purchased the lots, and was informed that the titles were free from encumbrance except the
attachment on the property due to Civil Case No. 3399.
15

Petitioner sought reconsideration of the decision but the Court of Appeals denied her motion for
reconsideration for lack of merit.
16

Petitioner thus presents before this Court the following issues for resolution:
I.
BETWEEN 2 BUYERS OF REGISTERED LAND, WHO HAS THE BETTER RIGHT-IS IT
THE FIRST BUYER WHO WAS GIVEN THE OWNERS DUPLICATE TCT TOGETHER
WITH A DEED OF SALE IN 1986, OR THE SECOND BUYER IN 1992 WITH ONLY A
DEED OF SALE.
II.
IS A BUYER OF REGISTERED LAND WHO DID NOT DEMAND OR REQUIRE THE
DELIVERY OF THE OWNERS DUPLICATE TCT A BUYER IN GOOD FAITH.
III.
II. IN SUBSEQUENT REGISTRATION OF REGISTERED LANDS, AS BY SALE, WHICH
LAW SHALL GOVERN, ARTICLE 1455 OF CIVIL CODE OR P.D. 1529 OR TORRENS
SYSTEM.
17

Petitioner avers that she was the first buyer in good faith and even had in her possession the
owners copy of the title so much so that she was able to register the deed of sale in her favor and
caused the issuance of a new title in her name. She argues that the presentation and surrender of
the deed of sale and the owners copy carried with it the "conclusive authority of Asuncion
Tecson" which cannot be overturned by the latters oral deposition.
18

Petitioner claims that respondent did not demand nor require delivery of the owners duplicate
title from the spouses Tecson, neither did it investigate the circumstances surrounding the
absence of the title. These indicate respondents knowledge of a defect in the title of the spouses
and, thus, petitioner concludes that respondent was not a buyer in good faith.
19

Finally, petitioner insists that the applicable law in this case is P.D. No. 1529, a special law
dealing precisely with the registration of registered lands or any subsequent sale thereof, and not
Article 1544 of the Civil Code which deals with immovable property not covered by the Torrens
System.
20

Respondent points out, on one hand, that petitioners first two issues which present an inquiry on
who has a better right or which one is a buyer in good faith, are questions of fact not proper in a
petition for review. The third issue, on the other hand, is ostensibly a question of law which had
been unsuccessfully raised below.
21

Respondent maintains that there is no room to speak of petitioner as a buyer in good faith since
she was never a buyer in the first place, as her claim is based on a null and void deed of sale, so
the court a quo found. Respondent also asserts that its status as a buyer in good faith was
established and confirmed in the proceedings before the two courts below.
22

Lastly, respondent argues that P.D. No. 1529 finds no application in the instant case. The
"production of the owners duplicate certificate x x x being conclusive authority from the
registered owner" is only true as between the registration applicant and the register of deeds
concerned, but never to third parties. Such conclusive authority, respondent adds, is "only for the
Register of Deeds to enter a new certificate or to make a memorandum of registration in
accordance with such instrument." It cannot cure the fatal defect that the instrument from which
such registration was effected is null and void ab initio, respondent concludes.
23

The petition is bereft of merit.
Petitioners arguments, which rest on the assumption that there was a double sale, must fail.
In the first place, there is no double sale to speak of. Art. 1544 of the Civil Code,
24
which
provides the rule on double sale, applies only to a situation where the same property is validly
sold to different vendees. In this case, there is only one sale to advert to, that between the
spouses Tecson and respondent.
In Remalante v. Tibe,
25
this Court ruled that the Civil Law provision on double sale is not
applicable where there is only one valid sale, the previous sale having been found to be
fraudulent. Likewise, in Espiritu and Apostol v. Valerio,
26
where the same parcel of land was
purportedly sold to two different parties, the Court held that despite the fact that one deed of sale
was registered ahead of the other, Art. 1544 of the Civil Code will not apply where said deed is
found to be a forgery, the result of this being that the right of the other vendee should prevail.
The trial court declared that the sale between the spouses Tecson and petitioner is invalid, as it
bears the forged signature of Asuncion. Said finding is based on the unrebutted testimony of
Asuncion and the trial courts visual analysis and comparison of the signatures in her Complaint-
in-Intervention and the purported deed of sale. This finding was upheld by the Court of Appeals,
as it ruled that the purported sale in petitioners favor is null and void, taking into account
Asuncions unrefuted deposition. In particular, the Court of Appeals noted petitioners failure to
attend the taking of the oral deposition and to give written interrogatories. In short, she did not
take the necessary steps to rebut Asuncions definitive assertion.
The congruence of the wills of the spouses is essential for the valid disposition of conjugal
property.
27
Thus, under Article 166 of the Civil Code
28
which was still in effect on 19 December
1986 when the deed of sale was purportedly executed, the husband cannot generally alienate or
encumber any real property of the conjugal partnership without the wifes consent.
In this case, following Article 173
29
of the Civil Code, on 26 June 1995, or eight and a half years
(8 ) after the purported sale to petitioner, Asuncion filed her Complaint-in-Intervention seeking
the nullification thereof, and while her marriage with Troadio was still subsisting. Both the Court
of Appeals and the trial court found Asuncions signature in the deed of sale to have been forged,
and consequently, the deed of sale void for lack of marital consent. We find no reason to disturb
the findings of the trial court and the Court of Appeals. Findings of fact of lower courts are
deemed conclusive and binding upon the Supreme Court subject to certain exceptions,
30
none of
which are present in this case. Besides, it has long been recognized in our jurisprudence that a
forged deed is a nullity and conveys no title.
31

Petitioner argues she has a better right over the property in question, as the holder of and the first
one to present, the owners copy of the title for the issuance of a new TCT. The Court is not
persuaded.
The act of registration does not validate petitioners otherwise void contract. Registration is a
mere ministerial act by which a deed, contract, or instrument is sought to be inscribed in the
records of the Office of the Register of Deeds and annotated at the back of the certificate of title
covering the land subject of the deed, contract, or instrument. While it operates as a notice of the
deed, contract, or instrument to others, it does not add to its validity nor converts an invalid
instrument into a valid one as between the parties,
32
nor amounts to a declaration by the state that
the instrument is a valid and subsisting interest in the land.
33
The registration of petitioners void
deed is not an impediment to a declaration by the courts of its invalidity.
Even assuming that there was double sale in this case, petitioner would still not prevail. The
pertinent portion of Art. 1544 provides:
Art. 1544. x x x.
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
x x x x.
In interpreting this provision, the Court declared that the governing principle is primus tempore,
potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the second
sale cannot defeat the first buyers rights, except where the second buyer registers in good faith
the second sale ahead of the first as provided by the aforequoted provision of the Civil Code.
Such knowledge of the first buyer does not bar him from availing of his rights under the law,
among them to register first his purchase as against the second buyer. However, knowledge
gained by the second buyer of the first sale defeats his rights even if he is first to register the
second sale, since such knowledge taints his prior registration with bad faith.
34
It is thus
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.
35

We agree with the trial court and the Court of Appeals that respondent was a buyer in good faith,
having purchased the nine (9) lots, including the subject lot, without any notice of a previous
sale, but only a notice of attachment relative to a pending civil case. In fact, in its desire to finally
have the title to the properties transferred in its name, it persuaded the parties in the said case to
settle the same so that the notice of attachment could be cancelled.
Relevant to the discussion are the following provisions of P.D. No. 1529:
Sec. 51. Conveyance and other dealings by registered owner. An owner of registered land may
convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing
laws. He may use such forms of deeds, mortgages, lease or other voluntary instruments as are
sufficient in law. But no deed, mortgage, lease or other voluntary instrument, except a will
purporting to convey or affect registered land shall take effect as a conveyance or bind the land,
but shall operate only as a contract between the parties and as evidence of authority to the
Register of Deeds to make Registration.
The act of registration shall be the operative act to convey or affect the land insofar as third
persons are concerned, and in all cases under this Decree, the registration shall be made in the
office of the Register of Deeds for the province or city where the land lies. (Emphasis supplied)
Sec. 52. Constructive notice upon registration.Every conveyance, mortgage, lease, lien
attachment, order, judgment, instrument or entry affecting registered land shall, if registered,
filed or entered in the office of the Register of Deeds for the province or city where the land to
which it relates lies, be constructive notice to all persons from the time of such registering, filing
or entering.
It has been held that between two transactions concerning the same parcel of land, the registered
transaction prevails over the earlier unregistered right. The act of registration operates to convey
and affect the registered land so that a bona fide purchaser of such land acquires good title as
against a prior transferee, if such prior transfer was unrecorded.
36
As found by the courts a quo,
respondent was able to register its purchase ahead of petitioner. It will be recalled that
respondent was able to register its Deed of Conditional Sale with the Register of Deeds as early
as 6 November 1992, and its Deed of Absolute Sale on 14 October 1993. On the other hand,
petitioner was able to present for registration her deed of sale and owners copy of the title only
on 23 January 1995, or almost nine years after the purported sale. Why it took petitioner nine (9)
years to present the deed and the owners copy, she had no credible explanation; but it is clear
that when she finally did, she already had constructive notice of the deed of sale in respondents
favor. Without a doubt, respondent had acquired a better title to the property.1wphi1
Finally, anent petitioners claim that P.D. No. 1529 applies to registered lands or any subsequent
sale thereof, while Art. 1544 of the Civil Code applies only to immovable property not covered
by the Torrens System, suffice it to say that this quandary has already been answered by an
eminent former member of this Court, Justice Jose Vitug, who explained that the registration
contemplated under Art. 1544 has been held to refer to registration under P.D. No. 1529, thus:
The registration contemplated under Art. 1544 has been held to refer to registration under Act
496 Land Registration Act (now PD 1529) which considers the act of registration as the
operative act that binds the land (see Mediante v. Rosabal, 1 O.G. [12] 900, Garcia v. Rosabal,
73 Phil 694). On lands covered by the Torrens System, the purchaser acquires such rights and
interest as they appear in the certificate of title, unaffected by any prior lien or encumbrance not
noted therein. The purchaser is not required to explore farther than what the Torrens title, upon
its face, indicates. The only exception is where the purchaser has actual knowledge of a flaw or
defect in the title of the seller or of such liens or encumbrances which, as to him, is equivalent to
registration (see Sec. 39, Act 496; Bernales v. IAC, G.R. 75336, 18 October 1988; Hernandez vs.
Sales, 69 Phil 744; Tajonera s. Court of Appeals, L-26677, 27 March 1981) (Emphasis
supplied)
37

WHEREFORE, the petition is DENIED. The assailed decision and resolution of the Court of
Appeals are affirmed. Costs against petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
SECOND DIVISION
G.R. No. 152627 September 16, 2005
SPOUSES AMANCIO and LUISA SARMIENTO and PEDRO OGSINER, Petitioners,
vs.

vs.
THE HON. COURT OF APPEALS (Special Former Fifth Division), RODEANNA
REALTY CORPORATION, THE HEIRS OF CARLOS MORAN SISON, PROVINCIAL
SHERIFF OF PASIG, M.M., MUNICIPAL (CITY) TREASURER OF MARIKINA, JOSE
F. PUZON, THE HON. EFICIO ACOSTA, REGIONAL TRIAL COURT OF PASIG
CITY, BRANCH 155 and REGISTER OF DEEDS OF MARIKINA (CITY), RIZAL,
Respondent.
D E C I S I O N
CHICO-NAZARIO, J .:
In a case for recovery of possession based on ownership (accion reivindicatoria), is the
defendants third-party complaint for cancellation of plaintiffs title a collateral attack on
such title?
This is the primary issue that requires resolution in this petition for review on certiorari of
the Decision
1
of the Court of Appeals dated 27 November 2001 and its Resolution
2
dated 08
March 2002 affirming the Decision of the Regional Trial Court (RTC) of Pasig, Branch
162, in Civil Case No. 54151, finding for then plaintiff (private respondent herein)
Rodeanna Realty Corporation (RRC).
The relevant antecedents of this case have been summarized by the Court of Appeals as
follows:
The subject of the present controversy is a parcel of land situated in Marikina covered by
Transfer Certificate of Title No. N-119631 and registered in the name of the plaintiff-
appellee RODEANNA REALTY CORPORATION.
The aforementioned land was previously owned by the Sarmiento spouses by virtue of a
deed of absolute sale executed on July 17, 1972 and as evidenced by a Transfer Certificate
of Title No. 3700807. Upon acquisition of the land, the Sarmiento spouses appointed
PEDRO OGSINER as their overseer.
On August 15, 1972, the subject land was mortgaged by the Sarmiento spouses to Carlos
Moran Sison (Mr. Sison) as a security for a sixty-five thousand three hundred seventy
pesos and 25/100 loan obtained by the Sarmiento spouses from Mr. Sison.
Upon failure of the Sarmiento spouses to pay the loan, Mr. Sison initiated the extra-judicial
foreclosure sale of the mortgaged property, and on October 20, 1977, the said property was
foreclosed through the Office of the Sheriff of Rizal, which accordingly, issued a certificate
of sale in favor of Mr. Sison, and which Mr. Sison caused to be annotated on the title of
Sarmiento spouses on January 31, 1978.
On August 25, 1982, JOSE PUZON (Mr. Puzon) purchased the same property in an
auction sale conducted by the Municipal Treasurer of Marikina for non-payment of taxes.
After paying P3,400.00, he was issued a certificate of sale and caused it to be registered in
the Registry of Deeds of Marikina. No redemption having been made by the Sarmiento
spouses, a final bill of sale was issued in his (Mr. Puzon) favor. Thereafter, Mr. Puzon filed
a petition for consolidation of ownership and issuance of new title over the subject property
before the Regional Trial Court of Pasig, Branch 155. The said petition, which was
docketed as LRC Case No. T-3367, was granted by the court in its Order dated August 03,
1984. Thereafter, Transfer Certificate of Title No. 102902 was issued in the name of Jose
Puzon.
On August 16, 1986, Mr. Puzon sold the property in question to herein plaintiff-appellee.
By virtue of such sale, a transfer certificate of title over the subject property was issued in
favor of the plaintiff-appellee. Records show that Mr. Puzon assured the plaintiff-appellee
that he (Jose Puzon) will take care of the squatters in the subject property by filing an
ejectment case against them. However, Mr. Puzon failed to comply with his promise.
On December 19, 1986, plaintiff-appellee filed a complaint for recovery of possession with
damages against the Sarmiento spouses and Pedro Ogsiner, the Sarmiento spouses
caretaker of the subject property who refused to vacate the premises. In its complaint,
plaintiff-appellee alleged that the Sarmiento spouses lost all the rights over the property in
question when a certificate of sale was executed in favor of Mr. Sison for their failure to
pay the mortgage loan.
On January 30, 1987, the Sarmiento spouses filed a motion for leave to file a third-party
complaint against Mr. Sison, the Provincial Sheriff of Pasig, Mr. Puzon, the Judge of
Regional Trial Court of Branch 155 in LRC Case No. R-3367 and the Register of Deeds of
Marikina. On the same date the Sarmiento spouses filed their answer to the complaint.
Expectedly, plaintiff-appellee opposed the motion.
In its order dated June 16, 1987, the trial court denied the motion of the Sarmiento spouses.
Records show that the said order of the trial court was set aside in a petition for certiorari
filed before this Court. Hence, the third-party complaint was admitted. Consequently, Mr.
Sison, the Register of Deeds of Marikina filed their answer, while Mr. Puzon filed a motion
to dismiss the third-party complaint on the grounds of misjoinder of causes of action and
non-jurisdiction of the trial court over said third-party complaint. In a motion to set for
hearing its special and affirmative defenses, the Register of Deeds of Marikina moved for
the dismissal of the third-party complaint against them. The motion of Mr. Puzon was held
in abeyance by the trial court ratiocinating that the issues raised in the motion still do not
appear to be indubitable.
On October 20, 1988, Mr. Puzon filed his answer.
In its order dated February 22, 1989, the trial court dismissed the third-party complaint
against the Register of Deeds of Marikina on the ground that the case may proceed even
without the Register of Deeds being impleaded.
On April 29, 1991, the trial court issued its assailed decision in favor of the plaintiff-
appellee. A timely appeal was filed by the Sarmiento spouses. In their manifestation filed
on July 17, 1989, the Heirs of Mr. Sison prayed for substitution for their late father.
Consequently, the Heirs of Mr. Sison moved for new trial or reconsideration on the ground
that they were not properly represented in the case after the death of Mr. Sison. In its
order dated November 28, 1991, the trial court granted the motion.
On February 4, 1993, the trial court dismissed the claim of Mr. Sison as represented by his
heirs, that he is the beneficial owner of the subject property. In its order dated May 18,
1993, the court a quo denied the motion for reconsideration of the Heirs of Mr. Sison.
3

The dispositive portion of the trial court ruling dated 29 April 1991 reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff
against all defendants:
1) ordering defendant Pedro Ogsiner and all persons claiming rights under him to vacate
the premises and surrender peaceful possession to the plaintiff within fifteen (15) days from
receipt of this order;
2) ordering defendant spouses Sarmiento to pay the sum of P20,000.00 as and for
attorneys fees;
3) ordering the defendants jointly and severally to pay the sum of P300.00 a month as
reasonable compensation for the use of the property in question starting June, 1986 until
such time that they actually surrendered the possession of the property to the plaintiff;
4) ordering defendant spouses Sarmiento to pay the cost of this suit.
Defendants third-party complaint against all third-party defendants is hereby dismissed
for lack of sufficient merit.
4

On appeal by herein petitioners Amancio and Luisa Sarmiento (Sarmiento spouses) and by
the heirs of Carlos Moran Sison, the Court of Appeals rendered the assailed Decision,
dated 27 November 2001, the dispositive portion of which reads:
WHEREFORE, for lack of merit, the instant appeal is hereby DISMISSED. The assailed
April 29, 1991 Decision of the Regional Trial Court of Pasig, Metro Manila is hereby
AFFIRMED with the modification that the award of P 20,000.00 as attorneys fees is
hereby DELETED. The February 03, 1993 Resolution and the May 18, 1993 Order of the
trial court are also hereby AFFIRMED.
5

On 08 March 2002, the Court of Appeals rendered the assailed Resolution denying
petitioners motion for reconsideration.
The Sarmiento spouses anchor their petition on the following legal arguments:
1) The ruling of the Court of Appeals that private respondent RRCs certificate of title
cannot be collaterally attacked and that their right to claim ownership over the subject
property is beyond the province of the action for recovery of possession is contrary to law
and applicable decisions of the Supreme Court;
2) The ruling of the Court of Appeals that private respondent RRC is entitled to ownership
of subject property simply by virtue of its title as evidenced by Transfer Certificate of Title
(TCT) No. N-119631 is contrary to law and jurisprudence and is not supported by
evidence; and
3) The affirmation by the Court of Appeals of the award of rentals to private respondent
RRC lacks factual and legal basis.
First Issue:
The Court of Appeals, in holding that the third-party complaint of the Sarmiento spouses
amounted to a collateral attack on TCT No. N-119631, ratiocinated as follows:
In resolving the errors/issues assigned by the herein parties, We should be guided by the
nature of action filed by the plaintiff-appellee before the lower court, and as previously
shown it is an action for the recovery of possession of the property in question with
damages. Thus, from the said nature of action, this Court believes that the focal point of
the case is whether or not the plaintiff-appellee has a better right to possess the contested
real property. Corollary, it must also be answered whether or not the Transfer Certificate
of Title No. N-119631 can be collaterally attacked in an action for recovery of possession.
. . .
In their assigned errors, the Sarmiento spouses alleged that the plaintiff-appellee is not a
purchaser in good faith, as they were chargeable with the knowledge of occupancy by
Pedro Ogsiner in behalf of the Sarmiento spouses, and that the auction sale of the property
in favor of Mr. Puzon is null and void for its failure to comply with the requirement of
notice provided by the law. The same have been argued by the Heirs of Mr. Sison.
The above assertions, We rule, amounts to a collateral attack on the certificate of title of
the plaintiff-appellee. A collateral attack is made when, in another action to obtain a
different relief, an attack on the judgment is made as an incident in said action. This is
proper only when the judgment on its face is null and void, as where it is patent that the
court, which rendered said judgment has no jurisdiction. On the other hand, a direct
attack against a judgment is made through an action or proceeding the main object of
which is to annul, set aside, or enjoin the enforcement of such judgment, if not carried into
effect, or if the property has been disposed of, the aggrieved party may sue for recovery.
In the present case, to rule for the nullity of the auction sale in favor of Mr. Puzon will
result in ruling for the nullity of the order of Branch 155 of the Regional Trial Court of
Pasig City, granting the petition for consolidation of ownership over the subject property
filed by Mr. Puzon. It will also result in the nullity of title issued in the name of Mr. Puzon.
Hence, the end objective in raising the aforementioned arguments is to nullify the title in
the name of the plaintiff-appellee. In fact, a reading of the answer of the Sarmiento spouses
and the Heirs of Mr. Sison reveals that they are asking the court to nullify all documents
and proceedings which led to the issuance of title in favor of the plaintiff-appellee. This is
obviously a collateral attack which is not allowed under the principle of indefeasibility of
torrens title. The issue of validity of plaintiff-appellees title can only be raised in an action
expressly instituted for that purpose. A certificate of title shall not be subject to collateral
attack. It cannot be altered, modified, or canceled except in a direct proceeding in
accordance with law. Case law on the matter shows that the said doctrine applies not only
with respect to the original certificate of title but also to transfer certificate of title. Hence,
whether or not the plaintiff-appellee has a right to claim ownership over the subject
property is beyond the province of the present action. It does not matter whether the
plaintiff-appellees title is questionable because this is only a suit for recovery of possession.
It should be raised in a proper action for annulment of questioned documents and
proceedings, considering that it will not be procedurally unsound for the affected parties to
seek for such remedy. In an action to recover possession of real property, attacking a
transfer certificate of title covering the subject property is an improper procedure. The
rule is well-settled that a torrens title as a rule, is irrevocable and indefeasible, and the duty
of the court is to see to it that this title is maintained and respected unless challenged in a
direct proceeding.
6
(Emphasis and underscoring supplied)
An action is deemed an attack on a title when the object of the action or proceeding is to
nullify the title, and thus challenge the judgment pursuant to which the title was decreed.
7

The attack is direct when the object of the action is to annul or set aside such judgment, or
enjoin its enforcement.
8
On the other hand, the attack is indirect or collateral when, in an
action to obtain a different relief, an attack on the judgment is nevertheless made as an
incident thereof.
9

In its analysis of the controversy, the Court of Appeals, alas, missed one very crucial detail
which would have turned the tide in favor of the Sarmiento spouses. What the Court of
Appeals failed to consider is that Civil Case No. 54151 does not merely consist of the case
for recovery of possession of property (filed by RRC against the Sarmiento spouses) but
embraces as well the third-party complaint filed by the Sarmiento spouses against Carlos
Moran Sison, Jose F. Puzon (Mr. Puzon), the Provincial Sherriff of Pasig, Metro Manila,
the Municipal Treasurer of Marikina, Rizal, the Judge of the RTC, Branch 155, in LRC
Case No. R-3367 and the Register of Deeds of the then Municipality of Marikina, Province
of Rizal.
The rule on third-party complaints is found in Section 22, Rule 6 of the 1997 Rules of
Court, which reads:
Sec. 22. Third, (fourth, etc.)party complaint. A third (fourth, etc.)-party complaint is a
claim that a defending party may, with leave of court, file against a person not a party to
the action, called the third-party defendant, for contribution, indemnity, subrogation or
any other relief, in respect of his opponents claim.
A third-party complaint is in the nature of an original complaint. This is so because it is
"actually independent of and separate and distinct from the plaintiffs complaint."
10
In
herein case, after leave of court was secured
11
to file a third-party complaint, the third-
party complainants (Sarmiento spouses) had to pay the necessary docket fees.
12

Summonses were then issued on the third-party defendants
13
who answered in due time.
14

In Firestone Tire and Rubber Company of the Philippines v. Tempongko,
15
we had occasion
to expound on the nature of a third-party complaint, thus:
The third-party complaint, is therefore, a procedural device whereby a "third party" who
is neither a party nor privy to the act or deed complained of by the plaintiff, may be
brought into the case with leave of court, by the defendant, who acts as third-party plaintiff
to enforce against such third-party defendant a right for contribution, indemnity,
subrogation or any other relief, in respect of the plaintiffs claim. The third-party
complaint is actually independent of and separate and distinct from the plaintiffs
complaint. Were it not for this provision of the Rules of Court, it would have to be filed
independently and separately from the original complaint by the defendant against the
third-party. But the Rules permit defendant to bring in a third-party defendant or so to
speak, to litigate his separate cause of action in respect of plaintiffs claim against a third
party in the original and principal case with the object of avoiding circuity of action and
unnecessary proliferation of lawsuits and of disposing expeditiously in one litigation the
entire subject matter arising from one particular set of facts. . . When leave to file the
third-party complaint is properly granted, the Court renders in effect two judgments in the
same case, one on the plaintiffs complaint and the other on the third-party complaint.
(Emphasis supplied)
Prescinding from the foregoing, the appellate court grievously erred in failing to appreciate
the legal ramifications of the third-party complaint vis--vis the original complaint for
recovery of possession of property. The third-party complaint for cancellation of TCT
being in the nature of an original complaint for cancellation of TCT, it therefore constitutes
a direct attack of such TCT.
The situation at bar can be likened to a case for recovery of possession wherein the
defendant files a counterclaim against the plaintiff attacking the validity of the latters title.
Like a third-party complaint, a counterclaim is considered an original complaint, as such,
the attack on the title in a case originally for recovery of possession cannot be considered as
a collateral attack. We thus held in Development Bank of the Philippines (DBP) v. Court of
Appeals:
16

Nor is there any obstacle to the determination of the validity of TCT No. 10101. It is true
that the indefeasibility of torrens titles cannot be collaterally attacked. In the instant case,
the original complaint is for recovery of possession filed by petitioner against private
respondent, not an original action filed by the latter to question the validity of TCT No.
10101 on which the petitioner bases its right. To rule on the issue of validity in a case for
recovery of possession is tantamount to a collateral attack. However, it should not be
overlooked that private respondent filed a counterclaim against petitioner, claiming
ownership over the land and seeking damages. Hence, we could rule in the question of the
validity of TCT No. 10101 for the counterclaim can be considered a direct attack on the
same. "A counterclaim is considered a complaint, only this time, it is the original defendant
who becomes plaintiff It stands on the same footing and is to be tested by the same rules
as if it were an independent action."
There being a direct attack on the TCT which was unfortunately ignored by the appellate
court, it behooves this Court to deal with and to dispose of the said issue more so because
all the facts and evidence necessary for a complete determination of the controversy are
already before us. Again, DBP instructs:
. . . In an analogous case, we ruled on the validity of a certificate of title despite the fact that
the original action instituted before the lower court was a case for recovery of possession.
The Court reasoned that since all the facts of the case are before it, to direct the party to
institute cancellation proceedings would be needlessly circuitous and would unnecessarily
delay the termination of the controversy which has already dragged on for 20 years.
17

Second Issue:
In their third-party complaint, as amended, the Sarmiento spouses asserted six causes of
action. The second
18
to sixth causes of action referred to the proceedings leading to and
resulting from the tax sale held on 28 August 1982, summarized by the trial court as
follows:
. . . Third Party Plaintiffs alleged that on August 28, 1982, the Municipal Treasurer of
Marikina sold at public auction, the same property in favor of Jose F. Puzon for tax
deficiency at the price of Three Thousand Three Hundred Eighty Four Pesos and 89/100 (P
3,383.89) which is very low considering that the area of the property is 1,060 square
meters; that they were not notified of the public auction sale and further, the requirements,
such as posting of notices in public places, among other requirements, were not complied
with; that since the property was sold at a very low price, the public auction sale and the
Certificate of Sale issued by Municipal Treasurer of Marikina in favor of third party
defendant Jose F. Puzon are null and void; that in August 1984, the third party defendant
in order to consolidate his ownership and title to the property filed a Petition with the Land
Registration Commission in the Regional Trial Court, Branch 155, Pasig, Metro Manila in
LRC Case No. R-3367, for consolidation of his ownership and title; that third party
plaintiffs were not notified thereof and did not have their day in Court; hence, the order of
the Judge of the Regional trial Court in LRC Case No. R-3367 authorizing the
consolidation of the ownership and title of Jose F. Puzon is null and void, that Jose F.
Puzon after having been issued a new title in his name sold in June 1986, the property in
favor of plaintiff RODEANNA REALTY CORPORATION.
19

The Sarmiento spouses thus prayed that: (a) the certificate of sale executed by the
Municipal Treasurer of the then Municipality of Marikina, Rizal, in favor of Mr. Puzon be
declared null and void and all subsequent transactions therefrom declared null and void as
well; (b) the Order of the RTC in LRC Case No. R-3367, authorizing the consolidation of
ownership of and issuance of new TCT No. 102909 in favor of Mr. Puzon, be declared null
and void; (c) the Register of Deeds be directed to cancel the Certificate of Sale and TCT
No. 102909 issued in favor of Mr. Puzon as well as TCT No. N-119631 issued in the name of
RRC and that TCT No. 370807 in the name of the Sarmiento spouses be restored; (d) all
third-party defendants be made to pay, jointly and severally, moral and exemplary
damages such amount as to be fixed by the court as well as attorneys fees in the amount of
P10,000.00; and (e) Mr. Puzon be made to pay P500,000.00 the actual value of the
property at the time of the tax sale in the remote event that the title of RRC is not
invalidated.
The trial court held that the Sarmiento spouses were not entitled to the relief sought by
them as there was nothing irregular in the way the tax sale was effected, thus:
Defendants Sarmiento aver that they were not notified of the auction sale of the property
by the Municipal Treasurer of Marikina. However, the Court would like to point out that
during the examination of Amancio Sarmiento, he testified that in 1969 or 1970, he started
residing at No. 13 19th Avenue, Cubao, Quezon City; that his property was titled in 1972;
that he transferred his residence from Cubao to No. 76 Malumanay Street, Quezon City
but he did not inform the Municipal Treasurer of the said transfer. Hence, notice was
directed to his last known address.
. . .
The law requires posting of notice and publication. Personal notice to the delinquent
taxpayer is not required. In the case at bar, notice was sent to defendants (sic) address at
No. 12 13th Avenue, Cubao Quezon City. If said notice did not reach the defendant, it is
because of defendants fault in not notifying the Municipal Treasurer of Marikina of their
change of address.
20

The above-quoted ratiocination does not sit well with this Court for two fundamental
reasons. First, the trial court erroneously declared that personal notice to the delinquent
taxpayer is not required. On the contrary, personal notice to the delinquent taxpayer is
required as a prerequisite to a valid tax sale under the Real Property Tax Code,
21
the law
then prevailing at the time of the tax sale on 28 August 1982.
22

Section 73 of the Real Property Tax Code provides:
Sec. 73. Advertisement of sale of real property at public auction. After the expiration of the
year for which the tax is due, the provincial or city treasurer shall advertise the sale at
public auction of the entire delinquent real property, except real property mentioned in
subsection (a) of Section forty hereof, to satisfy all the taxes and penalties due and the costs
of sale. Such advertisement shall be made by posting a notice for three consecutive weeks at
the main entrance of the provincial building and of all municipal buildings in the province,
or at the main entrance of the city or municipal hall in the case of cities, and in a public and
conspicuous place in barrio or district wherein the property is situated, in English, Spanish
and the local dialect commonly used, and by announcement at least three market days at
the market by crier, and, in the discretion of the provincial or city treasurer, by publication
once a week for three consecutive weeks in a newspaper of general circulation published in
the province or city.
The notice, publication, and announcement by crier shall state the amount of the taxes,
penalties and costs of sale; the date, hour, and place of sale, the name of the taxpayer
against whom the tax was assessed; and the kind or nature of property and, if land, its
approximate areas, lot number, and location stating the street and block number, district
or barrio, municipality and the province or city where the property to be sold is situated.
Copy of the notice shall forthwith be sent either by registered mail or by messenger, or
through the barrio captain, to the delinquent taxpayer, at his address as shown in the tax
rolls or property tax record cards of the municipality or city where the property is located,
or at his residence, if known to said treasurer or barrio captain: Provided, however, That a
return of the proof of service under oath shall be filed by the person making the service
with the provincial or city treasurer concerned. (Emphasis supplied)
We cannot overemphasize that strict adherence to the statutes governing tax sales is
imperative not only for the protection of the taxpayers, but also to allay any possible
suspicion of collusion between the buyer and the public officials called upon to enforce the
laws.
23
Notice of sale to the delinquent land owners and to the public in general is an
essential and indispensable requirement of law, the non-fulfillment of which vitiates the
sale.
24
Thus, the holding of a tax sale despite the absence of the requisite notice is
tantamount to a violation of delinquent taxpayers substantial right to due process.
25

Administrative proceedings for the sale of private lands for nonpayment of taxes being in
personam, it is essential that there be actual notice to the delinquent taxpayer, otherwise the
sale is null and void although preceded by proper advertisement or publication.
26

The consequential issue in this case, therefore, is whether or not the registered owners the
Sarmiento spouses were personally notified that a tax sale was to be conducted on 28
August 1982.
The Sarmiento spouses insist that they were not notified of the tax sale. The trial court
found otherwise, as it declared that a notice was sent to the spouses last known address.
Such conclusion constitutes the second fundamental error in the trial courts disposition of
the case as such conclusion is totally bereft of factual basis. When findings of fact are
conclusions without citation of specific evidence upon which they are based, this Court is
justified in reviewing such finding.
27

In herein case, the evidence does not support the conclusion that notice of the tax sale was
sent to the Sarmiento spouses last known address. What is clear from the evidence is that
the Sarmiento spouses were notified by mail after the subject property was already sold,
i.e., the notice that was sent to the last known address was the "Notice of Sold Properties"
and not the notice to hold a tax sale.
28
This was testified upon by third-party defendant
Natividad M. Cabalquinto, the Municipal Treasurer of Marikina, who swore that per her
records, neither notice of tax delinquency nor notice of tax sale was sent to the Sarmiento
spouses.
29
Counsel for respondent RRC did not cross-examine Ms. Cabalquinto on this on
the theory that Ms. Cabalquinto had no personal knowledge of the tax sale and the
proceedings leading thereto as she became Municipal Treasurer only in 1989.
30

Notwithstanding Ms. Cabalquintos lack of personal knowledge, her testimony -- that per
records in her possession no notice was actually sent to the Sarmiento spouses -- is
sufficient proof of the lack of such notice in the absence of contrary proof coming from the
purchaser in the tax sale, Mr. Puzon, and from his eventual buyer, herein private
respondent RRC. Be it noted that under Section 73 of the Real Property Tax Code, it is
required that a return of the proof of service to the registered owner be made under oath
and filed by the person making the service with the provincial or city treasurer concerned.
This implies that as far as tax sales are concerned, there can be no presumption of the
regularity of any administrative action; hence the registered owner/delinquent taxpayer
does not have the burden of proof to show that, indeed, he was not personally notified of
the sale thru registered mail.
There can be no presumption of the regularity of any administrative action which results in
depriving a taxpayer of his property through a tax sale.
31
This is an exception to the rule
that administrative proceedings are presumed to be regular.
32
This doctrine can be traced
to the 1908 case of Valencia v. J imenez and Fuster
33
where this Court held:
The American law does not create a presumption of the regularity of any administrative
action which results in depriving a citizen or taxpayer of his property, but, on the contrary,
the due process of law to be followed in tax proceedings must be established by proof and
the general rule is that the purchaser of a tax title is bound to take upon himself the burden
of showing the regularity of all proceedings leading up to the sale. The difficulty of
supplying such proof has frequently lead to efforts on the part of legislatures to avoid it by
providing by statute that a tax deed shall be deemed either conclusive or presumptive proof
of such regularity.
Those statutes attributing to it a conclusive effect have been held invalid as operating to
deprive the owner of his property without due process of law. But those creating a
presumption only have been sustained as affecting a rule of evidence, changing nothing but
the burden of proof. (Turpin v. Lemon, 187 U.S., 51.)
The tax law applicable to Manila does not attempt to give any special probative effect to the
deed of the assessor and collector, and therefore leaves the purchaser to establish the
regularity of all vital steps in the assessment and sale.
In the fairly recent case of Requiron v. Sinaban,
34
we had occasion to reiterate the doctrine
laid down in Valencia with respect specifically to tax sales conducted under Commonwealth
Act No. 470 (Assessment Law). Nevertheless, no substantial variance exists between
Commonwealth Act No. 470 and the Real Property Tax Code, which took effect on 01 June
1974, concerning the required procedure in the conduct of public auction sale involving
real properties with tax delinquencies.
35

In sum, for failure of the purchaser in the tax sale (third-party defendant Mr. Puzon) to
prove that notice of the tax sale was sent to the Sarmiento spouses, such sale is null and
void.
As the tax sale was null and void, the title of the buyer therein (Mr. Puzon) was also null
and void, which thus leads us to the question of who between petitioners and private
respondent RRC has the right to possess the subject property.
In its complaint for recovery of possession with damages filed before the trial court, RRC
averred that it is the present registered owner of the subject land which it bought from Mr.
Puzon, who was then the registered owner thereof, free from liens and encumbrances. It
also stated that therein defendant Pedro Ogsiner was an illegal occupant as he was the
overseer for the Sarmiento spouses who no longer had any title to or rights over the
property. It thus prayed that Pedro Ogsiner vacate the property and that he and the
Sarmiento spouses be ordered to pay attorneys fees and rent in the amount of P500.00
monthly from 1984 until Pedro Ogsiner finally vacates the land.
36

In their Answer,
37
the Sarmiento spouses invoked certain affirmative defenses, to wit:
(1) The certificate of sale issued by the Municipal Treasurer of Marikina, Rizal, the order
authorizing consolidation of ownership and the issuance of a new title all in favor of Mr.
Puzon were null and void as the Sarmiento spouses and Pedro Ogsiner were not notified of
the tax sale;
(2) Mr. Puzon, knowing that the sale of the subject property by the Municipal Treasurer of
Marikina was null and void, still sold the same to herein private respondent RRC; and
(3) RRC purchased the property in bad faith, thus the sale to it was null and void.
A complaint for recovery of possession based on ownership (accion reivindicatoria or accion
reivindicacion) is an action whereby the plaintiff alleges ownership over a parcel of land
and seeks recovery of its full possession.
38
As possession is sought based on ownership, we
must inquire into the title of RRC which it acquired from Mr. Puzon who, in turn, derived
his title from the void tax sale.
The void tax sale notwithstanding, RRCs title cannot be assailed if it is a purchaser in
good faith and for value.
39

In its narration of the facts, the trial court acknowledged that RRC -- through its
President, Roberto Siy, and through its representative, Lorenzo Tabilog conducted an
ocular inspection of the subject land and found therein that its actual occupant, Pedro
Ogsiner, had a house erected thereon and that such occupant was the overseer for the
Sarmiento spouses who claimed ownership over the subject land.
40
Armed with this
knowledge, RRC did only one thing: it offered Pedro Ogsiner P2,000.00 to vacate the
subject property.
41
Relying on the fact that the TCT in Mr. Puzons name was free of liens
and encumbrances and that Mr. Puzon would take care of the "squatters," RRC did not
investigate whatever claim Pedro Ogsiner and the Sarmiento spouses had over the subject
land.
From the foregoing undisputed facts, the trial court held:
There is no doubt that when the plaintiff Rodeanna Realty Corporation purchased the
property, there was a title in the name of Jose Puzon, thus, making them a purchaser (sic)
in good faith and for value. Said buyers relied on the owners (sic) title which is free and
clear of all liens and encumbrances.
. . .
After a careful evaluation of the facts of this case, the Court believes that plaintiff is
entitled to the relief sought for. As enunciated in the case of Carmelita E. Reyes vs.
Intermediate Appellate Court, Gregorio Galang and Soledad Pangilinan (No. L-60941,
February 28, 1985, 135 SCRA 214), a contract of sale between a buyer from public auction
of land sold for unpaid realty taxes and subsequent innocent purchaser in good faith and
for value is valid whether or not the City Treasurer followed the prescribed procedure.
In the case at bar, assuming that the Municipal Treasurer of Marikina failed to comply
with certain procedure, it does not follow that the Rodeanna Realty Corporation has no
valid title. For as they have asserted, they are purchaser in good faith and for value in the
amount of P190, 000.00. There is nothing in the record which would show that they were
aware or they were party to the alleged irregularities. Hence, title of Rodeanna Realty
Corporation cannot now be assailed (William vs. Barrera, 68 Phil. 656; PMHC vs. Mencias,
August 16, 1967, 20 SRCA 1031; Pascua vs. Capuyos, 77 SCRA 78).
42

In affirming the trial court, the Court of Appeals ruled:
As proven by the plaintiff-appellee, they obtained the property in question from Mr.
Puzon, who in turn acquired it in a public auction conducted by the Municipality of
Marikina. By virtue of the sale by Mr. Puzon to plaintiff-appellee, TCT No. N-119631 was
issued in its name. The best proof of ownership of a piece of land is the certificate of title.
The certificate of title is considered the evidence of plaintiff-appellees ownership over the
subject real property, and as its registered owner, it is entitled to its possession. Hence, as
compared to the Sarmiento spouses whose previous title over the subject property has been
cancelled, and to the Heirs of Mr. Sison, who had not shown any better proof of ownership,
the plaintiff-appellee, as evidenced by its certificate of title, has superior right to possess the
contested property. Xxx
43

Verily, every person dealing with registered land may safely rely on the correctness of the
certificate of title issued therefor and the law will in no way oblige him to go behind the
certificate to determine the condition of the property.
44
Thus, the general rule is that a
purchaser may be considered a purchaser in good faith when he has examined the latest
certificate of title.
45
An exception to this rule is when there exist important facts that would
create suspicion in an otherwise reasonable man to go beyond the present title and to
investigate those that preceded it. Thus, it has been said that a person who deliberately
ignores a significant fact which would create suspicion in an otherwise reasonable man is
not an innocent purchaser for value.
46
A purchaser cannot close his eyes to facts which
should put a reasonable man upon his guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of the vendor.
47
As we have held:
The failure of appellees to take the ordinary precautions which a prudent man would have
taken under the circumstances, specially in buying a piece of land in the actual, visible and
public possession of another person, other than the vendor, constitutes gross negligence
amounting to bad faith.
In this connection, it has been held that where, as in this case, the land sold is in the
possession of a person other than the vendor, the purchaser is required to go beyond the
certificate of title to ma[k]e inquiries concerning the rights of the actual possessor. Failure
to do so would make him a purchaser in bad faith. (Citations omitted).
. . .
One who purchases real property which is in the actual possession of another should, at
least make some inquiry concerning the right of those in possession. The actual possession
by other than the vendor should, at least put the purchaser upon inquiry. He can scarely, in
the absence of such inquiry, be regarded as a bona fide purchaser as against such
possessors.
48
(Emphasis supplied)
Prescinding from the foregoing, the fact that private respondent RRC did not investigate
the Sarmiento spouses claim over the subject land despite its knowledge that Pedro
Ogsiner, as their overseer, was in actual possession thereof means that it was not an
innocent purchaser for value upon said land. Article 524 of the Civil Code directs that
possession may be exercised in ones name or in that of another. In herein case, Pedro
Ogsiner had informed RRC that he was occupying the subject land on behalf of the
Sarmiento spouses. Being a corporation engaged in the business of buying and selling real
estate,
49
it was gross negligence on its part to merely rely on Mr. Puzons assurance that the
occupants of the property were mere squatters considering the invaluable information it
acquired from Pedro Ogsiner and considering further that it had the means and the
opportunity to investigate for itself the accuracy of such information.
Third Issue:
As it is the Sarmieno spouses, as exercised by their overseer Pedro Ogsiner, who have the
right of possession over the subject property, they cannot be made to pay rent to private
respondent RRC.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 27
November 2001 and its Resolution dated 08 March 2002 are REVERSED and SET ASIDE.
The public auction sale conducted on 28 August 1982 is declared VOID for lack of notice to
the registered owners Amancio and Luisa Sarmiento. Transfer Certificate of Title No. N-
119631 of the Registry of Deeds of what was then the Municipality of Marikina, Province of
Rizal, in the name of Rodeanna Realty Corporation is hereby ANNULLED. The Register
of Deeds of Marikina City, Metro Manila, is ordered to cancel TCT No. N-119631 and to
issue, in lieu thereof, a new title in the name of spouses Amancio and Luisa Sarmiento.
Costs against private respondent RRC.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 142403 March 26, 2003
ALEJANDRO GABRIEL and ALFREDO GABRIEL, petitioners,
vs.
SPOUSES PABLO MABANTA and ESCOLASTICA COLOBONG, DEVELOPMENT
BANK OF THE PHILIPPINES (Isabela Branch) and ZENAIDA TAN-REYES,
respondents.
SANDOVAL-GUTIERREZ, J .:
Born of the need to protect our land registration system from being converted into an instrument
of fraud, this Court has consistently adhered to the principle that "a mere registration of title in
case of double sale is not enough, good faith must concur with the registration."
In this petition for review on certiorari, Alejandro Gabriel and Alfredo Gabriel assailed the
Decision
1
dated March 30, 1999 of the Court of Appeals in CA-G.R. CV No. 33941 modifying
the Decision
2
dated April 12, 1991 of the Regional Trial Court, Branch 21, Santiago, Isabela in
Civil Case No. 0399 for specific performance, reconveyance and damages with application for
preliminary injunction.
The facts are as follows:
Spouses Pablo and Escolastica Mabanta were the registered owners of two lots located in Patul
and Capaltitan, Santiago, Isabela, with an area of 512 and 15,000 square meters, covered by
Transfer Certificates of Title (TCT) Nos. 72705 and 72707, respectively. On October 25, 1975,
they mortgaged both lots with the Development Bank of the Philippines (DBP) as collateral for a
loan of P14,000.00.
3

Five years thereafter or on September 1, 1980, spouses Mabanta sold the lots to Susana Soriano
by way of a "Deed of Sale of Parcels of Land With Assumption of Mortgage."
4
Included in the
Deed is an agreement that they could repurchase the lots within a period of two (2) years.
Spouses Mabanta failed to repurchase the lots. But sometime in 1984, they were able to convince
Alejandro Gabriel to purchase the lots from Susana Soriano. As consideration, Alejandro
delivered to Susana a 500-square meter residential lot with an actual value of P40,000.00 and
paid spouses Mabanta the sum of P5,000.00. On May 15, 1984, spouses Mabanta executed a
"Deed of Sale with Assumption of Mortgage"
5
in favor of Alejandro. For her part, Susana
executed a document entitled "Cancellation of Contract"
6
whereby she transferred to Alejandro
all her rights over the two lots.
Alejandro and his son Alfredo cultivated the lots. They also caused the restructuring of spouses
Mabantas loan with the DBP.
7
However, when they were ready to pay the entire loan, they
found that spouses Benito and Pura Tan had paid it and that the mortgage was already cancelled.
8

On August 18, 1985, Benito Tan and Alejandro Tridanio, a barangay official, approached
Alejandro to refund to him the P5,000.00 he paid to spouses Mabanta. Alejandro refused because
Tan was unwilling to return the formers 500-square meter lot delivered to Susana as purchase
price for the lots. Thereafter, spouses Tan tried to eject Alejandro from the lot covered by TCT
No. 72707.
On September 17, 1985, Alejandro and Alfredo filed with the Regional Trial Court, Branch 21,
Santiago, Isabela a complaint (involving the lot covered by TCT No. 72707) for specific
performance, reconveyance and damages with an application for a preliminary injunction against
spouses Mabanta, spouses Tan, the DBP and barangay officials Dominador Maylem and
Alejandro Tridanio. In due time, these defendants filed their respective answers.
During the proceedings, it turned out that it was spouses Tans daughter, Zenaida Tan-Reyes
who bought one of the lots (covered by TCT No. 72707) from spouses Mabanta on August 21,
1985. Not having been impleaded as a party-defendant, she filed an answer-in-intervention
alleging that she is the registered owner of the lot covered by TCT No. 72707; that she purchased
it from spouses Mabanta "in good faith and for value"; that she paid their loan with the DBP in
the amounts of P17,580.88 and P16,845.17 per Official Receipts Nos. 1749539 and 1749540,
respectively; that the mortgage with the DBP was cancelled and spouses Mabanta executed a
"Deed of Absolute Sale"
9
in her favor; and that TCT No. T-72707 was cancelled and in lieu
thereof, TCT No. T-160391 was issued in her name.
On April 12, 1991, the trial court rendered its Decision sustaining the right of Alejandro and
Alfredo Gabriel over the lot covered by TCT No. 72707 (now TCT No. T-160391), thus:
"WHEREFORE, in the light of the foregoing considerations judgment is hereby
rendered:
1. DECLARING Exhibit "A", the deed of sale with assumption of mortgage
executed by the spouses Pablo Mabanta and Escolastica Colobong (in favor of
Alejandro and Alfredo Gabriel) valid and subsisting.
2. ORDERING the plaintiff Alejandro Gabriel to pay to the spouses Pablo
Mabanta and Escolastica Colobong the sums of P5,000.00 plus P34,426.05
(representing the loan with the DBP which plaintiff assumed) within 30 days from
receipt hereof.
3. DECLARING the deed of sale executed by the spouses Pablo Mabanta and
Escolastica Colobong in favor of Zenaida Tan Reyes as null and void.
4. ORDERING the intervenor Zenaida Tan-Reyes to reconvey the land covered
by T.C.T. No. T-160391 in favor of Alejandro Gabriel.
"SO ORDERED."
In declaring null and void the "Deed of Absolute Sale" (or second sale) of the lot covered
by TCT No. 72707 between spouses Mabanta and Zenaida Tan-Reyes, the trial court
ratiocinated as follows:
"But Zenaida (Tan) Reyes professes that she is a buyer in good faith and for value. In her
testimony she said that the spouses Mabanta offered to sell the land to her on August 19,
1985. She was informed that the land was mortgaged in the DBP. She readily agreed to
buy the land on that same day. She did not inquire further into the status of the land. She
did not go and see the land first. What she did was to immediately go to the DBP the
following day and paid the mortgage obligation in the amount of P16,845.17 and
P17,580.88 (Exhibits "1" and "2"). The following day August 21, a deed of sale in her
favor was prepared and on October 17, 1985 she secured a certificate of title (Exhibit
"5"). Under the above circumstances, it cannot be said that she is a purchaser in good
faith. She should have first made a thorough investigation of the status of the land. Had
she inquired, she should have been informed that the land was previously sold to at least
two persons Susana Soriano and Alejandro Gabriel. She should also have first visited the
land she was buying. Had she done so she should have discovered that the land was being
cultivated by the Gabriels who would have informed her that they already bought the land
from the Mabantas. The reason why she did not do this is because she already was
appraised of the status of the land by her father Benito Tan. For reasons known only to
her, she decided to buy the land just the same.
x x x x x x x x x
"Zenaida Tan therefore is not a purchaser in good faith and she cannot seek refuge
behind her certificate of title. True, Article 1544 of the Civil Code provides that should
immovable property be sold to different vendees, the ownership shall belong to the
person who in good faith first recorded it in the registry of property. Unfortunately, the
registration made by Zenaida (Tan) Reyes of her deed of sale was not in good faith. For
this reason in accordance with the same Article 1544, the land shall pertain to the person
who in good faith was first in possession. There is no question that it is the Gabriels who
are in possession of the land."
Unsatisfied, spouses Mabanta and Zenaida Tan-Reyes interposed an appeal to the Court of
Appeals.
On March 30, 1999, the Court of Appeals rendered a Decision modifying the trial courts
Decision, declaring as valid the second sale of the lot covered by TCT No. 72707 between
spouses Mabanta and Zenaida Tan-Reyes on the ground that a person dealing with registered
land may simply rely on the correctness of the certificate of title and, in the absence of anything
to engender suspicion, he is under no obligation to look beyond it. The dispositive portion of the
Appellate Courts Decision reads:
"Wherefore the appealed judgment is AFFIRMED with the following modification:
1. DECLARING Exhibit "A", the deed of sale with assumption of mortgage executed by
the defendants-appellants spouses Pablo Mabanta and Escolastica Colobong over lots
covered by TCT Nos. T-72705 and T-72707 valid and subsisting;
2. Ordering spouses Pablo Mabanta and Escolastica Colobong to surrender TCT No.
72705 to plaintiff-appellee Alejandro Gabriel;
3. Declaring the deed of sale executed over lot with TCT No. 72707 (now T-160391) by
spouses Pablo Mabanta and Escolastica Colobong in favor of intervenor-appellant
Zenaida Tan Reyes as valid;
4. Ordering plaintiffs-appellees and any all persons claiming rights under them to vacate
Lot 3651-A now covered by TCT No. T-160391 and to deliver to intervenor-appellant
Zenaida Tan-Reyes the possession thereof;
5. Dismissing the case against defendants-appellants Benito Tan and Purita Masa;
6. No pronouncement as to costs.
"SO ORDERED."
In the instant petition for review on certiorari, petitioners Alejandro and Alfredo Gabriel raise
this lone issue:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN DECLARING THE SECOND
SALE OF THE DISPUTED LOT EXECUTED BY SPOUSES MABANTA IN FAVOR OF
ZENAIDA TAN-REYES VALID UNDER ARTICLE 1544 OF THE CIVIL CODE.
Petitioners contend that respondent Reyes is not a purchaser in good faith since she bought the
disputed lot with the knowledge that petitioner Alejandro is claiming it in a previous sale.
In her comment on the petition, respondent Reyes maintains that the Court of Appeals factual
finding that she is a purchaser in good faith and for value is final and conclusive. Meeting the
issue head on, she claims that there is no evidence that prior to August 21, 1985, when she
purchased the lot from respondent spouses Mabanta, she had knowledge of any previous lien or
encumbrance on the property.
For its part, respondent DBP avers that it acted in utmost good faith in releasing the mortgaged
lots to respondent spouses Mabanta who had the loan restructured and paid the same. Also, it did
not transact business with spouses Tan.
With respect to respondent spouses Mabanta, this Courts Resolution dated June 14, 2000
requiring them to file comment on the present petition was returned unserved. Thus, in its
Resolution dated January 22, 2001, this Court resolved to consider the Resolution of June 14,
2000 "deemed served" upon them.
10

The petition is impressed with merit.
The issue for our resolution is whether or not respondent Zenaida Tan-Reyes acted in good faith
when she purchased the subject lot and had the sale registered.
Settled is the principle that this Court is not a trier of facts. In the exercise of its power of review,
the findings of fact of the Court of Appeals are conclusive and binding and consequently, it is not
our function to analyze or weigh evidence all over again.
11
This rule, however, is not an iron-clad
rule.
12
In Floro vs. Llenado,
13
we enumerated the various exceptions and one which finds
application to the present case is when the findings of the Court of Appeals are contrary to those
of the trial court.
We start first with the applicable law.
Article 1544 of the Civil Code provides:
"ART. 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first 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.
14
The requirement of the law then is two-fold:
acquisition in good faith and registration in good faith.
15
The rationale behind this is
well-expounded in Uraca vs. Court of Appeals,
16
where this Court held:
"Under the foregoing, the prior registration of the disputed property by the second buyer
does not by itself confer ownership or a better right over the property. Article 1544
requires that such registration must be coupled with good faith. Jurisprudence teaches us
that "(t)he governing principle is primus tempore, potior jure (first in time, stronger in
right). Knowledge gained by the first buyer of the second sale cannot defeat the first
buyers right except where the second buyer registers in good faith the second sale ahead
of the first, as provided by the Civil Code. Such knowledge of the first buyer does not bar
her from availing of her rights under the law, among them, to register first her purchase
as against the second buyer. But in converso, knowledge gained by the second buyer of
the first sale defeats his right even if he is first to register the second sale, since such
knowledge taints his prior registration with bad faith. This is the price exacted by Article
1544 of the Civil Code for the second buyer being able to displace the first buyer, that
before the second buyer can obtain priority over the first, he must show that he acted in
good faith throughout (i.e. in ignorance of the first sale and of the first buyers right)
from the time of acquisition until the title is transferred to him by registration or failing
registration, by delivery of possession." (Emphasis supplied)
In the case at bar, certain pieces of evidence, put together, would prove that respondent Reyes is
not a buyer in good faith. The records show that on August 18, 1985, spouses Mabanta offered to
her for sale the disputed lot. They told her it was mortgaged with respondent DBP and that she
had to pay the loan if she wanted to buy it.
17
She readily agreed to such a condition. The
following day, her father Benito Tan, accompanied by barangay official Tridanio, went to
petitioner Alejandros house offering to return to him the P5,000.00 he had paid to spouses
Mabanta. Tan did not suggest to return the 500-square meter lot petitioner delivered to Susana
Soriano.
18
For this reason, petitioner refused Tans offer and even prohibited him from going to
respondent DBP. We quote the following testimony of petitioner who, despite his blindness as
shown by the records, testified to assert his right, thus:
"ATTY. CHANGALE:
Q What can you say to that statement?
A That is their mistake, sir.
Q Why do you say that is their mistake?
A Because her husband and Tridanio went at home offering to return the money but
I did not accept, sir.
Q Who is this Benito Tan you are referring to?
A The husband of Pura Masa, sir.
Q What is the relationship with the intervenor Zenaida Tan?
A The daughter, sir.
Q When did Benito Tan together with Councilman Tridanio came?
A Before they went to the Development Bank of the Philippines they came at home
and I prohibit them, sir.
Q How did you prohibit them?
A No, I said please I am just waiting for the Bank to inspect then I will pay my
obligation.
x x x x x x x x x
Q You stated earlier that you will just pay the payments. What are those payments
you are referring to?
A The payment I have given to Colobong and to the Bank, sir. They do not want to
return the payment I have given to Susana Soriano and that is the beginning of our
quarrel."
19

We are thus convinced that respondent Reyes had knowledge that petitioner previously bought
the disputed lot from respondent spouses Mabanta. Why should her father approach petitioner
and offer to return to him the money he paid spouses Mabanta? Obviously, aware of the previous
sale to petitioner, respondent Reyes informed her father about it. At this juncture, it is reasonable
to conclude that what prompted him to go to petitioners house was his desire to facilitate his
daughters acquisition of the lot, i.e., to prevent petitioner Alejandro from contesting it. He did
not foresee then that petitioner would insist he has a prior right over the lot.
Now respondent Reyes claims that she is a purchaser in good faith. This is preposterous. Good
faith is something internal. Actually, it is a question of intention. In ascertaining ones intention,
this Court must rely on the evidence of ones conduct and outward acts. From her actuations as
specified above, respondent Reyes cannot be considered to be in good faith when she bought the
lot.
Moreover, it bears noting that on September 16, 1985, both petitioners filed with the trial court
their complaint involving the lot in question against respondents. After a month, or on October
17, 1985, respondent Reyes had the "Deed of Absolute Sale" registered with the Registry of
Property. Evidently, she wanted to be the first one to effect its registration to the prejudice of
petitioners who, although in possession, have not registered the same. This is another indicum of
bad faith.
We have consistently held that "in cases of double sale of immovables, what finds relevance and
materiality is not whether or not the second buyer was a 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."
20
In Salvoro vs. Tanega,
21
we had the occasion 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."
Mere registration of title is not enough, good faith must concur with the registration. To be
entitled to priority, the second purchaser must not only establish prior recording of his deed, but
must have acted in good faith, without knowledge of the existence of another alienation by the
vendor to the other.
22
In the old case of Leung Yee vs. F. L. Strong Machinery, Co. and
Williamson, this Court ruled:
"One who purchases a real estate with knowledge of a defect of title in his vendor cannot
claim that he has acquired title thereto in good faith as against the true owner of the land
or of an interest therein; and the same rule must be applied to one who has knowledge of
facts which should have put him upon such inquiry and investigation as might be
necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot
close his eyes to facts which should put a reasonable man upon his guard, and then claim
that he acted in good faith under the belief that there was no defect in the title of the
vendor. His mere refusal to believe that such a defect exists, or his willful closing of his
eyes to the possibility of the existence of a defect in his vendors title will not make him
an innocent purchaser for value, if it afterwards develops that the title was in fact
defective, and it appears that he had such notice of the defect as would have led to its
discovery had he acted with that measure of precaution which may reasonably be
required of a prudent man in a like situation. x x x "
23

In fine, we hold that respondent Zenaida Tan-Reyes did not act in good faith when she bought
the lot and had the sale registered.
WHEREFORE, the assailed Decision of the Court of Appeals is REVERSED and SET ASIDE.
The Decision of the trial court is hereby reinstated.
SO ORDERED.



Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-5933 August 25, 1911
CRISANTO LICHAUCO, ET AL., petitioners-appellants,
vs.
JOSE BERENGUER, testamentary executor of Macario Berenguer, opponent-appelle.
Felipe Agoncillo, for appellants.
Ramon Salinas, for appellee.
ARELLANO, C.J .:
Crisanto Lichauco, on his own behalf, and his brothers, Faustino, Zacarias, Galo, and his sister,
Timotea Lichauco, his co-heirs, applied for the registration, in the new property registry, of two
rural estates situated in the pueblo of Arayat, Province of Pampanga, one of which, in the barrio
of Batasan, has an area of 204 hectares, 33 ares, and 38.795 centares, and the other, in the sitio of
Panantaglay, barrio of Calumpang, 120 hectares, 69 ares, and 58 centares. The boundaries and
other particulars relating to these lands are specified in the application, which for the purpose of
this opinion, are taken to be true.
With respect to both the said properties, the applicants allege that they obtained them by
inheritance from their grandmother, Cornelia Laochangco, and that the latter, in turn, had
acquired them from Macario Berenguer, through purchase with an agreement that the vendor
should have the right to redeem them. Jose Berenguer, the son of Macario Berenguer and the
administrator of his estate, opposed the registration of the first of the aforementioned properties,
and acquiesced in that of the second. The trial was had with respect to the first tract of land
above referred to, documentary and oral evidence was adduced by the parties, and the Court of
Land Registration decided:.
The adverse claim presented, relative to the parcel of land situated in Batasan, is
allowed; consequently, the registration of the same land applied for by the
applicants, is denied. Upon entry of a general default the adjudication and
registration of the second parcel, situated in Panantaglay, of 120 hectares, 69 ares,
and 58 centares, is decreed (at 12.10 p.m.) in favor of the applicants.
When this decision shall have become final, let the decree issue, and the registrar
of deeds for Pampanga shall cancel the registration entries found in the name of
Cornelia Laochangco on pages 192 and 196 of volume 1 of the district of Arayat,
properties Nos. 23 and 24, respectively, second inscriptions.
The applicants appealed from this judgment in so far as it denied the registration of the first
parcel of land, and their bill of exception having been filed with this court, with right to a review
of the evidence, they allege against the said judgment the following assignments of error:
1. The finding that the contract executed between Cornelia Laochangco and Macario Berenguer
was not a sale with right of repurchase, as it appears to be in the instrument (Exhibit C of the
applicants), but a real loan.
2. The finding that the instrument (Exhibit C) did not convey to the applicants any right of
ownership whatever, and that it was of no value and effect, as well also as the registration of the
same in the old registry; and
3. The allowance of the adverse claim filed by Jose Berenguer, as to the parcel of land situated in
Batasan, and the denial of its registration in the new registry.
The evidence to be considered with respect to the three preceding assignments of error, are: First,
on the part of the applicants, the public instrument executed by Macario Berenguer in favor of
Cornelia Laochangco (Exhibit C); second, on the part of the opponent, the account current
between Cornelia Laochangco and Macario Berenguer (Exhibit 5); and, third, the oral testimony
produced concerning this documentary evidence.
The public instrument, Exhibit C, in part reads as follows:
Don Macario Berenguer declares and states that he is the proprietor in fee-simple
of two parcels of follow unapropriated crown land situated within the district of
his pueblo. The first has an area of 763 quinones, 8 balitas, and 8 loanes, located
in the sitio of Batasan, and its boudaries are, etc., etc. The second is in the sitio of
Panantaglay, barrio of Calumpang, has an area of 73 hectares, 22 ares, and 6
centares, and is bounded on the north, etc., etc.
In the executory part of the said instrument, it is stated:
That under condition of right to repurchase (pacto de retro) he sells the said
properties to the aforementioned Doa Cornelia Laochangco for P4,000 and upon
the following conditions: First, the ale stipulated shall be for the period of two
years, counting from this date, within which time the deponent shall be entitled to
repurchase the land sold upon payment of this price; second, the lands sold shall,
during the term of the present contract, be held in lease by the undersigned who
shall pay, as rental therefor, the sum of 400 pesos per annum, or the equivalent in
sugar at the option of the vendor; third, all the fruits of the said lands shall be
deposited in the sugar depository of the vendee, situated in the district of Quiapo
of this city, and the value of which shall be applied on account of the price of this
sale fourth, the deponent acknowledges that he has received from the vendor the
purchase price of P4,000 already paid, and in legal tender currency of this country
. . .; fifth, all the taxes which may be assessed against the lands surveyed by
competent authority, shall be payable by and constitute a charge against the
vendor; sixth, if, through any unusual event, such as flood, tempest, etc., the
properties hereinbefore enumerated should be destroyed, wholly or in part, it shall
be incumbent upon the vendor to repair the damage thereto at his own expense
and to put them into a good state of cultivation, and should he fail to do so he
binds himself to give to the vendee other lands of the same area, qualify and
value.
The account current (Exhibit 5), which the applicants' counsel acknowledged to be correct, as
taken from their books, although impugned by him as irrelevant on account of the relation of
facts therein made concerning Cornelia Laochangco and in the preceding instrument, contains
the following statements:
1. Prior to June 28, 1889, Berengeur owned Laochangco 2,656,024/8 pesos;
2. Subsequent to this date, June 28, 1889, and up to October 5 of the same year, the former from
time to time received from the latter other amounts which, on the date last mentioned, amounted
to the sum of 3,949.91 pesos, which sum, by a payment made by Berenguer on the same date,
October 5, 1889, of 229.68 pesos, was reduced to 3,720.23 pesos.
3. On the same day, October 5, 1889, Laochangco gave Berenguer 1,000 pesos more.
4. From October 9, 1889, to August 10, 1890 Berenguer received other amounts until his debt to
Laochangco, all told, aggregated 4,912.43 pesos; and as the former had paid to the latter
1,023.82 pesos, he still owed him, on August 10, 1890, 3,888.61 pesos.
5. The account current ran on until July 16, 1896, without Berenguer receiving any more money,
the only items of the said account current being the amounts of sugar which Berenguer turned in
and which were credited to him, to wit, 454.87 pesos worth, in 1893; 515 pesos worth, in 1894;
806.37 pesos worth, in 1896, and the interest thereon charged to him by his creditor at the rate of
12 per cent per annum.
The opponent maintained, and his theory was accepted by the trial court, that Berenguer's
contract with Laochangco was not one of sale with right of repurchase, but merely one of loan
secured by those properties, and, consequently, that the ownership of the lands in question could
not have been conveyed to Laochangco, inasmuch as it continued to be held by Berenguer, as
well as their possession, which he had not ceased to enjoy.
Such a theory is, as argued by the appellants, erroneous. The instrument executed by Macario
Berenguer, the text of which has been transcribed in this decision, is very clear. Berenguer's heirs
may not go counter to the literal tenor of the obligation, the exact expression of the consent of
the contradicting parties contained in the instrument, Exhibit C. Not because the lands may have
continued in possession of the vendor, not because the latter may have assumed the payment of
the taxes on such properties, nor yet because the same party may have bound himself to
substitute by another any one of the properties which he might be destroyed, does the contract
case to be what it is, as set forth in detail in the public instrument. The vendor continued in the
possession of the lands, not a the owner thereof as before this sale, but as the lessee which he
became after its consummation, by virtue of a contract executed in his favor by the vendee in the
deed itself, Exhibit C. Right to ownership is not implied by the circumstance of the lessee's
assuming the responsibility of the payment of the taxes on the property leased, for their payment
is not peculiarly incumbent upon the owner, nor is such right implied by the obligation under
lease, since that obligation came from him and he continues under another character in its
possession a person why he guarantees its integrity and obligates himself to return the thing
even in a case of force majeure. Such liability, as general rule, is foreign t contracts of lease and,
if required, is exorbitant, but possible and lawful, if voluntarily agreed to, and such agreement
does not on this account involve any sign of ownership, nor other meaning than the will to
impose upon oneself scrupulous diligence in the care of a thing belonging to another.
The purchase and sale, once consummated, is a contract which by its nature transfers the
ownership and other rights in the thing sold. A pacto de retracto or sale with right to repurchase,
is nothing but a personal right stipulation between the vendee and vendor, to the end that the
latter may again acquire the ownership of the thing alienated.
It is true, very true indeed, that the sale with right of repurchase is employed as a
method of loan; it is likewise true that in practice many cases occur where the
consummation of pacto de retro sale means the financial ruin of a person; it is
also, unquestionable that in pacto de retro sales very important interests often
intervene, in the form of the price of the lease of the thing sold, which is
stipulated as an additional covenant. (Manresa, Civil Code, p. 274.)
But in the present case, unlike others heard by this court, there is no proof that the sale with right
of repurchase, made by Berenguer in favor of Laochangco is rather a mortgage to secure a loan.
The account current between Berenguer and Laochangco appears to be nothing but the beginning
of some business transaction in sugar, which gave rise to the contract of purchase and sale under
pacto de retracto, and the continuation of the same transactions which maintained the contract
beyond the period fixed for the redemption. When, on October 5 1889, Berenguer's debt
amounted to 3,720.23 pesos, Cornelia Laochangco gave him 1,000 pesos more; so that she
increased his debt to 4,720.23 pesos. The trial record offer no explanation of this conduct on the
part of his creditor other than that derived from the fact that two days afterwards, on the 7th of
the same month of October, 1889, Berenguer executed the instrument of sale under pacto de
retracto, of two parcels of land, one of 204 hectares and the other of 120, for the price of 4,000
pesos "which Berenguer acknowledges that he has received the vendee, already paid and in the
legal tender currency of this country."
Among other fundamental reason, the one just above mentioned is enough to establish the close
relation between the account current and the contract of purchase and sale, under pacto de
retracto, of the two parcels of land which are the subject of this case; and this explains how it
came to be covenanted in the said instrument of October 7, 1889, that "all the fruits of the said
lands shall be deposited in the sugar depository of the vendee, situated in the district of Quiapo
of this city, and the value of which shall be applied on account of the price of this sale."
The term of two years, stipulated in the instrument for the exercise of the right of redemption,
depended on such covenant, by the express will of the vendee, and, likewise by her express will,
the term fixed for the redemption was extended until at least the year 1896, during which time it
appears that Berenguer continued to deposit "the fruits of the said lands in the sugar depository
of the vendee," as payments on account of the price of the sale.
Until 1896, at least, there is no reason why the sale of the two parcels of land may be considered
to have been consummated; until then the vendee, on account of and as the price of the
repurchase, had continued to receive quantities of sugar, whereby it appears that the said vendee
admitted, as late as 1896, the exercise of the right of repurchase on the part of the vendor who
had been paying the price in sugar.
And up to the present time the right to exercise of the privilege of redemption still subsists, more
than one-half of the repurchase price having already been paid (excepting in such wise that is
owing as rentals on the lease); and in this state of affairs it is utterly impossible to consider the
right of repurchase as lapsed by considering the sale of the two said parcels of land as
consummated, at any intermediate time or until a settlement shall have been made with respect to
the value of the sugar turned in, in relation to the amount or price of the sale, and until the stat us
of the right of redemption, as already exercised by means of partial payments of the price of the
sale, shall have been determined.
Conventional redemption is the right which the vendor reserves to himself to recover the thing
sold, with the obligation to reimburse to the vendee the price of the sale, the expenses of the
contract, and any other legitimate payment made by reason of the sale, and the useful and
necessary expenses incurred for account of the thing sold. (Civil Code, articles 1507 and 1518.)
The right of redemption, in the present case, began to be exercised from the year following that
of the sale and continued, during seven years, until 1896, in such wise that already in August
1890 the price which the vendor must reimburse to the vendee had been reduced to 3,888.61
pesos, and the reduction was continued by the deposits of sugar intended to cancel the debt. This
was done by the express will of both parties, who believed that by so doing they best served their
interests, and in that manner they covenanted and acted one towards the other, without the least
contradiction or complaint. The exercise of the right of redemption having been commenced and
such advancement having already been made up to 1896 in the way of reimbursement of the
price of the repurchase, by the amount of sugar which the vendee had received from the vendor
for the purpose of reimbursing the price of the sale, it is in no manner permissible, at the will of
the heirs of the vendee, to consider had begun and continued by mutual agreement of both
contracting parties.
The terms of two years stipulated for the redemption expired; but in the contract itself there is the
additional covenant that the vendor shall deposit under the control of the vendeed all the fruits of
the lands leased for the purpose of repaying the price of the sale. After the expiration of that term
of two years, the vendee continued receiving in subsequent years fruits of the leased lands, under
that additional agreement that they all should be placed in his control in order to cancel the price
of the sale. These are facts absolutely incompatible with the term stipulated and with the idea of
the vendee becoming the owner of the lands merely by the expiration of the two years.
The vendee, who has been reimbursed by the vendor for a part of the repurchase price, is bound
to fulfill the obligation to sell back, derived from the sale with right to repurchase, or must show
reason why he may keep this part of the price and, notwithstanding his so doing, be considered
released from effecting the resale. He may be entitled to require the completion of the price, or
that he be paid other expenses before he returns the thing which he had purchased under such a
condition subsequent; but the exercise of the right of redemption having been begun and
admitted, the irrevocability of the ownership in such manner acquired is in all respects
incompatible with these acts so performed.
For this reason, this court does not consider it necessary to come to any conclusion relative to the
testimony of the opponent, Jose Berenguer, in so far as he testified that the agreement with right
to repurchase was already cancelled by the conveyance, in payment (which his father, during the
latter's lifetime, had made to one of the heirs of the vendee) of the 120 hectare tract of land in
Panantaglay, nor relative to the fact, an act at present consummated, of the applicants already
being the owners, both of a part of the repurchase price and of one of the parcels of land which
was the subject matter of the redemption.
It is sufficient for the purposes of the appeal to find, as we hereby do find, that the right of
redemption has not lapsedlapse which was the ground for the application for registration that
was based on the consolidation of the ownership of the two parcels of land, in the vendee, from
whom the applicants derive their right. Nor had that right lapsed, with respect to the Panantaglay
land; but as this land was, with the assent of the opponent, adjudicated in the judgment appealed
from , the adjudication by such assent is effective.
But, with respect to the Batasan land, of more than 204 hectares in area, the trial court did not
commit the third of the errors alleged in the appeal, by denying its registration in the new registry
in the name of the applicants, as such denial is in accord with the law and the merits of the case,
not by virtue of the findings contained in the judgment, but of those of the present decision, by
reason of which latter the registration applied for is not permissible.
The judgment appealed from is affirmed, only in so far as it finds that "the adverse claim
presented, relative to the parcel of land situated in Batasan, is allowed; consequently, the
registration applied for by the applicants, in connection with the same land, is denied.
That part of the judgment appealed from whereby the cancellation is ordered "of the registration
entries found in the name of Cornelia Laochangco in the old registry of deeds of Pampanga,
Province, on pages 192 and 196 of volume 1 of the district of Arayat, properties, Nos. 23 and 24
respectively, second inscription," is reversed in so far as such entries concern the purchase and
sale, with right of redemption, of the property No. 24, which is that of Batasan, an inscription
related to the more extensive one concerning the property No. 23, or that of Panantaglay.
No special finding is made as to the costs of this instance. So ordered.
Republic of the Philippines
SUPREME COURT
SECOND DIVISION
G.R. No. 168220. August 31, 2005
SPS. rudy Paragas and Corazon B. Paragas, Petitioners,
vs.
Hrs. of Dominador Balacano, namely: Dominic, Rodolfo, Nanette and Cyric, all surnamed
Balacano, represented by NANETTE BALACANO and ALFREDO BALACANO,
Respondent.
R E S O L U T I O N
CHICO-NAZARIO, J .:
This petition for review seeks to annul the Decision
1
dated 15 February 2005 of the Court of
Appeals in CA-G.R. CV No. 64048, affirming with modification the 8 March 1999 Decision
2
of
the Regional Trial Court (RTC), Branch 21, of Santiago City, Isabela, in Civil Case No. 21-2313.
The petition likewise seeks to annul the Resolution
3
dated 17 May 2005 denying petitioners
motion for reconsideration.
The factual antecedents were synthesized by the Court of Appeals in its decision.
Gregorio Balacano, married to Lorenza Sumigcay, was the registered owner of Lot 1175-E and
Lot 1175-F of the Subd. Plan Psd-38042 [located at Baluarte, Santiago City, Isabela] covered by
TCT No. T-103297 and TCT No. T-103298 of the Registry of Deeds of the Province of Isabela.
Gregorio and Lorenza had three children, namely: Domingo, Catalino and Alfredo, all surnamed
Balacano. Lorenza died on December 11, 1991. Gregorio, on the other hand, died on July 28,
1996.
Prior to his death, Gregorio was admitted at the Veterans General Hospital in Bayombong,
Nueva Vizcaya on June 28, 1996 and stayed there until July 19, 1996. He was transferred in the
afternoon of July 19, 1996 to the Veterans Memorial Hospital in Quezon City where he was
confined until his death.
Gregorio purportedly sold on July 22, 1996, or barely a week prior to his death, a portion of Lot
1175-E (specifically consisting of 15,925 square meters from its total area of 22,341 square
meters) and the whole Lot 1175-F to the Spouses Rudy ("Rudy") and Corazon Paragas
(collectively, "the Spouses Paragas") for the total consideration of P500,000.00. This sale
appeared in a deed of absolute sale notarized by Atty. Alexander V. de Guzman, Notary Public
for Santiago City, on the same date July 22, 1996 and witnessed by Antonio Agcaoili
("Antonio") and Julia Garabiles ("Julia"). Gregorios certificates of title over Lots 1175-E and
1175-F were consequently cancelled and new certificates of title were issued in favor of the
Spouses Paragas.
The Spouses Paragas then sold on October 17, 1996 a portion of Lot 1175-E consisting of 6,416
square meters to Catalino for the total consideration of P60,000.00.
Domingos children (Dominic, Rodolfo, Nanette and Cyric, all surnamed Balacano;) filed on
October 22, 1996 a complaint for annulment of sale and partition against Catalino and the
Spouses Paragas. They essentially alleged in asking for the nullification of the deed of sale
that: (1) their grandfather Gregorio could not have appeared before the notary public on July 22,
1996 at Santiago City because he was then confined at the Veterans Memorial Hospital in
Quezon City; (2) at the time of the alleged execution of the deed of sale, Gregorio was seriously
ill, in fact dying at that time, which vitiated his consent to the disposal of the property; and (3)
Catalino manipulated the execution of the deed and prevailed upon the dying Gregorio to sign
his name on a paper the contents of which he never understood because of his serious condition.
Alternatively, they alleged that assuming Gregorio was of sound and disposing mind, he could
only transfer a half portion of Lots 1175-E and 1175-F as the other half belongs to their
grandmother Lorenza who predeceased Gregorio they claimed that Lots 1175-E and 1175-F
form part of the conjugal partnership properties of Gregorio and Lorenza. Finally, they alleged
that the sale to the Spouses Paragas covers only a 5-hectare portion of Lots 1175-E and 1175-F
leaving a portion of 6,416 square meters that Catalino is threatening to dispose. They asked for
the nullification of the deed of sale executed by Gregorio and the partition of Lots 1175-E and
1175-F. They likewise asked for damages.
Instead of filing their Answer, the defendants Catalino and the Spouses Paragas moved to
dismiss the complaint on the following grounds: (1) the plaintiffs have no legal capacity - the
Domingos children cannot file the case because Domingo is still alive, although he has been
absent for a long time; (2) an indispensable party is not impleaded that Gregorios other son,
Alfredo was not made a party to the suit; and (3) the complaint states no cause of action that
Domingos children failed to allege a ground for the annulment of the deed of sale; they did not
cite any mistake, violence, intimidation, undue influence or fraud, but merely alleged that
Gregorio was seriously ill. Domingos children opposed this motion.
The lower court denied the motion to dismiss, but directed the plaintiffs-appellees to amend the
complaint to include Alfredo as a party. Alfredo was subsequently declared as in default for his
failure to file his Answer to the Complaint.
The defendants-appellees filed their Answer with Counterclaim on May 7, 1997, denying the
material allegations of the complaint. Additionally, they claimed that: (1) the deed of sale was
actually executed by Gregorio on July 19 (or 18), 1996 and not July 22, 1996; (2) the Notary
Public personally went to the Hospital in Bayombong, Nueva Vizcaya on July 18, 1996 to
notarize the deed of sale already subject of a previously concluded covenant between Gregorio
and the Spouses Paragas; (3) at the time Gregorio signed the deed, he was strong and of sound
and disposing mind; (4) Lots 1175-E and 1175-F were Gregorios separate capital and the
inscription of Lorenzas name in the titles was just a description of Gregorios marital status; (5)
the entire area of Lots 1175-E and 1175-F were sold to the Spouses Paragas. They interposed a
counterclaim for damages.
At the trial, the parties proceeded to prove their respective contentions.
Plaintiff-appellant Nanette Balacano testified to prove the material allegations of their complaint.
On Gregorios medical condition, she declared that: (1) Gregorio, who was then 81 years old,
weak and sick, was brought to the hospital in Bayombong, Nueva Vizcaya on June 28, 1996 and
stayed there until the afternoon on July 19, 1996; (2) thereafter, Gregorio, who by then was weak
and could no longer talk and whose condition had worsened, was transferred in the afternoon of
July 19, 1996 to the Veterans Memorial Hospital in Quezon City where Gregorio died. She
claimed that Gregorio could not have signed a deed of sale on July 19, 1996 because she stayed
at the hospital the whole of that day and saw no visitors. She likewise testified on their
agreement for attorneys fees with their counsel and the litigation expenses they incurred.
Additionally, the plaintiffs-appellees presented in evidence Gregorios medical records and his
death certificate.
Defendants-appellees, on the other hand, presented as witnesses Notary Public de Guzman and
instrumental witness Antonio to prove Gregorios execution of the sale and the circumstances
under the deed was executed. They uniformly declared that: (1) on July 18, 1996, they went to
the hospital in Bayombong, Nueva Vizcaya where Gregorio was confined with Rudy; (2)
Atty. De Guzman read and explained the contents of the deed to Gregorio; (3) Gregorio signed
the deed after receiving the money from Rudy; (4) Julia and Antonio signed the deed as
witnesses. Additionally, Atty. De Guzman explained that the execution of the deed was merely a
confirmation of a previous agreement between the Spouses Paragas and Gregorio that was
concluded at least a month prior to Gregorios death; that, in fact, Gregorio had previously asked
him to prepare a deed that Gregorio eventually signed on July 18, 1996. He also explained that
the deed, which appeared to have been executed on July 22, 1996, was actually executed on July
18, 1996; he notarized the deed and entered it in his register only on July 22, 1996. He claimed
that he did not find it necessary to state the precise date and place of execution (Bayombong,
Nueva Vizcaya, instead of Santiago City) of the deed of sale because the deed is merely a
confirmation of a previously agreed contract between Gregorio and the Spouses Paragas. He
likewise stated that of the stated P500,000.00 consideration in the deed, Rudy paid Gregorio
P450,000.00 in the hospital because Rudy had previously paid Gregorio P50,000.00. For his part,
Antonio added that he was asked by Rudy to take pictures of Gregorio signing the deed. He also
claimed that there was no entry on the date when he signed; nor did he remember reading
Santiago City as the place of execution of the deed. He described Gregorio as still strong but
sickly, who got up from the bed with Julias help.
Witness for defendants-appellants Luisa Agsalda testified to prove that Lot 1175-E was
Gregorios separate property. She claimed that Gregorios father (Leon) purchased a two-hectare
lot from them in 1972 while the other lot was purchased from her neighbor. She also declared
that Gregorio inherited these lands from his father Leon; she does not know, however,
Gregorios brothers share in the inheritance. Defendant-appellant Catalino also testified to
corroborate the testimony of witness Luisa Agsalda; he said that Gregorio told him that he
(Gregorio) inherited Lots 1175-E and 1175-F from his father Leon. He also stated that a portion
of Lot 1175-E consisting of 6,416 square meters was sold to him by the Spouses Paragas and that
he will pay the Spouses Paragas P50,000.00, not as consideration for the return of the land but
for the transfer of the title to his name.
Additionally, the defendants-appellants presented in evidence the pictures taken by Antonio
when Gregorio allegedly signed the deed.
4

The lower court, after trial, rendered the decision declaring null and void the deed of sale
purportedly executed by Gregorio Balacano in favor of the spouses Rudy Paragas and Corazon
Paragas. In nullifying the deed of sale executed by Gregorio, the lower court initially noted that
at the time Gregorio executed the deed, Gregorio was ill. The lower courts reasoning in
declaring the deed of sale null and void and this reasonings premises may be summarized as
follows: (1) the deed of sale was improperly notarized; thus it cannot be considered a public
document that is usually accorded the presumption of regularity; (2) as a private document, the
deed of sales due execution must be proved in accordance with Section 20, Rule 132 of the
Revised Rules on Evidence either: (a) by anyone who saw the document executed or written; or
(b) by evidence of the genuineness of the signature or handwriting of the maker; and (3) it was
incumbent upon the Spouses Paragas to prove the deed of sales due execution but failed to do so
the lower court said that witness Antonio Agcaoili is not credible while Atty. Alexander De
Guzman is not reliable.
5

The lower court found the explanations of Atty. De Guzman regarding the erroneous entries on
the actual place and date of execution of the deed of sale as justifications for a lie. The lower
court said
The Court cannot imagine an attorney to undertake to travel to another province to notarize a
document when he must certainly know, being a lawyer and by all means, not stupid, that he has
no authority to notarize a document in that province. The only logical thing that happened was
that Rudy Paragas brought the deed of sale to him on July 22, 1996 already signed and requested
him to notarize the same which he did, not knowing that at that time the vendor was already in a
hospital and [sic] Quezon City. Of course had he known, Atty. De Guzman would not have
notarized the document. But he trusted Rudy Paragas and moreover, Gregorio Balacano already
informed him previously in June that he will sell his lands to Paragas. In addition [sic, (,) was
omitted] Rudy Paragas also told him that Balacano received an advance of P50,000.00.
The intention to sell is not actual selling. From the first week of June when, according to Atty.
De Guzman, Gregorio Balacano informed him that he will sell his land to Rudy Paragas, enough
time elapsed to the time he was brought to the hospital on June 28, 1996. Had there been a
meeting of the minds between Gregorio Balacano and Rudy Paragas regarding the sale, surely
Gregorio Balacano would have immediately returned to the office of Atty. De Guzman to
execute the deed of sale. He did not until he was brought to the hospital and diagnosed to have
liver cirrhosis. Because of the seriousness of his illness, it is not expected that Gregorio
Balacano would be negotiating a contract of sale. Thus, Rudy Paragas negotiated with
Catalino Balacano, the son of Gregorio Balacano with whom the latter was staying.
6

The lower court also did not consider Antonio Agcaoili, petitioner Rudy Paragass driver, a
convincing witness, concluding that he was telling a rehearsed story. The lower court said
The only portion of his testimony that is true is that he signed the document. How could the
Court believe that he brought a camera with him just to take pictures of the signing? If the
purpose was to record the proceeding for posterity, why did he not take the picture of Atty. De
Guzman when the latter was reading and explaining the document to Gregorio Balacano? Why
did he not take the picture of both Gregorio Balacano and Atty. de Guzman while the old man
was signing the document instead of taking a picture of Gregorio Balacano alone holding a ball
pen without even showing the document being signed? Verily there is a picture of a document
but only a hand with a ball pen is shown with it. Why? Clearly the driver Antonio Agcaoili must
have only been asked by Rudy Paragas to tell a concocted story which he himself would not dare
tell in Court under oath.
7

The lower court likewise noted that petitioner Rudy Paragas did not testify about the signing of
the deed of sale. To the lower court, Rudys refusal or failure to testify raises a lot of questions,
such as: (1) was he (Rudy) afraid to divulge the circumstances of how he obtained the signature
of Gregorio Balacano, and (2) was he (Rudy) afraid to admit that he did not actually pay the
P500,000.00 indicated in the deed of sale as the price of the land?
8

The lower court also ruled that Lots 1175-E and 1175-F were Gregorios and Lorenzas conjugal
partnership properties. The lower court found that these lots were acquired during the marriage
because the certificates of title of these lots clearly stated that the lots are registered in the name
Gregorio, "married to Lorenza Sumigcay." Thus, the lower court concluded that the presumption
of law (under Article 160 of the Civil Code of the Philippines) that property acquired during the
marriage is presumed to belong to the conjugal partnership fully applies to Lots 1175-E and
1175-F.
9

Thus, on 8 March 1999, the RTC, Branch 21, of Santiago City, Isabela, rendered a Decision
10
in
Civil Case No. 21-2313, the dispositive portion of which reads as follows:
WHEREFORE in the light of the foregoing considerations judgment is hereby rendered:
1. DECLARING as NULL and VOID the deed of sale purportedly executed by Gregorio
Balacano in favor of the spouses Rudy Paragas and Corazon Paragas over lots 1175-E and 1175-
F covered by TCT Nos. T-103297 and T-103298, respectively;
2. ORDERING the cancellation of TCT Nos. T-258042 and T-258041 issued in the name of the
spouses Rudy and Corazon Paragas by virtue of the deed of sale; and
Declaring the parcel of lands, lots 1175-E and 1175-F as part of the estate of the deceased
spouses Gregorio Balacano and Lorenza Balacano.
11

In the assailed Decision dated 15 February 2005, the Court of Appeals affirmed the Decision of
the trial court, with the modification that Lots 1175-E and 1175-F were adjudged as belonging to
the estate of Gregorio Balacano. The appellate court disposed as follows:
Wherefore, premises considered, the appeal is hereby dismissed. We AFFIRM the appealed
Decision for the reasons discussed above, with the MODIFICATION that Lots 1175-E and 1175-
F belong to the estate of Gregorio Balacano.
Let a copy of this Decision be furnished the Office of the Bar Confidant for whatever action her
Office may take against Atty. De Guzman.
12
(Emphasis in the original.)
Herein petitioners motion for reconsideration was met with similar lack of success when it was
denied for lack of merit by the Court of Appeals in its Resolution
13
dated 17 May 2005.
Hence, this appeal via a petition for review where petitioners assign the following errors to the
Court of Appeals, viz:
A. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION,
SERIOUSLY ERRED IN FINDING THAT THERE WAS NO PERFECTED AND
PARTIALLY EXECUTED CONTRACT OF SALE OVER LOTS 1175-E AND 1175-F PRIOR
TO THE SIGNING OF THE DEED OF SALE.
B. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION,
SERIOUSLY FAILED TO APPRECIATE THE SIGNIFICANCE OF THE JUDICIAL
ADMISSION ON THE AUTHENTICITY AND DUE EXECUTION OF THE DEED OF SALE
MADE BY THE RESPONDENTS DURING THE PRE-TRIAL CONFERENCE.
C. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION,
BASED ITS CONCLUSION THAT GREGORIOS CONSENT TO THE SALE OF THE LOTS
WAS ABSENT MERELY ON SPECULATIONS AND SURMISES.
D. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION,
SERIOUSLY ERRED IN NOT RULING ON THE ISSUE OF RESPONDENTS LACK OF
LEGAL CAPACITY TO SUE FOR NOT BEING THE PROPER PARTIES IN INTEREST.
E. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION,
SERIOUSLY ERRED IN DISMISSING ATTY. ALEXANDER DE GUZMAN AND
ANTONIO AGCAOILI AS NOT CREDIBLE WITNESSES.
14

At bottom is the issue of whether or not the Court of Appeals committed reversible error in
upholding the findings and conclusions of the trial court on the nullity of the Deed of Sale
purportedly executed between petitioners and the late Gregorio Balacano.
To start, we held in Blanco v. Quasha
15
that this Court is not a trier of facts. As such, it is not its
function to examine and determine the weight of the evidence supporting the assailed decision.
Factual findings of the Court of Appeals, which are supported by substantial evidence, are
binding, final and conclusive upon the Supreme Court,
16
and carry even more weight when the
said court affirms the factual findings of the trial court. Moreover, well- entrenched is the
prevailing jurisprudence that only errors of law and not of facts are reviewable by this Court in a
petition for review on certiorari under Rule 45 of the Revised Rules of Court.
The foregoing tenets in the case at bar apply with greater force to the petition under
consideration because the factual findings by the Court of Appeals are in full agreement with that
of the trial court.
Specifically, the Court of Appeals, in affirming the trial court, found that there was no prior and
perfected contract of sale that remained to be fully consummated. The appellate court explained -
In support of their position, the defendants-appellants argue that at least a month prior to
Gregorios signing of the deed, Gregorio and the Spouses Paragas already agreed on the sale of
Lots 1175-E and 1175-F; and that, in fact, this agreement was partially executed by Rudys
payment to Gregorio of P50,000.00 before Gregorio signed the deed at the hospital. In line with
this position, defendants-appellants posit that Gregorios consent to the sale should be
determined, not at the time Gregorio signed the deed of sale on July 18, 1996, but at the time
when he agreed to sell the property in June 1996 or a month prior to the deeds signing; and in
June 1996, Gregorio was of sound and disposing mind and his consent to the sale was in no wise
vitiated at that time. The defendants-appellants further argue that the execution or signing of the
deed of sale, however, irregular it might have been, does not affect the validity of the previously
agreed sale of the lots, as the execution or signing of the deed is merely a formalization of a
previously agreed oral contract.
. . .
In the absence of any note, memorandum or any other written instrument evidencing the alleged
perfected contract of sale, we have to rely on oral testimonies, which in this case is that of Atty.
de Guzman whose testimony on the alleged oral agreement may be summarized as follows: (1)
that sometime in the first week of June 1996, Gregorio requested him (Atty. de Guzman) to
prepare a deed of sale of two lots; (2) Gregorio came to his firms office in the morning with a
certain Doming Balacano, then returned in the afternoon with Rudy; (3) he (Atty. de Guzman)
asked Gregorio whether he really intends to sell the lots; Gregorio confirmed his intention; (4)
Gregorio and Rudy left the law office at 5:00 p.m., leaving the certificates of title; (5) he
prepared the deed a day after Rudy and Gregorio came. With regard to the alleged partial
execution of this agreement, Atty. de Guzman said that he was told by Rudy that there was
already a partial payment of P50,000.00.
We do not consider Atty. de Guzmans testimony sufficient evidence to establish the fact that
there was a prior agreement between Gregorio and the Spouses Paragas on the sale of Lots 1175-
E and 1175-F. This testimony does not conclusively establish the meeting of the minds between
Gregorio and the Spouses Paragas on the price or consideration for the sale of Lots 1175-E and
1175-F Atty. de Guzman merely declared that he was asked by Gregorio to prepare a deed; he
did not clearly narrate the details of this agreement. We cannot assume that Gregorio and the
Spouses Paragas agreed to a P500,000.00 consideration based on Atty. de Guzmans bare
assertion that Gregorio asked him to prepare a deed, as Atty. de Guzman was not personally
aware of the agreed consideration in the sale of the lots, not being privy to the parties
agreement. To us, Rudy could have been a competent witness to testify on the perfection of this
prior contract; unfortunately, the defendants-appellants did not present Rudy as their witness.
We seriously doubt too the credibility of Atty. de Guzman as a witness. We cannot rely on his
testimony because of his tendency to commit falsity. He admitted in open court that while
Gregorio signed the deed on July 18, 1996 at Bayombong, Nueva Vizcaya, he nevertheless did
not reflect these matters when he notarized the deed; instead he entered Santiago City and July
22, 1996, as place and date of execution, respectively. To us, Atty. de Guzmans propensity to
distort facts in the performance of his public functions as a notary public, in utter disregard of the
significance of the act of notarization, seriously affects his credibility as a witness in the present
case. In fact, Atty. de Guzmans act in falsifying the entries in his acknowledgment of the deed
of sale could be the subject of administrative and disciplinary action, a matter that we however
do not here decide.
Similarly, there is no conclusive proof of the partial execution of the contract because the only
evidence the plaintiffs-appellants presented to prove this claim was Atty. de Guzmans
testimony, which is hearsay and thus, has no probative value. Atty. de Guzman merely stated that
Rudy told him that Rudy already gave P50,000.00 to Gregorio as partial payment of the purchase
price; Atty. de Guzman did not personally see the payment being made.
17

But, did Gregorio give an intelligent consent to the sale of Lots 1175-E and 1175-F when he
signed the deed of sale? The trial court as well as the appellate court found in the negative. In the
Court of Appeals rationale-
It is not disputed that when Gregorio signed the deed of sale, Gregorio was seriously ill, as he in
fact died a week after the deeds signing. Gregorio died of complications caused by cirrhosis of
the liver. Gregorios death was neither sudden nor immediate; he fought at least a month-long
battle against the disease until he succumbed to death on July 22, 1996. Given that Gregorio
purportedly executed a deed during the last stages of his battle against his disease, we seriously
doubt whether Gregorio could have read, or fully understood, the contents of the documents he
signed or of the consequences of his act. We note in this regard that Gregorio was brought to the
Veterans Hospital at Quezon City because his condition had worsened on or about the time the
deed was allegedly signed. This transfer and fact of death not long after speak volumes about
Gregorios condition at that time. We likewise see no conclusive evidence that the contents of
the deed were sufficiently explained to Gregorio before he affixed his signature. The evidence
the defendants-appellants offered to prove Gregorios consent to the sale consists of the
testimonies of Atty. de Guzman and Antonio. As discussed above, we do not find Atty. de
Guzman a credible witness. Thus, we fully concur with the heretofore-quoted lower courts
evaluation of the testimonies given by Atty. de Guzman and Antonio because this is an
evaluation that the lower court was in a better position to make.
Additionally, the irregular and invalid notarization of the deed is a falsity that raises doubts on
the regularity of the transaction itself. While the deed was indeed signed on July 18, 1996 at
Bayombong, Nueva Vizcaya, the deed states otherwise, as it shows that the deed was executed
on July 22, 1996 at Santiago City. Why such falsity was committed, and the circumstances under
which this falsity was committed, speaks volume about the regularity and the validity of the sale.
We cannot but consider the commission of this falsity, with the indispensable aid of Atty. de
Guzman, an orchestrated attempt to legitimize a transaction that Gregorio did not intend to be
binding upon him nor on his bounty.
Article 24 of the Civil Code tells us that in all contractual, property or other relations, when one
of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence,
mental weakness, tender age or other handicap, the courts must be vigilant for his protection.
18

Based on the foregoing, the court of Appeals concluded that Gregorios consent to the sale of the
lots was absent, making the contract null and void. Consequently, the spouses Paragas could not
have made a subsequent transfer of the property to Catalino Balacano. Indeed, nemo dat quod
non habet. Nobody can dispose of that which does not belong to him.
19

We likewise find to be in accord with the evidence on record the ruling of the Court of Appeals
declaring the properties in controversy as paraphernal properties of Gregorio in the absence of
competent evidence on the exact date of Gregorios acquisition of ownership of these lots.
On the credibility of witnesses, it is in rhyme with reason to believe the testimonies of the
witnesses for the complainants vis--vis those of the defendants. In the assessment of the
credibility of witnesses, we are guided by the following well-entrenched rules: (1) that evidence
to be believed must not only spring from the mouth of a credible witness but must itself be
credible, and (2) findings of facts and assessment of credibility of witness are matters best left to
the trial court who had the front-line opportunity to personally evaluate the witnesses demeanor,
conduct, and behavior while testifying.
20

In the case at bar, we agree in the trial courts conclusion that petitioners star witness, Atty. De
Guzman is far from being a credible witness. Unlike this Court, the trial court had the unique
opportunity of observing the demeanor of said witness. Thus, we affirm the trial court and the
Court of Appeals uniform decision based on the whole evidence in record holding the Deed of
Sale in question to be null and void.
In Domingo v. Court of Appeals,
21
the Court declared as null and void the deed of sale therein
inasmuch as the seller, at the time of the execution of the alleged contract, was already of
advanced age and senile. We held
. . . She died an octogenarian on March 20, 1966, barely over a year when the deed was allegedly
executed on January 28, 1965, but before copies of the deed were entered in the registry
allegedly on May 16 and June 10, 1966. The general rule is that a person is not incompetent to
contract merely because of advanced years or by reason of physical infirmities. However, when
such age or infirmities have impaired the mental faculties so as to prevent the person from
properly, intelligently, and firmly protecting her property rights then she is undeniably
incapacitated. The unrebutted testimony of Zosima Domingo shows that at the time of the
alleged execution of the deed, Paulina was already incapacitated physically and mentally. She
narrated that Paulina played with her waste and urinated in bed. Given these circumstances, there
is in our view sufficient reason to seriously doubt that she consented to the sale of and the price
for her parcels of land. Moreover, there is no receipt to show that said price was paid to and
received by her. Thus, we are in agreement with the trial courts finding and conclusion on the
matter: . . .
In the case at bar, the Deed of Sale was allegedly signed by Gregorio on his death bed in the
hospital. Gregorio was an octogenarian at the time of the alleged execution of the contract and
suffering from liver cirrhosis at that circumstances which raise grave doubts on his physical
and mental capacity to freely consent to the contract. Adding to the dubiety of the purported sale
and further bolstering respondents claim that their uncle Catalino, one of the children of the
decedent, had a hand in the execution of the deed is the fact that on 17 October 1996, petitioners
sold a portion of Lot 1175-E consisting of 6,416 square meters to Catalino for P60,000.00.
22
One
need not stretch his imagination to surmise that Catalino was in cahoots with petitioners in
maneuvering the alleged sale.
On the whole, we find no reversible error on the part of the appellate court in CA-G.R. CV No.
64048 that would warrant the reversal thereof.
WHEREFORE, the present petition is hereby DENIED. Accordingly, the Decision
23
and the
Resolution,
24
dated 15 February 2005 and 17 May 2005, respectively, of the Court of Appeals in
CA-G.R. CV No. 64048 are hereby AFFIRMED. No costs.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 124242 January 21, 2005
SAN LORENZO DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA
ZAVALLA LU, respondents.
D E C I S I O N
TINGA, J .:
From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita
Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa,
Laguna covered by TCT No. T-39022 and TCT No. T-39023 both measuring 15,808 square
meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo
Babasanta, (hereinafter, Babasanta) for the price of fifteen pesos (P15.00) per square meter.
Babasanta made a downpayment of fifty thousand pesos (P50,000.00) as evidenced by a
memorandum receipt issued by Pacita Lu of the same date. Several other payments totaling two
hundred thousand pesos (P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final
deed of sale in his favor so that he could effect full payment of the purchase price. In the same
letter, Babasanta notified the spouses about having received information that the spouses sold the
same property to another without his knowledge and consent. He demanded that the second sale
be cancelled and that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to
sell the property to him at fifteen pesos (P15.00) per square meter. She, however, reminded
Babasanta that when the balance of the purchase price became due, he requested for a reduction
of the price and when she refused, Babasanta backed out of the sale. Pacita added that she
returned the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court (RTC),
Branch 31, of San Pedro, Laguna, a Complaint for Specific Performance and Damages
1
against
his co-respondents herein, the Spouses Lu. Babasanta alleged that the lands covered by TCT No.
T- 39022 and T-39023 had been sold to him by the spouses at fifteen pesos (P15.00) per square
meter. Despite his repeated demands for the execution of a final deed of sale in his favor,
respondents allegedly refused.
In their Answer,
2
the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and when
the total advances of Pacita reached fifty thousand pesos (P50,000.00), the latter and Babasanta,
without the knowledge and consent of Miguel Lu, had verbally agreed to transform the
transaction into a contract to sell the two parcels of land to Babasanta with the fifty thousand
pesos (P50,000.00) to be considered as the downpayment for the property and the balance to be
paid on or before 31 December 1987. Respondents Lu added that as of November 1987, total
payments made by Babasanta amounted to only two hundred thousand pesos (P200,000.00) and
the latter allegedly failed to pay the balance of two hundred sixty thousand pesos (P260,000.00)
despite repeated demands. Babasanta had purportedly asked Pacita for a reduction of the price
from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter and when the Spouses Lu
refused to grant Babasantas request, the latter rescinded the contract to sell and declared that the
original loan transaction just be carried out in that the spouses would be indebted to him in the
amount of two hundred thousand pesos (P200,000.00). Accordingly, on 6 July 1989, they
purchased Interbank Managers Check No. 05020269 in the amount of two hundred thousand
pesos (P200,000.00) in the name of Babasanta to show that she was able and willing to pay the
balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 1990
3
wherein he prayed for the
issuance of a writ of preliminary injunction with temporary restraining order and the inclusion of
the Register of Deeds of Calamba, Laguna as party defendant. He contended that the issuance of
a preliminary injunction was necessary to restrain the transfer or conveyance by the Spouses Lu
of the subject property to other persons.
The Spouses Lu filed their Opposition
4
to the amended complaint contending that it raised new
matters which seriously affect their substantive rights under the original complaint. However, the
trial court in its Order dated 17 January 1990
5
admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a
Motion for Intervention
6
before the trial court. SLDC alleged that it had legal interest in the
subject matter under litigation because on 3 May 1989, the two parcels of land involved, namely
Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale with Mortgage.
7
It
alleged that it was a buyer in good faith and for value and therefore it had a better right over the
property in litigation.
In his Opposition to SLDCs motion for intervention,
8
respondent Babasanta demurred and
argued that the latter had no legal interest in the case because the two parcels of land involved
herein had already been conveyed to him by the Spouses Lu and hence, the vendors were without
legal capacity to transfer or dispose of the two parcels of land to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene. SLDC
filed its Complaint-in-Intervention on 19 April 1990.
9
Respondent Babasantas motion for the
issuance of a preliminary injunction was likewise granted by the trial court in its Order dated 11
January 1991
10
conditioned upon his filing of a bond in the amount of fifty thousand pesos
(P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu
executed in its favor an Option to Buy the lots subject of the complaint. Accordingly, it paid an
option money in the amount of three hundred sixteen thousand one hundred sixty pesos
(P316,160.00) out of the total consideration for the purchase of the two lots of one million two
hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After the Spouses Lu
received a total amount of six hundred thirty-two thousand three hundred twenty pesos
(P632,320.00) they executed on 3 May 1989 a Deed of Absolute Sale with Mortgage in its favor.
SLDC added that the certificates of title over the property were delivered to it by the spouses
clean and free from any adverse claims and/or notice of lis pendens. SLDC further alleged that it
only learned of the filing of the complaint sometime in the early part of January 1990 which
prompted it to file the motion to intervene without delay. Claiming that it was a buyer in good
faith, SLDC argued that it had no obligation to look beyond the titles submitted to it by the
Spouses Lu particularly because Babasantas claims were not annotated on the certificates of title
at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the
property to SLDC. It ordered the Spouses Lu to pay Babasanta the sum of two hundred thousand
pesos (P200,000.00) with legal interest plus the further sum of fifty thousand pesos (P50,000.00)
as and for attorneys fees. On the complaint-in-intervention, the trial court ordered the Register
of Deeds of Laguna, Calamba Branch to cancel the notice of lis pendens annotated on the
original of the TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and
SLDC did not register the respective sales in their favor, ownership of the property should
pertain to the buyer who first acquired possession of the property. The trial court equated the
execution of a public instrument in favor of SLDC as sufficient delivery of the property to the
latter. It concluded that symbolic possession could be considered to have been first transferred to
SLDC and consequently ownership of the property pertained to SLDC who purchased the
property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals alleging in the
main that the trial court erred in concluding that SLDC is a purchaser in good faith and in
upholding the validity of the sale made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the
trial court erred in failing to consider that the contract to sell between them and Babasanta had
been novated when the latter abandoned the verbal contract of sale and declared that the original
loan transaction just be carried out. The Spouses Lu argued that since the properties involved
were conjugal, the trial court should have declared the verbal contract to sell between Pacita Lu
and Pablo Babasanta null and void ab initio for lack of knowledge and consent of Miguel Lu.
They further averred that the trial court erred in not dismissing the complaint filed by Babasanta;
in awarding damages in his favor and in refusing to grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision
11
which set aside the judgment of
the trial court. It declared that the sale between Babasanta and the Spouses Lu was valid and
subsisting and ordered the spouses to execute the necessary deed of conveyance in favor of
Babasanta, and the latter to pay the balance of the purchase price in the amount of two hundred
sixty thousand pesos (P260,000.00). The appellate court ruled that the Absolute Deed of Sale
with Mortgage in favor of SLDC was null and void on the ground that SLDC was a purchaser in
bad faith. The Spouses Lu were further ordered to return all payments made by SLDC with legal
interest and to pay attorneys fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate court.
12

However, in a Manifestation dated 20 December 1995,
13
the Spouses Lu informed the appellate
court that they are no longer contesting the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,
14
the appellate court considered as withdrawn the motion
for reconsideration filed by the Spouses Lu in view of their manifestation of 20 December 1995.
The appellate court denied SLDCs motion for reconsideration on the ground that no new or
substantial arguments were raised therein which would warrant modification or reversal of the
courts decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A
BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER PACITA ZAVALLA LU
OBTAINED FROM IT THE CASH ADVANCE OF P200,000.00, SAN LORENZO WAS PUT
ON INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED
FACT THAT THE ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN
POSSESSION OF THE DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND
TOOK POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN,
ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT
RESPONDENT BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN
LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN THE DISPUTED
PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL
CONCURRENCE ON THE FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED
AND SET ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF
SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH.
15

SLDC contended that the appellate court erred in concluding that it had prior notice of
Babasantas claim over the property merely on the basis of its having advanced the amount of
two hundred thousand pesos (P200,000.00) to Pacita Lu upon the latters representation that she
needed the money to pay her obligation to Babasanta. It argued that it had no reason to suspect
that Pacita was not telling the truth that the money would be used to pay her indebtedness to
Babasanta. At any rate, SLDC averred that the amount of two hundred thousand pesos
(P200,000.00) which it advanced to Pacita Lu would be deducted from the balance of the
purchase price still due from it and should not be construed as notice of the prior sale of the land
to Babasanta. It added that at no instance did Pacita Lu inform it that the lands had been
previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took
possession of the property and asserted its rights as new owner as opposed to Babasanta who has
never exercised acts of ownership. Since the titles bore no adverse claim, encumbrance, or lien at
the time it was sold to it, SLDC argued that it had every reason to rely on the correctness of the
certificate of title and it was not obliged to go beyond the certificate to determine the condition
of the property. Invoking the presumption of good faith, it added that the burden rests on
Babasanta to prove that it was aware of the prior sale to him but the latter failed to do so. SLDC
pointed out that the notice of lis pendens was annotated only on 2 June 1989 long after the sale
of the property to it was consummated on 3 May 1989.1awphi1.nt
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu
informed the Court that due to financial constraints they have no more interest to pursue their
rights in the instant case and submit themselves to the decision of the Court of Appeals.
16

On the other hand, respondent Babasanta argued that SLDC could not have acquired ownership
of the property because it failed to comply with the requirement of registration of the sale in
good faith. He emphasized that at the time SLDC registered the sale in its favor on 30 June 1990,
there was already a notice of lis pendens annotated on the titles of the property made as early as
2 June 1989. Hence, petitioners registration of the sale did not confer upon it any right.
Babasanta further asserted that petitioners bad faith in the acquisition of the property is evident
from the fact that it failed to make necessary inquiry regarding the purpose of the issuance of the
two hundred thousand pesos (P200,000.00) managers check in his favor.
The core issue presented for resolution in the instant petition is who between SLDC and
Babasanta has a better right over the two parcels of land subject of the instant case in view of the
successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a document
signed by Pacita Lu acknowledging receipt of the sum of fifty thousand pesos (P50,000.00) as
partial payment for 3.6 hectares of farm lot situated at Barangay Pulong, Sta. Cruz, Sta. Rosa,
Laguna.
17
While the receipt signed by Pacita did not mention the price for which the property
was being sold, this deficiency was supplied by Pacita Lus letter dated 29 May 1989
18
wherein
she admitted that she agreed to sell the 3.6 hectares of land to Babasanta for fifteen pesos
(P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by the parties,
irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses Lu is a
contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,
19
which is manifested by the meeting of the
offer and the acceptance upon the thing which are to constitute the contract. The offer must be
certain and the acceptance absolute.
20
Moreover, contracts shall be obligatory in whatever form
they may have been entered into, provided all the essential requisites for their validity are
present.
21

The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos
(P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa,
Laguna. While there is no stipulation that the seller reserves the ownership of the property until
full payment of the price which is a distinguishing feature of a contract to sell, the subsequent
acts of the parties convince us that the Spouses Lu never intended to transfer ownership to
Babasanta except upon full payment of the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite his
repeated requests for the execution of the final deed of sale in his favor so that he could effect
full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta himself
recognized that ownership of the property would not be transferred to him until such time as he
shall have effected full payment of the price. Moreover, had the sellers intended to transfer title,
they could have easily executed the document of sale in its required form simultaneously with
their acceptance of the partial payment, but they did not. Doubtlessly, the receipt signed by
Pacita Lu should legally be considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane. In a contract of
sale, title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell,
by agreement the ownership is reserved in the vendor and is not to pass until the full payment of
the price.
22
In a contract of sale, the vendor has lost and cannot recover ownership until and
unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the
vendor until the full payment of the price, such payment being a positive suspensive condition
and failure of which is not a breach but an event that prevents the obligation of the vendor to
convey title from becoming effective.
23

The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the
purchase price. There being an obligation to pay the price, Babasanta should have made the
proper tender of payment and consignation of the price in court as required by law. Mere sending
of a letter by the vendee expressing the intention to pay without the accompanying payment is
not considered a valid tender of payment.
24
Consignation of the amounts due in court is essential
in order to extinguish Babasantas obligation to pay the balance of the purchase price. Glaringly
absent from the records is any indication that Babasanta even attempted to make the proper
consignation of the amounts due, thus, the obligation on the part of the sellers to convey title
never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not a contract
to sell, Babasantas claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent
25
and from that moment, the
parties may reciprocally demand performance.
26
The essential elements of a contract of sale, to
wit: (1) consent or meeting of the minds, that is, to transfer ownership in exchange for the price;
(2) object certain which is the subject matter of the contract; (3) cause of the obligation which is
established.
27

The perfection of a contract of sale should not, however, be confused with its consummation. In
relation to the acquisition and transfer of ownership, it should be noted that sale is not a mode,
but merely a title. A mode is the legal means by which dominion or ownership is created,
transferred or destroyed, but title is only the legal basis by which to affect dominion or
ownership.
28
Under Article 712 of the Civil Code, "ownership and other real rights over property
are acquired and transmitted by law, by donation, by testate and intestate succession, and in
consequence of certain contracts, by tradition." Contracts only constitute titles or rights to the
transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing the
same.
29
Therefore, sale by itself does not transfer or affect ownership; the most that sale does is
to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale,
that actually transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from
the moment it is delivered to him in any of the ways specified in Article 1497 to 1501.
30
The
word "delivered" should not be taken restrictively to mean transfer of actual physical possession
of the property. The law recognizes two principal modes of delivery, to wit: (1) actual delivery;
and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the vendee.
31

Legal or constructive delivery, on the other hand, may be had through any of the following ways:
the execution of a public instrument evidencing the sale;
32
symbolical tradition such as the
delivery of the keys of the place where the movable sold is being kept;
33
traditio longa manu or
by mere consent or agreement if the movable sold cannot yet be transferred to the possession of
the buyer at the time of the sale;
34
traditio brevi manu if the buyer already had possession of the
object even before the sale;
35
and traditio constitutum possessorium, where the seller remains in
possession of the property in a different capacity.
36

Following the above disquisition, respondent Babasanta did not acquire ownership by the mere
execution of the receipt by Pacita Lu acknowledging receipt of partial payment for the property.
For one, the agreement between Babasanta and the Spouses Lu, though valid, was not embodied
in a public instrument. Hence, no constructive delivery of the lands could have been effected. For
another, Babasanta had not taken possession of the property at any time after the perfection of
the sale in his favor or exercised acts of dominion over it despite his assertions that he was the
rightful owner of the lands. Simply stated, there was no delivery to Babasanta, whether actual or
constructive, which is essential to transfer ownership of the property. Thus, even on the
assumption that the perfected contract between the parties was a sale, ownership could not have
passed to Babasanta in the absence of delivery, since in a contract of sale ownership is
transferred to the vendee only upon the delivery of the thing sold.
37

However, it must be stressed that the juridical relationship between the parties in a double sale is
primarily governed by Article 1544 which lays down the rules of preference between the two
purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of double sale of immovable property. When the thing sold twice is an
immovable, the one who acquires it and first records it in the Registry of Property, both made in
good faith, shall be deemed the owner.
38
Verily, the act of registration must be coupled with
good faith that is, the registrant must have no knowledge of the defect or lack of title of his
vendor or must not have been aware of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of his vendor.
39

Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge
of Babasantas claim. Babasanta, however, strongly argues that the registration of the sale by
SLDC was not sufficient to confer upon the latter any title to the property since the registration
was attended by bad faith. Specifically, he points out that at the time SLDC registered the sale on
30 June 1990, there was already a notice of lis pendens on the file with the Register of Deeds, the
same having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis pendens obliterate the
effects of delivery and possession in good faith which admittedly had occurred prior to SLDCs
knowledge of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to Buy
in favor of SLDC upon receiving P316,160.00 as option money from SLDC. After SLDC had
paid more than one half of the agreed purchase price of P1,264,640.00, the Spouses Lu
subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC. At the time
both deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses Lu
with Babasanta. Simply stated, from the time of execution of the first deed up to the moment of
transfer and delivery of possession of the lands to SLDC, it had acted in good faith and the
subsequent annotation of lis pendens has no effect at all on the consummated sale between
SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of another without notice that some other
person has a right to, or interest in, such property and pays a full and fair price for the same at the
time of such purchase, or before he has notice of the claim or interest of some other person in the
property.
40
Following the foregoing definition, we rule that SLDC qualifies as a buyer in good
faith since there is no evidence extant in the records that it had knowledge of the prior
transaction in favor of Babasanta. At the time of the sale of the property to SLDC, the vendors
were still the registered owners of the property and were in fact in possession of the
lands.l^vvphi1.net Time and again, this Court has ruled that a person dealing with the owner of
registered land is not bound to go beyond the certificate of title as he is charged with notice of
burdens on the property which are noted on the face of the register or on the certificate of title.
41

In assailing knowledge of the transaction between him and the Spouses Lu, Babasanta apparently
relies on the principle of constructive notice incorporated in Section 52 of the Property
Registration Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land shall, if registered,
filed, or entered in the office of the Register of Deeds for the province or city where the land to
which it relates lies, be constructive notice to all persons from the time of such registering, filing,
or entering.
However, the constructive notice operates as suchby the express wording of Section 52from
the time of the registration of the notice of lis pendens which in this case was effected only on 2
June 1989, at which time the sale in favor of SLDC had long been consummated insofar as the
obligation of the Spouses Lu to transfer ownership over the property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the
annotation of the notice of lis pendens cannot help Babasantas position a bit and it is irrelevant
to the good or bad faith characterization of SLDC as a purchaser. A notice of lis pendens, as the
Court held in Natao v. Esteban,
42
serves as a warning to a prospective purchaser or
incumbrancer that the particular property is in litigation; and that he should keep his hands off
the same, unless he intends to gamble on the results of the litigation." Precisely, in this case
SLDC has intervened in the pending litigation to protect its rights. Obviously, SLDCs faith in
the merit of its cause has been vindicated with the Courts present decision which is the ultimate
denouement on the controversy.
The Court of Appeals has made capital
43
of SLDCs averment in its Complaint-in-Intervention
44

that at the instance of Pacita Lu it issued a check for P200,000.00 payable to Babasanta and the
confirmatory testimony of Pacita Lu herself on cross-examination.
45
However, there is nothing in
the said pleading and the testimony which explicitly relates the amount to the transaction
between the Spouses Lu and Babasanta for what they attest to is that the amount was supposed to
pay off the advances made by Babasanta to Pacita Lu. In any event, the incident took place after
the Spouses Lu had already executed the Deed of Absolute Sale with Mortgage in favor of SLDC
and therefore, as previously explained, it has no effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted by the prior
notice of lis pendens and assuming further for the same nonce that this is a case of double sale,
still Babasantas claim could not prevail over that of SLDCs. In Abarquez v. Court of Appeals,
46

this Court had the occasion to rule that if a vendee in a double sale registers the sale after he has
acquired knowledge of a previous sale, the registration constitutes a registration in bad faith and
does not confer upon him any right. If the registration is done in bad faith, it is as if there is no
registration at all, and the buyer who has taken possession first of the property in good faith shall
be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only after the second
vendee, Abarquez, registered their deed of sale with the Registry of Deeds, but the Israels were
first in possession. This Court awarded the property to the Israels because registration of the
property by Abarquez lacked the element of good faith. While the facts in the instant case
substantially differ from that in Abarquez, we would not hesitate to rule in favor of SLDC on the
basis of its prior possession of the property in good faith. Be it noted that delivery of the property
to SLDC was immediately effected after the execution of the deed in its favor, at which time
SLDC had no knowledge at all of the prior transaction by the Spouses Lu in favor of
Babasanta.1a\^/phi1.net
The law speaks not only of one criterion. The first criterion is priority of entry in the registry of
property; there being no priority of such entry, the second is priority of possession; and, in the
absence of the two priorities, the third priority is of the date of title, with good faith as the
common critical element. Since SLDC acquired possession of the property in good faith in
contrast to Babasanta, who neither registered nor possessed the property at any time, SLDCs
right is definitely superior to that of Babasantas.
At any rate, the above discussion on the rules on double sale would be purely academic for as
earlier stated in this decision, the contract between Babasanta and the Spouses Lu is not a
contract of sale but merely a contract to sell. In Dichoso v. Roxas,
47
we had the occasion to rule
that Article 1544 does not apply to a case where there was a sale to one party of the land itself
while the other contract was a mere promise to sell the land or at most an actual assignment of
the right to repurchase the same land. Accordingly, there was no double sale of the same land in
that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals
appealed from is REVERSED and SET ASIDE and the decision of the Regional Trial Court,
Branch 31, of San Pedro, Laguna is REINSTATED. No costs.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 158682 January 31, 2005
SPOUSES BIENVENIDO R. MACADANGDANG and VIRGINIA C.
MACADANGDANG, petitioners
vs.
SPOUSES RAMON MARTINEZ and GLORIA F. MARTINEZ, respondents.
D E C I S I O N
CORONA, J .:
Petitioners, spouses Bienvenido and Virginia Macadangdang (Macadangdang spouses), assail the
October 25, 2001 decision
1
of the Court of Appeals in CA-G.R. CV No. 32018, modifying the
November 13, 1990 decision
2
of Branch 149 of the Makati Regional Trial Court in Civil Case
No. 88-796.
The present controversy involves a house and lot in Lot 6, Block 22-A, Phase 5-A, Parkhomes
Subdivision, Tunasan, Muntinlupa, Metro Manila, covered by TCT No. 146553 in the name of
Emma A. Omalin.
On December 20, 1986, the Macadangdang spouses offered to buy the subject property from
Omalin for P380,000 on installment basis.
On the same date, the Macadangdang spouses made a downpayment of P5,000 through the
broker, Sto. Nino Realty Services, Inc. On January 3, 1987, they paid another P175,000.
Thereafter, Omalin executed a deed of sale with mortgage dated January 5, 1987. The deed
provided for the payment of the balance of P200,000 in three installments.
The Macadangdang spouses took possession of the house and lot on January 18, 1987. On April
22, 1987, they paid P60,000 and on October 1, 1987, another P30,000. After the Macadangdangs
had paid a total of P270,000, the parties agreed that the balance of P110,000 was to be paid upon
delivery of the TCT.
On January 29, 1988, Omalin executed a deed of absolute sale in favor of the Macadangdang
spouses. However, the latter did not pay the P110,000 balance because Omalin failed to deliver
the TCT. It turned out that the property was mortgaged to private respondent spouses Ramon and
Gloria Martinez (Martinez spouses).
It appears that on March 5, 1987, a certain Atty. Paterno Santos, a broker, offered to mortgage
the subject property to the Martinez spouses for P200,000. Atty. Santos was in possession of a
"clean" TCT No. 146553 and a fire insurance policy covering said property. The spouses
Martinez accepted the mortgage with interest at 36% p.a. and duly recorded it at the Registry of
Deeds of Makati. The proper annotation was made at the back of the title.
From September 1987 to March 9, 1988, Omalin paid the monthly interest of P6,000 but failed
to pay the subsequent interest from April 1988 to October 1989 amounting to P114,000.
The Macadangdang spouses filed a criminal case for estafa against Omalin and a combined
action for specific performance, annulment of contract and damages against the spouses
Martinez and Omalin.
After trial, the Makati RTC rendered a decision in favor of the Macadangdang spouses:
WHEREFORE, in view of the foregoing, judgment is rendered as follows:
1. The defendants Emma A. Omalin, Ramon Martinez and Gloria Martinez are hereby
ordered to deliver to the plaintiffs the owners duplicate copy of TCT No. 146553, free
from the encumbrance under Entry No. 30110 of the Register of Deeds of Makati, upon
plaintiffs payment of the balance of P100.000.
2. The defendant Emma A. Omalin is hereby ordered to pay plaintiffs the amount of
P30,000 as moral damages and P20,000 as attorneys fees and costs of suit.
3

On appeal, however, the appellate court modified the decision of the Makati RTC:
Considering that defendant Omalin remains to be the owner of the property despite the existence
of a valid mortgage, she has the right to sell it. Hence, we rule that the sale in favor of plaintiffs-
appellee is likewise valid, subject to the right of defendants-appellants to foreclose the property
for failure of defendant Omalin to pay her indebtedness.
xxx xxx xxx
WHEREFORE, the appealed decision is MODIFIED. A new one is hereby entered:
1. Declaring defendants-appellants Ramon and Gloria Martinez as mortgagees in good
faith.
2. Declaring the deed of sale with mortgage in favor of plaintiffs-appellees Bienvenido
and Virginia Macadangdang as valid and ordering them to pay defendant Omalin the
balance of the price in the sum of P110,000.
3. Ordering defendants-appellants to deliver the owners duplicate copy of TCT No.
146553 to plaintiffs-appellees, subject to the existing encumbrance and the right of
defendants-appellants to foreclose the property should defendant Omalin fail to pay her
obligation.
4. Ordering defendant Emma A. Omalin to pay plaintiffs-appellees the amount of
P30,000 as moral damages and P20,000 as attorneys fees and costs of suit.
The Macadangdang spouses are now before the Court with the following assignments of error:
FIRST ASSIGNED ERROR
THE COURT OF APPEALS "DECISION" OPENLY DISREGARDED AND OVERTURNED
EXISTING JURISPRUDENCE INVOLVING SIMILAR FACTS.
SECOND ASSIGNED ERROR
UNLESS REVERSED AND/OR MODIFIED, THE COURT OF APPEALS DECISION, IF
EVENTUALLY IMPLEMENTED, MIGHT GIVE RISE TO ABSURD RESULTS.
THIRD ASSIGNED ERROR
THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE TRIAL COURTS
DECISION DATED NOVEMBER 13, 1990.
4

The petition lacks merit.
The subject matter of the instant petition involves registered land. Unlike the case of unregistered
land, in which an earlier instrument, be it sale or mortgage, prevails over a latter one, and the
registration of any one of them is immaterial,
5
with respect to registered land, the rule is
different. Between two transactions concerning the same parcel of land, the registered transaction
prevails over the earlier unregistered right.
6
The act of registration operates to convey and affect
the registered land so that a bonafide purchaser of such land acquires good title as against a prior
transferee, if such prior transfer was unrecorded.
7

Sections 51 and 52 of PD 1529, otherwise known as the Property Registration Decree, are
pertinent:
Sec. 51. Conveyance and other dealings by registered owner. An owner of registered land may
convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing
laws. He may use such forms of deeds, mortgages, lease or other voluntary instruments as are
sufficient in law. But no deed, mortgage, lease or other voluntary instrument, except a will
purporting to convey or affect registered land shall take effect as a conveyance or bind the land,
but shall operate only as a contract between the parties and as evidence of authority to the
Register of Deeds to make Registration.
The act of registration shall be the operative act to convey or affect the land insofar as third
persons are concerned, and in all cases under this Decree, the registration shall be made in the
office of the Register of Deeds for the province or city where the land lies.
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien
attachment, order, judgment, instrument or entry affecting registered land shall, if registered,
filed or entered in the office of the Register of Deeds for the province or city where the land to
which it relates lies, be constructive notice to all persons from the time of such registering, filing
or entering.
It is clear from the foregoing that the registration of the deed is the effectual act which binds the
land insofar as third persons are concerned. Prior registration of a lien creates a preference as the
act of registration is the operative act that conveys and affects the land.
8
Considering that the
prior sale of the subject property to the Macadangdang spouses was not registered, it was the
registered mortgage to the spouses Martinez that was valid and effective. For sure, it was binding
on Omalin and, for that matter, even on the Macadangdang spouses, the parties to the prior sale.
The rule on prior registration is subject only to one exception, that is, when a party has
knowledge of a prior existing interest which is unregistered at the time he acquires a right to the
same land, his knowledge of that prior unregistered interest has the effect of registration as to
him.
9

The Martinez spouses claimed they had never met the Macadangdang spouses and were unaware
that Omalin had already sold the property to them. Hence, the appellate court declared the
Martinez spouses as mortgagees in good faith and innocent mortgagees for value.
An innocent mortgagee for value is akin to an innocent purchaser for value. The phrase
"innocent purchaser for value" is deemed to include an innocent lessee, mortgagee or other
(beneficiary of an) encumbrance for value.
10
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 such
property and pays a full and fair price for the same at the time of such purchase or before he has
notice of the claim of another person.
11
As a general rule, where the certificate of title is in the
name of the vendor when the land is sold, the vendee for value has the right to rely on what
appears on the face of the title and is not obligated to look beyond what appears on the face of
the certificate of title of the vendor. As an exception, the vendee is required to make the
necessary inquiries if there is anything in the certificate of title which raises any cloud or vice in
the ownership of the property.
12
Otherwise, his mere refusal to believe that such defect exists, or
his willful disregard of the possibility of the existence of a defect in his vendors title will not
make him an innocent purchaser for value if it afterwards develops that the title is in fact
defective, and it appears that he had such notice of the defect as would have led to its discovery
had he acted with that measure of precaution which may reasonably be required of a prudent man
in a like situation.
13

Nothing on record shows that the title of Omalin, the mortgagor, was flawed when it was
presented to the spouses Martinez. Their reliance on the title was therefore reasonable and
correct. They were in no way obliged to go beyond the TCT to determine the legal condition of
the property since there was nothing that should have aroused their suspicion about any defect or
problem about the title.
Where innocent third persons rely on the lack of defect of a certificate of title and acquire rights
over the property, the Court cannot disregard such rights. Otherwise, public confidence in the
certificate of title and ultimately, in the entire Torrens system will be impaired, for every one
dealing with registered property will have to inquire at every instance whether the title has been
regularly or irregularly issued.
14

On this note, being innocent registered mortgagees for value, the Martinez spouses acquired a
superior right over the property.
Accordingly, we find no reversible error by the appellate court in upholding the existing
encumbrance over the subject property acquired by the Macadangdang spouses, in declaring the
spouses Martinez as mortgagees in good faith and in recognizing their right to foreclose on the
mortgage should Omalin fail to pay her obligation.
The assailed decision of the appellate court is neither absurd nor unjust. The registered mortgage
contract of the Martinez spouses has given them the superior right, not as owners but only as
mortgagees. Consequently, they are entitled to be paid the amounts due them under the real
estate mortgage registered in their favor. In the event Omalin, as mortgagor, fails to pay the
mortgage obligation or, should any party, for that matter, who may have an interest in the
mortgaged property like the petitioners herein fail to redeem it from the mortgagees, the latter, as
declared by the Court of Appeals, may enforce their rights against the property by foreclosing on
the mortgage, regardless of who its owner may be, considering that the registered mortgage
attaches to the property.
WHEREFORE, the instant petition is hereby DENIED and the October 25, 2001 decision of the
Court of Appeals in CA-G.R. CV No. 32018 is AFFIRMED.
Costs against petitioners.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 128122 March 18, 2005
PREMIERE DEVELOPMENT BANK, Petitioner,
vs.
HON. COURT OF APPEALS, LIBERATO G. YAMBAO, JESUS B. RODRIGUEZ and
JESUS D. MORALES, Respondents.
x--------------------x
G.R. No. 128184 March 18, 2005
LILIAN M. TOUNDJIS, Petitioner,
vs.
HON. COURT OF APPEALS, LIBERATO G.YAMBAO, et al., and JOSELITO
GARAYGAY, ET AL., Respondents.
x--------------------x
G.R. No. 128229 March 18, 2005
JOSELITO P. GARAYGAY, CENTURY REALTY and DEVELOPMENT
CORPORATION, Petitioner,
vs.
HON. COURT OF APPEALS, LIBERATO G. YAMBAO, JESUS B. RODRIGUEZ and
JESUS D. MORALES, respondents.
D E C I S I O N
GARCIA, J .:
Before the Court are these three (3) separate petitions for review on certiorari under Rule 45 of
the Rules of Court to nullify and set aside the Decision
1
dated November 29, 1995 and
Resolution
2
dated February 6, 1997 of the Court of Appeals in CA-G.R. CV 42121.
The first assailed issuance affirmed an earlier decision
3
dated January 28, 1993 of the Regional
Trial Court at Quezon City, Branch 88 in its Civil Case No. Q-92-8455, declaring, inter alia,
herein private respondents, as plaintiffs therein, Liberato G. Yambao, Jesus B. Rodriquez and
Jesus D. Morales ("Yambao", "Rodriquez" and "Morales", respectively), as rightful owners of
the land subject of this case. The second assailed issuance, on the other hand, denied
reconsideration of the first.
At the core of the controversy is a 2,660-square meter parcel of land, denominated as Lot 23 of
the subdivision plan Fls-2804-D of SWO-17514, registered under TCT No. 9780 of the Manila
Registry, located as it were in Matandang Balara, which used to be a part of the then district of
Caloocan, City of Manila. The creation of Quezon City which found Lot 23 within its borders
saw the transfer of the corresponding property records to the new political unit and the
generation of new certificates of title to reflect territorial changes. As thus transferred, TCT No.
9780 was assigned title number TCT No. 9780 (693).
The evidence on record disclose the following factual antecedents:
Two (2) different persons with exactly the same name, i.e., Vicente T. Garaygay, each claimed
exclusive ownership of Lot 23 by virtue of an owners duplicate certificate each had possession
of during the period material covering said lot. One held TCT No. 9780, supra, and the other,
TCT No. 9780 (693), supra. The technical description of the land appearing in one copy
corresponds exactly with that in the other. The date "June 14, 1944" appears on the face of both
copies as a common date of entry. One, however, contained certain features, markings, and/or
entries not found in the other and vice versa.
On April 17, 1979, one of the two Vicente T. Garaygays, a resident of Cebu City (hereinafter
referred to as Garaygay of Cebu), executed a deed of sale
4
over the lot described in and covered
by his TCT No. 9780 (693) in favor of his nephew, Joselito P. Garaygay ("Joselito",
hereinafter). The sale notwithstanding, the owners duplicate certificate remained for some time
in the sellers possession.
In another transaction, the other Vicente T. Garaygay, a resident of Rizal (hereinafter referred to
as Garaygay of Rizal), sold to Liberto G. Yambao and Jesus B. Rodriguez the same property
described in TCT 9780. "YCM Compound, Angono, Rizal" is set out in the February 11, 1986
conveying deed
5
as the sellers residence. Buyers Yambao and Rodriquez would later sell a
portion of their undivided interests on the land to Jesus D. Morales.
6

Then came the June 11, 1988 fire that gutted a portion of the Quezon City hall and destroyed in
the process the original copy of TCT No. 9780 (693) on file with the Registry of Deeds of
Quezon City. Barely a month later, a certain Engr. Hobre filed an application, signed by
Garaygay of Cebu, for the reconstitution of the burned original on the basis of the latters
owners duplicate certificate. One Engr. Felino Cortez of the Land Registration Authority (LRA)
did the follow-up on the application. After due proceedings, the LRA issued an order of
reconstitution,
7
by virtue of which Garaygay of Cebu acquired reconstituted TCT No. RT-1764
(9780) (693).
8

Meanwhile, or on May 26, 1989, the deed of sale executed by Garaygay of Cebu in favor of his
nephew Joselito was registered, paving the issuance in the latters name of TCT No. 12183.
9

Thereafter, thru the efforts of same Engr. Cortez,
10
Lot 23 was subdivided into three (3) lots,
namely: Lot 23-A, Lot 23-B and Lot 23-C for which TCT Nos. 14414, 14415 and 14416,
respectively,
11
were issued. Joselito posthaste sold Lot 23-A to Lilian Toundjis who, pursuant
to a Contract to Sell executed on March 23, 1990,
12
undertook to pay Joselito the P.5 Million
balance of the P2.5 Million purchase price once she is placed in possession of a fenced-off
property. And, for shares of stock, Joselito assigned on February 26, 1991, the other two (2) lots,
i.e., Lot 23-B and Lot 23-C to Century Realty and Development Corporation ("Century
Realty") which, after securing TCT Nos. 34390 and 34391 therefor, mortgaged
13
the same to
Premiere Development Bank, Inc. ("Premiere Bank") to secure a P2.5 Million loan.
Clashing claims of ownership first came to a head when, sometime in May 1990, Liberato G.
Yambao and his agents forcibly prevented Joselitos hired hands from concrete-fencing the
subject property. The police and eventually the National Bureau of Investigation (NBI) entered
into the picture.
In the meantime, Yambao, Rodriquez and Morales as pro indiviso buyers of Lot No. 23,
caused the annotation on December 17, 1990, January 16, 1991 and February 15, 1991 of their
respective adverse claims on Joselitos TCT Nos. 14414, 14415 and 14416. They then filed with
the Regional Trial Court at Quezon City suit against Joselito, Century Realty and Premiere
Bank for quieting of title and annulment of said defendants fake titles with prayer for damages.
In their amended complaint,
14
docketed as Civil Case No. Q-92-8455 and raffled to Branch 88
of the court, Yambao, Rodriguez and Morales alleged, inter alia, the following:
1. That Joselito, taking advantage of the 1988 burning of the Quezon City Hall, and
"using an impostor, who pretended to be Vicente Garaygay, by means of fraud, deceit,
and unlawful manipulation succeeded in administratively reconstituting the aforesaid
property (sic) in 1990 on the basis of an alleged owners copy, which on its face is
patently fake and spurious and fake title bearing [TCT] No. 9780 (693)".
2. That a reconstituted title secured by means of fraud, deceit, or other machinations is
void ab initio under Section 11 of Republic Act (R.A.) 6732;
3. That after causing the reconstitution of the title, Joselito "acted fast to consummate his
scheme of depriving the plaintiffs of their ownership . . . of the [disputed] land by the
following successive acts", referring to Joselitos act of securing title in his name,
subdividing Lot No. 23 and securing titles to and disposing of the subdivided lots;
4. That they (Yambao, Rodriguez and Morales) filed their separate adverse claims and
caused the same to be annotated at the back of Joselitos TCT Nos. 14414, 14415 and
14416; that while the adverse claim of Rodriquez was still valid, Joselito executed on
February 26, 1991 a Deed of Assignment in favor of Century Realty, which thus made
the latter a "transferee in bad faith"; that on March 26, 1991, Century Realty executed a
mortgage contract in favor of Premiere Bank, "a mortgagee in bad faith"; and
5. That at the time the mortgage was executed, the houses of plaintiffs caretaker and a
chapel belonging to them were standing on the two lots in question.
Answering, principal defendants Joselito and Century Realty denied plaintiffs material
allegations and asserted, by way of affirmative defense, the validity of (a) the reconstitution of
TCT No. 9780 (693); (b) the assignment of real property in favor of Century Realty; and (c) the
mortgage made by Century Realty in favor of Premiere Bank.
In their separate answers, also with crossclaim and counterclaim, Lilian Toundjis, who was
allowed to intervene to oppose the action thus filed, and Premiere Bank virtually adopted
Joselitos position and pleaded, in addition, their right as bona fide purchaser or mortgagee for
value, as the case may be, of the subject property.
Issues having been joined, trial ensued with plaintiffs Yambao, Rodriguez and Morales offering
in evidence several documents. Foremost of these was Exhibit "B"
15
which is the owners
duplicate copy of TCT No. 9780 of the Registry of Manila once in the possession of Garaygay
of Rizal. On the other hand, the principal defendants presented no less than 38 pieces of marked
and sub-marked documentary evidence, among which was Exhibit. "1",
16
identical to Exhibit
"D", which is the duplicate copy of TCT No. 9780 (693) that pertained to Garaygay of Cebu
and used in the reconstitution of the burned original thereof.
In his testimony, Yambao stated having noticed, when Garaygay of Rizal offered to sell Lot 23,
that the corners and the portion of Exhibit "B" containing the owners personal circumstances
were torn and related the owners explanation as to how these oddities came about. Yambao
related that owing to the physical appearance of Exhibit "B", the recording of the Garaygay of
Rizal - Yambao/Rodriguez deed of sale (Exh. "A") was refused since the more crucial
document, i.e., the torn owners copy was itself not registrable unless it is first reconstituted. He
also testified that, to assure himself of the genuineness of the sellers owners duplicate
certificate, he and Garaygay of Rizal repaired to the Quezon City Registry to compare his
(Garaygay of Rizals) copy with the original copy on file with the registry, and discovered that
the only difference was that the owners duplicate bears the title number "9780", while the
original had "9780 (693)" typewritten on a straight line.
17
As told by Yambao, Garaygay of
Rizals explanation for the figure difference is that "693" was not affixed on his (Garaygay of
Rizals) title because he never, in first place, presented the same to the Quezon City Registry for
correction or affixture.
Yambao also testified that Garaygay of Rizal, when asked to show proof of his identity,
presented a voters ID with his picture,
18
a Commission of Elections (COMELEC) certification
attesting to his being a registered voter in Precinct No. 21 in Angono, Rizal
19
and a certification
of residence issued by the barangay captain of the place.
20
Yambao added that before concluding
the sale, he, together with the prospective seller, proceeded to the land site where the residents
and/or caretakers thereat assured him that his companion, Garaygay of Rizal, was actually the
landowner.
For their part, defendants presented Garaygay of Cebu who alleged, among other things, having
acquired Lot 23 from one Macaria Lim vda. Arambulo sometime in 1944, having paid taxes
thereon for the period 1949-1990
21
and mortgaging in 1949 the titled property with Meralco
Employees Savings & Loan Association, with the mortgage deed and later the discharge of
mortgage being annotated on his title.
22
Joselito also took the witness stand in defense of his
ownership of Lot 23 and the transactions he entered into involving the lot.
Eventually, the trial court rendered judgment finding for the plaintiffs and against the defendants,
declaring Joselitos TCT No. 9780 (693) and all subsequent titles traceable to it and transactions
involving its derivatives as null and void. To the trial court, plaintiffs evidence preponderated
over those of the defendants whose main witness, Garaygay of Cebu, gave inconsistent
testimony, while Joselito hedged on his answer regarding a cousin connected with LRA. Going
against the defendants cause, the trial court further observed dubious circumstances surrounding
the reconstitution of TCT 9780 (693), the more disturbing of which is the admitted participation
of LRA personnel in the reconstitution process.
Dated January 28, 1993, the trial courts decision
23
dispositively reads:
WHEREFORE, in view of the foregoing, the Court renders the following judgment to
wit:
1. Plaintiffs Liberato G.Yambao, Jesus B. Rodriguez and Jesus D. Morales are
hereby declared the rightful owners and possessors of the land described in TCT
No. 9780 marked as Exh. B;
2. Defendants title, TCT No. 9780 (693), marked as Exh. 1 (p. 349, Rollo,
identical to Exh. D, p. 493 Rollo); the LRA Order of Reconstitution . . .;
defendants reconstituted title No. RT-1764 (9780) (693) marked as Exh. "4" . . .;
the cancelled title TCT No. 12183 and its derivative titles, TCT Nos. 14414,
14415, and 14416, all in the name of defendant Joselito P. Garaygay and
intervenor Lilian M. Toundjis involving TCT 14414; the Deed of Assignment and
Transfer between Joselito P. Garaygay and Century Realty involving TCT Nos.
14415 and 14416; [the derivative] titles of defendant Century Realty . . . namely
TCT Nos. 34390 . . . and 34391 . . .; and the Deed of Real Estate Mortgage
executed by Century Realty . . . in favor of defendant Premiere Bank, Inc. are all
declared null and void and without force and effect;
3. The Register of Deeds of Quezon City to strike out the reconstituted title [but
already cancelled] No. 1764 (9780) (693) and TCT No. 12183, . . . ; to cancel
TCT 14414 . . .; to cancel the Deed of Assignment and Transfer between Joselito
P. Garaygay and Century Realty . . . covered by TCT Nos. 14415 and 14416, and
necessarily cancel TCT Nos. 34390 and 34391 . . .; to cancel the Deed of Real
Estate Mortgage over TCT Nos. 34390 and 34390 . . .; and thereafter, to enter and
register the Deeds of Sale, dated February 11, 1986 (Exh. "A") and July 10, 1988
(Exh. "C") and forthwith issue corresponding new title/s in the names of the
plaintiffs, free from all encumbrances, except those entered into by them, upon
payment of all taxes and fees prescribed by law;
4. Defendant Joselito P. Garaygay is sentenced to pay each of the [three] plaintiffs
. . ., the sum of P100,000. 00 as moral damages;
5. Defendants Joselito P. Garaygay, Century Realty . . . and Premiere Bank, Inc.
are sentenced to pay jointly and severally each of the two plaintiffs, namely
Liberato Yambao and Jesus Morales, the sum of P25,000.00 as exemplary
damages and to plaintiff Jesus B. Rodriquez the sum of P25,000.00 as nominal
damages The defendants are also sentenced to pay jointly and severally the sum
of P20,000.00 as attorneys fees and the cost of suit;
6. Defendant Joselito P. Garaygay is further sentenced to reimburse Lilian M.
Toundjis the sum of P2,000,000.00 with interest thereon at 6% per annum from
the date of judgment;
7. With the annulment of the [aforementioned] Deed of Assignment and Transfer
between defendant Joselito P. Garaygay and defendant Century Realty . . . and the
Deed of Real Estate Mortgage . . . between defendant Century Realty . . . and
defendant Premiere Bank, Inc., all aforementioned defendants who are respective
parties to the named deeds are hereby ordered to make a full return and restitution
to each other of all monies, things and objects they have received thereunder
without interest within fifteen days from finality of this judgment;
8. All other claims are dismissed.
SO ORDERED. [Words in bracket added]
In time, herein petitioners appealed to the Court of Appeals whereat their recourse was docketed
as CA- G.R. CV No. 42121.
In its Decision of November 29, 1995,
24
the Court of Appeals affirmed in toto the appealed
decision of the trial court, the affirmance being predicated on the following main justifications:
All in all, the Court agrees with the trial court in giving low rating to both Vicente
Garaygay of Cebu and appellant JOSELITO as witnesses. The court notes that Vicente T.
Garaygay of Cebu has no explanation why the deed of sale between him and Arambulo
was not adduced in evidence x x x
In view of the foregoing questionable actuations of Vicente T. Garaygay of Cebu and his
nephew . . . and their cohorts, the trial court (sic) is constrained to declare that the
defendants mother title TCT No. 9780 (693) marked as Exhibit 1, which served as the
basis of the reconstitution is a fake and spurious title. x x x Thus, all titles in the name of
Vicente T. Garaygay of Cebu and Joselito Garaygay are null and void. x x x .
On the other hand, the claim of appellees that their certificate of title is a genuine title is
supported with credible and sufficient evidence. The contention of the appellants that the
appellees title should not be accepted as genuine because it is not authenticated lacks
merit. The owners copy of the title of appellees is a public document (Broce vs. Broce, 4
Phil. 611). Unlike a private document which must be authenticated before its admission .
. ., there is no need to authenticate a public document to make it admissible in evidence
(Rule 132, Sec 24). The rule that a document must be authenticated before it is
admissible in evidence does not apply to public documents which are admissible without
further proof of their due execution or genuineness x x x. Public documents are already
authenticated by the official signature and seal which they bear, of which this Court takes
judicial notice (Apostol, Essentials of Evidence, 1991, ed., p. 430) (Underscoring added).
Their motion for reconsideration having been denied by the appellate court in its Resolution of
February 6, 1997,
25
petitioners have separately come to this Court. That of petitioner Premier
Bank was docketed as G.R. No. 128122; that of Toundjis as G.R. No. 128184; and that of
Joselito Garaygay and Century Realty as G.R. No. 128229.
Per this Courts Resolution dated June 18, 1997,
26
the three (3) separate petitions were, upon
private respondents motion, ordered consolidated.
The principal issue tendered in the separate petitions, albeit formulated a bit differently, comes
down to the following: whether or not the Court of Appeals erred in holding Garaygay of Rizal,
instead of Garaygay of Cebu, as the real owner of Lot 23. Behind this issue is the corollary
question of whether or not the same court erred in finding Garaygay of Rizals owners copy,
TCT No. 9780, instead of the Garaygay of Cebus copy, TCT No. 9780 (693), as the authentic
title covering Lot 23.
Petitioners urge reversal on the submission that, unlike Garaygay of Cebu who came forward
and took the witness stand, the identity of Garaygay of Rizal - who they stressed at every turn
had not been presented to testify - has not been established. Albeit they do not say so, the
inference of their posture is that an impostor has taken the identity of Vicente T. Garaygay.
Corollarily, they also contend that the authenticity of the impostor Garaygays adverted owners
copy of TCT No. 9780 has remained unproven.
The desired reversal cannot be granted.
Both defining documents, Exhibit "1" and Exhibit "B", appear to have been issued by the
appropriate Registry of Deeds and as such would ordinarily enjoy the guarantees flowing from
the legal presumption of regularity of issuance.
27
But how and precisely when the legal
aberration occurred where two (2) owners duplicate certificates ended up in the hands of two (2)
distinct persons, complete strangers to each other, are questions which the records do not provide
clear answer. It may not be idle to speculate, though, that fraud or other improper manipulations
had been employed along the way, with likely the willing assistance of land registry official/s, to
secure what for the nonce may be tagged as the other title. Consistent with the presumption of
regularity of issuance, however, the authenticity of one copy has to be recognized. And
necessarily, one of the two (2) outstanding owners copies has to be struck down as wrongly
issued, if not plainly spurious, under the governing Torrens system of land registration. For, a
piece of land cannot plausibly be covered at the same time, under the same concept of
ownership, by two (2) outstanding certificates of title, each having the same validity, force and
effect. One has to be spurious, or at least one has to prevail over the other.
28
Else, the ideal
sought to be achieved by the Torrens system would be illusory. As it were, the Torrens system of
land registration aims to obviate possible conflicts of title by giving the public the right to rely
upon the face of the Torrens certificate and to dispense, as a rule, with the necessity of inquiring
further;
29
on the part of the registered owner, the system gives him complete peace of mind that
he would be secured in his ownership as long as he has not voluntarily disposed of any right over
the covered property.
30

The categorical conclusion of the Court of Appeals confirmatory of that of the trial court is
that Exhibit "B" is genuine and that Garaygay of Rizal is a real person. On the other hand,
Exhibit "1" was adjudged spurious. These factual determinations as a matter of long and sound
appellate practice must be accorded great weight, and, as rule, should not be disturbed on
appeal,
31
save for the most compelling and cogent reasons,
32
like when such factual findings
were drawn from a vacuum, or, in fine, reached arbitrarily.
33

To be sure, arbitrariness cannot contextually be imputed on the appellate court. Its finding that
Garaygay of Rizal is an authentic person, once residing in and a registered voter of Angono,
Rizal has adequate evidentiary support in his voters ID, the COMELEC and barangay
certifications aforementioned and the testimony of an occupant of Lot 23. And for whatever it is
worth, Garaygay of Cebu no less testified that there are three (3) Vicente T. Garaygay in the
Philippines.
34
The reality that the private respondents failed to put Garaygay of Rizal on the
witness box to identify his copy of the title and defend his erstwhile ownership of Lot 23 may
perhaps support petitioners claim about his being fictitious if his whereabouts during the trial, if
still alive then, was known. But, as found by the appellate court, "Yambao never heard from or
about Garaygay of Rizal" after they have executed the Deed of Absolute Sale (Exh. "A", supra)
on February 11, 1986.
Petitioners attribution of error on the part of the appellate courts declaring Garaygay of Rizal
as owner of the disputed parcel of land is untenable. It cannot be overemphasized that the
possessor-owner of the authentic copy of TCT No. 9780 was necessary the real owner of Lot 23.
That possessory distinction happened to belong to Garaygay of Rizal.
Moreover, facts and reasonable inferences drawn therefrom point to Exhibit "1" as being
spurious, necessarily leaving Exhibit "B" as the authentic duplicate copy. For starters, there is
the appearance and physical condition of the owners copies in question which, if properly
evaluated in the light of attendant circumstances, would help in determining which is genuine
and which is sham.
35
For, the condition and physical appearance of a document would, to borrow
from Junquera, reveal, albeit silently, "the naked truth, hiding nothing, forgetting nothing and
exaggerating nothing." As aptly observed by the appellate court, rationalizing its conclusion
adverted to above, Exhibit "B" has no defect, except for its partly being torn. Respondents
explanation for the defective state of Exhibit "B", as related to them by Garaygay of Rizal, i.e.,
it was due to exposure of the document to the elements, like rain, following his evacuation from
Manila to a small nipa hut in Angono, Rizal during the Japanese occupation,
36
merited approval
from the trial court and the Court of Appeals. Both courts, being in a better position to pass upon
the credibility of petitioners witness and appreciate his testimony respecting the less than usual
appearance of Exhibit "B", their findings command the respect of this Court.
Lest it be overlooked, what might be considered as defects in Garaygay of Cebus copy are, at
bottom, the combined effects thereon of the passage of time and the elements. Standing alone,
these defects do not, in our view, undermine the integrity of the document.
However, unlike Exhibit "B", Exhibit "1" contained entries and other uncommon markings or
features which could not have existed without human intervention. Although any one of them
may perhaps not be appreciable in isolation, these features and/or markings, taken together,
indeed put the integrity of Exhibit "1" under heavy cloud and indeed cast doubt on its
genuineness.
The irregularities listed in the appealed decision may be summed up in the following wise:
1. Two (2) Victory stamps issued after liberation were strangely pasted on the seal of
Garaygay of Cebus title Exhibit "1" - when such stamps were not yet in existence
when such title was entered in the Registry of Deeds of Manila on June 14, 1944;
2. Exhibit "1" was prepared on "Judicial Form No. 109-D Revised June 1945", which
came into circulation after June 14, 1944;
3. Exhibit "1" bears the handwritten figure "9780" in ink above the typewritten number
"693". There is no initial to suggest that the handwritten number "9780 over the
typewritten title number "693" was officially authorized;
4. The first letter "Y" in the surname "Garaygay" in Exhibit "1" was inserted in ink. In
contrast, there is no such insertion in Exhibit "B"; and
5. Exhibit "1" carries the annotation "subject to further disposition by the government
with respect to real estate transactions consummated during the Japanese regime, and
subject to the provisions of Sec. 4, Rule 74 of the New Rules of Court".
37
Such
annotation is supposed to have been contemporaneously made on the date of the issuance
of the title in 1944. Yet, in what appears to be an anomalous instance, advertence is made
to "transactions consummated during the Japanese regime" and to "Rule 74 of the Rules
of Court", logically implying, as aptly observed by the Court of Appeals, that the
annotation was entered after liberation and also after 1964 when the New Rules of Court
came into effect.
Almost as if it were an afterthought, petitioners explained that the Victory stamps could have
been pasted, the 1945 revised judicial form utilized, and the annotations referred to in item # (5)
entered when the TCT of Garaygay of Cebu was reissued. Anent the number "9780" appearing
in ink, the proffered explanation was that the handwritten "9780" was a mere provisional
marking.
The foregoing explanations are, at best speculative, thus correctly struck down by the appellate
court. And unfortunately, Garaygay of Cebu, the best person to shed light on the foregoing
unusual situations and help the limping case of the petitioners, could not himself offer an
explanation.
Petitioners insistence that the inscription on Garaygay of Cebus copy of the deed of mortgage
and the discharge of mortgage he constituted over Lot 23 in favor of Meralco Employees
Savings and Loan Association proves the authenticity of the latters owner duplicate is valid to a
point. But, to suggest that such inscription could not have been possible were his title spurious is
altogether a different matter. We need not cite cases memorialized in books of jurisprudence
where land dealings are annotated on reconstituted certificates secured thru fraud or otherwise
issued irregularly. Stated a little differently, an annotation of what is otherwise a bona-fide land
transaction is not a peremptory argument against the spurious character, if that be the case, of the
document on which it is annotated.
In the same token, the payment by Garaygay of Cebu of land taxes on Lot 23 does not also
necessary detract from the spurious nature of his title, Exhibit "1". After all, any one can pay real
estate taxes on a given property without being quizzed by the local treasury whether or not the
payor owns the real property in question. This is not to say of course that tax receipts are
evidence of ownership, since they are not, albeit they are good indicia of possession in the
concept of owner, for no one would ordinarily be paying taxes for a property not in his actual or
at least constructive possession.
38

Other than paying taxes from 1949 to 1990
39
(mistakenly stated by respondent court as from
1949 to 1960), however, Garaygay of Cebu and this holds true for his nephew Joselito - did
not appear before the current stand-off to have exercised dominion over Lot 23. For one, it has
not been shown that Garaygay of Cebu was at any time in possession of the property in
question, unlike his namesake from Rizal who managed to place the property under the care of
certain individuals who built semi-permanent structure-dwelling houses thereon without so much
of a protest from Garaygay of Cebu or his nephew Joselito after the latter purportedly bought the
property. For another, neither Garaygay of Cebu nor his nephew Joselito ever instituted any
action to eject or recover possession from the occupants of Lot 23. This passivity bespeaks
strongly against their claim of ownership. It has been said that a partys failure to raise a
restraining arm or a shout of dissent to anothers possession for an unreasonably long period is
simply contrary to his claim of ownership.
40
Not lost on this Court are circumstances noted by
the trial court which negatively reflect on Garaygay of Cebus and his nephews claim of
ownership. Some excerpts of what the trial court wrote:
"On its face, Exh. "5" [the original copy of the deed of sale between Garaygay and his
nephew] was notarized by one Armando Pulgado. However, there are certifications by
both the Bureau of National Archives that no Notarial records of Armando Pulgado exist
in Manila. (Exh. "KK") or in Quezon City (Exh. "LL"), and by the Clerk of Court that
Atty. Armando Pulgado was not appointed as notary public for and in the City of Manila
for the year 1979 (Exh. "MM")
Exh. "5" dated April 17, 1979 was registered only on May 26, 1989, over 10 years from
the sale. JOSELITO could not explain how thereafter his own title (TCT 12183) was
issued in his name since it was not he who registered the Deed of Sale, Exh. "5". In other
words, someone else registered it for him.
Neither JOSELITO nor his uncle . . .followed up the petition for reconstitution which was
prepared, filed and processed by interested persons in Manila, which scenario prompted
plaintiffs counsel to observe that the reconstitution was among the first of all applicants
in Quezon City to be approved (p. 32, TSN August 17, 1992). Of these interested
persons, the most unthinkable was Engr. Felino Cortez of the LRA who did the follow-
ups on the application in Manila. It is remarkable why Cortez, who is neither a friend nor
relative, took special interest in not only following up the application for reconstitution
but in effecting the subdivision of TCT 12183 into [3 lots], for which three derivative
titles of TCT 12183 were issued . . . . Again JOSELITO had no knowledge of this fact of
subdivision until his uncle, . . . telephoned him with the information that the land was
already subdivided.
In short, it appears to the Court that without doing anything, Vicente T. Garaygay of
Cebu has his title (Exh. "1") reconstituted. On the other hand, without knowing anything,
JOSELITO obtained TCT 12183 in his name and had the land subdivided and sold.
These circumstances demonstrate that neither JOSELITO nor his uncle, Vicente T.
Garaygay of Cebu acted ante litem motam like the true owners they claim to be in their
respective times. xxx
Several questions confound the Courts curiosity. Why were some LRA officials so
interested in the speedy reconstitution and in the subdivision of the land in excess of their
bureaucratic duties? Where did Vicente T. Garaygay of Cebu get his owners copy, Exh.
"1". Did some conniving LRA officers supply the judicial form and Victory stamps? Why
was JOSELITO so evasive about his cousin in the LRA as shown in his examination?
xxx xxx xxx
As the Court sees it, the Deed of Sale (Exh. "5" was a simulated transaction because both
JOSELITO and his uncle admit this was a joint venture to sell the property in question.
However, the facts suggest that the joint venture was not limited to the two of them.
The persons who prepared and filed the application for reconstitution, and those officers
in the LRA who followed it up and who thereafter subdivided the land into three lots for
easier sale, those at the NBI who tried to persuade Yambao and Morales to settle the
dispute . . . are apparently part of the joint venture or stand to profit from it"
This brings us to the core of Toundjis and Premiere Banks petitions. The first asserts the
rights of a purchaser and the other, that of a mortgagee, in good faith and for value of Lot 23, a
status respectively denied them by the appellate court.
The rule that a subsequent declaration of a title as null and void is not a ground for nullifying the
contractual right of a purchaser, rmortgagee or other transferees in good faith, with the
exceptions thereto, is well-settled. Where the certificate of title is in the name of the seller or
mortgagor, the innocent purchaser or mortgagee for value has the right to rely on what appears
on the certificate without inquiring further.
41
In the absence of anything to excite or arouse
suspicion, or except when the party concerned had actual knowledge of facts or circumstances
that should impel a reasonably cautious person to make such further inquiry, said purchaser or
mortgagee is without obligation to look beyond the certificate and investigate the title of the
seller or mortgagor. Thus, where innocent third persons, relying on the correctness of the
certificate, acquire rights over the property as buyer or mortgagee, the subsequent declaration of
nullity of title is not a ground for nullifying the right of such buyer or mortgagee.
42

Tested by the above norm, may Toundjis be considered, as she has claimed, an innocent
purchaser for value, meaning one who buys or acquires, for valuable consideration, a piece of
land of another without notice that some other person has a right to, or interest in, such property
at the time of purchase, or before he has notice of the claim or interest of some other persons in
the property.
43

The Court of Appeals rejected the claim of Toundjis, and rightly so.
A study of the record shows that TCT 14414 covering Lot. 23-A that Toundjis contracted to buy
from Joselito carried an annotation that it was administratively reconstituted. Records also
indicate that Toundjis knew at the time of the sale that Joselito did not have possession of the lot
inasmuch as she agreed to pay the balance of the purchase price as soon as the seller can fence
off the property and surrender physical possession thereof to her.
Even for these two (2) reasons alone, which should have placed Toundjis on guard respecting
Joselitos title, her claim of being a bona fide purchaser for value must fail. The rejection,
therefore, by the Court of Appeals of such claim is correct. Likewise acceptable is the appellate
courts holding, citing Republic vs. Court of Appeals,
44
that a purchaser of a property cannot be
in good faith where the title thereof shows that it was reconstituted. Noted with approval, too, is
the appellate courts observation that the "contract to sell (Exh. "44") which is unregistered and
not annotated at the back of the title of the property [cannot adversely affect appellees]" for the
reason that under "Sec. 51 of PD 1529 (Property Registration Act), the act of registration shall
be the operative act to convey or affect the land in so far (sic) as third parties are concerned."
45

Premiere Bank cannot also be accorded the status of an innocent mortgagee for value vis--vis
the mortgage of the lots covered by TCT Nos. 34390 and 34391 constituted in its favor by
Century Realty. Apart from the annotations that said titles are only administratively
reconstituted,
46
the appellate court provided the ensuing compelling reasons:
"Premiere inspected the property to be mortgaged xxx on March 6, and 11, 1991 as can
be seen in its Real Estate Appraisal Report (Exhs. "EE", "EE-1"). The adverse claim of
Jesus Rodriguez was cancelled on March 26, 1991 xxx Hence, when Premiere inspected
the property xxx, it was aware of the existence of Rodriquez adverse claim. This is
admitted by Premieres witness xxx. The adverse claim of Rodriquez annotated at the
back of TCT No. 14415 and marked as Exhibit I-3 and also at the back of TCT No.
14416 (Exh. J) marked as Exhibit J-3 declares that he is the vendee of the land
described.
There are buildings of strong material on the land in dispute xxx.
Premiere is aware of the existence of these structures as can be seen in its real estate
report (Exh. EE). Said report states that there are shanties erected in the property in
dispute.
But despite the existence of alleged shanties which are in fact and in truth big
structures, two of them being concrete buildings (Exhs. 0 to O-3), Premiere Bank
proceeded in the execution of the mortgage contract. xxx.
If the land mortgaged is in the possession of a person other than the mortgagor, the
mortgagee is required to go beyond the certificate of title and make inquiries as to the
rights of the actual possessors. Failure to do so would make him a mortgagee in bad faith
(Sunshine Finance vs. IAC, 203 SCRA 213; Conspecto vs. Fruto, 31 Phil 144)".
It cannot be overemphasized that Premiere Bank, being in the business of extending loans
secured by real estate mortgage, is familiar with rules on land registration. As such, it was, as
here, expected to exercise more care and prudence than private individuals in their dealing with
registered lands.
47
Accordingly, given inter alia the suspicion-provoking presence of occupants
other than the owner on the land to be mortgaged, it behooved Premiere Bank to conduct a more
exhaustive investigation on the history of the mortgagors title. That Premiere Bank accepted in
mortgage the property in question notwithstanding the existence of structures on the property and
which were in actual, visible and public possession of a person other than the mortgagor,
constitutes gross negligence amounting to bad faith.
48
Premier Bank is thus not entitled to have
its lien annotated on the genuine title.
49

A final consideration: Petitioners maintain that the appellate court erred in annulling the LRA
order of reconstitution (Exh. "3"), even if such relief was not prayed for in private respondents
amended complaint and notwithstanding the fact that the LRA was not impleaded as an
indispensable party in Civil Case No. Q-92-8455.
The contention is far from tenable. An action for quieting of title, as here, is equivalent to an
action for reconveyance of title wrongfully or erroneously registered in anothers name. The
successful outcome of such action would in most cases necessarily entail the cancellation of
existing title wrongly issued to another, which in turn requires the action of the LRA and/or the
proper Register of Deeds. As in the past, this Court, to obviate multiplicity of suits, had ordered
the LRA or the Register of Deeds, albeit not impleaded below, to cancel such erroneously issued
titles.
Before writing finis to this ponencia, two (2) peripheral matters raised need to be addressed.
First, petitioner Toundjis has, as an alternative prayer, asked that the appealed decision ordering
Joselito to reimburse her the sum of P2,000,000.00 be modified, such that the reimbursable
amount shall bear interest of nineteen (19%) percent (down from the 25% she sought in her
answer-in-intervention) instead of six (6%) per annum reckoned from March 23, 1990, instead of
from January 28, 1993, the date of judgment of the trial court. Absent an explanation with cogent
legal support why her plea for a modificatory ruling should be favorably considered, this Court
denies the same.
Second, petitioners have invited attention to and made much of this Courts per curiam Decision
dated April 7, 1993
50
in A.M. P-91-593, entitled "Office of the Court Administrator vs. Atty.
Liberato Yambao et al."
51
In it, the Court dismissed herein respondent Yambao from the service
as then Clerk of Court, RTC, Quezon City, Branch 80 for, among other things, having in his
possession a forged deed of sale executed by Vicente T. Garaygay. It should be stressed in this
regard, however, that this Court, in its Resolution of May 18, 1994,
52
resolved to "SUSPEND the
implementation of the effects of the decision of April 7, 1993 pending the judicious review by the
Court of Appeals of the decision of the Regional Trial Court, Branch 80, Quezon City in Civil
Case No. Q-92-8455."
This Court need not belabor the effects on A.M. P-91-593 of the appealed decision of the Court
of Appeals, as hereby affirmed.
WHEREFORE, the instant petitions are DENIED and the impugned Decision of the Court of
Appeals AFFIRMED.
Costs against petitioners.
SO ORDERED

Republic of the Philippines
SUPREME COURT
SECOND DIVISION
G.R. No. 143254 August 18, 2005
JUSTINA COSIPE SIGAYA, ROMEO, FELY, TOMAS, BERNARDO, LEDA,
ANASTACIO, ERLINDA, Present: ROSA,TERESITA, EDWIN and HELEN, PUNO,
Chairman, AUSTRIA-MARTINEZ, Petitioners, CALLEJO, SR., TINGA, and all surnamed
SIGAYA,
vs.
CHICO-NAZARIO, J J . DIOMER MAYUGA, JOSE VIVA and ROSELA VIVA,
HONORATO DE LOS SANTOS and RENATO DISTOR, Respondent.
D E C I S I O N
AUSTRIA-MARTINEZ, J.:
The question of whether or not a person is a purchaser in good faith is a factual matter that will
generally be not delved into by this Court especially when the findings of the trial court on the
matter were affirmed by the Court of Appeals (CA). Settled as this rule may be, petitioners now
come before this Court seeking an exception to the general rule.
The facts are as follows:
Dionisia Alorsabes owned a three hectare land in Dao, Capiz, denominated as Lot 3603. In 1934,
she sold a portion of the lot to Juanito Fuentes while the remainder was inherited by her children
Paz Dela Cruz, Rosela Dela Cruz, and Consorcia Arroja (an adopted child), and a grandson,
Francisco Abas, in representation of his deceased mother Margarita Dela Cruz. These four heirs
executed an Extra-Judicial Settlement with Sale dated February 4, 1964 wherein Consorcia sold
her share with an area of 6,694 square meters to spouses Balleriano Mayuga. On April 1, 1977,
Paz also sold her share to Honorato de los Santos. Later, another document entitled Extra-
Judicial Partition with Deed of Sale dated November 2, 1972 was uncovered wherein the heirs of
Dionisia purportedly adjudicated Lot 3603 among themselves and sold their shares to Francisco.
On January 9, 1978, Francisco executed a Deed of Sale over Lot 3603 in favor of Teodulfo
Sigaya. Thus, the title over Lot 3603 was cancelled and a new one was issued in the name of
Teodulfo, predecessor-in-interest of the petitioners herein.
1

On October 14, 1986, the petitioners, who are the widow and children of Teodulfo, filed Civil
Case Nos. V-5325, V-5326, V-5327 and V-5328 for recovery of possession and damages against
Diomer Mayuga, Honorato de los Santos, Sps. Jose Viva and Rosela Dela Cruz-Viva, and
Renato Distor,
2
respectively, before the Regional Trial Court (RTC) of Roxas City, Branch 16,
praying that respondents be ordered to vacate Lot 3603, and turn over the same to petitioners;
that petitioners right of ownership and possession over the property be confirmed and that
respondents be ordered to pay damages in the form of unrealized income starting 1980, plus
attorneys fees and costs.
3

Respondents in their answers with counterclaim averred that: the Deed of Sale executed by
Francisco in favor of Teodulfo and the title thereon are null and void for being based on a
fictitious Extra-Judicial Settlement with Sale; Rosela Dela Cruz-Viva and Paz Dela Cruz, who
are illiterates, were fraudulently made to sign as vendees in the Extra-Judicial Settlement with
Sale dated 1972, when Francisco represented that they were merely signing as witnesses to the
sale of Francisco of his share to Teodulfo. As counterclaim, they asked for attorneys fees and
damages.
4

Respondent Mayuga further asserted that he possesses his portion of the property by virtue of the
sale by Consorcia Arroja of her share to his parents, Sps. Balleriano Mayuga. Respondent de los
Santos meanwhile averred that Paz Dela Cruz sold her share to him in 1957. Respondents Rosela
Dela Cruz-Viva and her husband Jose Viva claimed that the portion of land occupied by them
pertains to Roselas share which she inherited from Dionisia, while respondent Renato Distor
claimed that his wife inherited said property from her father Juanito Fuentes, who in turn bought
the same from Dionisia during her lifetime.
5

The four cases were consolidated and on February 14, 1992, the trial court rendered its decision,
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered as follows:
1. Declaring the defendants Geomer (sic) Mayuga as the real and absolute owner of the portion
of land, containing an area of Six Thousand Six Hundred Ninety Four (6,694) square meters,
more [or] less, portion of Lot No. 3603, Dao Cadastre and subject matter in Civil Case No. 5325
indicated in the Commissioners Report (Exh."4") as Exh. "4-B";
2. Declaring the defendant Honorato de los Santos as the absolute owner of the portion of land
containing an area of Six Thousand Six Hundred Ninety Five (6,695) square meters more or less,
portion of lot No. 3603 Dao Cadastre, and subject matter in Civil Case No. 5326 indicated in the
Commissioners Report (Exh. "4") as Exh. "4-D";
3. Declaring the defendants spouses Jose Viva and Rosela dela Cruz as the absolute owners of
the portion of land containing an area of Six Thousand Six Hundred Ninety Four (6,694) square
meters, more or less, portion of Lot No. 3603, Dao Cadastre, and subject matter in Civil Case
No. 5327 indicated in the Commissioners Report (Exh. "4") as Exh. "4-C";
4. Declaring the defendant, Renato Distor, as the absolute owner of the portion of land
containing an area of Six Thousand Three Hundred Forty Four (6,344) square meters, more or
less, portion of Lot No. 3603, Dao Cadastre, and subject matter in Civil Case No. 5328 indicated
in the Commissioners Report (Exh. "4") as Exh. "4-E";
5. Declaring the plaintiffs as the absolute owners of the portion of land containing an area of
Seven Thousand Forty-Six (7,046) square meters, more or less, portion of Lot No. 3603, Dao
Cadastre, indicated in the Commissioners Report (Exh. "4") as Exh. "4-F";
6. Declaring Transfer Certificate of Title No. T-15630 of the Register of Deeds of Capiz as null
and void and should be cancelled;
7. Declaring that Deed of Sale, Exh. "C" as null and void except as affecting the portion with an
area of Seven Thousand Forty Six (7,046) square [meters] of Lot 3603 which portion had been
sold by Francisco Abas to the spouses Teodulfo Sigaya and Justina Cosipe;
8. Declaring that Extra-Judicial Partition with Deed of Sale as having been procured through
fraud and therefore not valid in so far as the sale of the shares of Paz de la Cruz and Priscilla de
la Cruz were concerned;
9. Condemning the plaintiffs to severally and jointly pay the following:
a) Unto Diomar Mayuga, defendant in Civil Case No. V-5325, P10,000.00 as attorneys fees and
litigation expenses;
b) Unto Honorato de los [Santos], defendant, in Civil Case No. V-5326, P10,000.00 as
[attoneys] fees and litigation expenses;
c) Unto the (sic) Jose Viva and Rosela de la Cruz, defendants in Civil Case No. V-5327,
P10,000.00 as [attorneys] fees and litigation expenses; and
d) Unto Renato Distor, defendant in Civil Case No. V-5328, P10,000.00 as [attorneys] fees and
litigation expenses; and
e) Dismissing Civil Case Nos. V-5325, V-5326, V-5327 and V-5328 with costs in each case
against the plaintiffs.
SO ORDERED.
6

The trial court explained that:
There is no question that the deed of sale of the portion bought by Jacinto Fuentes from Dionisia
Alorsabes and now possessed by defendants Renato Distor was a public instrument executed in
1934; and the portion occupied by defendant Diomer Mayuga is the portion bought by spouses
Florentina Viva and Balleriano Mayuga from Consorcia Mayuga as her share in lot 3603;
defendant Honorato de los Santos is in possession of the portion which he bought from Paz de la
Cruz, in 1977, although he had been possessing this portion since May 15, 1957 by virtue of a
private document of mortgage. (citations omitted)

In these cases, the court believes and so holds that the evidence of actual occupation and
possession of the defendants of the portions of Lot 3603, to each of them appertaining had been
satisfactorily proven. The defendants were not able to file any opposition to the reconstitution of
title solely because they were not notified actually. They could not also be considered to have
constructive notice because there was no publication of the Notice of Hearing of the petition.
From the evidence taken together by its totality of evidence tilts more in favor of the defendants
and against the plaintiffs.
7

Not satisfied with the decision, petitioners went to the CA which affirmed, in its Decision
promulgated on April 19, 2000, the ruling of the RTC except as to the award of attorneys fees
and expenses of litigation.
8
It then disposed of the appeal as follows:
WHEREFORE, premises considered, the decision of the court a quo is hereby AFFIRMED, with
the modification that the awards of attorneys fees and expenses of litigation to the defendants-
appellants are hereby eliminated.
SO ORDERED.
9

The CA found:
Looking at the evidence presented, the trial court considered the defendants-appellees as having
proven the actual possession and validity of the possession of the lots in question. Against that,
the plaintiffs- appellants put forward the TCT held by Teodulfo Sigaya, whose validity rests
upon the ability of Francisco Abas to sell Lot 3603, which the TCT now covers, and that the sale
to Teodulfo Sigaya was registered. Prior registration would protect an innocent purchaser in
good faith and for value. But the plaintiffs-appellants cannot now claim the (sic) Teodulfo
Sigaya was an innocent purchaser for value. The trial court gave more credence to the testimony
of defendants-appellees and their witnesses that they had been in possession for a longer period
of time, even before the sale to Teodulfo Sigaya in 1978. This issue of credibility requires a
determination that is concededly best left to the trial court with its unique position of having been
enabled to observe that elusive and incommunicable evidence of the deportment of witnesses on
the stand. Findings of the trial court, following that assessment, must be given the highest degree
of respect absent compelling reasons to conclude otherwise. Teodolfo (sic) Sigaya examined the
land in question, and did so as a reasonably prudent man buying real property should. As the
defendants-appellees were in possession before him, he should have questioned such and delved
deeper into the title and right of Francisco Abas to sell the lot. Not having done so, he is not an
innocent purchaser in good faith, and not entitled to protection under the Torrens system.
It is clear that the title of Francisco Abas was obtained through fraud, thus further damaging the
case of the plaintiffs-appellants, whose predecessor-in-interest should have probed beyond the
title after examining the lot to be sold him. As held by the Supreme Court:
"xxx Having bought the land registered under the Torrens system from their vendors who
procured title thereto by means of fraud, petitioners cannot invoke the indefeasibility of a
certificate of title against the private respondent to the extent of her interest. The Torrens system
of land registration should not be used as a means to perpetuate fraud against the rightful owner
of real property. Registration to be effective, must be made in good faith. (Palanca vs. Registry
of Lands, 43 Phil. 149 [1922]). Thus, it is a settled rule that the defense of indefeasibility of a
certificate of title does not extend to a transferee who takes it with notice of the flaws in his
transferors title. If at all, the petitioners only acquire the right which their vendors then had.
(Ramos et al. vs. Direno, et al., 50 Phil. 786 [1927]).
The plaintiffs-appellants contentions as to their ownership of the lot in question must then fail in
the face of the principles laid down in jurisprudence.
10

Petitioners now come before this Court on a petition for review under Rule 45 of the Rules of
Court, raising the sole issue of: WHETHER A PERSON DEALING WITH A REGISTERED
LAND CAN SAFELY RELY ON THE CORRECTNESS OF THE CERTIFICATE OF TITLE
ISSUED THEREFOR.
11

Petitioners argue that: Teodulfo, their predecessor-in-interest, purchased the subject property
from Francisco, who was in possession of the Original Certificate of Title (OCT) No. RO-5841
(17205), a reconstituted copy of the original, in the name of Dionisia and of the Extra-Judicial
Partition with Deed of Sale, dated November 2, 1972; relying on these instruments and after
inspecting the land and seeing that nobody occupied the same, Teodulfo bought the land and had
the title subsequently issued in his name; the fact that Teodulfo examined the lot does not give
rise to the conclusion that he is not an innocent purchaser in good faith as adverted to by the CA;
if indeed Abas committed fraud in acquiring said lot, Teodulfo is also a victim of
misrepresentation; there was no evidence that Teodulfo and Francisco connived to defraud
respondents; Teodulfo did not have actual knowledge of facts and circumstances that would
impel him to make further inquiry; and as purchaser in good faith, Teodulfo enjoys the protection
of the Torrens system.
12

Respondents in their Comment meanwhile contend that: the petition failed to comply with the
requirements of Rule 45 of the Rules of Court as respondents were not served a copy of the
motion for extension of time; the issue in the present petition does not involve a question of law
but entails only a review of the facts which cannot be done by this Court; in any case, Teodulfo
relied on a title that is not in the name of his transferor, Francisco, but on its registered owner,
Dionisia, who was already deceased at the time of the supposed sale to Teodulfo; since the right
of the supposed transferor was not shown in the title but merely on a Deed of Extra-Judicial
Settlement with Sale, which turned out irregular, it was incumbent upon Teodulfo to examine
further the extent of the right of the supposed transferor and why there were a lot of occupants in
the land in dispute; his failure to do so operates against his favor and those of his successors-in-
interest.
13

The parties filed their respective memoranda.
Petitioners, in their Memorandum, further aver that: Teodulfo is a purchaser in good faith having
relied on OCT No. RO-5841 (17205) in the name of Dionisia and the Extra-Judicial Partition
with Deed of Sale dated November 2, 1972 which shows that Francisco is the absolute owner of
the lot; four years had elapsed from the date that the OCT was reconstituted and the time
Teodulfo bought the property from Francisco and yet none of the respondents had registered
their right in the property; the Extra-Judicial Settlement of Lot 3603 of the Cadastral Survey of
Dao, Capiz with Sale dated February 4, 1964, on which respondents base their claims, was never
registered with the Registry of Deeds; not having been registered, this will not affect the right of
third persons who had no knowledge thereof; there was no circumstance that would put Teodulfo
on his guard and in cases of double sales of real property, the ownership shall be awarded to the
vendee who first registers the sale in good faith; Teodulfo is a resident of Zarraga, Capiz which
is more than 50 kilometers from Dao, Capiz, thus Teodulfo could not have actual knowledge of
facts and circumstances that would impel him to make further inquiry; the land was merely
pointed to him by Francisco and from what he had seen, there was nothing that would arouse his
suspicion.
14

Meanwhile, respondents, in their Memorandum, contend that they were in possession of the
property before Teodulfo; that Teodulfo should have probed deeper into the right of Francisco to
sell said lot, and not having done so, he cannot be considered as a purchaser in good faith; and
that the issue of credibility requires a determination that is best left to the trial court with its
unique position of being able to observe the elusive and incommunicable evidence of the
deportment of witnesses on the stand.
15

Petitioners claim that they are raising before this Court the legal issue of: Whether a person
dealing with a registered land can safely rely on the correctness of the Certificate of Title issued
therefor.
16

Contrary to what petitioners would like this Court to believe, the resolution of the present
petition hinges principally on the determination of a question of fact and not one of law.
Both parties concede that a purchaser in good faith can safely rely on the four corners of a
Torrens Title. The disagreement lies, however, as to whether or not Teodulfo should be
considered as a purchaser in good faith and thus enjoy the protection of the Torrens system.
Indeed, this question is one of fact and not one of law. There is a question of fact when the doubt
or difference arises as to the truth or the falsity of the statement of facts while a question of law
exists when there is doubt or controversy as to what the law is on a certain state of facts.
17

The determination of whether Teodulfo is a buyer in good faith is a factual issue which is
generally outside the province of this Court to determine in a petition for review.
18
If for this
matter alone, the petition should be dismissed because the remedy of appeal by certiorari under
Rule 45 of the Rules of Court contemplates only questions of law.
19
Indeed, this Court is not a
trier of facts,
20
and the factual findings of the CA are binding and conclusive upon this Court,
unless:
(1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the
inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is
based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) the Court of
Appeals went beyond the issues of the case and its findings are contrary to the admissions of
both appellant and appellees; (7) the findings of fact of the Court of Appeals are contrary to
those of the trial court; (8) said findings of fact are conclusions without citation of specific
evidence on which they are based; (9) 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) the findings of
fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted
by the evidence on record.
21

The binding effect of the CAs factual findings on this Court applies with greater force when
both the trial court and the CA are in complete agreement on their factual findings.
22
It is also
settled that absent any circumstance requiring the overturning of the factual conclusion made by
the trial court, particularly if affirmed by the CA, the Court necessarily upholds such findings of
fact.
23

In this case, petitioners failed to show that they fall under any of the exceptional circumstances.
In reaching its conclusion, the trial court gave weight to the testimonies of Engineer Jesus
Pimentel, a geodetic engineer commissioned by the court to conduct a survey of the land, who
found that respondents acquired their respective lots through sale or inheritance;
24
of Rolly
Daniel, a barangay official who lived 50 meters from said lot, who said that respondents had
been in possession of their respective lots even before 1960 and that Teodulfo and Francisco
asked him to accompany them sometime between 1976 to 1978 as they went to the different
houses of respondents because Teodulfo was going to buy Franciscos share;
25
of Ursula Abas,
wife of Francisco, who said that Francisco committed suicide after it was discovered that he
fraudulently sold the portion belonging to his aunts to Teodulfo by making them sign a prepared
document on the pretext that they were only signing as witnesses to the sale of his share, when in
fact said document also sold their aunts shares;
26
as well as the testimonies of Prudencio
Fuentes, son of Jacinto and brother-in-law of respondent Renato Distor; Lourdes Distor, wife of
Renato; Florentina Mayuga, mother of Diomer; and respondents Renato Distor, Honorato de los
Santos, Rosela Dela Cruz-Viva who asserted that they have been in possession of said lots before
the purported sale to Teodulfo.
27

Petitioners, meanwhile, could only present Fely Sigaya and Cesar de los Santos. Fely testified
that: the land was acquired by her father from Francisco by virtue of a Deed of Sale dated
January 9, 1978 and that Francisco became the owner of the property by virtue of an Extra-
Judicial Partition with Deed of Sale; when her father bought the property, he showed the
documents to a lawyer who said that the same were in order; when her father visited the
property, he found no occupants thereat; her father also filed a petition in 1974 for reconstitution
of title of Lot 3603 thus a reconstituted title was issued in the name of Dionisia Alorsabes.
28

Cesar, petitioners caretaker meanwhile, merely corroborated Felys testimony.
29

This Court has held that the burden of proving the status of a purchaser in good faith lies upon
one who asserts that status and this onus probandi cannot be discharged my mere invocation of
the legal presumption
of good faith.
30

In this case, the Court finds that petitioners have failed to discharge such burden.
A purchaser in good faith is one who buys property without notice that some other person has a
right to or interest in such property and pays its fair price before he has notice of the adverse
claims and interest of another person in the same property. The honesty of intention which
constitutes good faith implies a freedom from knowledge of circumstances which ought to put a
person on inquiry.
31
As enunciated in Lim vs. Chuatoco
32

good faith consists in the possessor's belief that the person from whom he received the thing
was the owner of the same and could convey his title. Good faith, while it is always to be
presumed in the absence of proof to the contrary, requires a well founded belief that the person
from whom title was received was himself the owner of the land, with the right to convey it.
There is good faith where there is an honest intention to abstain from taking any unconscientious
advantage from another. Otherwise stated, good faith is the opposite of fraud and it refers to the
state of mind which is manifested by the acts of the individual concerned.
33

Indeed, it is a well-settled rule that every person dealing with registered land may safely rely on
the correctness of the certificate of title issued therefor and the law will in no way oblige him to
go beyond the certificate to determine the condition of the property. Where there is nothing in
the certificate of title to indicate any cloud or vice in the ownership of the property, or any
encumbrance thereon, the purchaser is not required to explore further than what the Torrens Title
upon its face indicates in quest for any hidden defects or inchoate right that may subsequently
defeat his right thereto.
34

However, this rule shall not apply when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such inquiry or when the
purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to
induce a reasonably prudent man to inquire into the status of the title of the property in
litigation.
35

In this case, preponderance of evidence shows that respondents had been in actual possession of
their respective portions even prior to 1960. Rolly Daniel, which the trial court considered as a
credible witness, testified that not only were respondents in actual possession of their respective
portions prior to 1960, he even accompanied Francisco and Teodulfo to the different houses of
respondents sometime between 1976 to 1978 as Teodulfo was going to buy the portion of
Francisco.
36
This Court cannot give credence therefore to the claim of petitioners that Teodulfo
found no occupants in the property.
There being occupants of the property, the Court cannot ascribe good faith to Teodulfo who has
not shown any diligence in protecting his rights.
As the Court has stated:
A purchaser cannot simply close his eyes to facts which should put a reasonable man on his
guard and then claim that he acted in good faith under the belief that there was no defect in the
title of his vendor. His mere refusal to believe that such defect exists or his willful closing of his
eyes to the possibility of the existence of a defect in his vendors title will not make him an
innocent purchaser for value if it later develops that the title was in fact defective, and it
appears that he would have notice of the defect had he acted with that measure of
precaution which may reasonably be required of a prudent man in a similar situation.
37

(Emphasis supplied)
Petitioners also argue that the rule on double sale of real property should apply in this case, and
since they are the first to register the sale in good faith, they are entitled to be awarded ownership
thereof.
The Court disagrees. Apart from the fact that Teodulfo is not a purchaser in good faith, the law
on double sales as provided in Art. 1544 of the Civil Code
38
contemplates a situation where a
single vendor sold one and the same immovable property to two or more buyers. For the rule to
apply, it is necessary that the conveyance must have been made by a party who has an existing
right in the thing and the power to dispose it. The rule cannot be invoked where the two different
contracts of sale are made by two different persons, one of them not being the owner of the
property sold.
39
In this case, respondents derive their right over their respective portions either
through inheritance or sale from Dionisia while petitioners invoke their right from the sale of
the land from Francisco. Clearly, the law on double sales does not apply here.
WHEREFORE, the petition is DENIED for lack of merit and the decision of the Court of
Appeals is AFFIRMED.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
THIRD DIVISION
G.R. No. 125254 October 11, 2005
SPOUSES SAMUEL ULEP (Deceased) and SUSANA REPOGIA-ULEP; SAMUEL ULEP
is substituted by his surviving spouses SUSANA REPOGIA-ULEP and his children:
SALLY, RENATO, RODELIO and RICHARD, all surnamed ULEP, and VALENTINA
ULEP, Petitioners,
vs.
HONORABLE COURT OF APPEALS, former Eight Division, IGLESIA NI CRISTO,
MAXIMA RODICO and spouses WARLITO PARINGIT and ENCARNACION
PARINGIT-GANTE, Respondents.
D E C I S I O N
GARCIA, J .:
Under consideration is this petition for review under Rule 45 of the Rules of Court seeking the
reversal and setting aside of the Decision
1
dated August 15, 1995 of the Court of Appeals (CA)
in CA-G.R. CV. No. 39333, and its Resolution
2
dated April 25, 1996, denying petitioners motion
for reconsideration.
The assailed decision modified the June 17, 1991 decision
3
of the Regional Trial Court at
Urdaneta, Pangasinan, Branch 48, in its Civil Case No. U-3929, an action for Quieting of Title,
Reconveyance and Declaration of Nullity of Titles and Subdivision Plan, with Damages, thereat
commenced by the petitioners against the herein private respondents.
The factual antecedents:
Principal petitioners SAMUEL ULEP, now deceased and substituted by his heirs, and
VALENTINA ULEP are brother-and-sister. Together with their siblings, namely, Atinedoro
Ulep and Rosita Ulep, they are children of the late Valentin Ulep.
During his lifetime, the father Valentin Ulep owned a parcel of land, identified as Lot 840 with
an area of 3,270 square meters, located at Asingan, Pangasinan.
Sometime in 1950, the older Ulep sold the one-half (1/2) eastern portion of Lot 840, comprising
an area of 1,635 square meters, to respondent Maxima Rodico, while the remaining one-half
(1/2) western portion with the same area, to his son Atinedoro Ulep married to Beatriz Ulep,
and to his other daughter Valentina Ulep.
On June 5, 1952, all the transferees of Lot 840, namely, Maxima Rodico (for the eastern portion)
and Atinedoro Ulep and Valentina Ulep (for the western portion), were jointly issued in their
names Transfer Certificate of Title No. 12525.
On June 18, 1971, Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep sold the one-half
(1/2) portion of the area sold to them by their father to their brother Samuel Ulep and the latters
wife, Susana Repogia-Ulep. The portion sold to Samuel and Susana has an area of 817.5 square
meters. The document of sale was registered with the Office of the Registry of Deeds of
Pangasinan on February 20, 1973.
Later, an area of 507.5 square meters of the western portion of Lot 840 was sold by the spouses
Atinedoro Ulep and Beatriz Ulep to respondent Warlito Paringit and the latters spouse
Encarnacion Gante, who were then issued TCT No. 12688 on September 23, 1975.
Evidently, all the foregoing transactions were done and effected without an actual ground
partition or formal subdivision of Lot 840.
In June 1977, respondent Iglesia ni Cristo (INC) begun constructing its chapel on Lot 840. In
the process, INC encroached portions thereof allegedly pertaining to petitioners and blocked
their pathways.
This prompted Samuel Ulep and sister Rosita Ulep to make inquiries with the Office of the
Register of Deeds of Pangasinan. To their consternation, they discovered from the records of said
office that a deed of sale bearing date December 21, 1954, was
purportedly executed by their brother Atinedoro Ulep his, wife Beatriz and their sister Valentina
Ulep in favor of INC over a portion of 620 square meters, more or less, of Lot 840, and that on
the basis of said deed, INC was issued TCT No. 12689 on September 23, 1975
4
over the portion
allegedly sold to it by the three. Samuel was further shocked to find out that on July 9, 1975, an
affidavit of subdivision was executed by respondents INC, Maxima Rodico and the spouses
Warlito Paringit and Encarnation Gante, on the basis of which affidavit Lot 840 was
subdivided into four (4) lots, namely: (1) Lot 840-A, covered by TCT No. 16205 in his
(Samuels) name that of his wife, Susana Repogia-Ulep; (2) Lot 840-B, covered by TCT No.
12688 in the names of Warlito Paringit and the latters wife Encarnacion Gante; (3) Lot-C 840-
C, covered by TCT No. 12689 in the name of INC; and (4) Lot 840-D, covered by TCT No.
12690
5
in the name of Maxima Rodico.
Such was the state of things when, on March 29, 1983, in the Regional Trial Court at
Pangasinan, the spouses Samuel Ulep and Susana Repogia-Ulep, the spouses Atinedoro Ulep
and Beatriz Ulep and their sister Valentina Ulep, filed their complaint for Quieting of Title,
Reconveyance and Declaration of Nullity of Title and Subdivision Plan with Damages against
respondents INC, Maxima Rodico and the spouses Warlito Paringit and Encarnacion Gante.
In their complaint, docketed as Civil Case No. U-3929, the Uleps basically alleged that they and
respondents are co-owners of Lot 840 in the following proportions:
1,635 square meters to Maxima Rodico;
817.5 square meters to spouses Samuel Ulep and Susana Repogia-Ulep;
507.5 square meters to spouses Warlito Paringit and Encarnacion Gante;
210 square meters to spouses Atinedoro Ulep and Beatriz Ulep, and Valentina Ulep;
100 square meters to Iglesia Ni Cristo.
6

In the same complaint, the spouses Atinedoro Ulep and Beatriz Ulep and their sister Valentina
Ulep denied having executed a deed of sale in favor of INC over a portion of 620 square meters
of Lot 840, claiming that their signatures appearing on the deed were forged. At the most, so they
claimed, what they sold to INC was only 100 square meters and not 620 square meters.
Petitioners Samuel Ulep and Valentina Ulep, along with the spouses Atinedoro Ulep and Beatriz
Ulep, likewise averred that the subject lot was subdivided without their knowledge and consent.
In their common "Answer," respondents Maxima Rodico and the spouses Warlito Paringit and
Encarnacion Gante maintained that the segregation of their shares was known to petit ioners and
that it was done with the consent of Samuel Ulep himself.
For its part, INC, in its separate "Answer", asserted that it purchased from the spouses Atinedoro
Ulep and Beatriz Ulep and their sister Valentina Ulep the portion containing 620 square meters
of Lot 840 on December 21, 1954, as evidenced by a deed of sale duly registered with the
Registry of Deeds of Pangasinan.
During the pendency of the proceedings in Civil Case No. U-3929, Atinedoro Ulep died. Less
than a month thereafter, or more specifically on November 16, 1987, Atinedoros widow Beatriz
Ulep and their children executed a deed of renunciation, thereunder waiving all their rights and
interests over Lot 840 and relinquishing the same in favor of the spouses Samuel Ulep and
Susana Repogia-Ulep.
7

Eventually, in a decision dated June 17, 1991, the trial court rendered judgment, as follows:
There being no res adjudicata in this case as already decided by the Court of Appeals, this Court
renders judgment as borne out by the evidence presented in favor of the [petitioners] and against
the [respondents], ordering the latter and all persons claiming title under them to vacate and
surrender a portion of 520 sq. m. of the land in question in favor of the [petitioners] in such a
way that [respondent] INC owns only 100 sq. m.; declaring and annulling the following
documents;
1. Deed of sale dated December 21, 1954 allegedly executed by plaintiffs-spouses Atinedoro
Ulep and Beatriz Aguilar and Valentina Ulep in favor of [respondent] INC, (Exh. A);
2. TCT No. 12689 issued to Iglesia Ni Cristo (Exh. K-1);
3. The affidavit of confirmation of subdivision, (Exh. K and Exh. 2); and
4. TCT No. 12605 (Exh. K-4) and a new TCT No. be issued to include the original 817.5 sq. m.
in favor of Samuel Ulep and Susan Repogia;
Declaring Lot No. 840 to be owned by the following parties in the following proportions:
(a) 1,635 sq. m. eastern portion to [respondent] Maxima Rodico already covered by TCT No.
12690 (Exh. K-3);
(b) 817.5 sq. m. to [petitioners] Samuel Ulep and Susana Repogia and a new TCT to be issued;
(c) of 210 sq. m. to [petitioners] Samuel Ulep and Susana Repogia; and the other one-half or
105 sq. m. to [petitioner] Valentina Ulep in accordance with Exh. "C," a deed of renunciation
executed by the heirs of Atinedoro Ulep who died in 1987 and his surviving spouse Beatriz
Aguilar and a new Transfer Certificate of Title be issued;
(d) 507.5 sq. m. to [respondents] Warlito Paringit and Encarnacion Gante, already covered by
TCT No. 12688 (Exh. K-2);
(e) 100 sq. m. to [respondent] Iglesia Ni Cristo; and a new title to be issued;
and ordering the Register of Deeds of Pangasinan, to issue new Transfer Certificate of Title in
favor of [petitioners] Samuel Ulep and Susana Repogia covering 817.5 sq. m.; and another new
Transfer Certificate of Title covering 105 sq. m. in favor of Valentina Ulep and the other of
210 sq. m. or 105 sq. m. in favor of Samuel Ulep and Susana Repogia pursuant to Exh. "C"; and
still another new Transfer Certificate of Title covering 100 sq. m. in favor of Iglesia Ni Cristo
and for the latter to pay the costs.
SO ORDERED.
8
(Words in bracket ours).
Dissatisfied, respondent INC interposed an appeal to the Court of Appeals (CA), which appellate
recourse was thereat docketed as CA-G.R. CV No. 39333. For their part, respondents Maxima
Rodico and the spouses Warlito Paringit and Encarnacion Gante opted not to appeal.
As stated at the threshold hereof, the appellate court, in its Decision dated August 15, 1995,
modified that of the trial court, thus:
WHEREFORE, premises considered, the appealed judgment is MODIFIED as above indicated.
Accordingly, the decretal portion of said judgment should read as follows:
"1. The Deed of Absolute Sale dated December 21, 1954 executed by plaintiffs-spouses
Atinedoro Ulep and Beatriz Aguilar and Valentina Ulep in favor of [respondent] INC is declared
valid (Exh. K-1).
"2. Lot No. 840 is declared as owned by the following parties in the following proportions:
(f) 1,635 sq. m. eastern portion to [respondent] Maxima Rodico already covered by TCT No.
12690 (Exh. K-3);
(g) 297.5 sq. m. to [petitioner]-spouses Samuel Ulep and Susana Repogia;
(h) of 210 sq. m. to [petitioner]-spouses Samuel Ulep and Susana Repogia; and the other one-
half or 105 sq. m. to Valentina Ulep in accordance with Exh. "C," a deed of renunciation
executed by the heirs of Atinedoro Ulep who died in 1987 and his surviving spouse Beatriz
Aguilar;
(i) 507.5 sq. m. to [respondents] Warlito Paringit and Encarnacion Gante, already covered by
TCT No. 12688 (Exh. K-2);
(j) 620 sq. m. to [respondent] INC, already covered by TCT No. 12689 (Exh. K-1).
"3. TCT No. 16205 registered in the names of [petitioner-spouses] Samuel and Susan Ulep (Exh.
K-4) is annulled.
"The Register of Deeds of Pangasinan is ordered to issue a new TCT in favor of [petitioner-
spouses] Samuel Ulep and Susana Repogia covering only 297.5 sq. m.; and another new TCT
covering 105 sq. m. in favor of Valentina Ulep and the other of 210 sq. m. or 105 sq. m. in
favor of [petitioner-spouses] Samuel Ulep and Susana Repogia pursuant to Exh. "C". No Costs."
SO ORDERED.
9
(Words in brackets ours).
In so ruling, the Court of Appeals explained:
There is no adequate evidentiary demonstration in the record that the deed of sale (dated
December 21, 1954 executed by Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep in
favor of INC over the 620 square-meter area of the western portion of Lot 840) is void and
inefficacious on account of forgery.
As a public instrument which enjoys the presumption of regularity, clear and convincing
evidence is necessary to contradict the terms thereof.
xxx xxx xxx
In the present case, the biased, interested testimony of [petitioners] cannot overcome the
evidentiary force of the deed of sale which was acknowledged before a notary public, and hence,
a public document.
xxx xxx xxx
The sale of 620 sq. m. in favor of [respondent] INC executed by vendors Atinedoro and
Valentina Ulep is dated December 21, 1954, while the sale of 817.50 sq. meters by the same
vendors to [petitioners] Samuel and Susana Ulep was made on June 18, 1971. [Respondent] INC
registered its 620 sq. meters on December 21, 1954 by reason of which TCT No. 12689 was
issued in its name. [Petitioner-spouses] Samuel and Susana Ulep registered the land sold to them
on February 9, 1977 and TCT No. 16205 was issued in their names. Evidently, applying Article
1544, [petitioner] INCs ownership and title over the 620 sq. meters prevail. The land consisting
of 620 sq. meters was first sold to INC and its title was registered first. Thus, the same vendors
could have sold only the remaining 297.50 sq. meters of Lot 840 to [petitioner-spouses] Samuel
and Susana Ulep and TCT No. 16205 issued in the latters name for 817.50 sq. meters is null and
void. There is no evidence that [respondent] INC is guilty of bad faith in acquiring the 620 sq.
meters portion of Lot 840. (Words in bracket ours).
Their motion for reconsideration having been denied by the same court in its equally challenged
Resolution of April 25, 1996, petitioners are now with us via the present recourse, faulting the
appellate court as follows:
I.
THE HONORABLE COURT OF APPEALS ERRED IN NOT AFFIRMING THE DECISION
DATED JUNE 17, 1991 (ANNEX A) OF THE TRIAL COURT, REGIONAL TRIAL COURT,
FIRST JUDICIAL REGION, BRANCH 48, URDANETA PANGASINAN IN CIVIL CASE
NO. 3929.
II.
AND IN THE ALTERNATIVE, THE HONORABLE COURT OF APPEALS ERRED IN NOT
AWARDING PETITIONERS SAMUEL ULEP AND SUSANA REPOGIA THE AREA OF
817.5 SQUARE METERS AND IN NOT REDUCING THE SHARE OF PRIVATE
RESPONDENTS, SPOUSES WARLITO PARINGIT AND ENCARNACION GANTE FROM
507.5 SQUARE METERS TO 197 SQUARE METERS.
10

Petitioners initially submit that the factual findings of the trial court should not have been
disturbed by the appellate court, the same being entitled to great weight and respect.
We have consistently held that factual findings of the Court of Appeals and other lower courts
are, as a rule, final and conclusive upon this Court, except, inter alia, where their findings are at
odd with each other,
11
as here.
Simply put, the issue before us is whether or not the Court of Appeals committed reversible error
in modifying the decision of the trial court.
Evidently, the issue necessitates an inquiry into the facts. While, as a rule, factual issues are not
within the province of this Court, nonetheless, in light of the conflicting factual findings of the
two (2) courts below, an examination of the facts obtaining in this case is in order.
Petitioners contend that respondent INC is entitled to only 100 square meters and not 620 square
meters of the western portion of Lot 840. To them, the deed of sale conveying 620 square meters
thereof to INC was void as the signatures of the vendors therein, namely, the spouses Atinedoro
Ulep and Beatriz Ulep and Valentina Ulep, were forged. They submit that what should instead be
upheld was the sale of 817.5 square meters in their favor by the same vendors.
As the Court sees it, the present controversy is a classic case of double sale. On December 21,
1954, Atinedoro Ulep, his wife Beatriz Ulep and sister Valentina Ulep sold the disputed area
(620 square-meter) of Lot 840 to INC. Subsequently, on January 18, 1971, a second sale was
executed by the same vendors in favor of spouses Samuel Ulep and Susana Ulep. The Court is,
therefore, called upon to determine which of the two groups of buyers has a better right to the
area in question.
Article 1544 of the Civil Code provides the statutory solution:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.
Otherwise stated, the law provides that a double sale of immovable transfers ownership to (1) the
first registrant in good faith; (2) then, the first possessor in good faith; and (3) finally, the buyer
who in good faith presents the oldest title.
12

Jurisprudence teaches that the governing principle is primus tempore, potior jure (first in time,
stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first
buyers rights except where the second buyer registers in good faith the second sale ahead of the
first, as provided by the aforequoted provision of the Civil Code. Such knowledge of the first
buyer does not bar him from availing of his rights under the law, among them to register first his
purchase as against the second buyer. In converso, knowledge gained by the second buyer of the
first sale defeats his rights even if he is first to register the second sale, since such knowledge
taints his prior registration with bad faith. This is the price exacted by the same provision of the
Civil Code for the second buyer to be able to displace the first buyer; before the second buyer
can obtain priority over the first, he must show that he acted in good faith throughout (i.e.
ignorance of the first sale and of the first buyers rights) from the time of acquisition until the
title is transferred to him by registration, or, failing registration, by delivery of possession.
13

Per records, the sale of the disputed 620 square-meter portion of Lot 840 to respondent INC was
made on December 21, 1954 and registered with the Registry of Deeds of Pangasinan on
January 5, 1955. In fact, INC was issued a title over the same portion on September 23, 1975.
On the other hand, the conveyance to the spouses Samuel Ulep and Susana Repogia-Ulep
happened on January 18, 1971 and the spouses registered their document of conveyance only on
February 22, 1973.
14

Clearly, not only was respondent INC the first buyer of the disputed area. It was also the first to
register the sale in its favor long before petitioners Samuels and Susanas intrusion as second
buyers. Although Samuel and Susana thereafter registered the sale made to them, they did so
only after 18 years from the time INC caused the registration of its own document of sale.
"Registration" means any entry made in the books of the Registry which records solemnly and
permanently the right of ownership and other real rights.
15
However, mere registration is not
sufficient. Good faith must concur with registration, else registration becomes an exercise in
futility.
16
In the instant case, the registration made by respondent INC of its deed of sale more
than satisfies this requirement. The same thing cannot be said of petitioners Samuel Ulep and
Susana Ulep. Said petitioners, by their own admission, were aware that there existed an
agreement between INC and vendors Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep
involving a portion of 100 square meters of Lot 840. Knowledge of such transaction should have
put the spouses Samuel Ulep and Susana Ulep upon such inquiry or investigation as might be
necessary to acquaint them with the possible defects in the title of their vendors. They should
have acted with that measure of precaution which may reasonably be required of a prudent man
in a similar situation. After all, good faith, or the lack of it, is, in the last analysis, a question of
intention. But in ascertaining the intention by which one is actuated on a given occasion, courts
are necessarily controlled by the evidence as to the conduct and outward acts by which the
inward motive may, with safety, be determined. So it is that the honesty of intention, the
honest lawful intent, which constitutes good faith implies a freedom from knowledge and
circumstances which ought to put a person on inquiry.
17
Hence, proof of such knowledge
overcomes the presumption of good faith.
Here, the spouses Samuel Ulep and Susana Ulep were fully aware, or could have been, if they
had chosen to inquire, of the rights of INC under the deed of sale duly annotated on the common
title of the spouses Atinedoro Ulep and Beatriz Ulep and Valentina Ulep. Verily, the sale to INC
should prevail over the sale made to spouses Samuel and Susana because INC was the first
registrant in good faith.
Petitioners allegation of forgery relative to the deed of sale executed on December 21, 1954 by
the spouses Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep over the 620 square-
meter portion of Lot 840 cannot be sustained. As a rule, forgery cannot be presumed and must be
proved by clear, positive and convincing evidence, the burden for which lies on the party
alleging it. The fact of forgery can only be established by a comparison between the alleged
forged signature and the authentic and genuine signature of the person whose signature is
theorized to have been forged.
18

Here, petitioners claim of forgery is unsupported by any substantial evidence other than their
own self-serving testimonies. As it were, they failed to present handwriting experts and other
persons familiar with the handwriting of the spouses Atinedoro Ulep, his wife Beatriz and sister
Valentina Ulep that would show that their signatures appearing in the questioned deed of sale in
favor of respondent INC were forged. Due to the technicality of the procedure involved in the
examination of forged documents, the expertise of questioned document examiners is usually
helpful. These handwriting experts can help determine fundamental, significant differences in
writing characteristics between the questioned and the standard or sample specimen signatures,
as well as the movement and manner of execution strokes.
Petitioners insist that the conveyance of only 100 square meters to INC was in fact evidenced by
a deed of sale notarized by a certain Atty. Benjamin Fernandez.
19
However, they sorely failed to
produce in court the said alleged deed of sale. They could have, at the very least, presented Atty.
Fernandez to prove the existence of that deed, but they did not. The only plausible conclusion is
that no such deed exists.
On the other hand, to bolster its claim of ownership, respondent INC presented the December 21,
1954 deed of sale executed in its favor by the spouses Atinedoro and Beatriz Ulep and Valentina
Ulep over a portion of 620 square meters of Lot 840. To be sure, INCs deed of sale was duly
notarized by Atty. Bernabe Salcedo Calimlim.
20
Generally, a notarized document carries the
evidentiary weight conferred upon it with respect to its due execution, and documents
acknowledged before a notary public have in their favor the presumption of regularity.
21
Thus,
the notarized deed of sale executed on December 21, 1954 by Atinedoro Ulep, his wife Beatriz
and sister Valentina Ulep over the contested area in favor of respondent INC deserves full
credence and is valid and enforceable in the absence, as here, of overwhelming evidence to the
contrary.
In a last-ditch but futile attempt to persuade the Court, petitioners alternatively pray that INCs
portion of 620 square meters of Lot 840, assuming that INC is entitled to it, should be taken from
the western portion of the same lot sold to respondent spouses Warlito Paringit and Encarnacion
Gante, and not from them. To petitioners, the share of the spouses Warlito and Encarnacion
should accordingly be reduced from 507.5 square meters to only 197 square meters.
We note, however, that petitioners never raised before the trial court nor before the appellate
court the issue of Warlitos and Encarnacions entitlement to 507.5 square meters. Quite the
contrary, petitioners even alleged in their complaint that the spouses Warlito Paringit and
Encarnacion Gante are owners of 507.5 square meters of Lot 840. They never questioned the
spouses ownership of said portion. This issue was only posed by petitioners in the instant
petition before this Court. It is certainly too late for them to raise said issue for the first time at
this late stage of the proceedings.
Points of law, theories, issues and arguments not brought to the attention of the lower court need
not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for
the first time on appeal. Basic considerations of fair play, justice and due process underlie the
rule. It would be unfair to the adverse party who would have no opportunity to present evidence
in contra to the new theory, which it could have done had it been aware of it at the time of the
hearing before the trial court.
22

Of course, this rule admits of certain exceptions. For one, issues of lack of jurisdiction, though
not raised below, may be considered by the reviewing court as they may be raised at any stage.
For another, the reviewing court may also consider an issue not properly raised during trial when
there is plain error. Likewise, it may entertain such arguments when there are jurisprudential
developments affecting the issues, or when the issues raised present a matter of public policy.
23

Unfortunately for petitioners, however, none of these exceptions exists in this case. It is thus too
late in the day for petitioners to raise in this recourse the sale made by the spouses Atinedoro
Ulep and Beatriz Ulep of the 507.5 square-meter area of Lot 840 to the spouses Warlito Paringit
and Encarnacion Gante. To allow petitioners to do so would be utterly unfair to the latter.
WHEREFORE, the petition is DENIED and the assailed decision and resolution of the Court of
Appeals AFFIRMED in toto.
Costs against petitioners.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 123935 December 14, 2001
LEONCIO and ENRIQUETA, both surnamed BARRERA, petitioners,
vs.
COURT OF APPEALS and ROSENDO C. PALABASAN, respondents.
PARDO, J .:
The Case
In this petition for certiorari,
1
petitioners seek to annul the decision of the Court of Appeals
2

affirming the decision of the Regional Trial Court,
3
Makati, Branch 66, as well as its resolution
4

denying reconsideration thereof.
The Facts
Azalia Salome (Salome) owned a house and lot located at No. 2641 Bonifacio St., Bangkal,
Makati City, covered by Transfer Certificate of Title No. 61772. Salome mortgaged the property
to Country Bankers Insurance and Surety Company to secure a P10,000.00 loan.
On July 1, 1966, Salome sold the property to Rosendo C. Palabasan.
5
Transfer Certificate of
Title No. 61772 was cancelled and a new one, Transfer Certificate of Title No. 167387,
6
was
issued in the name of Rosendo C. Palabasan and Bella S. Palabasan.
On April 19, 1989, Leoncio and Enriqueta Barrera (spouses Barrera) filed with the Regional
Trial Court, Makati City, Branch 138, a complaint
7
against Palabasan for reconveyance with
damages. They alleged that they had been in possession of the property since 1962 by virtue of a
Deed of Sale with Assumption of Mortgage which was not notarized; that Salome executed a
notarized Deed of Sale with Assumption of Mortgage in their favor on March 31, 1966; that,
pursuant to this notarized deed, they settled Salome's obligations with the Country Bankers
Insurance and Surety Company; that they tried to redeem the property but were not able to do so
because Palabasan had done so and the title to the property was released to Palabasan; that in
1970, they signed a blank document which was supposed to become Palabasan's authority to sell
the land for them; that in 1975, they were surprised to learn that the blank document which they
had signed turned out to be a contract of lease wherein they were the lessees and Palabasan was
the lessor of the property; and that Palabasan registered the property in his name and was able to
secure Transfer Certificate of Title No. 167387.
In his answer to the complaint, Palabasan asserted that he bought the property from Salome on
June 30, 1966, after he had paid the obligation of Salome with Country Bankers Insurance and
Surety Company; that he had been issued Transfer Certificate of Title No. 167387 in his name
after he had the deed of sale registered; that the spouses Barrera were in possession of the
property as lessees of Salome; and that a contract of lease was executed by and between the
spouses Barrera and Palabasan in 1970. Consequently, he claimed that the spouses Barrera had
no legal right to claim reconveyance of the property in question.1wphi1.nt
On February 23, 1993, after trial, the lower court rendered a decision
8
declaring Palabasan to
have validly acquired title to the property in question. The trial court, ruling that the case is one
of double sale of an immovable, applied the second paragraph of Article 1544
9
of the Civil Code.
In time, the spouses Barrera appealed
10
the decision to the Court of Appeals.
11

On October 25, 1995, the Court of Appeals promulgated a decision affirming in toto the decision
of the trial court. The appellate court, however, found Article 1544 of the Civil Code
inapplicable to the case as there was no sale between the spouses Barrera and Salome because
Salome's testimony given in a previous case
12
to this effect was stricken off the record since she
died prior to cross-examination; the testimony of Cenon Mateo, the common-law husband of
Salome showed that he was not aware of the transaction entered into on March 31, 1966; and
counsel for spouses Barrera admitted that the sale transaction in 1962 did not materialize as the
property was mortgaged to Country Bankers Insurance and Surety Company.
On December 4, 1995, the spouses Barrera filed a motion for reconsideration
13
of the decision;
however, on February 21, 1996, the Court of Appeals denied the same.
14

Hence, this petition.
15

The Issues
The issues raised are: whether respondent Palabasan is the owner of the property in question; and
whether there was double sale of an immovable property covered by Article 1544 of the Civil
Code.
The Court's Ruling
The petition is without merit.
An action for reconveyance of a property is the sole remedy of a landowner whose property has
been wrongfully or erroneously registered in another's name after one year from the date of the
decree so long as the property has not passed to an innocent purchaser for value.
16
The action
does not seek to reopen the registration proceedings and set aside the decree of registration but
only purports to show that the person who secured the registration of the property in controversy
is not the real owner thereof.
17
Fraud may be a ground for reconveyance. For an action for
reconveyance based on fraud to prosper, the party seeking reconveyance must prove by clear and
convincing evidence his title to the property and the fact of fraud.
18

It must be stressed that mere allegations of fraud are not enough. Intentional acts to deceive and
deprive another of his right, or in some manner, injure him, must be specifically alleged and
proved.
19
The burden of proof rests on petitioners; this, the petitioners failed to do.
Petitioners offered no proof that there was misrepresentation or concealment in the registration
of the deed that led to the issuance of Transfer Certificate of Title No. 167387. With the
presumption of regularity in the performance of official functions, the claim of petitioners that
the issuance of Transfer Certificate of Title No. 167387 was tainted with fraud must fail.
As to proof of title to the property, respondent Palabasan offered the following: Transfer
Certificate of Title No. 167387,
20
Tax Declaration No. 03251,
21
the Deed of Absolute Sale
22

dated June 30, 1966, executed by Salome in favor of respondent Palabasan, the Contract of
Lease,
23
with respondent Palabasan as the lessor and petitioner Leoncio Barrera as the lessee, and
the decision for the court of First Instance, Pasig, Branch XIX in Civil Case No. 38608,
24
finding
respondent Palabasan to be the lawful owner of the property covered by Transfer Certificate of
Title No. 167387.
On the other hand, petitioner spouses Barrera only have the Deed of Absolute Sale with
Assumption of Real Estate Mortgage
25
evidencing a transaction which occurred in 1962, a Deed
of Sale with Assumption of Mortgage
26
dated March 31, 1966 and the testimonies of Cenon
Mateo
27
and petitioner Leoncio Barrera.
28
The spouses Barrera attempted to offer in evidence the
transcript of stenographic notes taken of the testimony of Salome in Civil Case No. 14009.
29

Respondent objected to the offer which opposition the trial court sustained.
30

We find respondent Palabasan to be the owner of the property.
The decision of the then Court of First Instance, Pasig, Branch XIX in Civil Case No. 38608,
promulgated on September 4, 1981
31
and reinstated on August 10, 1990,
32
finding respondent
Palabasan to be the lawful owner of the property covered by Transfer Certificate of Title No.
167387 may not be invoked in this case since said decision had become stale.
33

Article 1144 (3) of the Civil Code provides that an action upon a judgment must be brought
within ten years from the time the right of action accrues.
On the other hand, Section 6, Rule 39, Revised Rules of Court, states:
"A final and executory judgment or order may be executed on motion within five (5)
years from the date of its entry. After the lapse of such time, and before it is barred by the
statute of limitations, a judgment may be enforced by motion within five (5) years from
the date of its entry and thereafter by action before it is barred by the statute of
limitations."
The rule is that the court could issue a writ of execution by motion within five (5) years from
finality of the decision.
34
A writ of execution issued after the expiration of that period is null and
void.
35
There is a need for the interested party to file an independent action for revival of
judgment. The judgment may be enforced after the lapse of this period and before the same is
barred by the statute of limitations, by instituting an ordinary civil actions.
36
"The reason is that
after the lapse of the five-year period, the judgment is reduced to a mere right of action, which
judgment must be enforced, as all other ordinary actions, by the institution of a complaint in the
regular form. Such action must be filed within ten (10) years from the date the judgment became
final."
37

The decision having become stale, "any action to enforce or revive it has prescribed."
38

This notwithstanding, the greater weight of evidence lies in favor of respondent Palabasan's
claim of ownership over the land. Surely, Transfer Certificate of Title No. 167387 and Tax
Declaration No. 03251 which respondent Palabasan offered in evidence is more convincing than
petitioners' evidence.
The certificate of title issued is an absolute and indefeasible evidence of ownership of the
property in favor of the person whose name appears therein. It is binding and conclusive upon
the whole world.
39

Anent the question of whether this case is one of double sale, suffice it to say that there is no
sufficient proof on the sale between Salome and petitioners. There is no double sale that would
warrant the application of Article 1544 of the Civil Code.
As mentioned at the outset, the evidence petitioners adduced to prove the sale was the notarized
deed executed on March 31, 1966. However, a perusal of the deed would show that the sale is
conditioned on the payment by the petitioners of Salome's obligation with the Country Bankers
Insurance and Surety Company under the contract of mortgage.
Petitioners submitted no evidence to show that they complied with the condition given. Hence,
there was no consummation of the contract which would transfer ownership of the property to
the petitioners. All that they presented was the self-serving testimony of petitioner Leoncio
Barrera
40
to the effect that the obligations were paid by them. Notable is Cenon Mateo's
testimony that he has no knowledge of any transaction entered into by Salome on March 31,
1966.
41

Likewise, there is no sufficient evidence to show that the earlier transaction in 1962 ever
materialized. The testimony of Salome in Civil Case No. 14009 confirming the existence of this
transaction is inadmissible for lack of cross-examination. Likewise, the Deed of Absolute Sale
with Assumption of Real Estate Mortgage
42
not having been notarized, its genuineness and due
execution will have to be proven. In this case, the petitioners only presented the testimony of
petitioner Leoncio Barrera and Cenon Mateo, which are, again, self-serving assertions if not
corroborated by any other evidence. Notable is the counsel of petitioners own admission that "the
said transaction however did not in any way materialize for the reason that the property, subject
of the transaction was mortgaged to Country Bankers and Surety Company."
43

The only sale that materialized in this case was the sale by Salome to respondent Palabasan that
was evidenced by a deed of absolute sale that enabled respondent Palabasan to redeem the
property from Country Bankers Insurance and Surety Company and consequently to secure
Transfer Certificate of Title No. 167387 in his favor over the same property.1wphi1.nt
The Fallo
WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of
Appeals in CA-G.R. CV No. 40909 and its resolution denying reconsideration.
No Costs.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-11198 March 20, 1917
THOS, D. AITKEN, plaintiff-appellant,
vs.
JULIAN LA O, as administrator of the estate of Apolonia Remigio, deceased, defendant-
appellee.
Aitken and DeSelms for appellant.
Gabriel La O for appellee.
CARSON, J .:
It appears from the record in this case that a Chinaman named To Jan Co erected a store building
on a parcel of land belonging to Apolonia Remigio, under an agreement whereby one-half of the
rents were to go to her and one-half to To Jan Co; that the owner of the land, nor having received
the rents agreed upon, instituted an action on September 21, 1908, against To Jan Co and one of
the occupants of the building to recover these rents; that judgment having been rendered in her
favor in the sum of P3,425, execution issued and thereafter the house was purchased by the
judgment creditor, Apolonia Remigio, at the sheriff's sale on February 11, 1910, had under
authority of the execution; that she took possession forthwith; that the defendant in this action is
the administrator of the estate of Apolonia Remigio deceased, and as such is now in possession
of the house and the land upon which it stands; that on October 6, 1908, not long after the filing
of the complaint in the above-mentioned action, which was dated September 21, 1908, To Jan Co
executed an unregistered deed of sale of the house in question to another Chinaman named To
Cun, reserving therein the right to repurchase within ninety days; that this right was never
exercised; that To Cun (the second Chinaman) never took possession under this deed; that
thereafter, On October 22, 1912, To Cun (the second Chinaman) executed an unregistered deed
of sale of the house to the plaintiff in this action, who, on June 9, 1915, instituted these
proceedings wherein he prays a judgment for possession of the house, and for an accounting of
the rentals collected thereon since the first days of September, 1908, alleging that his one-half
share of these rentals amounts to P2,485.
The opinion of the trial judge filed together with his judgment is as follows:
The plaintiff herein seeks to recover the possession of a certain house that was erected on
lands belonging to a third person. The said land belonged to Apolonia Remigio during
her lifetime but since her demise it forms part of her estate. The estate is administered by
Julian La O. Plaintiff further claims the sum of P2,485, as being one half of the rentals
obtained from the building since September 1, 1908.
Plaintiff alleges that he is the owner of the said building designated as numbers 15, 17, 19
and 21 Calle Salazar, district of Binondo, and that he is entitled to collect rentals
therefrom.
The defendant not only denies the plaintiff's claim to the building and its rentals, but
maintains that the building belongs to said party defendant.
From the evidence introduced by the plaintiff, it appears that the building in question is
not properly a house, but a camarin of four doors or apartments; that it was erected by the
Chinaman To Jan Co on the lot that now belongs to the estate of Apolonia Remigio
(Exhibit C); that on October 6, 1908 (Exhibit A), to Jan Co sold it under pacto de retro
for the term of three months, which might be extended to nine, to a Chinaman named To
Cun, for P1,800, a sum in which, by reason of three due and unpaid notes, the vendor To
Jan Co was indebted to the vendee To Cun.
The latter, in turn, by a deed certified on October 22, 1912 (Exhibit B), sold the building
or camarin to the plaintiff, Aitken, for the same amount of P1,800.
But it has been proven by the evidence introduced by the defendant that when the
Chinaman To Jan Co conveyed the building to To Cun on October 6, 1908 (Exhibit A),
he had already (on September 24, 1908) been personally notified of the proceedings filed
against him and the Chinaman To Ky in the justice of the peace court of Manila by the
representative of Apolonia Remigio to eject them from the lot on which the building
stands and to recover the sum of P3,425 as rent due for the said house. After the trial was
had (the order defendant, To Ky, who was absent, first having been summoned by public
notice), judgment was rendered against both of them. On August 26, 1909, a writ of
execution was issued by virtue of which the lot was restored to the plaintiff and on
February 11, 1910, after publication of notice, the building or camarin erected thereon
was sold at public auction for one peso and adjudicated to the plaintiff, as attested by the
certificate issued on the said date by the clerk of this court. To Jan Co failed to exercise
his right of redemption within the year granted him that right expired on the 10th of the
same month of the following year, 1911. To Cun, notwitshanding that he had purchased
the building in question under pacto de retro on October 6, 1908, did not redeem it either.
Nowhere in the record does it appear that the ownership which To Cun pretends to have
acquired in the building by the expiration of the period granted for the exercise of the
right of redemption that was not utilized by To Jan Co, was consolidated, nor that either
the latter, or To Cun, paid any taxes, unless it was for the years 1914 and 1915, long after
the sale referred to in Exhibit B, the deed of October 22, 1912, executed by To Cun in
behalf of the herein plaintiff. But here it is to be noted that the two tax receipts (Exhibits
F and G), dated June 26, 1914, and June 30, 1915, appear to have been made out to To
Cun, notwithstanding that he had disposed of the building as far back as October 22,
1912. Neither does the evidence show that To Jan Co (notwithstanding that on October 6,
1908, he sold the building under pacto de retro to To Cun) made any record in the
ejectment proceedings with regard to the lot occupied by the building, of the fact that he
was not the owner of the building or that he had conveyed his ownership therein to To
Cun; much less does it show that the latter filed any third-party claim.
If the camarin was levied upon in execution of the judgment rendered in the proceedings
for ejectment and recovery of rentals, prosecuted against To Jan Co; if the latter did
nothing to pay the said rentals; if the alleged purchaser To Cun made no effort to recover
possession of the building; if the sale at public auction, after proper advertisement and
legal steps, was accomplished, the property awarded to the highest bidder and no third-
party claim was filed by the person who considered himself to be the owner
notwithstanding that he had knowledge of the course of the proceedings; if the building
was sold at auction for the express purpose of applying the proceeds of the sale to the
payment of the rent owning for the lot on which it was erected; and if neither To Jan Co,
nor the alleged purchaser To Cun, exercised the right of redemption within the year
granted by law and specified in the certificate issued by the sheriff of this city, the
conveyance of the ownership of the building by this official, in the name of the plaintiff
and debtor To Jan Co, to the highest bidder, who was the defendant herself, Apolonia
Remigio, is perfectly legal and valid.
To Cun must so have understood the matter, as must also the plaintiff himself, Aitken,
who, notwithstanding his being a practicing attorney of this city, has done nothing since
October 22, 1912, in regard to the building which, according to the deed Exhibit B, he
acquired, either with regard to paying the taxes or to collecting the rentals to which he
claimed he was entitled and which he is now trying to collect in the sum of P2,485,
embracing the period which has elapsed since September 1, 1908. If Aitken had had the
least idea that he had acquired a right in the building, it is not probable that he would
have allowed nearly three years to elapse from October 21, 1912, without having exerted
every possible effort to collect from the vendor and alleged owner To Cun, not only the
rentals unpaid from September 1, 1908, but also those due from October 22, 1912, to
April 7 of the present year, the date on which the idea occurred to him to seek redress in
the courts.
The sale of the building to To Cun and the latter sale of same by To Cun to the plaintiff
cannot be upheld because To Jan Co, the original vendor, had no right to sell it to To Cun
after having lost the right to do so, and the latter had no right to make the sale to Aitken.
To Cun acquired no right in the building; consequently he could convey nothing to the
purchaser.
As the plaintiff acquired no right whatever in the building, still less in the rentals
produced by it, this action will not lie.
Julian La O, in his capacity of administrator of the estate of Apolonia Remigio, is
absolved from the complaint, with the costs against the plaintff.
While we are inclined to agree with the trial judge that the evidence of record tends strongly to
disclose that the transaction evidenced by the deed of sale with reserved right of repurchase from
To Jan Co to To Cun was not a bona fide conveyance of the house; and that whatever rights in or
to the house which To Cun may have acquired by virtue of that transaction were abandoned and
surendered by him long prior to the date of the execution of the deed of conveyance to the
plaintiff in this action; we prefer to rest our judgment affirming the dismissal of the complaint
upon the express provisions of article 1473 of the Civil Code.
The article is as follows:
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 personal property.
Should it be real property, it shall belong to the person acquiring it who first recorded it
in the registry.
Should there be no entry, the property shall belong to the person who first took
possession of it in good faith, and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.
Granting, for the sake of argument, that the sale from To Jan Co to To Cun was a valid and
binding transaction, it is evident that the house has been sold as his property to two different
vendees, and the sale To Cun not having been recorded in the registry, the property belongs to
the estate of Apolonia Remigio, the purchaser who first took possession in good faith.
It has been suggested that since To Jan Co, the judgment debtor, had conveyed all his right, title
and interest in the house to To Cun prior to the date of the sheriff's sale to Apolonia Remigio, she
took nothing thereunder, because, as it is said, she could acquire merely such interest in the
property as remained in the judgment debtor at the date of the sale. It will readily be seen,
however, that analogous reasoning would defeat a claim of title by the second purchaser of real
estate in each and all of the cases wherein such right is secured to him under the provisions of the
above cited article of the Code.
Were it not for that article, it cannot be doubted, on general principles, that should an owner of
real estate execute an unregistered deed of sale of all right, title and interest therein to two
different persons, the second purchaser would take nothing under the deed, because the vendor,
at the date of the second sale, has no right, title or interest in the property which he can lawfully
convey to such purchaser. But the provisions of this article except from the general doctrine the
cases therein mentioned, to this extent at least, that an unregistered deed to the first purchaser,
cannot be held to have had the effect of conveying title; good as against a second purchaser,
when it appears that the second purchaser was the first to secure possession.
The rule thus announced is in substantial conformity with the doctrine quite uniformly upheld by
the courts in the United States, which is set forth as follows in freeman on Executions (3d Ed.
Sec. 336), supported by numerous citations of authority:
We have elsewhere had occasion to treat of the rights of purchasers at execution sales,
when brought in conflict with claims derived from unrecorded instruments made by the
defendant, or based upon some other secret transaction not known to the purchaser. We
then said: Wherever, under the law, a deed or mortgage is valid without being recorded, a
subsequently attaching judgment lien against the grantor or mortgagor will not be of any
benefit to the lienholder as against the deed or mortgage. But a purchaser at a sale under a
judgment is, to the same extent as if he were purchaser at a private or voluntary sale,
protected from claims previously acquired by third persons from the judgment debtor, of
which he has no actual nor constructive notice. But if, at the time of the sale, the
purchaser has actual notice of any legal or equitable right in a third person, or if, in the
absence of such notice, the instrument evidencing such right is properly of record, or if
possession is held under it, then the title acquired by the purchaser cannot prejudice the
interest of such third person.
In a footnote (No. 45) to the paragraph from which the foregoing extract is taken, we find the
following concise statement of the precise proposition upon which our ruling is based:
Purchasers at execution sales are, to the sale extent as other purchasers, entitled to the
benefit of the statutes requiring instruments affecting the title to real estate to be
recorded. (Stewart vs. Freeman, 22 Pa. St., 120; Heister vs. Fortner, 2 Binn., 40; 4 Am.
Dec., 417; Mann's Appeal, 1 Pa. St., 24; Scribner vs. Lockwood, 9 Ohio, 184; Waldo vs.
Russel, 5 Mo., 387; Goepp vs. Gartiser, 35 Pa. St., 130; Duke vs. Clark, 58 Miss., 465;
Lee vs. Beringham, 30 Kan., 312; Draper vs. Bryon, 26 Mo., 108; 69 Am. Dec., 483;
Grace vs. Wade, 45 Tex. 529; Milner vs. Hyland, 77 Ind., 458; Miles vs. King, 5 S. C.,
146.)
We conclude that the judgment entered in the court below should be affirmed, with the costs of
this instance against the appellant. So ordered.
Torres, Trent and Araullo, JJ., concur.
Moreland, J., did not sign.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-3667 September 5, 1907
NATALIA FABIAN ET AL., plaintiffs-appellants,
vs.
SMITH, BELL & CO., defendants-appellees.
Rafael Palma for appellants.
Kinney, Odlin & Lawrence for appellees.
WILLARD, J .:
On the 28th of January 1901 Emiliano Boncan was the owner of the real estate in question in this
case his title thereto being recorded in the registry of property. On that they he sold and
conveyed the same by a public documents to the plaintiffs. This deed was never recorded in the
registry of property. The appellees, Smith, Bell & Co., having some years thereafter obtained a
judgment against Emiliano Boncan, levied an execution issued on said judgment upon the real
estate in question, which then stood upon the said record in the name of said Boncan. The
plaintiffs thereupon brought this action to restrain the judgment creditors from selling property
under this execution. Judgment was entered in the court below in favor of the defendants, and the
plaintiffs have appealed.
The question in the case is whether the levy of an execution against a judgment debtor upon real
estate which stands in his name in the registry of property takes precedence or not of an
unrecorded deed of the same property made by the judgment debtor prior to the levy in question.
This question, so far as the Spanish law in force prior to the present Code of Civil Procedure is
concerned, has been considered by this court in a case relating to an attachment made under the
same circumstances. By the provisions of that law an execution, such as was levied in the case at
bar, stands upon the same footing as an attachment. Both are provisional records, one mentioned
in article 42, paragraph 2, of the Mortgage Law, and the other in paragraph 3 of the same article.
They are placed upon the same footing also by article 44, which is as follows:
The creditor who obtains an entry in his favor in cases Nos. 2, 3, and 4 of article 42 shall
have preference, only with regard to the property entered, over those who have another
claim against the same debtor, contracted subsequently to said entry.
The case above referred to is the case of Martinez vs. Holliday, Wise & Co. (1 Phil. Rep., 194).
In that case it was said (p. 197):
From the time when the Mortgage Law of 1861 was in consideration up to the present
time there has been only one opinion concerning the effects of provisional record of this
class. It has always been said that it did not change the character of the debt; that it did
not convert into a right to the thing itself the claim of the creditor; that it did not give him
any preference over existing claims which were not s provisionally recorded.
This case was followed in that of Olivares vs. Hoskyn & Co. (2 Phil. Rep., 689), where the
creditor had obtained judgment and levied an execution, the case, therefore, being similar to this
case. It was also followed in the case of Peterson vs. Newberry (6 Phil. Rep., 260).
In accordance with the provisions of Mortgage Law and the Civil Code, as they have thus
construed by this court, there can be no doubt that the claim of the appellants is superior to the
claim of the appellees.
These provisions of the Spanish law had not been modified or repealed in the respect by the
Code of Civil Procedure. The section of that code relating to attachment provide that when real
estate stands upon the records in name of the defendant the attachment shall be made in a certain
way, and when it stands in the name of the third person the attachment shall be made in a certain
way; but nothing is said in any of these sections as to any priority secured by the attachment. The
provision which is found in the statute law of a great many of the States of America, to the effect
that an unrecorded deed shall be void as to subsequent attaching or judgment creditors, nowhere
appears in this code. Article 1473 of the Civil Code, which gives preference to that one of two
deeds which is first recorded, does not extend to attachments or executions.
The same is true of the sections of the code (Civil Procedure) relating to executions; it appearing,
moreover, in section 463, that a purchaser under an execution sale "shall be substituted to and
acquire all the right, interest, title, and claim of the judgment debtor thereto," which in this case
would be nothing. The case of Peterson vs. Newberry, above cited, arose after the publication of
the present Code of Civil Procedure.
Article 389 of the Mortgage Law is in part as follows:
From the time this law goes into operation, no document or instrument which has not
been recorded in the registry shall be admitted in the ordinary of special courts or
tribunals. in the councils and offices of the Government, by which interest subject to
record are created, conveyed, acknowledged, modified or extinguished, according to the
same law, if the object of the presentation be to enforce, to the prejudice of the third
persons, the interest which should have been recorded.
This article does not aid the appellees for they do not come within the meaning of the phrase
"third persons" found therein. In the Commentaries of Galindo y Escolsura upon the Mortgage
Law, volume 2 (2d ed.), page 635, it is said:
Therefore it is the general opinion that when a person, by virtue of a judgment for the
recovery of the debt not supported by a mortgage , secures an attachment against property
which turns out to have been previously sold, although the purchaser did not have the
property registered in his name, the latter has a superior right, as the attachment does not
confer a real right.
See also page 641 of the same volume.
The judgment of the court below is reversed, and the cause remanded with directions to enter
judgment for the plaintiffs as prayed in the complaint. No costs will be allowed to either party in
this court. So ordered.
Arellano, C.J., Torres, Johnson, and Tracey, JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-28740 February 24, 1981
FERMIN Z. CARAM, JR., petitioner,
vs.
CLARO L. LAURETA, respondent.
FERNANDEZ, J .:
This is a petition for certiorari to review the decision of the Court of Appeals
promulgated on January 29, 1968 in CA-G. R. NO. 35721-R entitled "Claro L. Laureta,
plaintiff-appellee versus Marcos Mata, Codidi Mata and Fermin Caram, Jr., defendants-
appellants; Tampino (Mansaca), et al. Intervenors-appellants," affirming the decision of
the Court of First Instance of Davao in Civil Case No. 3083.
1

On June 25, 1959, Claro L. Laureta filed in the Court of First Instance of Davao an
action for nullity, recovery of ownership and/or reconveyance with damages and
attorney's fees against Marcos Mata, Codidi Mata, Fermin Z. Caram, Jr. and the
Register of Deeds of Davao City.
2

On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land covered by
Original Certificate of Title No. 3019 in favor of Claro Laureta, plaintiff, the respondent
herein. The deed of absolute sale in favor of the plaintiff was not registered because it
was not acknowledged before a notary public or any other authorized officer. At the time
the sale was executed, there was no authorized officer before whom the sale could be
acknowledged inasmuch as the civil government in Tagum, Davao was not as yet
organized. However, the defendant Marcos Mata delivered to Laureta the peaceful and
lawful possession of the premises of the land together with the pertinent papers thereof
such as the Owner's Duplicate Original Certificate of Title No. 3019, sketch plan, tax
declaration, tax receipts and other papers related thereto.
3
Since June 10, 1945, the
plaintiff Laureta had been and is stin in continuous, adverse and notorious occupation of
said land, without being molested, disturbed or stopped by any of the defendants or
their representatives. In fact, Laureta had been paying realty taxes due thereon and had
introduced improvements worth not less than P20,000.00 at the time of the filing of the
complaint.
4

On May 5, 1947, the same land covered by Original Certificate of Title No. 3019 was
sold by Marcos Mata to defendant Fermin Z. Caram, Jr., petitioner herein. The deed of
sale in favor of Caram was acknowledged before Atty. Abelardo Aportadera. On May
22, 1947, Marcos Mata, through Attys. Abelardo Aportadera and Gumercindo Arcilla,
filed with the Court of First Instance of Davao a petition for the issuance of a new
Owner's Duplicate of Original Certificate of Title No. 3019, alleging as ground therefor
the loss of said title in the evacuation place of defendant Marcos Mata in Magugpo,
Tagum, Davao. On June 5, 1947, the Court of First Instance of Davao issued an order
directing the Register of Deeds of Davao to issue a new Owner's Duplicate Certificate of
Title No. 3019 in favor of Marcos Mata and declaring the lost title as null and void. On
December 9, 1947, the second sale between Marcos Mata and Fermin Caram, Jr. was
registered with the Register of Deeds. On the same date, Transfer Certificate of Title
No. 140 was issued in favor of Fermin Caram Jr.
5

On August 29, 1959, the defendants Marcos Mata and Codidi Mata filed their answer
with counterclaim admitting the existence of a private absolute deed of sale of his only
property in favor of Claro L. Laureta but alleging that he signed the same as he was
subjected to duress, threat and intimidation for the plaintiff was the commanding officer
of the 10th division USFIP operating in the unoccupied areas of Northern Davao with its
headquarters at Project No. 7 (Km. 60, Davao Agusan Highways), in the Municipality of
Tagum, Province of Davao; that Laureta's words and requests were laws; that although
the defendant Mata did not like to sell his property or sign the document without even
understanding the same, he was ordered to accept P650.00 Mindanao Emergency
notes; and that due to his fear of harm or danger that will happen to him or to his family,
if he refused he had no other alternative but to sign the document.
6

The defendants Marcos Mata and Codidi Mata also admit the existence of a record in
the Registry of Deeds regarding a document allegedly signed by him in favor of his co-
defendant Fermin Caram, Jr. but denies that he ever signed the document for he knew
before hand that he had signed a deed of sale in favor of the plaintiff and that the
plaintiff was in possession of the certificate of title; that if ever his thumb mark appeared
in the document purportedly alienating the property to Fermin Caram, did his consent
was obtained through fraud and misrepresentation for the defendant Mata is illiterate
and ignorant and did not know what he was signing; and that he did not receive a
consideration for the said sale.
7

The defendant Fermin Caram Jr. filed his answer on October 23, 1959 alleging that he
has no knowledge or information about the previous encumbrances, transactions, and
alienations in favor of plaintiff until the filing of the complaints.
8

The trial court rendered a decision dated February 29, 1964, the dispositive portion of
which reads:
9

1. Declaring that the deed of sale, Exhibit A, executed by Marcos Mata in
favor of Claro L. Laureta stands and prevails over the deed of sale, Exhibit
F, in favor of Fermin Caram, Jr.;
2. Declaring as null and void the deed of sale Exhibit F, in favor of Fermin
Caram, Jr.;
3. Directing Marcos Mata to acknowledge the deed of sale, Exhibit A, in
favor of Claro L. Laureta;
4. Directing Claro L. Laureta to secure the approval of the Secretary of
Agriculture and Natural Resources on the deed, Exhibit A, after Marcos
Mata shall have acknowledged the same before a notary public;
5. Directing Claro L. Laureta to surrender to the Register of Deeds for the
City and Province of Davao the Owner's Duplicate of Original Certificate of
Title No. 3019 and the latter to cancel the same;
6. Ordering the Register of Deeds for the City and Province of Davao to
cancel Transfer Certificate of Title No. T-140 in the name of Fermin
Caram, Jr.;
7. Directing the Register of Deeds for the City and Province of Davao to
issue a title in favor of Claro L. Laureta, Filipino, resident of Quezon City,
upon presentation of the deed executed by Marcos Mata in his favor,
Exhibit A, duly acknowledged by him and approved by the Secretary of
Agriculture and Natural Resources, and
8. Dismissing the counterclaim and cross claim of Marcos Mata and
Codidi Mata, the counterclaim of Caram, Jr., the answer in intervention,
counterclaim and cross-claim of the Mansacas.
The Court makes no pronouncement as to costs.
SO ORDERED.
The defendants appealed from the judgment to the Court of Appeals.
10
The appeal was
docketed as CA-G.R. NO. 35721- R.
The Court of Appeals promulgated its decision on January 29, 1968 affirming the
judgment of the trial court.
In his brief, the petitioner assigns the following errors:
11

I
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING
THAT IRESPE AND APORTADERA WERE ATTORNEYS-IN-FACT OF
PETITIONER CARAM FOR THE PURPOSE OF BUYING THE
PROPERTY IN QUESTION.
II
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING
THAT THE EVIDENCE ADDUCED IN THE TRIAL COURT CONSTITUTE
LEGAL EVIDENCE OF FRAUD ON THE PART OF IRESPE AND
APORTADERA AT TRIBUTABLE TO PETITIONER.
III
THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE
ERROR OF LAW IN HOLDING THAT KNOWLEDGE OF IRESPE AND
APORTADERA OF A PRIOR UNREGISTERED SALE OF A TITLED
PROPERTY ATTRIBUTABLE TO PETITIONER AND EQUIVALENT IN
LAW OF REGISTRATION OF SAID SALE.
IV
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING
THAT AN ACTION FOR RECONVEYANCE ON THE GROUND OF
FRAUD PRESCRIBES WITHIN FOUR (4) YEARS.
The petitioner assails the finding of the trial court that the second sale of the property
was made through his representatives, Pedro Irespe and Atty. Abelardo Aportadera. He
argues that Pedro Irespe was acting merely as a broker or intermediary with the specific
task and duty to pay Marcos Mata the sum of P1,000.00 for the latter's property and to
see to it that the requisite deed of sale covering the purchase was properly executed by
Marcos Mata; that the Identity of the property to be bought and the price of the purchase
had already been agreed upon by the parties; and that the other alleged representative,
Atty. Aportadera, merely acted as a notary public in the execution of the deed of sale.
The contention of the petitioner has no merit. The facts of record show that Mata, the
vendor, and Caram, the second vendee had never met. During the trial, Marcos Mata
testified that he knows Atty. Aportadera but did not know Caram.
12
Thus, the sale of the
property could have only been through Caram's representatives, Irespe and Aportadera.
The petitioner, in his answer, admitted that Atty. Aportadera acted as his notary public
and attorney-in-fact at the same time in the purchase of the property.
13

The petitioner contends that he cannot be considered to have acted in bad faith
because there is no direct proof showing that Irespe and Aportadera, his alleged
agents, had knowledge of the first sale to Laureta. This contention is also without merit.
The Court of Appeals, in affirming the decision of the trial court, said:
14

The trial court, in holding that appellant Caram. Jr. was not a purchaser in
good faith, at the time he bought the same property from appellant Mata,
on May 5, 1947, entirely discredited the testimony of Aportadera. Thus it
stated in its decision:
The testimony of Atty. Aportadera quoted elsewhere in this decision is
hollow. There is every reason to believe that Irespe and he had known of
the sale of the property in question to Laureta on the day Mata and Irespe,
accompanied by Leaning Mansaca, went to the office of Atty. Aportadera
for the sale of the same property to Caram, Jr., represented by Irespe as
attorney-in-fact. Ining Mansaca was with the two Irespe and Mata to
engage the services 6f Atty. Aportadera in the annulment of the sale of his
land to Laureta. When Leaning Mansaca narrated to Atty. Aportadera the
circumstances under which his property had been sold to Laureta, he
must have included in the narration the sale of the land of Mata, for the
two properties had been sold on the same occassion and under the same
circumstances. Even as early as immediately after liberation, Irespe, who
was the witness in most of the cases filed by Atty. Aportadera in his
capacity as Provincial Fiscal of Davao against Laureta, must have known
of the purchases of lands made by Laureta when he was regimental
commander, one of which was the sale made by Mata. It was not a mere
coincidence that Irespe was made guardian ad litem of Leaning Mansaca,
at the suggestion of Atty. Aportadera and attorney-in-fact of Caram, Jr.
The Court cannot help being convinced that Irespe, attorney-in-fact of
Caram, Jr. had knowledge of the prior existing transaction, Exhibit A,
between Mata and Laureta over the land, subject matter of this litigation,
when the deed, Exhibit F, was executed by Mata in favor of Caram, Jr.
And this knowledge has the effect of registration as to Caram, Jr. RA pp.
123-124)
We agree with His Honor's conclusion on this particular point, on two
grounds the first, the same concerns matters affecting the credibility of
a witness of which the findings of the trial court command great weight,
and second, the same is borne out by the testimony of Atty. Aportadera
himself. (t.s.n., pp. 187-190, 213-215, Restauro).
Even if Irespe and Aportadera did not have actual knowledge of the first sale, still their
actions have not satisfied the requirement of good faith. Bad faith is not based solely on
the fact that a vendee had knowledge of the defect or lack of title of his vendor. In the
case of Leung Yee vs. F. L. Strong Machinery Co. and Williamson, this Court held:
15

One who purchases real estate with knowledge of a defect or lack of title
in his vendor can not claim that he has acquired title thereto in good faith,
as against the true owner of the land or of an interest therein, and the
same rule must be applied to one who has knowledge of facts which
should have put him upon such inquiry and investigation as might be
necessary to acquaint him with the defects in the title of his vendor.
In the instant case, Irespe and Aportadera had knowledge of circumstances which
ought to have put them an inquiry. Both of them knew that Mata's certificate of title
together with other papers pertaining to the land was taken by soldiers under the
command of Col. Claro L. Laureta.
16
Added to this is the fact that at the time of the
second sale Laureta was already in possession of the land. Irespe and Aportadera
should have investigated the nature of Laureta's possession. If they failed to exercise
the ordinary care expected of a buyer of real estate they must suffer the consequences.
The rule of caveat emptor requires the purchaser to be aware of the supposed title of
the vendor and one who buys without checking the vendor's title takes all the risks and
losses consequent to such failure.
17

The principle that a person dealing with the owner of the registered land is not bound to
go behind the certificate and inquire into transactions the existence of which is not there
intimated
18
should not apply in this case. It was of common knowledge that at the time
the soldiers of Laureta took the documents from Mata, the civil government of Tagum
was not yet established and that there were no officials to ratify contracts of sale and
make them registerable. Obviously, Aportadera and Irespe knew that even if Mata
previously had sold t he Disputed such sale could not have been registered.
There is no doubt then that Irespe and Aportadera, acting as agents of Caram,
purchased the property of Mata in bad faith. Applying the principle of agency, Caram as
principal, should also be deemed to have acted in bad faith.
Article 1544 of the New Civil Code provides that:
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 recordered it in the Registry of Property.
Should there be no inscription, the ownership shag 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.
(1473)
Since Caram was a registrant in bad faith, the situation is as if there was no registration
at all.
19

The question to be determined now is, who was first in possession in good faith? A
possessor in good faith is one who is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it.
20
Laureta was first in possession of the
property. He is also a possessor in good faith. It is true that Mata had alleged that the
deed of sale in favor of Laureta was procured by force.
21
Such defect, however, was
cured when, after the lapse of four years from the time the intimidation ceased, Marcos
Mata lost both his rights to file an action for annulment or to set up nullity of the contract
as a defense in an action to enforce the same.
Anent the fourth error assigned, the petitioner contends that the second deed of sale,
Exhibit "F", is a voidable contract. Being a voidable contract, the action for annulment of
the same on the ground of fraud must be brought within four (4) years from the
discovery of the fraud. In the case at bar, Laureta is deemed to have discovered that the
land in question has been sold to Caram to his prejudice on December 9, 1947, when
the Deed of Sale, Exhibit "F" was recorded and entered in the Original Certificate of
Title by the Register of Deeds and a new Certificate of Title No. 140 was issued in the
name of Caram. Therefore, when the present case was filed on June 29, 1959, plaintiff's
cause of action had long prescribed.
The petitioner's conclusion that the second deed of sale, "Exhibit F", is a voidable
contract is not correct. I n order that fraud can be a ground for the annulment of a
contract, it must be employed prior to or simultaneous to the, consent or creation of the
contract. The fraud or dolo causante must be that which determines or is the essential
cause of the contract. Dolo causante as a ground for the annulment of contract is
specifically described in Article 1338 of the New Civil Code of the Philippines as
"insidious words or machinations of one of the contracting parties" which induced the
other to enter into a contract, and "without them, he would not have agreed to".
The second deed of sale in favor of Caram is not a voidable contract. No evidence
whatsoever was shown that through insidious words or machinations, the
representatives of Caram, Irespe and Aportadera had induced Mata to enter into the
contract.
Since the second deed of sale is not a voidable contract, Article 1391, Civil Code of the
Philippines which provides that the action for annulment shall be brought within four (4)
years from the time of the discovery of fraud does not apply. Moreover, Laureta has
been in continuous possession of the land since he bought it in June 1945.
A more important reason why Laureta's action could not have prescribed is that the
second contract of sale, having been registered in bad faith, is null and void. Article
1410 of the Civil Code of the Philippines provides that any action or defense for the
declaration of the inexistence of a contract does not prescribe.
In a Memorandum of Authorities
22
submitted to this Court on March 13, 1978, the
petitioner insists that the action of Laureta against Caram has prescribed because the
second contract of sale is not void under Article 1409
23
of the Civil Code of the
Philippines which enumerates the kinds of contracts which are considered void.
Moreover, Article 1544 of the New Civil Code of the Philippines does not declare void a
second sale of immovable registered in bad faith.
The fact that the second contract is not considered void under Article 1409 and that
Article 1544 does not declare void a deed of sale registered in bad faith does not mean
that said contract is not void. Article 1544 specifically provides who shall be the owner in
case of a double sale of an immovable property. To give full effect to this provision, the
status of the two contracts must be declared valid so that one vendee may contract
must be declared void to cut off all rights which may arise from said contract. Otherwise,
Article 1544 win be meaningless.
The first sale in favor of Laureta prevails over the sale in favor of Caram.
WHEREFORE, the petition is hereby denied and the decision of the Court of Appeals
sought to be reviewed is affirmed, without pronouncement as to costs.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 170405 February 2, 2010
RAYMUNDO S. DE LEON, Petitioner,
vs.
BENITA T. ONG.
1
Respondent.
D E C I S I O N
CORONA, J .:
On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land
2
with
improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these properties were
mortgaged to Real Savings and Loan Association, Incorporated (RSLAI), petitioner and
respondent executed a notarized deed of absolute sale with assumption of mortgage
3
stating:
x x x x x x x x x
That for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND
PESOS (P1.1 million), Philippine currency, the receipt whereof is hereby acknowledged from
[RESPONDENT] to the entire satisfaction of [PETITIONER], said [PETITIONER] does
hereby sell, transfer and convey in a manner absolute and irrevocable, unto said
[RESPONDENT], his heirs and assigns that certain real estate together with the buildings and
other improvements existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the
following terms and conditions:
1. That upon full payment of [respondent] of the amount of FOUR HUNDRED FIFTEEN
THOUSAND FIVE HUNDRED (P415,000), [petitioner] shall execute and sign a deed of
assumption of mortgage in favor of [respondent] without any further cost whatsoever;
2. That [respondent] shall assume payment of the outstanding loan of SIX HUNDRED
EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS (P684,500) with REAL
SAVINGS AND LOAN,
4
Cainta, Rizal (emphasis supplied)
x x x x x x x x x
Pursuant to this deed, respondent gave petitioner P415,500 as partial payment. Petitioner, on the
other hand, handed the keys to the properties and wrote a letter informing RSLAI of the sale and
authorizing it to accept payment from respondent and release the certificates of title.
Thereafter, respondent undertook repairs and made improvements on the properties.
5
Respondent
likewise informed RSLAI of her agreement with petitioner for her to assume petitioners
outstanding loan. RSLAI required her to undergo credit investigation.
Subsequently, respondent learned that petitioner again sold the same properties to one Leona
Viloria after March 10, 1993 and changed the locks, rendering the keys he gave her useless.
Respondent thus proceeded to RSLAI to inquire about the credit investigation. However, she was
informed that petitioner had already paid the amount due and had taken back the certificates of
title.
Respondent persistently contacted petitioner but her efforts proved futile.
On June 18, 1993, respondent filed a complaint for specific performance, declaration of nullity
of the second sale and damages
6
against petitioner and Viloria in the Regional Trial Court (RTC)
of Antipolo, Rizal, Branch 74. She claimed that since petitioner had previously sold the
properties to her on March 10, 1993, he no longer had the right to sell the same to Viloria. Thus,
petitioner fraudulently deprived her of the properties.
Petitioner, on the other hand, insisted that respondent did not have a cause of action against him
and consequently prayed for the dismissal of the complaint. He claimed that since the transaction
was subject to a condition (i.e., that RSLAI approve the assumption of mortgage), they only
entered into a contract to sell. Inasmuch as respondent did apply for a loan from RSLAI, the
condition did not arise. Consequently, the sale was not perfected and he could freely dispose of
the properties. Furthermore, he made a counter-claim for damages as respondent filed the
complaint allegedly with gross and evident bad faith.
Because respondent was a licensed real estate broker, the RTC concluded that she knew that the
validity of the sale was subject to a condition. The perfection of a contract of sale depended on
RSLAIs approval of the assumption of mortgage. Since RSLAI did not allow respondent to
assume petitioners obligation, the RTC held that the sale was never perfected.
In a decision dated August 27, 1999,
7
the RTC dismissed the complaint for lack of cause of
action and ordered respondent to pay petitioner P100,000 moral damages, P20,000 attorneys
fees and the cost of suit.
Aggrieved, respondent appealed to the Court of Appeals (CA),
8
asserting that the court a quo
erred in dismissing the complaint.
The CA found that the March 10, 2003 contract executed by the parties did not impose any
condition on the sale and held that the parties entered into a contract of sale. Consequently,
because petitioner no longer owned the properties when he sold them to Viloria, it declared the
second sale void. Moreover, it found petitioner liable for moral and exemplary damages for
fraudulently depriving respondent of the properties.
In a decision dated July 22, 2005,
9
the CA upheld the sale to respondent and nullified the sale to
Viloria. It likewise ordered respondent to reimburse petitioner P715,250 (or the amount he paid
to RSLAI). Petitioner, on the other hand, was ordered to deliver the certificates of titles to
respondent and pay her P50,000 moral damages and P15,000 exemplary damages.
Petitioner moved for reconsideration but it was denied in a resolution dated November 11,
2005.
10
Hence, this petition,
11
with the sole issue being whether the parties entered into a contract
of sale or a contract to sell.
Petitioner insists that he entered into a contract to sell since the validity of the transaction was
subject to a suspensive condition, that is, the approval by RSLAI of respondents assumption of
mortgage. Because RSLAI did not allow respondent to assume his (petitioners) obligation, the
condition never materialized. Consequently, there was no sale.
Respondent, on the other hand, asserts that they entered into a contract of sale as petitioner
already conveyed full ownership of the subject properties upon the execution of the deed.
We modify the decision of the CA.
Contract of Sale or Contract to Sell?
The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The RTC ruled
that it was a contract to sell while the CA held that it was a contract of sale.
In a contract of sale, the seller conveys ownership of the property to the buyer upon the
perfection of the contract. Should the buyer default in the payment of the purchase price, the
seller may either sue for the collection thereof or have the contract judicially resolved and set
aside. The non-payment of the price is therefore a negative resolutory condition.
12

On the other hand, a contract to sell is subject to a positive suspensive condition. The buyer does
not acquire ownership of the property until he fully pays the purchase price. For this reason, if
the buyer defaults in the payment thereof, the seller can only sue for damages.
13

The deed executed by the parties (as previously quoted) stated that petitioner sold the properties
to respondent "in a manner absolute and irrevocable" for a sum of P1.1 million.
14
With regard to
the manner of payment, it required respondent to pay P415,500 in cash to petitioner upon the
execution of the deed, with the balance
15
payable directly to RSLAI (on behalf of petitioner)
within a reasonable time.
16
Nothing in said instrument implied that petitioner reserved ownership
of the properties until the full payment of the purchase price.
17
On the contrary, the terms and
conditions of the deed only affected the manner of payment, not the immediate transfer of
ownership (upon the execution of the notarized contract) from petitioner as seller to respondent
as buyer. Otherwise stated, the said terms and conditions pertained to the performance of the
contract, not the perfection thereof nor the transfer of ownership.
Settled is the rule that the seller is obliged to transfer title over the properties and deliver the
same to the buyer.
18
In this regard, Article 1498 of the Civil Code
19
provides that, as a rule, the
execution of a notarized deed of sale is equivalent to the delivery of a thing sold.
In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent.
Moreover, not only did petitioner turn over the keys to the properties to respondent, he also
authorized RSLAI to receive payment from respondent and release his certificates of title to her.
The totality of petitioners acts clearly indicates that he had unqualifiedly delivered and
transferred ownership of the properties to respondent. Clearly, it was a contract of sale the parties
entered into.
Furthermore, even assuming arguendo that the agreement of the parties was subject to the
condition that RSLAI had to approve the assumption of mortgage, the said condition was
considered fulfilled as petitioner prevented its fulfillment by paying his outstanding obligation
and taking back the certificates of title without even notifying respondent. In this connection,
Article 1186 of the Civil Code provides:
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment.
Void Sale Or Double Sale?
Petitioner sold the same properties to two buyers, first to respondent and then to Viloria on two
separate occasions.
20
However, the second sale was not void for the sole reason that petitioner
had previously sold the same properties to respondent. On this account, the CA erred.
This case involves a double sale as the disputed properties were sold validly on two separate
occasions by the same seller to the two different buyers in good faith.
Article 1544 of the Civil Code provides:
Article 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. (emphasis supplied)
This provision clearly states that the rules on double or multiple sales apply only to purchasers in
good faith. Needless to say, it disqualifies any purchaser in bad faith.
A purchaser in good faith is one who buys the property of another without notice that some other
person has a right to, or an interest in, such property and pays a full and fair price for the same at
the time of such purchase, or before he has notice of some other persons claim or interest in the
property.
21
The law requires, on the part of the buyer, lack of notice of a defect in the title of the
seller and payment in full of the fair price at the time of the sale or prior to having notice of any
defect in the sellers title.
Was respondent a purchaser in good faith? Yes.
Respondent purchased the properties, knowing they were encumbered only by the mortgage to
RSLAI. According to her agreement with petitioner, respondent had the obligation to assume the
balance of petitioners outstanding obligation to RSLAI. Consequently, respondent informed
RSLAI of the sale and of her assumption of petitioners obligation. However, because petitioner
surreptitiously paid his outstanding obligation and took back her certificates of title, petitioner
himself rendered respondents obligation to assume petitioners indebtedness to RSLAI
impossible to perform.
Article 1266 of the Civil Code provides:
Article 1266. The debtor in obligations to do shall be released when the prestation become
legally or physically impossible without the fault of the obligor.
Since respondents obligation to assume petitioners outstanding balance with RSLAI became
impossible without her fault, she was released from the said obligation. Moreover, because
petitioner himself willfully prevented the condition vis--vis the payment of the remainder of the
purchase price, the said condition is considered fulfilled pursuant to Article 1186 of the Civil
Code. For purposes, therefore, of determining whether respondent was a purchaser in good faith,
she is deemed to have fully complied with the condition of the payment of the remainder of the
purchase price.
Respondent was not aware of any interest in or a claim on the properties other than the mortgage
to RSLAI which she undertook to assume. Moreover, Viloria bought the properties from
petitioner after the latter sold them to respondent. Respondent was therefore a purchaser in good
faith. Hence, the rules on double sale are applicable.
Article 1544 of the Civil Code provides that when neither buyer registered the sale of the
properties with the registrar of deeds, the one who took prior possession of the properties shall be
the lawful owner thereof.
In this instance, petitioner delivered the properties to respondent when he executed the notarized
deed
22
and handed over to respondent the keys to the properties. For this reason, respondent took
actual possession and exercised control thereof by making repairs and improvements thereon.
Clearly, the sale was perfected and consummated on March 10, 1993. Thus, respondent became
the lawful owner of the properties.
Nonetheless, while the condition as to the payment of the balance of the purchase price was
deemed fulfilled, respondents obligation to pay it subsisted. Otherwise, she would be unjustly
enriched at the expense of petitioner.
Therefore, respondent must pay petitioner P684,500, the amount stated in the deed. This is
because the provisions, terms and conditions of the contract constitute the law between the
parties. Moreover, the deed itself provided that the assumption of mortgage "was without any
further cost whatsoever." Petitioner, on the other hand, must deliver the certificates of title to
respondent. We likewise affirm the award of damages.
WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the Court of
Appeals in CA-G.R. CV No. 59748 are hereby AFFIRMED with MODIFICATION insofar as
respondent Benita T. Ong is ordered to pay petitioner Raymundo de Leon P684,500 representing
the balance of the purchase price as provided in their March 10, 1993 agreement.
Costs against petitioner.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 124242 January 21, 2005
SAN LORENZO DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA
ZAVALLA LU, respondents.
D E C I S I O N
TINGA, J .:
From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita
Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa,
Laguna covered by TCT No. T-39022 and TCT No. T-39023 both measuring 15,808 square
meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo
Babasanta, (hereinafter, Babasanta) for the price of fifteen pesos (P15.00) per square meter.
Babasanta made a downpayment of fifty thousand pesos (P50,000.00) as evidenced by a
memorandum receipt issued by Pacita Lu of the same date. Several other payments totaling two
hundred thousand pesos (P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final
deed of sale in his favor so that he could effect full payment of the purchase price. In the same
letter, Babasanta notified the spouses about having received information that the spouses sold the
same property to another without his knowledge and consent. He demanded that the second sale
be cancelled and that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to
sell the property to him at fifteen pesos (P15.00) per square meter. She, however, reminded
Babasanta that when the balance of the purchase price became due, he requested for a reduction
of the price and when she refused, Babasanta backed out of the sale. Pacita added that she
returned the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court (RTC),
Branch 31, of San Pedro, Laguna, a Complaint for Specific Performance and Damages
1
against
his co-respondents herein, the Spouses Lu. Babasanta alleged that the lands covered by TCT No.
T- 39022 and T-39023 had been sold to him by the spouses at fifteen pesos (P15.00) per square
meter. Despite his repeated demands for the execution of a final deed of sale in his favor,
respondents allegedly refused.
In their Answer,
2
the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and when
the total advances of Pacita reached fifty thousand pesos (P50,000.00), the latter and Babasanta,
without the knowledge and consent of Miguel Lu, had verbally agreed to transform the
transaction into a contract to sell the two parcels of land to Babasanta with the fifty thousand
pesos (P50,000.00) to be considered as the downpayment for the property and the balance to be
paid on or before 31 December 1987. Respondents Lu added that as of November 1987, total
payments made by Babasanta amounted to only two hundred thousand pesos (P200,000.00) and
the latter allegedly failed to pay the balance of two hundred sixty thousand pesos (P260,000.00)
despite repeated demands. Babasanta had purportedly asked Pacita for a reduction of the price
from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter and when the Spouses Lu
refused to grant Babasantas request, the latter rescinded the contract to sell and declared that the
original loan transaction just be carried out in that the spouses would be indebted to him in the
amount of two hundred thousand pesos (P200,000.00). Accordingly, on 6 July 1989, they
purchased Interbank Managers Check No. 05020269 in the amount of two hundred thousand
pesos (P200,000.00) in the name of Babasanta to show that she was able and willing to pay the
balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 1990
3
wherein he prayed for the
issuance of a writ of preliminary injunction with temporary restraining order and the inclusion of
the Register of Deeds of Calamba, Laguna as party defendant. He contended that the issuance of
a preliminary injunction was necessary to restrain the transfer or conveyance by the Spouses Lu
of the subject property to other persons.
The Spouses Lu filed their Opposition
4
to the amended complaint contending that it raised new
matters which seriously affect their substantive rights under the original complaint. However, the
trial court in its Order dated 17 January 1990
5
admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a
Motion for Intervention
6
before the trial court. SLDC alleged that it had legal interest in the
subject matter under litigation because on 3 May 1989, the two parcels of land involved, namely
Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale with Mortgage.
7
It
alleged that it was a buyer in good faith and for value and therefore it had a better right over the
property in litigation.
In his Opposition to SLDCs motion for intervention,
8
respondent Babasanta demurred and
argued that the latter had no legal interest in the case because the two parcels of land involved
herein had already been conveyed to him by the Spouses Lu and hence, the vendors were without
legal capacity to transfer or dispose of the two parcels of land to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene. SLDC
filed its Complaint-in-Intervention on 19 April 1990.
9
Respondent Babasantas motion for the
issuance of a preliminary injunction was likewise granted by the trial court in its Order dated 11
January 1991
10
conditioned upon his filing of a bond in the amount of fifty thousand pesos
(P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu
executed in its favor an Option to Buy the lots subject of the complaint. Accordingly, it paid an
option money in the amount of three hundred sixteen thousand one hundred sixty pesos
(P316,160.00) out of the total consideration for the purchase of the two lots of one million two
hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After the Spouses Lu
received a total amount of six hundred thirty-two thousand three hundred twenty pesos
(P632,320.00) they executed on 3 May 1989 a Deed of Absolute Sale with Mortgage in its favor.
SLDC added that the certificates of title over the property were delivered to it by the spouses
clean and free from any adverse claims and/or notice of lis pendens. SLDC further alleged that it
only learned of the filing of the complaint sometime in the early part of January 1990 which
prompted it to file the motion to intervene without delay. Claiming that it was a buyer in good
faith, SLDC argued that it had no obligation to look beyond the titles submitted to it by the
Spouses Lu particularly because Babasantas claims were not annotated on the certificates of title
at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the
property to SLDC. It ordered the Spouses Lu to pay Babasanta the sum of two hundred thousand
pesos (P200,000.00) with legal interest plus the further sum of fifty thousand pesos (P50,000.00)
as and for attorneys fees. On the complaint-in-intervention, the trial court ordered the Register
of Deeds of Laguna, Calamba Branch to cancel the notice of lis pendens annotated on the
original of the TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and
SLDC did not register the respective sales in their favor, ownership of the property should
pertain to the buyer who first acquired possession of the property. The trial court equated the
execution of a public instrument in favor of SLDC as sufficient delivery of the property to the
latter. It concluded that symbolic possession could be considered to have been first transferred to
SLDC and consequently ownership of the property pertained to SLDC who purchased the
property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals alleging in the
main that the trial court erred in concluding that SLDC is a purchaser in good faith and in
upholding the validity of the sale made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the
trial court erred in failing to consider that the contract to sell between them and Babasanta had
been novated when the latter abandoned the verbal contract of sale and declared that the original
loan transaction just be carried out. The Spouses Lu argued that since the properties involved
were conjugal, the trial court should have declared the verbal contract to sell between Pacita Lu
and Pablo Babasanta null and void ab initio for lack of knowledge and consent of Miguel Lu.
They further averred that the trial court erred in not dismissing the complaint filed by Babasanta;
in awarding damages in his favor and in refusing to grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision
11
which set aside the judgment of
the trial court. It declared that the sale between Babasanta and the Spouses Lu was valid and
subsisting and ordered the spouses to execute the necessary deed of conveyance in favor of
Babasanta, and the latter to pay the balance of the purchase price in the amount of two hundred
sixty thousand pesos (P260,000.00). The appellate court ruled that the Absolute Deed of Sale
with Mortgage in favor of SLDC was null and void on the ground that SLDC was a purchaser in
bad faith. The Spouses Lu were further ordered to return all payments made by SLDC with legal
interest and to pay attorneys fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate court.
12

However, in a Manifestation dated 20 December 1995,
13
the Spouses Lu informed the appellate
court that they are no longer contesting the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,
14
the appellate court considered as withdrawn the motion
for reconsideration filed by the Spouses Lu in view of their manifestation of 20 December 1995.
The appellate court denied SLDCs motion for reconsideration on the ground that no new or
substantial arguments were raised therein which would warrant modification or reversal of the
courts decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A
BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER PACITA ZAVALLA LU
OBTAINED FROM IT THE CASH ADVANCE OF P200,000.00, SAN LORENZO WAS PUT
ON INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED
FACT THAT THE ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN
POSSESSION OF THE DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND
TOOK POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN,
ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT
RESPONDENT BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN
LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN THE DISPUTED
PROPERTY.
THE COURT OF APPEA