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Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-15385 June 30, 1960
ALEJANDRA BUGARIN VDA. DE SARMIENTO, plaintiff-appellee,
vs.
JOSEFA R. LESACA, defendant-appellant.
Juan R. Arbizo for appellee.
Pastor de Castro for appellant.
BAUTISTA ANGELO, J.:

On December 31, 1949, plaintiff filed a complaint in the Court of First Instance of Zambales praying for
the rescission of the contract of sale executed between her and defendant for failure of the latter to place
the former in the actual physical possession of the lands she bought.

After issues were joined, the parties submitted the case for decision upon the following stipulation of
facts: that on January 18, 1949, plaintiff bought from defendant two parcels of land for P5,000; that after
the sale, plaintiff tried to take actual physical possession of the lands but was prevented from doing so by
one Martin Deloso who claims to be the owner thereof; that on February 1, 1949, plaintiff instituted an
action before the Tenancy Enforcement Division of the Department of Justice to oust said Martin Deloso
from the possession of the lands, which action she later abandoned for reasons known only to her; that on
December 12, 1949, plaintiff wrote defendant asking the latter either to change the lands sold with
another of the same kind and class or to return the purchase price together with the expenses she had
incurred in the execution of the sale, plus 6 per cent interest; and that since defendant did not agree to
this proposition as evidenced by her letter dated December 21,1949, plaintiff filed the present action.

On April 11, 1957, the trial court rendered judgment declaring the deed of sale entered into between
plaintiff and defendant rescinded, and ordering the latter to pay the former the sum of P5,000,
representing the purchase price of the lands, plus the amount of P50.25 which plaintiff spent for the
execution and registration of the deed of sale, with legal interest on both sums from January 18, 1949.
Defendant, in due time, appealed to the Court of Appeals, but the case was certified to us on the ground
that the questions involved are purely legal.

The issue posed by appellant is whether the execution of the deed of sale in a public document (Exhibit A)
is equivalent to delivery of possession of the lands sold to appellee thus relieving her of the obligation to
place appellee in actual possession thereof.

Articles 1461 and 1462 of the old Civil Code provide:

ART. 1461. The vendor is bound to deliver and warrant the thing which is the subject-matter of the sale.

ART. 1462. The thing sold shall be deemed delivered when the vendee is placed in the control and
possession thereof.

If the sale should be made by means of a public instrument, the execution thereof shall be equivalent to
the delivery of the thing which is the subject-matter of the contract unless the contrary appears or is
clearly to be inferred from such instrument.

From the above it is clear that when a contract of sale is executed the vendor is bound to deliver to the
vendee the thing sold by placing the vendee in the control and possession of the subject-matter of the
contract. However, if the sale is executed by means of a public instrument, the mere execution of the
instrument is equivalent to delivery unless the contrary appears or is clearly to be inferred from such
instrument.
The question that now arises is: Is there any stipulation in the sale in question from which we can infer
that the vendor did not intend to deliver outright the possession of the lands to the vendee? We find none.
On the contrary, it can be clearly seen therein that the vendor intended to place the vendee in actual
possession of the lands immediately as can be inferred from the stipulation that the vendee "takes actual
possession thereof ... with full rights to dispose, enjoy and make use thereof in such manner and form as
would be most advantageous to herself." The possession referred to in the contract evidently refers to
actual possession and not merely symbolical inferable from the mere execution of the document.

Has the vendor complied with this express commitment? she did not. As provided in Article 1462, the
thing sold shall be deemed delivered when the vendee is placed in the control and possession thereof,
which situation does not here obtain because from the execution of the sale up to the present the vendee
was never able to take possession of the lands due to the insistent refusal of Martin Deloso to surrender
them claiming ownership thereof. And although it is postulated in the same article that the execution of a
public document is equivalent to delivery, this legal fiction only holds true when there is no impediment
that may prevent the passing of the property from the hands of the vendor into those of the vendee. This
is what we said in a similar case:

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 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 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 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. (Addison vs. Felix and Tioco, 38 Phil., 404; See also Garchitorena vs. Almeda, 48 Off.
Gaz., No., 8, 3432; 3437)

The next question to resolve is: Can plaintiff rescind the contract of sale in view of defendant's failure to
deliver the possession of the lands?

We are inclined to uphold the affirmative. While defendant contends that rescission can be availed of only
in the cases enumerated in Articles 1291 and 1292 of the old civil Code and being a subsidiary remedy
(Article 1294) it can only be resorted to when no other remedy is available, yet we agree with plaintiff's
contention that this action is based on Article 1124 of the same Code, which provides:

Art 1124. The right to resolve reciprocal obligations, in case one of the obligors should fail to comply with
that which is incumbent upon him, is deemed to be implied.

The person prejudiced may choose between exacting the fulfillment of the obligation or its resolution with
indemnity for losses and payment of interest in either case. He may also demand the resolution of the
obligation even after having elected its fulfillment, should the latter be found impossible.

Undoubtedly in a contract of purchase and sale the obligation of the parties is reciprocal, and, as provided
by the law, in case one of the parties fails to comply with what is incumbent upon him to do , the person
prejudiced may either exact the fulfillment of the obligation or rescind the sale. Since plaintiff chose the
latter alternative, it cannot be disputed that her action is in accordance with law.

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We agree with the trial court that there was no fraud in the transaction in question but rather a non-
fulfillment by the plaintiff-appellee C.N. Hodges of his obligation, as vendor, to deliver the things, which
were the subject-matter of the contract, to the defendant-appellant Alberto Granada, as purchaser thereof
(article 1461, Civil Code), and place them in the latter's control and possession (article 1462, Civil Code)
which was not done. Inasmuch as the obligations arising from the contract of purchase and sale, Exhibit A,
which was entered into by the plaintiff-appellee and the defendant-appellant, are reciprocal and the
former had failed to comply with that which was incumbent upon him, the latter has the implied right to
resolve them, and he may choose between exacting from the vendor the fulfillment of the obligation or its
resolution with indemnity for damages and payment of interest in either case (article 1124, Civil Code).
Inasmuch as the defendant-appellant had chosen to rescind the aforesaid contract of purchase and sale in
his cross-complaint, there arose the necessity on the part of the plaintiff-appellee, to return the purchase
price with interest thereon, and on the part of the defendant-appellant, to restore the things which were
the subject-matter thereof, in case he had received them (article 1295, Civil Code). (Hodges vs. Granada,
59 Phil., 429, 432; See also Pabalan vs. Velez, 22 Phil., 29; Addison vs. Felix and Tioco, supra;
Rodriguez vs. Flores, 43 Off. Gaz., No. 6, 2247.)

Wherefore the decision appealed from is affirmed, with costs against defendant-appellant.

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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.:

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 Norkis'
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

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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).

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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.

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SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 109410 August 28, 1996


CLARA M. BALATBAT, petitioner,
vs.
COURT OF APPEALS and Spouses JOSE REPUYAN and AURORA REPUYAN, respondents.

TORRES, JR. , J.:p

Petitioner Clara M. Balatbat instituted this petition for review pursuant to Rule 45 of the Revised Rules of
Court seeking to set aside the decision dated August 12, 1992 of the respondent Court of Appeals in CA-
GR. CV No. 29994 entitled "Alexandra Balatbat and Clara Balatbat, plaintiffs-appellants versus Jose
Repuyan and Aurora Repuyan, defendants-appellees", the dispositive portion of which reads: 1

WHEREFORE, the judgment appealed from is affirmed with the modification that the awards
of P10,000.00 for attorney's fees and P5,000.00 as costs of litigation are deleted.

SO ORDERED.

The records show the following factual antecedents:

It appears that on June 15, 1977, Aurelio A. Roque filed a complaint for partition docketed as Civil Case
No. 109032 against Corazon Roque, Alberto de los Santos, Feliciano Roque, Severa Roque and Osmundo
Roque before the then Court of First Instance of Manila, Branch IX. 2 Defendants therein were declared in
default and plaintiff presented evidence ex-parte. On March 29, 1979, the trial court rendered a decision
in favor of plaintiff Aurelio A. Roque, the pertinent portion of which reads: 3

From the evidence, it has been clearly established that the lot in question covered by
Transfer Certificate of Title No. 51330 was acquired by plaintiff Aurelio Rogue and Maria
Mesina during their conjugal union and the house constructed thereon was likewise built
during their marital union. Out of their union, plaintiff and Maria Mesina had four children,
who are the defendants in this case. When Maria Mesina died on August 28, 1966, the only
conjugal properties left are the house and lot above stated of which plaintiff herein, as the
legal spouse, is entitled to one-half share pro-indiviso thereof. With respect to the one-half
share pro-indiviso now forming the estate of Maria Mesina, plaintiff and the four children,
the defendants here, are each entitled to one-fifth (1/5) share pro-indiviso. The deceased
wife left no debt.

Wherefore, judgment is hereby rendered ordering the partition of the properties, subject
matter of this case consisting of the house and lot, in the following manner:

1. Of the house and lot forming the conjugal properties, plaintiff is entitled to one-half
share pro-indiviso thereof while the other half forms the estate of the deceased Maria
Mesina;

2. Of the Estate of deceased Maria Mesina, the same is to be divided into five (5) shares and
plaintiff and his four children are entitled each to one-fifth share thereof pro-indiviso.

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Plaintiff claim for moral, exemplary and actual damages and attorney's fees not having been
established to the satisfaction of the Court, the same is hereby denied.

Without pronouncement as to costs.

SO ORDERED

On June 2, 1979, the decision became final and executory. The corresponding entry of judgment was
made on March 29, 1979. 4

On October 5, 1979, the Register of Deeds of Manila issued a Transfer Certificate of Title No. 135671 in
the name of the following persons in the following proportions: 5

Aurelio A. Roque 6/10 share


Severina M. Roque 1/10 share
Osmundo M. Roque 1/10 share
Feliciano M. Roque 1/10 share
Corazon M. Roque 1/10 share

On April 1, 1980, Aurelio A. Rogue sold his 6/10 share in T.C.T. No. 135671 to spouses Aurora Tuazon-
Repuyan and Jose Repuyan as evidenced by ."Deed of Absolute Sale." 6

On July 21, 1980, Aurora Tuazon Repuyan caused the annotation of her affidavit of adverse claim 7
on the
Transfer Certificate of Title No. 135671, 8 to wit:

Entry No. 5627/T-135671 NOTICE OF ADVERSE CLAIM Filed by Aurora Tuazon


Repuyan, married, claiming among others that she bought 6/10 portion of the property
herein described from Aurelio Roque for the amount of P50,000.00 with a down payment of
P5,000.00 and the balance of P45,000.00 to be paid after the partition and subdivision of
the property herein described, other claims set forth in Doc. No. 954, page 18, Book 94 of
________________ 64 _______ PEDRO DE CASTRO, Notary Public of Manila.

Date of instrument July 21, 1980


Date of inscription July 21, 1980 at 3:35 p.m.

TERESITA H.
NOBLEJAS
Acting Register of
Deeds

By:

RAMON D.
MACARICAN
Acting Second
Deputy

On August 20, 1980, Aurelio A. Roque filed a complaint for "Rescission of Contract" docketed as Civil Case
No. 134131 against spouses Aurora Tuazon-Repuyan and Jose Repuyan before Branch IV of the then
Court of First Instance of Manila. The complaint is grounded on spouses Repuyan's failure to pay the
balance of P45,000.00 of the purchase price. 9 On September 5, 1980, spouses Repuyan filed their answer
with counterclaim. 10

In the meantime, the trial court issued an order in Civil Case No. 109032 (Partition case) dated February
2, 1982, to wit: 11

1
In view of all the foregoing and finding that the amount of P100,000.00 as purchase price
for the sale of the parcel of land covered by TCT No. 51330 of the Registry of Deeds of
Manila consisting of 84 square meters situated in Callejon Sulu, District of Santa Cruz,
Manila, to be reasonable and fair, and considering the opportunities given defendants to
sign the deed of absolute sale voluntarily, the Court has no alternative but to order, as it
hereby orders, the Deputy Clerk of this Court to sign the deed of absolute sale for and in
behalf of defendants pursuant to Sec. 10, Rule 39 of the Rules of Court, in order to effect
the partition of the property involved in this case.

SO ORDERED.

A deed of absolute sale was executed on February 4, 1982 between Aurelio S. Roque, Corazon
Roque, Feliciano Roque, Severa Roque and Osmundo Roque and Clara Balatbat, married to
Alejandro Balatbat. 12On April 14, 1982, Clara Balatbat filed a motion for the issuance of a writ of
possession which was granted by the trial court on September 14, 1982 "subject, however, to valid
rights and interest of third persons over the same portion thereof, other than vendor or any other
person or persons privy to or claiming any rights or interests under it." The corresponding writ of
possession was issued on September 20, 1982. 13

On May 20, 1982, petitioner Clara Balatbat filed a motion to intervene in Civil Case No. 134131 14 which
was granted as per court's resolution of October 21, 1982. 15 However, Clara Balatbat failed to file her
complaint in intervention. 16 On April 15, 1986, the trial court rendered a decision dismissing the
complaint, the pertinent portion of which reads: 17

The rescission of contracts are provided for in the laws and nowhere in the provision of the
Civil Code under the title Rescissible Contracts does the circumstances in the case at bar
appear to have occurred, hence, the prayer for rescission is outside the ambit for which
rescissible [sic] could be granted.

The Intervenor Plaintiff, Clara Balatbat, although allowed to intervene, did not file her
complaint in intervention.

Consequently, the plaintiff having failed to prove with sufficient preponderance his action,
the relief prayed for had to be denied. The contract of sale denominated as "Deed of
Absolute Sale" (Exh. 7 and sub-markings) being valid and enforceable, the same pursuant
to the provisions of Art. 1159 of the Civil Code which says:

Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.

has the effect of being the law between the parties and should be complied with. The
obligation of the plaintiff under the contract being to have the land covered by TCT No.
135671 partitioned and subdivided, and title issued in the name of the defendant buyer (see
page 2 par. C of Exh. 7-A) plaintiff had to comply thereto to give effect to the contract.

WHEREFORE, judgment is rendered against the plaintiff, Aurelio A. Roque, and the plaintiff
in intervention, Clara Balatbat, and in favor of the defendants, dismissing the complaint for
lack of merit, and declaring the Deed of Absolute Sale dated April 1, 1980 as valid and
enforceable and the plaintiff is, as he is hereby ordered, to partition and subdivide the land
covered by T.C.T. No. 135671, and to aggregate therefrom a portion equivalent to 6/10
thereof, and cause the same to be titled in the name of the defendants, and after which, the
defendants, and after which, the defendants, and after which, the defendants, and after
which, the defendants to pay the plaintiff the sum of P45,000.00. Considering further that
the defendants suffered damages since they were forced to litigate unnecessarily, by way of
their counterclaim, plaintiff is hereby ordered to pay defendants the sum of P15,000.00 as
moral damages, attorney's fees in the amount of P5,000.00.

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Costs against plaintiff.

SO ORDERED.

On March 3, 1987, petitioner Balatbat filed a notice of lis pendens in Civil Case No. 109032 before the
Register of Deeds of Manila. 18

On December 9, 1988, petitioner Clara Balatbat and her husband, Alejandro Balatbat filed the instant
complaint for delivery of the owners duplicate copy of T.C.T. No. 135671 docketed as Civil Case No. 88-
47176 before Branch 24 of the Regional Trial Court of Manila against private respondents Jose Repuyan
and Aurora Repuyan. 19

On January 27, 1989, private respondents filed their answer with affirmative defenses and compulsory
counterclaim. 20

On November 13, 1989, private respondents filed their memorandum 21


while petitioners filed their
memorandum on November 23, 1989. 22

On August 2, 1990, the Regional Trial Court of Manila, Branch 24, rendered a decision dismissing the
complaint, the dispositive portion of which reads : 23

Considering all the foregoing, this Court finds that the plaintiffs have not been able to
establish their cause of action against the defendants and have no right to the reliefs
demanded in the complaint and the complaint of the plaintiff against the defendants is
hereby DISMISSED. On the counterclaim, the plaintiff are ordered to pay defendants the
amount of Ten Thousand Pesos by way of attorney's fees, Five Thousand Pesos as costs of
litigation and further to pay the costs of the suit.

SO ORDERED.

Dissatisfied, petitioner Balatbat filed an appeal before the respondent Court of Appeals which rendered the
assailed decision on August 12, 1992, to wit: 24

WHEREFORE, the judgment appealed from is affirmed with the modification that the awards
of P10,000.00 for attorney's fees and P5,000.00 as costs of litigation are deleted.

SO ORDERED.

On March 22, 1993, the respondent Court of Appeals denied petitioner's motion for reconsideration. 25

Hence, this petition for review.

Petitioner raised the following issues for this Court's resolution:

WHETHER OR NOT THE ALLEGED SALE TO THE PRIVATE RESPONDENTS WAS MERELY
EXECUTORY AND NOT A CONSUMMATED TRANSACTION?

II

WHETHER OR NOT THERE WAS A DOUBLE SALE AS CONTEMPLATED UNDER ART. 1544 OF
THE CIVIL CODE?

III
1
WHETHER OR NOT PETITIONER WAS A BUYER IN GOOD FAITH AND FOR VALUE?

IV

WHETHER OR NOT THE COURT OF APPEALS ERRED IN GIVING WEIGHT AND


CONSIDERATION TO THE EVIDENCE OF THE PRIVATE RESPONDENTS WHICH WERE NOT
OFFERED?

Petitioner asseverates that the respondent Court of Appeals committed grave abuse of discretion
tantamount to lack or excess of jurisdiction in affirming the appealed judgment considering (1) that the
alleged sale in favor of the private respondents Repuyan was merely executory; (2) that there is no
double sale; (3) that petitioner is a buyer in good faith and for value; and (4) that private respondents did
not offer their evidence during the trial.

Contrary to petitioner's contention that the sale dated April 1, 1980 in favor of private respondents
Repuyan was merely executory for the reason that there was no delivery of the subject property and that
consideration/price was not fully paid, we find the sale as consummated, hence, valid and enforceable. In
a decision dated April 15, 1986 of the Regional Trial Court of Manila Branch IV in Civil Case No. 134131,
the Court dismissed vendor's Aurelio Roque complaint for rescission of the deed of sale and declared that
the Sale dated April 1, 1980, as valid and enforceable. No appeal having been made, the decision became
final and executory. It must be noted that herein petitioner Balatbat filed a motion for intervention in that
case but did not file her complaint in intervention. In that case wherein Aurelio Roque sought to rescind
the April 1, 1980 deed of sale in favor of the private respondents for non-payment of the P45,000.00
balance, the trial court dismissed the complaint for rescission. Examining the terms and conditions of the
"Deed of Sale" dated April 1, 1980, the P45,000.00 balance is payable only "after the property covered by
T.C.T. No. 135671 has been partitioned and subdivided, and title issued in the name of the BUYER" hence,
vendor Roque cannot demand payment of the balance unless and until the property has been subdivided
and titled in the name of private respondents. Devoid of any stipulation that "ownership in the thing shall
not pass to the purchaser until he has fully paid the price" 26, ownership in thing shall pass from the
vendor to the vendee upon actual or constructive delivery of the thing sold even if the purchase price has
not yet been fully paid. The failure of the buyer has not yet been fully paid. The failure of the buyer to
make good the price does not, in law, cause the ownership to revest to the seller unless the bilateral
contract of sale is first rescinded or resolved pursuant to Article 1191 of the New Civil Code. 27 Non-
payment only creates a right to demand the fulfillment of the obligation or to rescind the contract.

With respect to the non-delivery of the possession of the subject property to the private respondent,
suffice it to say that ownership of the thing sold is acquired only from the time of delivery thereof, either
actual or constructive. 28Article 1498 of the Civil Code provides that when the sale is made through a
public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object
of the contract, if from the deed the contrary does not appear or cannot be inferred. 29 The execution of
the public instrument, without actual delivery of the thing, transfers the ownership from the vendor to the
vendee, who may thereafter exercise the rights of an owner over the same. 30 In the instant case, vendor
Roque delivered the owner's certificate of title to herein private respondent. It is not necessary that
vendee be physically present at every square inch of the land bought by him, possession of the public
instrument of the land is sufficient to accord him the rights of ownership. Thus, delivery of a parcel of land
may be done by placing the vendee in control and possession of the land (real) or by embodying the sale
in a public instrument (constructive). The provision of Article 1358 on the necessity of a public document
is only for convenience, not for validity or enforceability. It is not a requirement for the validity of a
contract of sale of a parcel of land that this be embodied in a public instrument. 31

A contract of sale being consensual, it is perfected by the mere consent of the parties. 32 Delivery of the
thing bought or payment of the price is not necessary for the perfection of the contract; and failure of the
vendee to pay the price after the execution of the contract does not make the sale null and void for lack of
consideration but results at most in default on the part of the vendee, for which the vendor may exercise
his legal remedies. 33

Article 1544 of the New Civil Code provides:


z
If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it
should be movable property.

Should it be movable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession and in the absence thereof, to the person who present the oldest
title, provided there is good faith.

Article 1544 of the Civil Code provides that in case of double sale of an immovable property, ownership
shall be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of
Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default
thereof, to the person who presents the oldest title, provided there is good faith. 34

In the case at bar, vendor Aurelio Roque sold 6/10 portion of his share in TCT No. 135671 to private
respondents Repuyan on April 1, 1980. Subsequently, the same lot was sold again by vendor Aurelio
Roque (6/10) and his children (4/10), represented by the Clerk of Court pursuant to Section 10, Rule 39
of the Rules of Court, on February 4, 1982. Undoubtedly, this is a case of double sale contemplated under
Article 1544 of the New Civil Code.

This is an instance of a double sale of an immovable property hence, the ownership shall vests in the
person acquiring it who in good faith first recorded it in the Registry of Property. Evidently, private
respondents Repuyan's caused the annotation of an adverse claim on the title of the subject property
denominated as Entry No. 5627/T-135671 on July 21, 1980. 35 The annotation of the adverse claim on
TCT No. 135671 in the Registry of Property is sufficient compliance as mandated by law and serves notice
to the whole world.

On the other hand, petitioner filed a notice of lis pendens only on February 2, 1982. Accordingly, private
respondents who first caused the annotation of the adverse claim in good faith shall have a better right
over herein petitioner. Moreover, the physical possession of herein petitioners by virtue of a writ of
possession issued by the trial court on September 20, 1982 is "subject to the valid rights and interest of
third persons over the same portion thereof, other than vendor or any other person or persons privy to or
claiming any rights to interest under it." 36 As between two purchasers, the one who has registered the
sale in his favor, has a preferred right over the other who has not registered his title even if the latter is in
actual possession of the immovable property. 3 7 Further, even in default of the first registrant or first in
possession, private respondents have presented the oldest title. 38 Thus, private respondents who
acquired the subject property in good faith and for valuable consideration established a superior right as
against the petitioner.

Evidently, petitioner cannot be considered as a buyer in good faith. In the complaint for rescission filed by
vendor Aurelio Roque on August 20, 1980, herein petitioner filed a motion for intervention on May 20,
1982 but did not file her complaint in intervention, hence, the decision was rendered adversely against
her. If petitioner did investigate before buying the land on February 4, 1982, she should have known that
there was a pending case and an annotation of adverse claim was made in the title of the property before
the Register of Deeds and she could have discovered that the subject property was already sold to the
private respondents. It is incumbent upon the vendee of the property to ask for the delivery of the
owner's duplicate copy of the title from the vendor. A purchaser of a valued piece of property cannot just
close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in
good faith and under the belief that there were no defect in the title of the vendor. 39 One who purchases
real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title
thereto in good faith as against the true owner of the land or of an interest therein; and the same rule
must be applied to one who has knowledge of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of his vendor. Good faith,
or the want of it is not a visible, tangible fact that can be seen or touched, but rather a state or condition
of mind which can only be judged of by actual or fancied tokens or signs. 40 In fine, petitioner had nobody
1
to blame but herself in dealing with the disputed property for failure to inquire or discover a flaw in the
title to the property, thus, it is axiomatic that culpa lata dolo aequiparatur gross negligence is
equivalent to intentional wrong.

IN VIEW OF THE FOREGOING PREMISES, this petition for review is hereby DISMISSED for lack of merit.
No pronouncement as to costs.

IT IS SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-22604 February 3, 1925
GUADALUPE GONZALEZ and LUIS GOMEZ, plaintiffs-appellants,
vs.
E.J. HABERER, defendant-appellee.
Feria and La O for appellants.
Paredes, Buencamino and Yulo for appellee.

OSTRAND, J.:

This action is brought to recover the sum of P34,260 alleged to be due the plaintiffs from the defendant
upon a written agreement for the sale of a tract of land situated in the Province of Nueva Ecija. The
plaintiffs also ask for damages in the sum of P10,000 for the alleged failure of the defendant to comply
with his part of the agreement.

The defendant in his answer admits that of the purchase price stated in the agreement a balance of
P31,000 remains unpaid, but by way of special defense, cross-complaint and counter-claim alleges that at
the time of entering into the contract the plaintiffs through false representations lead him to believe that
they were in possession of the land and that the title to the greater portion thereof was not in dispute;
that on seeking to obtain possession he found that practically the entire area of the land was occupied by
adverse claimants and the title thereto disputed; that he consequently has been unable to obtain
possession of the land; and that the plaintiffs have made no efforts to prosecute the proceedings for the
registration of the land. He therefore asks that the contract be rescinded; that the plaintiffs be ordered to
return to him the P30,000 already paid by him to them and to pay P25,000 as damages for breach of the
contract.

The court below dismissed the plaintiffs' complaint, declared the contract rescinded and void and gave the
defendant judgment upon his counterclaim for the sum of P30,000, with interest from the date upon which
the judgment becomes final. The case is now before this court upon appeal by the plaintiffs from that
judgment.

The contract in question reads as follows:

Know all men by these presents:

That I, Guadalupe Gonzalez y Morales de Gomez, married with Luis Gomez, of age, and
resident of the municipality of Bautista, Province of Pangasinan, Philippine Islands, do
hereby state:

1. That I am the absolute and exclusive owner of a parcel of land situated in the barrio of
Partida, municipality of Guimba, Nueva Ecija, described as follows:

z
Bounded on the north by the land of Don Marcelino Santos; on the east, by the land of Doa
Cristina Gonzalez; on the south by the Binituan River; and on the west, by the land of Doa
Ramona Gonzalez; containing an area of 488 hectares approximately.

2. That an application was filed for the registration of the above described land in the
registry of property of Nueva Ecija, which application is still pending in the Court of First
Instance of Nueva Ecija.

3. That in consideration of the sum of P125 per hectare I do hereby agree and bind myself
to sell and transfer by way of real and absolute sale the land above described to Mr. E.J.
Habere, binding myself to execute the deed of sale immediately after the decree of the
court adjudicating said land in my favor is registered in the registry of property of the
Province of Nueva Ecija. The condition of this obligation to sell are as follows:

"1. That Mr. E.J. Haberer has at this moment paid me the sum of P30,000 on
account of the price of the aforesaid land.

"2. That said Mr. E.J. Haberer agrees and binds himself to pay within six months
from the date of the execution of this document the unpaid balance of the purchase
price.

"3. That said Mr. E.J. Haberer shall have the right to take possession of the aforesaid
land immediately after the execution of this document together with all the
improvements now existing on the same land, such as palay plantation and others.

"4. That said Mr. E.J. agrees and binds himself to pay the expenses to be incurred
from this date in the registration of the aforesaid land up to the filing of the proper
decree in the office of the register of deeds of the Province of Nueva Ecija.

"5. That in the event that the court should hold that I am not the owner of all or any
part of the aforesaid land, I agree and bind myself to return without interest all such
amounts of money as I have received or may receive from Mr. E.J. Haberer as the
purchase price of said land, but, in the event that the court should adjudicate a part
of the aforesaid land to me, then I agree and bind myself to sell said portion
adjudicated to me, returning all the amounts received from Mr. E.J. Haberer in
excess of the price of said portion at the rate of P125 per hectare.

"6. The Mr. E.J. Haberer does hereby waive any interest or indemnity upon the
amount that I am to return to him and which I have receive from Mr. E.J. Haberer as
the purchase price of the aforesaid land."

I, E.J. Haberer, married, of age, and resident of the municipality of Talavera, Nueva Ecija,
do hereby state that, having known the contents of this document, I accept the same with
all the stipulations and conditions thereof.

I, Luis Gomez, married, of age, and resident of the municipality of Bautista, Province of
Pangasinan, do hereby grant my wife, Da. Guadalupe Gonzalez y Morales de Gomez, the
due marital license to execute this document and make effective the definite sale of the land
as above stipulated, she being empowered to execute the deed of sale and other necessary
documents in order that the full ownership over the aforesaid land may be transferred to
Mr. E.J. Haberer, as stipulated in this document.

In testimony whereof, we hereunto set our hands at Manila, this 7th day of July, 1920.

1
(Sgd.) GUADALUPE G. DE GOMEZ
E.J. HABERER
LUIS GOMEZ

Signed in the presence of the witnesses:

(Sgd.) EMIGDIO DOMINGO


L.G. ALVAREZ

(Acknowledged before notary.)

It is conceded by the plaintiffs that the defendant never obtained actual or physical possession of the land,
but it is argued that under the contract quoted the plaintiffs were under no obligation to place him in
possession. This contention cannot be sustained. Cause 3 of paragraph 3 of the contract gave the
defendant the right to take possession of the land immediately upon the execution of the contract and
necessarily created the obligation on the part of the plaintiffs to make good the right thus granted; it was
one of the essential conditions of the agreement and the failure of the plaintiffs to comply with this
condition, without fault on the part of the defendant, is in itself sufficient ground for the rescission, even in
the absence of any misrepresentation on their part. (Civil Code, art. 1124 ; Pabalan vs. Velez, 22 Phil.,
29.)

It is therefore unnecessary to discuss the question whether the defendant was induced to enter into the
agreement through misrepresentation made by the plaintiff Gomez. We may say, however, that the
evidence leaves no doubt that some misrepresentations were made and that but for such
misrepresentations the defendant would not have been likely to enter into the agreement in the form it
appeared. As to the contention that the plaintiff Gonzalez cannot be charged with the misrepresentations
of Gomez, it is sufficient to say that the latter in negotiating for the sale of the land acted as the agent
and representative of the other plaintiff, his wife; having accepted the benefit of the representations of
her agent she cannot, of course, escape liability for them. (Haskell vs. Starbird, 152 Mass., 117; 23
A.S.R., 809.)

The contention of the appellants that the symbolic delivery effected by the execution and delivery of the
agreement was a sufficient delivery of the possession of the land, is also without merit. The possession
referred to in the contract is evidently physical; if it were otherwise it would not have been necessary to
mention it in the contract. (See Cruzado vs. Bustos and Escaler, 34 Phil., 17.)

The judgment appealed from is in accordance with the law, is fully sustained by the evidence, and is
therefore affirmed, with the costs against the appellants. So ordered.

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Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-30056 August 30, 1988
MARCELO AGCAOILI, plaintiff-appellee
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-appellant.
Artemio L. Agcaoili for plaintiff-appellee.
Office of the Government Corporate Counsel for defendant-appellant.

NARVASA, J.:

The appellant Government Service Insurance System, (GSIS, for short) having approved the application of
the appellee Agcaoili for the purchase of a house and lot in the GSIS Housing Project at Nangka Marikina,
Rizal, subject to the condition that the latter should forthwith occupy the house, a condition that Agacoili
tried to fulfill but could not for the reason that the house was absolutely uninhabitable; Agcaoili, after
paying the first installment and other fees, having thereafter refused to make further payment of other
stipulated installments until GSIS had made the house habitable; and appellant having refused to do so,
opting instead to cancel the award and demand the vacation by Agcaoili of the premises; and Agcaoili
having sued the GSIS in the Court of First Instance of Manila for specific performance with damages and
having obtained a favorable judgment, the case was appealled to this Court by the GSIS. Its appeal must
fail.

The essential facts are not in dispute. Approval of Agcaoili's aforementioned application for purchase 1 was
contained in a letter 2 addressed to Agcaoili and signed by GSIS Manager Archimedes Villanueva in behalf
of the Chairman-General Manager, reading as follows:

Please be informed that your application to purchase a house and lot in our GSIS Housing
Project at Nangka, Marikina, Rizal, has been approved by this Office. Lot No. 26, Block No.
(48) 2, together with the housing unit constructed thereon, has been allocated to you.

You are, therefore, advised to occupy the said house immediately.

If you fail to occupy the same within three (3) days from receipt of this notice, your
application shall be considered automatically disapproved and the said house and lot will be
awarded to another applicant.

Agcaoili lost no time in occupying the house. He could not stay in it, however, and had to leave the very
next day, because the house was nothing more than a shell, in such a state of incompleteness that
civilized occupation was not possible: ceiling, stairs, double walling, lighting facilities, water connection,
bathroom, toilet kitchen, drainage, were inexistent. Agcaoili did however ask a homeless friend, a certain
1
Villanueva, to stay in the premises as some sort of watchman, pending completion of the construction of
the house. Agcaoili thereafter complained to the GSIS, to no avail.

The GSIS asked Agcaoili to pay the monthly amortizations and other fees. Agcaoili paid the first monthly
installment and the incidental fees, 3 but refused to make further payments until and unless the GSIS
completed the housing unit. What the GSIS did was to cancel the award and require Agcaoili to vacate the
premises. 4 Agcaoili reacted by instituting suit in the Court of First Instance of Manila for specific
performance and damages. 5 Pending the action, a written protest was lodged by other awardees of
housing units in the same subdivision, regarding the failure of the System to complete construction of
their own houses. 6 Judgment was in due course rendered ,7 on the basis of the evidence adduced by
Agcaoili only, the GSIS having opted to dispense with presentation of its own proofs. The judgment was in
Agcaoili's favor and contained the following dispositions, 8 to wit:

1) Declaring the cancellation of the award (of a house and lot) in favor of plaintiff (Mariano
Agcaoili) illegal and void;

2) Ordering the defendant (GSIS) to respect and enforce the aforesaid award to the plaintiff
relative to Lot No. 26, Block No. (48) 2 of the Government Service Insurance System
(GSIS) low cost housing project at Nangka Marikina, Rizal;

3) Ordering the defendant to complete the house in question so as to make the same
habitable and authorizing it (defendant) to collect the monthly amortization thereon only
after said house shall have been completed under the terms and conditions mentioned in
Exhibit A ;and

4) Ordering the defendant to pay P100.00 as damages and P300.00 as and for attorney's
fees, and costs.

Appellant GSIS would have this Court reverse this judgment on the argument that

1) Agcaoili had no right to suspend payment of amortizations on account of the incompleteness of his
housing unit, since said unit had been sold "in the condition and state of completion then existing ... (and)
he is deemed to have accepted the same in the condition he found it when he accepted the award;" and
assuming indefiniteness of the contract in this regard, such circumstance precludes a judgment for specific
performance. 9

2) Perfection of the contract of sale between it and Agcaoili being conditioned upon the latter's immediate
occupancy of the house subject thereof, and the latter having failed to comply with the condition, no
contract ever came into existence between them ;10

3) Agcaoili's act of placing his homeless friend, Villanueva, in possession, "without the prior or subsequent
knowledge or consent of the defendant (GSIS)" operated as a repudiation by Agcaoili of the award and a
deprivation of the GSIS at the same time of the reasonable rental value of the property. 11

Agcaoili's offer to buy from GSIS was contained in a printed form drawn up by the latter, entitled
"Application to Purchase a House and/or Lot." Agcaoili filled up the form, signed it, and submitted it. 12 The
acceptance of the application was also set out in a form (mimeographed) also prepared by the GSIS. As
already mentioned, this form sent to Agcaoili, duly filled up, advised him of the approval of his "application
to purchase a house and lot in our GSIS Housing Project at NANGKA, MARIKINA, RIZAL," and that "Lot No.
26, Block No. (48) 2, together with the housing unit constructed thereon, has been allocated to you."
Neither the application form nor the acceptance or approval form of the GSIS nor the notice to
commence payment of a monthly amortizations, which again refers to "the house and lot awarded"
contained any hint that the house was incomplete, and was being sold "as is," i.e., in whatever state of
completion it might be at the time. On the other hand, the condition explicitly imposed on Agcaoili "to
occupy the said house immediately," or in any case within three (3) days from notice, otherwise his
"application shall be considered automatically disapproved and the said house and lot will be awarded to

z
another applicant" would imply that construction of the house was more or less complete, and it was by
reasonable standards, habitable, and that indeed, the awardee should stay and live in it; it could not be
interpreted as meaning that the awardee would occupy it in the sense of a pioneer or settler in a rude
wilderness, making do with whatever he found available in the envirornment.

There was then a perfected contract of sale between the parties; there had been a meeting of the minds
upon the purchase by Agcaoili of a determinate house and lot in the GSIS Housing Project at Nangka
Marikina, Rizal at a definite price payable in amortizations at P31.56 per month, and from that moment
the parties acquired the right to reciprocally demand performance. 13 It was, to be sure, the duty of the
GSIS, as seller, to deliver the thing sold in a condition suitable for its enjoyment by the buyer for the
purpose contemplated ,14 in other words, to deliver the house subject of the contract in a reasonably
livable state. This it failed to do.

It sold a house to Agcaoili, and required him to immediately occupy it under pain of cancellation of the
sale. Under the circumstances there can hardly be any doubt that the house contemplated was one that
could be occupied for purposes of residence in reasonable comfort and convenience. There would be no
sense to require the awardee to immediately occupy and live in a shell of a house, a structure consisting
only of four walls with openings, and a roof, and to theorize, as the GSIS does, that this was what was
intended by the parties, since the contract did not clearly impose upon it the obligation to deliver
a habitable house, is to advocate an absurdity, the creation of an unfair situation. By any objective
interpretation of its terms, the contract can only be understood as imposing on the GSIS an obligation to
deliver to Agcaoili a reasonably habitable dwelling in return for his undertaking to pay the stipulated price.
Since GSIS did not fulfill that obligation, and was not willing to put the house in habitable state, it cannot
invoke Agcaoili's suspension of payment of amortizations as cause to cancel the contract between them. It
is axiomatic that "(i)n reciprocal obligations, neither party incurs in delay if the other does not comply or
is not ready to comply in a proper manner with what is incumbent upon him." 15

Nor may the GSIS succeed in justifying its cancellation of the award to Agcaoili by the claim that the latter
had not complied with the condition of occupying the house within three (3) days. The record shows that
Agcaoili did try to fulfill the condition; he did try to occupy the house but found it to be so uninhabitable
that he had to leave it the following day. He did however leave a friend in the structure, who being
homeless and hence willing to accept shelter even of the most rudimentary sort, agreed to stay therein
and look after it. Thus the argument that Agcaoili breached the agreement by failing to occupy the house,
and by allowing another person to stay in it without the consent of the GSIS, must be rejected as devoid
of merit.

Finally, the GSIS should not be heard to say that the agreement between it and Agcaoili is silent, or
imprecise as to its exact prestation Blame for the imprecision cannot be imputed to Agcaoili; it was after
all the GSIS which caused the contract to come into being by its written acceptance of Agcaoili's offer to
purchase, that offer being contained in a printed form supplied by the GSIS. Said appellant having caused
the ambiguity of which it would now make capital, the question of interpretation arising therefrom, should
be resolved against it.

It will not do, however, to dispose of the controversy by simply declaring that the contract between the
parties had not been validly cancelled and was therefore still in force, and that Agcaoili could not be
compelled by the GSIS to pay the stipulated price of the house and lot subject of the contract until and
unless it had first completed construction of the house. This would leave the contract hanging or in
suspended animation, as it were, Agcaoili unwilling to pay unless the house were first completed, and the
GSIS averse to completing construction, which is precisely what has been the state of affairs between the
parties for more than twenty (20) years now. On the other hand, assuming it to be feasible to still finish
the construction of the house at this time, to compel the GSIS to do so so that Agcaoili's prestation to pay
the price might in turn be demanded, without modifying the price therefor, would not be quite fair. The
cost to the GSIS of completion of construction at present prices would make the stipulated price
disproportionate, unrealistic.

The situation calls for the exercise by this Court of its equity jurisdiction, to the end that it may
render complete justice to both parties.
1
As we . . reaffirmed in Air Manila, Inc. vs. Court of Industrial Relations (83 SCRA 579, 589
[1978]). "(E)quity as the complement of legal jurisdiction seeks to reach and do 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 so to do.
Equity regards the spirit of and not the letter, the intent and not the form, the substance
rather than the circumstance, as it is variously expressed by different courts... " 16

In this case, the Court can not require specific performance of the contract in question according to its
literal terms, as this would result in inequity. The prevailing rule is that in decreeing specific performance
equity requires 17

... not only that the contract be just and equitable in its provisions, but that the
consequences of specific performance likewise be equitable and just. The general rule is that
this equitable relief will not be granted if, under the circumstances of the case, the result of
the specific enforcement of the contract would be harsh, inequitable, oppressive, or result in
an unconscionable advantage to the plaintiff . .

In the exercise of its equity jurisdiction, the Court may adjust the rights of parties in accordance with the
circumstances obtaining at the time of rendition of judgment, when these are significantly different from
those existing at the time of generation of those rights.

The Court is not restricted to an adjustment of the rights of the parties as they existed
when suit was brought, but will give relief appropriate to events occuring ending the suit. 18

While equitable jurisdiction is generally to be determined with reference to the situation


existing at the time the suit is filed, the relief to be accorded by the decree is governed by
the conditions which are shown to exist at the time of making thereof, and not by the
circumstances attending the inception of the litigation. In making up the final decree in an
equity suit the judge may rightly consider matters arising after suit was brought. Therefore,
as a general rule, equity will administer such relief as the nature, rights, facts and
exigencies of the case demand at the close of the trial or at the time of the making of the
decree. 19

That adjustment is entirely consistent with the Civil Law principle that in the exercise of rights a person
must act with justice, give everyone his due, and observe honesty and good faith. 20 Adjustment of rights
has been held to be particularly applicable when there has been a depreciation of currency.

Depreciation of the currency or other medium of payment contracted for has frequently
been held to justify the court in withholding specific performance or at least conditioning it
upon payment of the actual value of the property contracted for. Thus, in an action for the
specific performance of a real estate contract, it has been held that where the currency in
which the plaintiff had contracted to pay had greatly depreciated before enforcement was
sought, the relief would be denied unless the complaint would undertake to pay the
equitable value of the land. (Willard & Tayloe [U.S.] 8 Wall 557,19 L. Ed 501; Doughdrill v.
Edwards, 59 Ala 424) 21

In determining the precise relief to give, the Court will "balance the equities" or the respective interests of
the parties, and take account of the relative hardship that one relief or another may occasion to them .22

The completion of the unfinished house so that it may be put into habitable condition, as one form of relief
to the plaintiff Agcaoili, no longer appears to be a feasible option in view of the not inconsiderable time
that has already elapsed. That would require an adjustment of the price of the subject of the sale to
conform to present prices of construction materials and labor. It is more in keeping with the realities of
the situation, and with equitable norms, to simply require payment for the land on which the house
stands, and for the house itself, in its unfinished state, as of the time of the contract. In fact, this is an
alternative relief proposed by Agcaoili himself, i.e., "that judgment issue . . (o)rdering the defendant

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(GSIS) to execute a deed of sale that would embody and provide for a reasonable amortization of
payment on the basis of the present actual unfinished and uncompleted condition, worth and value of the
said house. 23

WHEREFORE, the judgment of the Court a quo insofar as it invalidates and sets aside the cancellation by
respondent GSIS of the award in favor of petitioner Agcaoili of Lot No. 26, Block No. (48) 2 of the GSIS
low cost housing project at Nangka, Marikina, Rizal, and orders the former to respect the aforesaid award
and to pay damages in the amounts specified, is AFFIRMED as being in accord with the facts and the law.
Said judgments is however modified by deleting the requirement for respondent GSIS "to complete the
house in question so as to make the same habitable," and instead it is hereby ORDERED that the contract
between the parties relative to the property above described be modified by adding to the cost of the
land, as of the time of perfection of the contract, the cost of the house in its unfinished state also as of the
time of perfection of the contract, and correspondingly adjusting the amortizations to be paid by petitioner
Agcaoili, the modification to be effected after determination by the Court a quo of the value of said house
on the basis of the agreement of the parties, or if this is not possible by such commissioner or
commissioners as the Court may appoint. No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 78272 August 29, 1989
DR. and MRS. MERLIN CONSING, petitioners,
vs.
THE COURT OF APPEALS and CARIDAD SANTOS, respondents.
Sumulong Law Offices for petitioners.
Edgardo B. Arellano for private respondent,

CORTES, J.:

Petitioner Merlin Consing is the registered owner of a 9,643 sq. m. parcel of land covered by Transfer
Certificate of Title (TCT) No. 312970 located in barrio Bayanbayanan, Marikina, Rizal. Sometime in 1971,
Consing caused the subdivision of said parcel of land into thirty-eight (38) lots and submitted a
subdivision plan to the Land Registration Commission (LRC) which was approved on January 25, 1971 as a
simple subdivision plan. Subsequently, Consing filed a petition for segregation of title and the issuance of
separate certificates of title for the 38 lots. In the same petition, Consing likewise informed the Register of
Deeds that he voluntarily grants the right of way in lots 2, 7, 8, 13, 14, 19, 20, 25, 26, 31, 32, 35, 36,
and 37 [Exh. "3"]. The petition for segregation was granted and thereafter, doing business under the
name Mearle Homes, the spouses Consing engaged in the sale of these 38 lots.

On October 4, 1971 private respondent Caridad Santos and the Consings entered into an agreement
denominated as a "Contract of Sale" whereby the latter agreed to sell, transfer and convey to the former a
house and lot more particularly described as follows:

A newly constructed 4 bedrooms, two bathrooms, complete with light and water connections
bungalow, fenced on two parcels of land (Lot No. 26 of subdivision plan (LRC) Psd 134075
and Lot No. 25 of subdivision plan (LRC) Psd 134075, all being a portion of Lot B (LRC) Psd
133634, LRC Rec No. 7672 containing an area of TWO HUNDRED NINETY FOUR (294)
SQUARE METERS & TWO HUNDRED NINETY FIVE (295) SQUARE METERS, respectively more
or less including the voluntary right of way, covered by TCT No. 313386 and TCT 313385,
respectively; located at Barrio Bayanbayanan, Municipality of Marikina, Rizal [Exh."11"].

It is stipulated in said "Contract of Sale" that in consideration of the agreement to sell the buyer will pay
the seller P 110,000.00 with interest at 12% per annum, payable as follows: P25,000.00 upon the signing

1
of the contract and a monthly installment of P 1,020.14 payable on or before the fifth day of each month
beginning December 1971 without necessity of demand until the amount of the purchase price and
interest shall have been fully paid after which ownership would be transferred to the buyer.

Santos paid her monthly installments to the Consings. Starting May 1972, however, she defaulted in her
payments. Consing sent her several letters of demand to which she did not reply. On June 28, 1974,
counsel for the Consings sent a final demand letter to Santos asking her to settle her obligations which by
then have accrued to Pl 2,818.61, otherwise, they shall be constrained to resort to court litigation.
[Record, p. 12].

Santos, represented by a lawyer, manifested her willingness to settle her obligations on the condition that
the Consings comply with all the laws and regulations on subdivisions and after payment to her of
damages as a consequence of the use of a portion of her lot, more or less 168 sq.m., as a subdivision
road [Record, p. 13].

Subsequently, on July 26, 1974, the Consings filed an ejectment case against Santos. After trial, on
November 4, 1974, judgment was rendered by Judge Gregorio de la Paz of the Municipal Court of Marikina
in favor of the Consings.

It appears, however, that on August 22, 1974, with the ejectment case still pending, Santos filed with the
then Court of First Instance (CFI) a complaint for specific performance with damages against the
Consings. On March 17, 1975, the CFI issued a restraining order enjoining the Municipal Court of Marikina
from resolving the motion for execution filed by the Consings in the ejectment case and from taking
further action in said case until further orders from the CFI [Record, p. 69].

Also borne out by the record is the criminal complaint filed by Santos against Merlin Consing charging him
with the crime of Violation of Municipal Ordinance No. 7, Series of 1964 of Marikina for contracting to sell
to her the two lots in question without first securing the approval of the Municipal Council of Marikina for
his subdivision plan [Exh. "1"]. On May 21, 1975 this complaint was dismissed by the fiscal on the
grounds of lack of a prima facie case and prescription [Exh. "1-b"].

At about the same time, Consing submitted his subdivision plan to the Municipal Council of Marikina for
approval. The council, in turn, referred the same to the Department of Local Government and Community
Development (DLGCD) in compliance with its Memorandum Circular No. 73-41 of September 7, 1973. The
DLGCD in its second endorsement dated March 13, 1975, noted that the "subdivision plan meets in
general the requirements in the subdivision regulations of this Office with respect to lot areas and lot
frontages except the street widths which are not indicated as road lots and which are below the 10 m.
minimum requirement. It is therefore recommended that the existing roads should be indicated on the
plan as road lots and the corresponding areas along the sides of the said roads as corrected, be reserved
for future road widening and annotated in the title as such and should be excluded from the sale of the
corresponding affected lots. . . ." [Exh. "D"]

On August 28, 1981, the CFI rendered judgment finding that although the Consings may have "corrected
the irregularities and/or [have] complied with the legal requirements for the operation of their subdivision,
they cannot escape their liability to [Santos] for having sold to her portions of the roads or streets
denominated as right-of-way. On this ground alone, this Court believes that [Santos] was fully justified in
refusing to pay further her monthly amortizations. In the interest of justice, fair play and equity, this
Court believes that there shall be a proportionate reduction of the purchase price of the two lots
corresponding to the area of 168 square meters, more or less, used as a [right] of way." [Record, p. 485].
The dispositive portion of the CFI decision reads as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff (Santos), ordering the
defendants Consings to allow the plaintiff to continue paying her monthly amortizations of
the two lots in question of the reduced purchase price of P 78,375.68, after deducting
whatever amounts were already paid by her.

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Defendants are further ordered to pay the plaintiff the amount of P 10,000.00 as and for
attorney's fees.

The restraining order issued against Municipal Judge Gregorio C. de la Paz is made
permanent.

Plaintiffs other prayers for relief, as well as defendants' counterclaim, are dismissed, for lack
of merit.

With costs against the defendants.

SO ORDERED [Record, p. 486].

The Consings interposed an appeal to the Court of Appeals which affirmed the decision of the CFI with
modification as to the computation of the amount to be deducted from the purchase price. The decretal
portion of the CA decision 1 is as follows:

WHEREFORE, the appealed decision is hereby affirmed with the modification that the
reduced purchase price of the property in question should be, as it is hereby fixed, at P
94,312.16 instead of P 78,375.68. Costs against appellants.

SO ORDERED [CA Decision, pp. 12-13].

From the decision of the Court of Appeals, petitioner-spouses filed this petition for review citing the
following reasons why the decision of respondent court should be reviewed and their petition allowed:

1. The decision rendered by the respondent Court of Appeals in this case does not comply
with the requirements of Article VIII, section 13, of the New Constitution;

2. It is arbitrary and there is no law to support Judge Pineda and the respondent Court of
Appeals in holding that when the Consings constituted a voluntary right of way on Lots 25
and 26, the portions subject to the right of way ceased to be owned by the Consings and
became streets or road lots which the Consings have no right to sell;

3. It is arbitrary and contrary to the documented facts for the respondent Court of Appeals
to say that the portions of Lots 25 and 26 subject to a voluntary right of way are actually
used as streets or roads even though it is clearly stated in the lot titles, in the location
plans, and in the contract of sale, that said portions are not streets or roads, but are
portions subject to voluntary right of way, and in spite of the fact that the subdivision was
approved by the Land Registration Commissioner as a simple subdivision plan which clearly
shows that there are no streets or road lots in the subdivision.

4. It is arbitrary for Judge Pineda and the respondent Court of Appeals to suppose that the
portions of Lots 25 and 26 subject to right of way are streets or road lots and then compute
the value of the said portions in a careless and erroneous manner, deducting afterwards the
value so computed from the P 110,000 purchase price; and

5. There is no legal or factual basis in ordering the Consings to pay P 10,000 attorney's fee
to Caridad [Rollo, pp. 24-25].

Thereafter, private respondent, as required by the Court, filed her Answer/Comment to which petitioners
filed their Reply. On May 2, 1988 the Court, after considering the allegations contained, the issues raised
and the arguments adduced in the pleadings submitted by the parties, gave due course to the petition
[Rollo, p. 84].

1
Petitioners first raise the issue of the Court of Appeals' non-compliance with the certification requirement
under Art. VIII, Sec. 13 of the 1987 Constitution.

Art. VIII, Sec. 13 of the 1987 Constitution provides that:

Sec. 13. The conclusions of the Supreme Court in any case submitted to it for decision en
banc or in division shall be reached in consultation before the case is assigned to a Member
for the writing of the opinion of the Court. A certification to this effect signed by the Chief
Justice shall be issued and a copy thereof attached to the record of the case and served
upon the parties. Any Member who took no part, or dissented, or abstained from a decision
or resolution must state the reason therefor. The same requirements shall be observed by
all lower collegiate courts. [Emphasis supplied].

The first sentence of this provision outlining the decision-making process of the Supreme Court is adopted
from both the 1935 2 and 1973 3 Constitutions. The latter Constitution further broadened the application of
the requirement on the decision-making process by mandating that this "shall be observed by all inferior
collegiate courts."

The certification 4 requirement, however, is a new provision introduced by the framers of the 1987
Constitution. Its purpose is to ensure the implementation of the constitutional requirement that decisions
of the Supreme Court and lower collegiate courts, such as the Court of Appeals, Sandiganbayan and Court
of Tax Appeals, are reached after consultation with the members of the court sitting en banc or in a
division before the case is assigned to a member thereof for decision-writing. The decision is thus
rendered by the court as a body and not merely by a member thereof [I Record of the Constitutional
Commission 498-500], This is in keeping with the very nature of a collegial body which arrives at its
decisions only after deliberation, the exchange of views and ideas, and the concurrence of the required
majority vote.

The absence, however, of the certification would not necessarily mean that the case submitted for decision
had not been reached in consultation before being assigned to one member for the writing of the opinion
of the Court since the regular performance of official duty is presumed [Sec. 5 (m) of Rule 131, Rules of
Court]. The lack of certification at the end of the decision would only serve as evidence of failure to
observe the certification requirement and may be basis for holding the official responsible for the omission
to account therefor [See I Record of the Constitutional Commission 460]. Such absence of certification
would not have the effect of invalidating the decision.

The second and third assigned errors of petitioners assail the decision of the Court of Appeals finding that
a portion of Lots 25 and 26, although called a voluntary right of way, is a subdivision road which they
have no right to sell. The Consings argue that it is a voluntary easement which they have a right to
constitute by virtue of Art. 619 of the New Civil Code and "[b]y constituting and establishing a voluntary
right of way in said two lots, the portions subject to the voluntary right of way did not become streets or
roads as held by Judge Pineda and the respondent Court of Appeals; they continue to be the property of
the Consings but subject to an encumbrance, i.e. subject to an easement of right of way." [Petition, p. 22;
Rollo, p. 27]. Further, the Consings contend that "the portions of Lots 25 and 26 subject to voluntary right
of way can never be used as streets or road lots because [their] subdivision plan was approved by the
Land Registration Commissioner as a simple subdivision plan which means that there are no streets or
road lots in the subdivision, otherwise it would not have been approved as [such]." [Petition, p. 24; Rollo,
p. 29]. In fine, the Consings are alleging that there is no basis for the reduction in the purchase price of
the two lots.

Private respondent Santos on the other hand, avers that the alleged right of way is actually a subdivision
road. This road is included in the two lots sold to her and she is deprived of the use and enjoyment
thereof, hence, a reduction in the purchase price of said lots is in order.

Petitioners' contentions are devoid of merit. The evidence on record negates the Consings' assertion that
the portions subject to the voluntary easement of right of way are not roads. It is undisputed that the

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Consings' subdivision plan was approved by the LRC as a simple subdivision which indicated no streets or
roads. However, this does not preclude the need for them within the subdivision. An examination of the
Consings' subdivision plan reveals that the land is subdivided into 38 lots with the so-called voluntary right
of way cutting across lots 2 and 3, 7 and 6, 8 and 9,13 and 12,14 and 15, 19 and 18, 20 and 21, 25 and
24, 26 and 27, 31 and 30, 32 and 33. The relative position of this "right of way" vis-a-vis the lots shows
that it is in fact a road without which the subdivision lot buyers would have no means of access to and
from the subdivision.

Moreover, as heretofore stated, when the Municipal Council referred the Consings subdivision plan to the
DLGCD the latter recommended that the existing roads within the subdivision should be indicated on the
plan as road lots. In turn, the Municipal Council of Marikina passed Resolution No. 70 approving the
subdivision plan of Mearle Homes, Inc. subject, however, to several conditions one of which is the
subdivision owner's compliance with the recommendation of the DLGCD. On May 19, 1975, Merlin Consing
wrote a letter addressed to the Municipal Mayor and Municipal Council of Marikina wherein he admitted
that "the road lots as shown in the plan originally approved by the Land Registration Commission are the
Right-of-way which are annotated in the corresponding transfer Certificate of Titles, copies of which were
supplied or forwarded to your office. These are the road lots mentioned. ..."[Exh."24"].

In this same letter, Merlin Consing stated that "the road lots annotated in their corresponding titles ARE
NOT INCLUDED in the sale of the property." However, the transfer certificates of title covering lot 25 and
lot 26 clearly state the boundaries thereof and when compared to the Consings' subdivision plan would
reveal that the seller sold that portion covered by the right of way to the buyer. Further, the "Contract of
Sale" between the parties is specific that the property sold to Santos includes the voluntary right of way
[See Exh. "11" pertinent portion quoted in p. 2 of this decision].

In Lim v. De los Santos [G.R. No. L-18137, August 31, 1963, 8 SCRA 798] the Court had occasion to state
one duty of a subdivision lot seller. In said case the subdivision lot buyers instituted an action for specific
performance with damages to compel the sellers to construct the necessary roads in the subdivision that
would serve as outlets. The sellers' motion to dismiss on the ground of lack of cause of action was
sustained by the trial court because the contract to sell between the parties mentioned no obligation on
the part of the defendants to construct roads. The case reached this Tribunal and in resolving the issue of
whether or not the complaint stated a cause of action, the Court, speaking through Mr. Justice JBL Reyes,
declared that "[t]he allegations in the complaint that defendant-vendor made representations that 'she
would have constructed (i.e., would cause to be built) adequate outlets' for the lots sold do not strike us
to be so improbable as to justify their being disbelieved de plano. After all, a seller's duty is to deliver the
thing sold in a condition suitable for its enjoyment by the buyer for the purposes contemplated (Sent.
Trib. Supreme of Spain, 17 Nov. 1930), and proper access to a residence is essential to its enjoyment. . .
." [at 802; Emphasis supplied].

In the case at bar, in including as part of Santos' purchase price the value of the subdivision road,
petitioners have shifted to her the burden of providing for an access to and from the subdivision. The
Consings have thus failed in their duty as subdivision lot sellers and for such failure and consequent
unfairness and injustice to Santos, the latter should be entitled to a proportionate reduction in her
purchase price of the two lots.

Petitioner-spouses also allege that the CA erred in its computation of the amount to be deducted from the
purchase price of the lots. They contend that respondent court had no basis when it made its computation
and it merely assumed the price to be deducted.

The CFI's computation deducted from the total purchase price of P 110,000.00 the price per square meter
of the lots multiplied by the total area covered by the right of way which is 168 sq.m. In arriving at the
price per square meter of the two lots, the trial court divided the total purchase price by the total area of
the two lots, which is 589 sq.m.

On appeal to the Court of Appeals, the Consings took exception to this method of computation alleging
that the trial court failed to take into account the value of the bungalow constructed on the lots and which

1
is part of the contract. The Court of Appeals found merit in this allegation and re-computed the price per
square meter of the two lots in the following manner:

... There is, however, no evidence showing the price of the land sold, separately from that
of the house erected thereon. Be that as it may, it may be reasonably assumed under the
circumstances of the case, that one-half (1/2) of the price of the property corresponds to
the house and the other half to the lot. Upon this assumption, the price per square meter of
the land (with a total area of 589 square meters) may be placed at P 93.38, and the price of
168 square meters of right of way at P 15,687.84 (instead of P31,375.68 stated in the
appealed decision) which is logically and reasonably deductible from the total purchase price
due from the appellee. In consequence, the total reduced purchase price of the subject
property may be fixed at P 94,312.16 (or P l10,000.00 minus P l5,687.84). [CA Decision, p.
11].

Indeed, the record is bereft of any evidence as regards the price of the two lots sold to Santos separately
from the price of the bungalow constructed thereon. The exhibits presented by the parties and their
testimonies do not reveal separate valuations of the bungalow and the two lots. Evident therefore is the
fact that the purchase price of P110,000.00 is for both the bungalow and the two lots sold
as one property. Further, to require the parties to adduce their respective evidence as to the separate
valuations of the properties in question would only serve to unduly delay the disposition of the case. Under
these circumstances, the Court of Appeals' computation that one-half of the purchase price of P
110,000.00 corresponds to the value of the bungalow and the other half to the two lots is both just and
fair. Accordingly, the Court will not disturb the same.

Finally, petitioners allege that "there is no basis for awarding attorney's fees to (private respondent] in
this case because the Consings have not 'acted in gross and evident bad faith in refusing to satisfy
[Santos'] plainly valid, just and demandable claim' (Art. 2208, para. 5 of the Civil Code of the Philippines)"
[Petition, p. 26; Rollo, p. 31]. The evidence on record, however, proves otherwise. While the Consings
have secured the necessary licenses to operate a subdivision from the Municipal Council of Marikina and
the National Housing Authority they, however, exerted the effort to obtain them only after private
respondent filed a complaint for specific performance against them. Moreover, as heretofore mentioned,
petitioner-spouses constituted an alleged "right of way" over the two lots sold to private respondent which
as the evidence on record reveals was intended to be a subdivision road occupying 168 sq. m. of the total
589 sq. m. of the lots sold. This conduct on the part of the petitioners clearly shows gross and evident bad
faith, not to mention lack of fairness, for which reason affirmance of the award of P 10,000.00 attorney's
fees in favor of private respondent is in order.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

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Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 126444 December 4, 1998


ALFONSO QUIJADA, CRESENTE QUIJADA, REYNELDA QUIJADA, DEMETRIO QUIJADA,
ELIUTERIA QUIJADA, EULALIO QUIJADA, and WARLITO QUIJADA, petitioners,
vs.
COURT OF APPEALS, REGALADO MONDEJAR, RODULFO GOLORAN, ALBERTO ASIS, SEGUNDINO
RAS, ERNESTO GOLORAN, CELSO ABISO, FERNANDO BAUTISTA, ANTONIO MACASERO, and
NESTOR MAGUINSAY, respondents.

MARTINEZ, J.:

Petitioners, as heirs of the late Trinidad Quijada, filed a complaint against private respondents for quieting
of title, recovery of possession and ownership of parcels of land with claim for attorney's fees and
damages. The suit was premised on the following facts found by the court of Appeals which is materially
the same as that found by the trial court:

Plaintiffs-appellees (petitioners) are the children of the late Trinidad Corvera Vda, de
Quijada. Trinidad was one of the heirs of the late Pedro Corvera and inherited from the
latter the two-hectare parcel of land subject of the case, situated in the barrio of San
Agustin, Talacogon, Agusan del Sur. On April 5, 1956, Trinidad Quijada together with her
sisters Leonila Corvera Vda. de Sequea and Paz Corvera Cabiltes and brother Epapiadito
Corvera executed a conditional deed of donation (Exh. C) of the two-hectare parcel of land
subject of the case in favor of the Municipality of Talacogon, the condition being that the
parcel of land shall be used solely and exclusively as part of the campus of the proposed
provincial high school in Talacogon. Apparently, Trinidad remained in possession of the
parcel of land despite the donation. On July 29, 1962, Trinidad sold one (1) hectare of the
subject parcel of land to defendant-appellant Regalado Mondejar (Exh. 1). Subsequently,

1
Trinidad verbally sold the remaining one (1) hectare to defendant-appellant (respondent)
Regalado Mondejar without the benefit of a written deed of sale and evidenced solely by
receipts of payment. In 1980, the heirs of Trinidad, who at that time was already dead, filed
a complaint for forcible entry (Exh. E) against defendant-appellant (respondent) Regalado
Mondejar, which complaint was, however, dismissed for failure to prosecute (Exh. F). In
1987, the proposed provincial high school having failed to materialize, the Sangguniang
Bayan of the municipality of Talacogon enacted a resolution reverting the two (2) hectares
of land donated back to the donors (Exh. D). In the meantime, defendant-appellant
(respondent) Regalado Mondejar sold portions of the land to defendants-appellants
(respondents) Fernando Bautista (Exh. 5), Rodolfo Goloran (Exh. 6), Efren Guden (Exh. 7)
and Ernesto Goloran (Exh. 8).

On July 5, 1988, plaintiffs-appellees (petitioners) filed this action against defendants-


appellants (respondents). In the complaint, plaintiffs-appellees (petitioners) alleged that
their deceased mother never sold, conveyed, transferred or disposed of the property in
question to any person or entity much less to Regalado Mondejar save the donation made to
the Municipality of Talacogon in 1956; that at the time of the alleged sale to Regalado
Mondejar by Trinidad Quijada, the land still belongs to the Municipality of Talacogon, hence,
the supposed sale is null and void.

Defendants-appellants (respondents), on the other hand, in their answer claimed that the
land in dispute was sold to Regalado Mondejar, the one (1) hectare on July 29, 1962, and
the remaining one (1) hectare on installment basis until fully paid. As affirmative and/or
special defense, defendants-appellants (respondents) alleged that plaintiffs action is barred
by laches or has prescribed.

The court a quo rendered judgment in favor of plaintiffs-appellees (petitioners): firstly


because "Trinidad Quijada had no legal title or right to sell the land to defendant Mondejar
in 1962, 1966, 1967 and 1968, the same not being hers to dispose of because ownership
belongs to the Municipality of Talacogon (Decision, p. 4; Rollo, p. 39) and, secondly, that
the deed of sale executed by Trinidad Quijada in favor of Mondejar did not carry with it the
conformity and acquiescence of her children, more so that she was already 63 years old at
the time, and a widow (Decision, p. 6; Rollo, p. 41)."1

The dispositive portion of the trial court's decision reads:

WHEREFORE, viewed from the above perceptions, the scale of justice having tilted in favor
of the plaintiffs, judgment is, as it is hereby rendered:

1) ordering the Defendants to return and vacate the two (2)


hectares of land to Plaintiffs as described in Tax Declaration No.
1209 in the name of Trinidad Quijada;

2) ordering any person acting in Defendants' behalf to vacate


and restore the peaceful possession of the land in question to
Plaintiffs;

3) ordering the cancellation of the Deed of Sale executed by the


late Trinidad Quijada in favor of Defendant Regalado Mondejar
as well as the Deeds of Sale/Relinquishments executed by
Mondejar in favor of the other Defendants;

4) ordering Defendants to remove their improvements


constructed on the questioned lot;

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5) ordering the Defendants to pay Plaintiffs, jointly and
severally, the amount of P10,000.00 representing attorney's
fees;

6) ordering Defendants to pays the amount of P8,000.00 as


expenses of litigation; and

7) ordering Defendants to pay the sum of P30,000.00


representing moral damages.

SO ORDERED.2

On appeal, the Court of Appeals reversed and set aside the judgment a quo3 ruling that the sale made
by Trinidad Quijada to respondent Mondejar was valid as the former retained an inchoate
interest on the lots by virtue of the automatic reversion clause in the deed of
donation.4 Thereafter, petitioners filed a motion for reconsideration. When the CA denied their
motion,5 petitioners instituted a petition for review to this Court arguing principally that the
sale of the subject property made by Trinidad Quijada to respondent Mondejar is void,
considering that at that time, ownership was already transferred to the Municipality of
Talacogon. On the contrary, private respondents contend that the sale was valid, that they are
buyers in good faith, and that petitioners' case is barred by laches. 6

We affirm the decision of the respondent court.

The donation made on April 5, 1956 by Trinidad Quijada and her brother and sisters7 was
subject to the condition that the donated property shall be "used solely and exclusively as a
part of the campus of the proposed Provincial High School in Talacogon." 8 The donation further
provides that should "the proposed Provincial High School be discontinued or if the same shall
be opened but for some reason or another, the same may in the future be closed" the donated
property shall automatically revert to the donor.9 Such condition, not being contrary to law,
morals, good customs, public order or public policy was validly imposed in the donation. 10

When the Municipality's acceptance of the donation was made known to the donor, the former
became the new owner of the donated property donation being a mode of acquiring and
transmitting ownership 11 notwithstanding the condition imposed by the donee. The donation
is perfected once the acceptance by the donee is made known to the donor. 12 According,
ownership is immediately transferred to the latter and that ownership will only revert to the
donor if the resolutory condition is not fulfilled.

In this case, that resolutory condition is the construction of the school. It has been ruled that
when a person donates land to another on the condition that the latter would build upon the
land a school, the condition imposed is not a condition precedent or a suspensive condition but
a resolutory one. 13 Thus, at the time of the sales made in 1962 towards 1968, the alleged
seller (Trinidad) could not have sold the lots since she had earlier transferred ownership
thereof by virtue of the deed of donation. So long as the resolutory condition subsists and is
capable of fulfillment, the donation remains effective and the donee continues to be the owner
subject only to the rights of the donor or his successors-in-interest under the deed of donation.
Since no period was imposed by the donor on when must the donee comply with the condition,
the latter remains the owner so long as he has tried to comply with the condition within a
reasonable period. Such period, however, became irrelevant herein when the donee-
Municipality manifested through a resolution that it cannot comply with the condition of
building a school and the same was made known to the donor. Only then when the non-
fulfillment of the resolutory condition was brought to the donor's knowledge that ownership
of the donated property reverted to the donor as provided in the automatic reversion clause of
the deed of donation.

1
The donor may have an inchoate interest in the donated property during the time that
ownership of the land has not reverted to her. Such inchoate interest may be the subject of
contracts including a contract of sale. In this case, however, what the donor sold was the land
itself which she no longer owns. It would have been different if the donor-seller sold her
interests over the property under the deed of donation which is subject to the possibility of
reversion of ownership arising from the non-fulfillment of the resolutory condition.

As to laches, petitioners' action is not yet barred thereby. Laches presupposes 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; 14 "it is negligence or omission to assert
a right within a reasonable time, thus, giving rise to a presumption that the party entitled to
assert it either has abandoned or declined to assert it." 15 Its essential elements of:

a) Conduct on the part of the defendant, or of one under


whom he claims, giving rise to the situation complained
of;

b) Delay in asserting complainant's right after he had


knowledge of the defendant's conduct and after he has
an opportunity to sue;

c) Lack of knowledge or notice on the part of the


defendant that the complainant would assert the right on
which he bases his suit; and,

d) Injury or prejudice to the defendant in the event relief


is accorded to the complainant. 16

are absent in this case. Petioners' cause of action to quiet title commenced only when
the property reverted to the donor and/or his successors-in-interest in 1987. Certainly,
when the suit was initiated the following year, it cannot be said that petioners had slept
on their rights for a long time. The 1960's sales made by Trinidad Quijada cannot be the
reckoning point as to when petitioners' cause of action arose. They had no interest over
the property at that time except under the deed of donation to which private
respondents were not privy. Moreover, petitioners had previously filed an ejectment suit
against private respondents only that it did not prosper on a technicality.

Be that at it may, there is one thing which militates against the claim of petitioners. Sale, being
a consensual contract, is perfected by mere consent, which is manifested the moment there is a
meeting of the minds17 as to the offer and acceptance thereof on three (3) elements: subject
matter, price and terms of payment of the price. 18 Ownership by the seller on the thing sold at
the time of the perfection of the contract of sale is not an element for its perfection. What the
law requires is that the seller has the right to transfer ownership at the time the thing sold is
delivered. 19 Perfection per se does not transfer ownership which occurs upon the actual or
constructive delivery of the thing sold. 20 A perfected contract of sale cannot be challenged on
the ground of non-ownership on the part of the seller at the time of its perfection; hence, the
sale is still valid.

The consummation, however, of the perfected contract is another matter. It occurs upon the
constructive or actual delivery of the subject matter to the buyer when the seller or her
successors-in-interest subsequently acquires ownership thereof. Such circumstance happened
in this case when petitioners who are Trinidad Quijada's heirs and successors-in-interest
became the owners of the subject property upon the reversion of the ownership of the land to
them. Consequently, ownership is transferred to respondent Mondejar and those who claim
their right from him. Article 1434 of the New Civil Code supports the ruling that the seller's
"title passes by operation of law to the buyer." 21 This rule applies not only when the subject

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matter of the contract of sale is goods, 22 but also to other kinds of property, including real
property. 23

There is also no merit in petitioners' contention that since the lots were owned by the
municipality at the time of the sale, they were outside the commerce of men under Article 1409
(4) of the NCC;24 thus, the contract involving the same is inexistent and void from the
beginning. However, nowhere in Article 1409 (4) is it provided that the properties of a
municipality, whether it be those for public use or its patrimonial property 25 are outside the
commerce of men. Besides, the lots in this case were conditionally owned by the municipality.
To rule that the donated properties are outside the commerce of men would render nugatory
the unchallenged reasonableness and justness of the condition which the donor has the right to
impose as owner thereof. Moreover, the objects referred to as outsides the commerce of man
are those which cannot be appropriated, such as the open seas and the heavenly bodies.

With respect to the trial court's award of attorney's fees, litigation expenses and moral
damages, there is neither factual nor legal basis thereof. Attorney's fees and expenses of
litigation cannot, following the general rule in Article 2208 of the New Civil Code, be recovered
in this case, there being no stipulation to that effect and the case does not fall under any of the
exceptions. 26 It cannot be said that private respondents had compelled petitioners to litigate
with third persons. Neither can it be ruled that the former acted in "gross and evident bad
faith" in refusing to satisfy the latter's claims considering that private respondents were under
an honest belief that they have a legal right over the property by virtue of the deed of sale.
Moral damages cannot likewise be justified as none of the circumstances enumerated under
Articles 2219. 27 and 2220 28 of the New Civil Code concur in this case

WHEREFORE, by virtue of the foregoing, the assailed decision of the Court of Appeals is
AFFIRMED.

SO ORDERED.

SECOND DIVISION
G.R. No. 117187 July 20, 2001
UNION MOTOR CORPORATION, petitioner-appellant,
vs.
THE COURT OF APPEALS, JARDINE-MANILA FINANCE, INC., SPOUSES ALBIATO BERNAL and
MILAGROS BERNAL, respondents-appellees.

DE LEON, JR., J.:

Before us on appeal, by way of a petition for review on certiorari, is the Decision 1 dated March 30,1994
and Resolution2 dated September 14, 1994 of the Court of Appeals3 Which affirmed the Decision dated
March 6, 1989 of the Regional Trial Court of Makati, Metro Manila, Branch 150, in Civil Case No. 920 as
well as its Resolution dated September 14, 1994 which denied the Motion for Reconsideration of the
petitioner.

The facts are as follows:

On September 14, 1979, the respondent Bernal spouses purchased from petitioner Union Motor
Corporation one Cimarron Jeepney for Thirty Seven Thousand Seven Hundred Fifty Eight Pesos and Sixty
Centavos (P37,758.60) to be paid in installments. For this purpose, the respondent spouses executed a
promissory note and a deed of chattel mortgage in favor of the petitioner. Meanwhile, the petitioner
entered into a contract of assignment of the promissory note and chattel mortgage with Jardine-Manila
Finance, Inc. Through Manuel Sosmea, an agent of the petitioner, the parties agreed that the respondent
spouses would pay the amount of the promissory note to Jardine-Manila Finance, Inc., the latter being the
assignee of the petitioner. To effectuate the sale as well as the assignment of the promissory note and

1
chattel mortgage, the respondent spouses were required to sign a notice of assignment, a deed of
assignment, a sales invoice, a registration certificate, an affidavit, and a disclosure statement. The
respondent spouses were obliged to sign all these documents for the reason that, according to Sosmea,
it was a requirement of petitioner Union Motor Corporation and Jardine-Manila Finance, Inc. for the
respondent spouses to accomplish all the said documents in order to have their application approved.
Upon the respondent spouses' tender of the downpayment worth Ten Thousand Thirty-Seven Pesos
(P10,037.00), and the petitioner's acceptance of the same, the latter approved the sale. Although the
respondent spouses have not yet physically possessed the vehicle, Sosmea required them to sign the
receipt as a condition for the delivery of the vehicle.

The respondent spouses continued paying the agreed installments even if the subject motor vehicle
remained undelivered inasmuch as Jardine-Manila Finance, Inc. promised to deliver the subject jeepney.
The respondent spouses have paid a total of Seven Thousand Five Hundred Seven Pesos (P7,507.00)
worth of installments before they discontinued paying on account of non-delivery of the subject motor
vehicle. According to the respondent spouses, the reason why the vehicle was not delivered was due to
the fact that Sosmea allegedly took the subject motor vehicle in his personal capacity.

On September 11, 1981, Jardine-Manila Finance, Inc., filed a complaint for a sum of money, docketed as
Civil Case No. 42849, against the respondent Bernal spouses before the then Court of First Instance of
Manila. This case was later on transferred to the Regional Trial Court of Makati, Branch 150. On November
10, 1981, the complaint was amended to include petitioner Union Motor Corporation as alternative
defendant, the reason being that if the respondent spouses' refusal to pay Jardine-Manila Finance, Inc.
was due to petitioner's non-delivery of the unit, the latter should pay Jardine-Manila Finance, Inc. what
has been advanced to the petitioner. After the petitioner filed its answer, the respondent spouses filed
their amended answer with cross-claim against the former and counterclaim against Jardine-Manila
Finance, Inc. Following the presentation of evidence of Jardine-Manila Finance, Inc., the respondent
spouses presented as witnesses Albiato Bernal and Pacifico Tacub in support of their defense and
counterclaim against the plaintiff and cross-claim against the petitioner. The petitioner did not present any
evidence in asmuch as the testimony of the witness it presented was ordered stricken off the record for
his repeated failure to appear for cross-examination on the scheduled hearings. The trial court deemed the
presentation of the said witness as having been waived by the petitioner.

On March 6, 1989, the trial court rendered a decision, the dispositive portion of which reads:

WHEREFORE,judgment is hereby rendered ordering:

1. Plaintiff to pay spouses Bernals the sum of P7,507.15 plus legal interest until fully paid;

2. Union Motor Corporation to pay defendants spouses Bernals the downpayment in the amount of
P10,037.00, plus legal interest until fully paid;

3. Union Motor Corporation to pay plaintiff P23,268.29, plus legal interest until fully paid, and
attorney's fees equivalent to 20% of the amount due to plaintiff.

Union Motor Corporation shall further pay defendants spouses Bernals the sum of P20,000.00 as moral
damages, P10,000.00 as attorney's fees and costs of suit.

The petitioner interposed an appeal before the Court of Appeals while the respondent spouses appealed to
hold the petitioner solidarily liable with Jardine-Manila Finance, Inc. The appellate court denied both
appeals and affirmed the trial court's decision by holding that:

Now, as to the appeal of defendant Union Motors, it must be noted that said defendant had failed
to adduce evidence in court to support its claim of non-liability. We cannot see how the absence of
any evidence in favor of said defendant can result in favorable reliefs to its side on appeal. There is
simply no evidence to speak of in appellant Union Motor's favor to cause a reversal of the lower

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court's decision. In the case of Tongson v. C.A. G.R No. 77104, November 6, 1992, the Supreme
Court reiterated that:

"As mandated by the Rules of Court, each party must prove his own affirmative allegation,
i.e., one who asserts the affirmative of the issue has the burden of presenting at the trial
such amount of evidence required by law to obtain a favorable judgment: by preponderance
of evidence in civil cases, and by proof beyond reasonable doubt in criminal cases. x x x".

Hence, the instant petition anchored on the following assigned errors:

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) GRAVELY ERRED AND ABUSED ITS
DISCRETION IN NOT FINDING THAT THE LOWER COURT A QUO'S DECISION OF MARCH 6, 1989 IS
CONTRARY TO LAW AND THE EVIDENCE ON RECORD;

II

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) GRAVELY ERRED AND ABUSED ITS
DISCRETION IN NOT FINDING THAT THE APPEALED DECISION WAS RENDERED IN DEPRlVATION
AND IN DENIAL OF HEREIN PETITIONER-APPELLANT'S RIGHT TO DUE PROCESS.

The first issue to be resolved in the instant case is whether there has been a delivery, physical or
constructive, of the subject motor vehicle.

On this score, petitioner Union Motor Corporation maintains that the respondent spouses are not entitled
to a return of the downpayment for the reason that there was a delivery of the subject motor vehicle.
According to the petitioner, the appellate court erred in holding that no delivery was made by relying
exclusively on the testimonial evidence of respondent Albiato Bernal without considering the other
evidence on record, like the sales invoice and delivery receipt which constitute an admission that there
was indeed delivery of the subject motor vehicle. Also, there was a constructive delivery of the vehicle
when respondent Albiato Bernal signed the registration certificate of the subject vehicle. Inasmuch as
there was already delivery of the subject motor vehicle, ownership has been transferred to the respondent
spouses. The Chattel Mortgage Contract signed by the respondent Bernal spouses in favor of the petitioner
likewise proves that ownership has already been transferred to them for the reason that, under Article
2085 of the New Civil Code, the mortgagor must be the owner of the property. 5 As owners of the jeepney,
the respondent Bernal spouses should bear the loss thereof in accordance with Article 1504 of the New
Civil Code which provides that when the ownership of goods is transferred to the buyer, the goods are at
the buyer's risk whether actual delivery has been made or not. These, then, are the contentions of the
petitioner.

The main allegation of the respondent Bernal spouses, on the other hand, is that they never came into
possession of the subject motor vehicle. Thus, it is but appropriate that they be reimbursed by the
petitioner of the initial payment which they made. They also claim that Jardine-Manila Finance, Inc., and
the petitioner conspired to defraud and deprive them of the subject motor vehicle for which they suffered
damages.

We rule in favor of the respondent Bernal spouses.

Undisputed is the fact that the respondent Bernal spouses did not come into possession of the subject
Cimarron jeepney that was supposed to be delivered to them by the petitioner. The registration certificate,
receipt and sales invoice that the respondent Bernal spouses signed were explained during the hearing
without any opposition by the petitioner. According to testimonial evidence adduced by the respondent
spouses during the trial of the case, the said documents were signed as a part of the processing and for
the approval of their application to buy the subject motor vehicle. Without such signed documents, no
sale, much less delivery, of the subject jeepney could be made. The documents were not therefore an
1
acknowledgment by respondent spouses of the physical acquisition of the subject motor vehicle but
merely a requirement of petitioner so that the said subject motor vehicle would be delivered to them.

We have ruled that 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. 6

The registration certificate signed by the respondent spouses does not conclusively prove that constructive
delivery was made nor that ownership has been transferred to the respondent spouses. Like the receipt
and the invoice, the signing of the said documents was qualified by the fact that it was a requirement of
petitioner for the sale and financing contract to be approved. In all forms of delivery, it is necessary that
the act of delivery, whether constructive or actual, should be coupled with the intention of delivering the
thing. The act, without the intention, is insufficient. 7 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. 8 Enlightening is Addison v. Felix
and Tioco9 wherein we ruled that:

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
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. (Italics supplied)

The act of signing the registration certificate was not intended to transfer the ownership of the subject
motor vehicle to respondent Bernal spouses inasmuch as the petitioner still needed the same for the
approval of the financing contract with Jardine-Manila Finance, Inc. The record shows that the registration
certificate was submitted to Jardine-Manila Finance, Inc., which took possession thereof until Sosmea
requested the latter to hand over the said document to him. The fact that the registration certificate was
still kept by Jardine-Manila Finance, Inc. and its unhesitating move to give the same to Sosmea just goes
to show that the respondent spouses still had no complete control over the subject motor vehicle as they
did not even possess the said certificate of registration nor was their consent sought when Jardine-Manila
Finance, Inc. handed over the said document to Sosmea.

Inasmuch as there was neither physical nor constructive delivery of a determinate thing (in this case, the
subject motor vehicle), the thing sold remained at the seller's risk. 10 The petitioner should therefore bear
the loss of the subject motor vehicle after Sosmea allegedly stole the same.

Petitioner's reliance on the Chattel Mortgage Contract executed by the respondent spouses does not help
its assertion that ownership has been transferred to the latter since there was neither delivery nor transfer
of possession of the subject motor vehicle to respondent spouses. Consequently, the said accessory
contract of chattel mortgage has no legal effect whatsoever inasmuch as the respondent spouses are not
the absolute owners thereof, ownership of the mortgagor being an essential requirement of a valid
mortgage contract. The Carlos case11cited by the petitioner is not applicable to the case at bar for the
reason that in the said case, apart from the fact that it has a different issue, the buyer took possession of
the personal property and was able to sell the same to a third party. In the instant case, however, the
respondent spouses never acquired possession of the subject motor vehicle. The manifestations of
ownership are control and enjoyment over the thing owned. The respondent spouses never became the
actual owners of the subject motor vehicle in as much as they never had dominion over the same.
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The petitioner also disputes the finding of the appellate court that there was no delivery it did not
consider, according to the petitioner, the fact that the circumstance of non-delivery was not shown and
that the respondent spouses never made any demand for the possession of the vehicle. Contrary to the
petitioner's allegation, the respondent spouses presented sufficient evidence to prove that Sosmea took
delivery and possession of that subject motor vehicle in his personal capacity as shown by a
document12 on which he (Sosmea) personally acknowledged receipt of the registration certificate from
Jardine-Manila Finance, Inc. Also, respondent Albiato Bernal testified to the effect that they went several
times to the office of the petitioner to demand the delivery of the subject motor vehicle. The petitioner
failed to refute that testimonial evidence considering that it waived its right to present evidence.

Anent the second issue, the petitioner claims that the trial court committed a violation of due process
when it ordered the striking off of the testimony of the petitioner's witness as well as the declaration that
petitioner has abandoned its right to present evidence. According to the petitioner, the delays in the
hearing of the case were neither unjust nor deliberate. It just so happened that from August 5, 1986 up to
June 1987, the designated counsel for the petitioner was either appointed to the government or was short
of time to go over the records of the case inasmuch as he was a new substitute counsel. During the last
time the petitioner's counsel moved for the postponement of the case, witness Ambrosio Balones was not
available due to gastroentiritis as shown by a medical certificate.

Well-settled is the rule that "factual findings of the Court of Appeals are conclusive on the parties and not
reviewable by the Supreme Court and they carry even more weight when the Court of Appeals affirms the
factual findings of the trial Court."13 In the present case, the trial court found that after the direct
testimony of petitioner's witness, Ambrosio Balones, the continuation of the cross-examination was
postponed and re-scheduled for four (4) times from November 21, 1986 up to June 19, 1987, all at the
instance of petitioner Union Motor Corporation. For three (3) times, the witness did not appear whenever
the case was called for hearing. On June 19, 1987, when asked by the trial court why the witness was not
present, the petitioner's counsel could not give any good reason for his absence. Neither did the petitioner
offer to present any other witness to testify on that day. The appellate court assented to these findings by
quoting the decision of the trial court, to wit:

Defendant Union Motors Corporation has no evidence as the testimony of its only witness, Arnbrosio
Balones, was ordered stricken off the record in the hearing of June 19, 1987, for his continuous failure to
appear on scheduled hearings. The Court further considered said defendant to have waived further
presentation of evidence. 14

The petitioner attempts to shift the blame on the respondents for the failure of its witness, Balones, to
finish his testimony. It was at the instance of Atty. Tacub, counsel for the respondents, that the testimony
of petitioner 's witness, Balones, was discontinued after Atty. Tacub asked for a recess and later on for the
postponement of the cross-examination of the said witness. The petitioner had the duty to produce its
witness when he was called to finish his testimony. To place the blame on the respondent spouses is to
put a premium on the negligence of the petitioner to require its own witness to testify on cross-
examination. By presenting witness Balones on direct-examination, the petitioner had the corresponding
duty to make him available for cross-examination in accordance with fair play and due process. The
respondents should not be prejudiced by the repeated failure of the petitioner to present its said witness
for cross-examination. Hence, the trial court ordered that the unfinished testimony of said witness be
stricken off the record.

However, we cannot affirm that part of the ruling of the courts a quo awarding moral damages to the
respondents. For moral damages to be awarded in cases of breach of contract, the plaintiff must prove
bad faith or fraudulent act on the part of the defendant. 15 In the instant case, the allegations about
connivance and fraudulent schemes by the petitioner and Manuel Sosmea were merely general
allegations and without any specific evidence to sustain the said claims. In fact, Exhibit "1" which bears
the name and signature of Sosmea as the person who received the registration certificate militates
against the respondent spouses' claim that the petitioner connived with its agent to deprive them of the
possession of the subject motor vehicle. The said document shows that Sosmea acted only in his
personal and private capacity, thereby effectively excluding any alleged participation of the petitioner in

1
depriving them of the possession of the subject motor vehicle. The petitioner should not be held liable for
the acts of its agent which were done by the latter in his personal capacity,

However, we affirm the award of attorney's fees, When a party is compelled to litigate with third persons
or to incur expenses to protect his interest, attorney's fees should be awarded, 16 In the present case, the
respondent spouses were forced to implead the petitioner Union Motor Corporation on account of the
collection suit filed against them by Jardine Manila Finance, Inc., a case which was eventually won by the
respondent spouses.

WHEREFORE, the appealed Decision dated March 30, 1994 of the Court of Appeals is
hereby AFFIRMED with the MODIFICATION that the award of moral damages is deleted. With costs
against the petitioner. 1wphi1.nt

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 26844 September 27, 1927
ISABEL FLORES, plaintiff-appellant,
vs.
TRINIDAD LIM, defendant-appellee.

Sumulong, Lavides and Hilado and DeWitt, Perkins and Brady for appellant.
Vicente Sotto for appellee.

STATEMENT

January 20, 1923, plaintiffs land was sold at sheriff's sale to the defendant for P1,603.78, it is the barrio
of Pinaninding, municipality of Laguimanoc formerly Atimonan Province of Tayabas, and is about
seventy-three hectares, on which were 164 coconut bearing trees and 1,000 non-bearing and about 300
buri trees. The usual certificate of sale was issued to the defendant under the provisions of section 463 of
the Code of Civil Procedure. Prior to the one year period of redemption, plaintiff made a formal demand
upon the defendant, under the provisions of section 469 of the same Code, for an accounting of the fruits
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and profits derived by her from the land, so that the plaintiff might have credit for the amount received on
the money required for redemption from the sale

The instant case is brought by the plaintiff to redeem, and it is alleged that at the time of the sale, the
defendant took the actual, physical possession of the property, and has refused and still refuses to render
an account of fruits, profits, to plaintiff's damage in the sum of P1,000 and she prays judgment that the
defendant be ordered to render an itemized account, the amount of which should be deducted from the
price of the redemption; that plaintiff have the right to redeem; and that defendant pay her P1,000 as
damages and costs.

For answer the defendant makes a general and specific denial, and as a special defense alleges that her
rights of ownership over the land arise rather from a purchase made from the Government which had
confiscated the land for a delinquency in the payment of the land tax than from her acquisition of it at
public auction. That the plaintiff has not repurchased the land within one year, and the offer to redeem
was made out of time. Defendant consented to the redemption upon the condition only that the plaintiff
should pay the purchase price of the land, P6,371.19, the value of the improvements, P217.07, the
amount of the land tax, and alleges that plaintiff offered to pay only the sum of P2,500 and promising to
pay that little by little, which offer the defendant rejected. That the action was brought for the purpose of
delaying the matter, and to gain time in which to obtain the money to redeem. That the defendant has
been improving the land up to the present date, and she prays that she be absolved from the complaint,
and in the event redemption is allowed, that plaintiff be required to pay her the value of the
improvements made on the land in question. As a reply plaintiff made a general and specific denial of all
of the new matter alleged in the answer, and as a special defense, alleged that the defendant had no legal
right to make such improvements, and that they were made without her knowledge, and that she is not
liable for such improvements.

The evidence was taken upon such issues, and the trial court rendered judgment giving plaintiff the right
to redeem the land upon the payment to the defendant within fifteen days from notice the following
amounts: (a) The price of the land at the auction sale with legal interest thereon up to this date; (b) the
amount of the land tax paid by the defendant with legal interest up to this date; and (c) the sum of
P15,000 the value of the improvement made by the defendant on the land, and in case redemption is not
made within that period, the right is lost, and relieved the defendant from rendering an account.

On appeal the plaintiff assigns the following errors:

ERROR NO. 1

The trial court erred in sentencing plaintiff to reimburse defendant in the sum of P15,000 for
improvements alleged to have been introduced by said defendant in the land in suit, although said
improvements were placed thereon by defendant with manifest bad faith.

ERROR NO. 2

The trial court erred in not ordering defendant to account to plaintiff for fruits and benefits received
by said defendant from the land, and credit plaintiff against the amount due for its redemption the
value of said fruits and benefits.

ERROR NO. 3

The trial court erred in denying plaintiff's motion for new trial on the ground of fraud and newly
discovered evidence, that excessive indemnity was granted, and that the decision was not justified
by the evidence and that the same was against the law.

JOHNS, J.:

1
The lower court having found that the plaintiff has a legal right to redeem, and the defendant not having
appealed from that portion of the decision, the only question before this court is the amount which the
plaintiff should pay to redeem. The property was sold to the defendant at sheriff's sale under the
provisions of Chapter XIX of the Code of Civil Procedure, section 461 of which provides:

When the purchaser of any personal property, capable of manual delivery, pays the purchase
money, the officer making the sale must deliver to the purchaser the property, and if desired,
execute and deliver to him a certificate of sale. Such sale conveys to the purchaser all the right
which the debtor had in such property on the day the execution or attachment was levied.

Section 463, among other things, provides:

Upon a sale of real property, the purchaser shall be substituted, to, and acquire all the right,
interest, title, and claim of the judgment debtor thereto, subject to the right of redemption as
hereinafter provided. The officer must give to the purchaser a certificate of sale containing:

1. A particular description of the real property sold;

2. The price paid for each distinct lot or parcel;

3. The whole price by him paid;

4. The date when the right of redemption expires.

Construing that section, this court in Pabico vs. Ong Pauco, (43 Phil., 572), said:

The sheriff's action in placing the defendant as the purchaser at the execution sale, in possession
of the land was absolutely without warrant of law, was null and void ab initio, and not merely
voidable, and no special action for setting the proceedings aside are therefore required. In
executing a judgment the duties of the sheriff are merely ministerial; he simply carries out the
orders of the court. If the writ of execution or other order of the court does not command or direct
him to deliver the possession of real property to a certain person, he has no authority whatever to
do so and in undertaking to eject the party in possession and deliver such possession to some one
else, he becomes a mere trespasser. In such case, the person to whom possession is delivered is
also a trespasser and the fact that he has been aided by another trespasser can constitute no
defense.

The act of going on the property and excluding the lawful possessor therefrom necessarily implies
the exertion of force over the property, and this is all that is necessary.

If a trespasser enters upon land in open daylight, under the very eyes of the person already
clothed with lawful possession, but without the consent of the latter, and there plants himself and
excludes such prior possessor from the property, the action of forcible entry and detainer can
unquestionable be maintained, even though no force implied from the mere acts of planting himself
on the ground and excluding the other party.

Among other things, section 465 of the Code of Civil Procedure provides:

The judgment debtor, or redemptioner , may redeem the property from the purchaser, at any time
within twelve months after the sale, on paying the purchaser the amount of his purchase with one
per cent per month interest thereon in addition, up to the time of redemption, together with the
amount of any assessments or taxes which the purchaser may have paid thereon after purchase,
and interest on such last-named amount at the same rate.

That is to say, the statute specifically provides that the redemptioner may redeem within twelve months
after the sale by paying the purchaser the amount of his purchase, with interest thereon at one per cent
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per month from the date of the purchase to the time of redemption, together with the amount of any
assessments or taxes which the purchaser may have paid after the purchase, with interest thereon at the
same rate. The statute having specified what the redemptioner should pay to redeem it follows that she is
not required to pay anything not specified in the statute.

The lower court found that immediately after the purchase, the defendant entered upon and took
possession of the premises, and that at the time of the trial, she had planted 8,000 coconut trees on the
land at an expense of P15,000, and that to redeem the property it was not only necessary for the plaintiff
to pay the amounts specified in section 465 of the Code above quoted, but in addition thereto and in order
to redeem the property, she must pay the defendant the further sum of P15,000, the cost and the value of
the 8,000 coconut trees planted on the property by the defendant. That was error. It nullifies the plain
and express provisions of the statute, and there is no legal principle upon which it can be sustained.

The record shows that immediately after the sale, the defendant took the actual, physical possession of
the property and drove off the employees of the plaintiff.

A purchaser of real property at an ordinary execution sale is not entitled to possession at an ordinary
execution rents and profits until after the period of redemption has expired and the legal title to the land
had become vested in him.

The defendant had no legal right to possession of the land in question and, hence, she was a trespasser
from the time she took possession during the whole period of redemption. Being such a trespasser, and
under the provisions of section 465 of the Code of Civil Procedure, the defendant cannot recover from the
plaintiff any money which she expended for the planting of the coconut trees.

It is claimed that after the sale the plaintiff had said that she would not redeem, and that the defendant
expended the money relying upon that statement. The evidence of that nature was verbal and is more or
less hearsay, and to say the least, it is not clear or convincing. We are dealing with real property, the title
to which is passed by written conveyance, judicial sale, will or descent, and it would be very dangerous to
hold that the right of redemption can be waived by parol testimony. Be that as it may, the evidence
should be both clear and convincing and free from any doubt.

Suffice it to say that upon that point, there is a failure of proof. It is possible that a case could arise where
the purchaser at a sheriff's sale pending the period for redemption might be forced to make certain
improvements for the preservation of the property, and in equity and good conscience, he would then be
entitled to receive the reasonable cost of such improvements as a condition precedent to the right of
redemption. But that is not this case, and is a matter wholly outside of the record. The alleged improperty,
and were apparently made for the sole purpose or preventing redemption. Defendant's contention would
nullify the express provisions of the statute, and would put it beyond the power of the judgment debtor to
redeem any real property sold on execution. It is the policy of the law to aid rather than to defeat the
right of redemption.

Under the provisions of section 469 of the Code Civil Procedure, the plaintiff made a demand upon the
defendant for an accounting, and it was the legal duty of the defendant to comply with that demand. That
section also provides that for the failure to comply with the demand, the redemptioner "may bring an
action to compel an accounting and disclosure of such rents and profits, and until fifteen days from and
after the final determination of such action, the right of redemption is extended to such redemptioner or
debtor."

In legal effect, the lower court held that such a demand was made, and that by reason thereof, the period
of redemption was extended. But found that "the defendant is not under obligation to render a detailed
account of the products of the coconut and buri trees planted on the land." Technically speaking, the
defendant should have been required to render an accounting, but under all the circumstances, and in
view of the fact that no large amount is involved, we are not disposed to disturb that finding.

1
The judgment of the lower court, requiring the plaintiff to pay the defendant P15,000 as one of the
conditions for the redemption of the property, is reversed, but the judgment as to the payment of "(a) the
price of said land at the auction sale with the legal interest thereon up to this day;" and "(b) the amount
of the land tax paid by the defendant with legal interest up to this date" is in all things and respects
affirmed, with costs. So ordered.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-48278 November 8, 1988
AURORA TAMBUNTING, ANTONIO TAMBUNTING, JOSE P. TAMBUNTING and THE ACTING
PROVINCIAL SHERIFF FOR THE PROVINCE OF RIZAL, petitioners,
vs.
HON. COURT OF APPEALS, DAMASO R. CRUZ, and MONICA ANDRES, respondents.

Guadiz & Jimenez for petitioners.

Salvador A. Navarro for respondents.

PADILLA, J.:

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On 16 December 1959, private respondents, spouses Damaso R. Cruz and Monica Andres (hereafter, the
Cruzes) obtained a loan from petitioners, spouses Antonio and Aurora Tambunting (hereafter, the
Tambuntings) in the amount of P3,600.00. The Tambuntings are engaged in the lending-pawnshop
business using the name and style "Agencia de Tambunting", with co-petitioner Jose P. Tambunting as
Manager. The loan was evidenced by a promissory note executed by the Cruzes, payable within four (4)
months from 16 December 1959, with interest at 12% per annum. As security for payment of the loan, a
Deed of Real Estate Mortgage was executed by the Cruzes in favor of the Tambuntings over a parcel of
land belonging to the Cruzes, covered by Transfer Certificate of Title No. 59433, Register of Deeds of
Rizal.

Due to debtors' failure to pay the loan obligation at maturity, a petition for extrajudicial foreclosure of
mortgage was filed by the creditors on 17 March 1967. On 4 July 1967, a notice of sheriff's sale was
posted announcing an auction sale on 2 August 1967 at 10:00 o'clock in the morning. As shown by the
affidavit of publication, the notice of sale was published in the Rizal Chronicle, a newspaper of general
circulation in Rizal province, on 12, 19, and 26 July 1967.

On 2 August 1967, the Cruzes instituted an action against the Tambuntings for annulment of mortgage
and damages with prayer for a writ of preliminary injunction before the Court of First Instance of Rizal,
Branch 6-Pasig (docketed as Civil Case No. 10180). On the same day, a temporary restraining order was
issued by the court enjoining herein petitioners from proceeding with the scheduled sale and to suspend
the same until further orders from the court.

When the temporary restraining order was dissolved on 1 September 1967, the proposed sale was moved
to 20 October 1967. Postings of sheriff's notice of sale were made on 15 September 1967 with a re-
publication of said notice in the Rizal Chronicle on 27 September, 4 & 11 October, 1967. However, on 19
October 1967, petitioners were again directed by the court to hold the scheduled sale in abeyance due to
a motion for reconsideration filed by the Cruzes in regard to the lifting of the temporary restraining order.

Upon denial of the Cruzes 1 motion for reconsideration, petitioners published in the Rizal Chronicle on 20
December 1967, the sheriff's notice of scheduled sale on 26 January 1968.

On 26 January 1968, the Cruzes thru counsel wrote the Provincial Sheriff of Rizal asking that the auction
sale set for that day (26 January 1968) be postponed to some other date considering that there was no
compliance with the notices required by law. On the same date, the Cruzes again thru counsel sent the
sheriff a notice of lis pendensinforming the latter that Civil Case No. 10180 had been filed by them for the
annulment of the mortgage, upon the foreclosure of which the sale was to be conducted, and that such
action affects title to the property.

The mortgage property was nonetheless sold at public auction on 26 January 1968 to Aurora Tambunting
and Antonio Tambunting for P9,400.05. Thereafter, mortgagee-vendee Antonio Tambunting sold and
transferred his share in the property to his wife Aurora Tambunting.

On 31 January 1969, Aurora Tambunting executed an Affidavit of Consolidation of Title, for the issuance of
a new title in her name. On 31 January 1969, Transfer Certificate of Title No. 239717-Rizal was issued in
the name of Aurora Tambunting, married to Antonio Tambunting. Aurora Tambunting then transferred the
property to Tambunting Realty Corporation which obtained Transfer Certificate of Title No. 270972-Rizal in
its name.

On or about 24 August 1970, the private respondents filed a supplemental complaint in Civil Case No.
10180 impleading Tambunting Realty Corporation, the Provincial Sheriff and the Register of Deeds of
Rizal, the first, as the subsequent vendee of the property, the second, as the officer responsible for
holding the extrajudicial foreclosure sale of 26 January 1968, and the third, for the subsequent transfers
of the mortgaged property despite alleged non-compliance with the requirements of Act 3135, Sec. 3 (as
amended by Act 4118) on posting and publication of the notice of foreclosure sale.

1
On 2 September 1974, the Court of First Instance of Rizal rendered judgment, the dispositive part of
which reads:

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered::

(a) Declaring the Real Estate Mortgage (Exhibit "A"and "3") as well as the Promissory Note
for P4,600.00 [sic] Exhibit "1") valid until fully paid as hereunder provided;

(b) Declaring without force and effect the Certificate dated April 25, 1963 (Exhibit "B"),
insofar as it states that the capital was increased from P3,000.00 [sic] to P5,000.00;

(c) Ordering the plaintiffs to pay the defendants Aurora Tambunting and Antonio
Tambunting the sum of P3,600.00 plus 12% per annum from April 25, 1963 until the
obligation shall have been duly paid; (as amended);

(d) Ordering plaintiffs to pay defendants Aurora Tambunting and Antonio Tambunting the
sum equivalent to 10% (Exhibit "1" also Exhibit "3-A") of the amount of P3,600.00 by way
of mitigated liquidated damages, plus attorney's fees in the amount of Pl,000.00; and
finally,

(e) Declaring as null and void the Deed of Sale (Exhibit "L-2"), Affidavit of Consolidation
(Exhibit "L-3"), Transfer Certificate of Title No. 239713 (Exhibit
"L-4"), Absolute Deed of Sale (Exhibit ("L-5"), Transfer Certificate of Title No. 270972
(Exhibit "L-6"), and ordering the Register of Deeds to reinstate the Transfer Certificate Title
No. 59433 in the name of the plaintiffs giving it therefore all force and effect as though it
had not been cancelled. ...

SO ORDERED. 1

The Tambuntings filed a motion for reconsideration, while the Cruzes filed an opposition and moved for
partial reconsideration, insisting on automatic nullity of the Real Estate Mortgage due to alleged full
payment of the obligation as of 25 April 1963 and claiming reimbursement of all proceeds by way of
rentals received by the Tambuntings during the pendency of the case.

The trial court modified par. (c) of the dispositive part of its judgment and ordered the Cruzes to pay the
Tambuntings P3,600.00 plus 12% interest per annum from 25 April 1963 until the obligation is fully paid.
The rest of the dispositive part of the judgment remained.

Before the Court of Appeals in CA-G.R. No. 57714-R, the Tambuntings questioned the trial court's ruling
voiding the foreclosure sale. Affirming the judgment of the Court of First Instance, the Court of Appeals in
a decision * promulgated on 13 December 1977, reasoned that the petitioners deviated from the posting
and publication requirements of law, which rendered the notice of sale ineffective and voided the auction
sale of 26 January 1968.

On 23 January 1978, the Cruzes filed in the same CA-G.R. No. 57714-R a "petition for accounting of fruits
and application of the same against amount of judgment with restraining order" to restrain the
Tambuntings from continuing to collect rentals from tenants of the property in question, to render an
accounting of rentals received, and to apply collected rentals to satisfy the judgment rendered against
them, and to turn over to them the excess rentals. They also sought to suspend the running of interest on
the P3,600.00 principal of the loan until the final accounting is submitted by the Tambuntings and
necessary application (offset of accounts) has been made. 2

Finding the Cruzes' petition meritorious, the same was granted by the Court of Appeals in a
resolution ** promulgated 2 May 1978, except for the suspension of interest on the P3,600.00 loan,
which was denied. The Tambuntings also filed a Motion for Reconsideration of the 13 December 1977
decision but it was denied for lack of merit in the same resolution of 2 May 1978. 3
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Hence, this recourse by way of review on certiorari filed by the Tambuntings.

Petitioners assign two (2) errors allegedly committed by the Court of Appeals: First, the Court of First
Instance and the Court of Appeals erroneously nullified and set aside the auction sale for lack of
compliance with the formalities of law, when the sale on 26 January 1968 was purely a postponement of
previously scheduled sales, notices of which had been posted and published as required by law.
Consequently, the nullification of the various deeds of transfer and transfer certificates of title resulting
from said sale is unwarranted, contend the petitioners. Second, the Court of Appeals erred in granting the
Cruzes' petition for accounting of fruits, etc. after judgment had been rendered, because this was
tantamount to a modification of the trial court's judgment, and an appellee, who is not an appellant,
cannot seek affirmative relief from the appellate court.

We uphold the questioned decision and resolution of the Court of Appeals.

Act. No. 3135 (governing extrajudicial foreclosure of real estate mortgage), as amended by Act No. 4118,
reads:

SEC. 3. Notice shall be given by posting notices of the sale for not less than twenty (20)
days in at least three public places of the municipality or city where the property is situated,
and if such property is worth more than four hundred pesos, such notice shall also be
published once a week for at least three consecutive weeks in a newspaper of general
circulation in the municipality or city.

The rule is that statutory provisions governing publication of notice of mortgage foreclosure sales must be
strictly complied with, and that even slight deviations therefrom will invalidate the notice and render the
sale at least voidable. 4 Interpreting Sec. 457 of the Code of Civil Procedure (reproduced in Sec. 18 (c) of
Rule 39, Rules of Court and in Sec. 3 of Act No. 3135) in Campomanes v. Bartolome and German &
Co., 5 this Court held that if a sheriff sells without the notice prescribed by the Code of Civil Procedure
induced thereto by the judgment creditor, and the purchaser at the sale is the judgment creditor, the sale
is absolutely void and no title passes. This is regarded as the settled doctrine in this jurisdiction whatever
the rule may be elsewhere. 6

Where required by the statute or by the terms of the foreclosure decree, public notice of the
place and time of the mortgage foreclosure sale must be given, a statute requiring it being
held applicable to subsequent sales as well as to the first advertised sale of the property. It
has been held that failure to advertise a mortgage foreclosure sale in compliance with
statutory requirements constitutes a jurisdictional defect invalidating the sale and that a
substantial error or omission in a notice of sale will render the notice insufficient and vitiate
the sale. 7

One issue of a newspaper of general circulation is not substantial compliance with the required publication
of once (1) a week for at least three (3) consecutive weeks. 8 Petitioners claim the publisher's affidavit of
publication is merely a customary proof, hence, it should not be considered as the sole evidence of
publication. This may be so in the presence of equally convincing evidence. In the case at bar, however,
there is no such other proof of publication. To show compliance, the published notices and certificate of
posting by the sheriff of the notice of sale of 26 January 1968 should have been presented. They do not
appear in the record. Neither can the sale be considered as an adjournment of an earlier sale under Sec.
24 of Rule 39 of the Rules of Court. 9 As correctly posed by the Court of Appeals, why was there one (1)
publication of the notice of sale scheduled on 26 January 1968? 10 The presumption of compliance with
official duty 11 has been rebutted by the failure to present proof of posting and publication of the notice of
sale of 26 January 1968.

There being no reversible error in the Court of Appeals ruling on this issue, we have no choice but to
affirm the declared nullity of the mortgage foreclosure sale in question, for lack of compliance with the
mandatory requirements of law in the matter of posting and publication of notice of sale.

1
At this juncture, it should be carefully stressed that, while the foreclosure or auction sale of 26 January
1968 is null and void, the real estate mortgage as well as the Cruzes' loan obligation to the Tambuntings
remain valid and effective as ruled in the decisions of the trial court and the Court of Appeals.

As to the second issue, the Court notes that private respondents, the Cruzes, have repeatedly sought the
refund and reimbursement of money collected and received as rentals by the Tambuntings from the
property in question from January return to them (private respondents). 12 1969 until its actual Was the
appellate court, however, the proper forum for respondents' aforesaid petition for accounting of fruits,
etc.?

We hold that it was and the Court of Appeals resolution of 2 May 1978 is in accordance with law.

Private respondents' petition for accounting, etc. 13 did not really seek a modification of the judgments of
the trial court and the Court of Appeals. The remedy sought (accounting and offsetting of accounts) was a
direct clear-cut consequence of an equally clear-cut decision which, in effect, held that the Cruzes were
never divested of their ownership over the property in question. In other words, the accounting sought
and granted is merely an incident of the declared respondents' right of ownership under the Civil Code. 14

As to petitioners' claim that it was erroneous for the appellate court to grant said petition for accounting,
etc. because an appellee (like the private respondents) who is not at the same time an appellant cannot
seek a modification of the trial court's judgment, 15 the rule indeed is found in Section 7, Rule 51 of the
Rules of Court stating that

SEC. 7. Questions that may be decided.No error which does not affect the jurisdiction over
the subject matter will be considered unless stated in the assignment of errors and properly
argued in the brief, save as the court, at its option, may notice plain errors not specified,
and also clerical errors. 16

But, as already stated, the private respondents' petition for accounting, etc. was merely a direct
consequence of the Court of Appeals decision which affirmed the trial court's judgment declaring them as
not having lost their ownership over the disputed property. If the respondents had been precluded from
filing said petition for accounting, etc. in the Court of Appeals, they would have had to file a separate
action which could only result in a multiplicity of suits.

Moreover, said petition for accounting, etc. is based on the rationale underlying a related rule in the Rules
of Court. Sec. 34, Rule 39 of the Rules of Court provides:

SEC. 34. Rents and profits pending redemption. Statement thereof and credit thereof on
redemption.The purchaser, from the time of the sale until a redemption, and a
redemptioner, from the time of his redemption until another redemption, is entitled to
receive the rents of the property sold or the value of the use and occupation thereof when
such property is in the possession of a tenant. But when any such rents and profits have
been received by the judgment creditor or purchaser, or by a redemptioner, or by the
assignee of either of them, from property thus sold preceding such redemption, the
amounts of such rents and profits shall be a credit upon the redemption money to be paid;
and, if a later redemptioner or the judgment debtor, before the expiration of the time
allowed for such redemption demands in writing of such creditor, purchaser, or prior
redemptioner, or his assigns, a written and verified statement of the amounts of the rents
and profits thus received, the period of redemption is extended five (5) days after such
demand is complied with and such sworn statement given to such later redemptioner or
debtor. If such statement is not so given within one (1) month from and after such demand,
such redemptioner or debtor may bring an action to compel an accounting and disclosure of
such rents and profits, and until fifteen (15) days from and after the final determination of
such action, the right of redemption is extended to such redemptioner or debtor.

z
What clearly appears from this provision is the right of the debtor to demand for an accounting of the
rents and profits received by a creditor during the period of redemption. Thus, while the Rules of Court
allow the purchaser in an execution sale to receive the rentals if the purchased property is occupied by
tenants, he is, however, accountable to the judgment debtor or mortgagor, as the case may be, for the
amounts so received and the same will be duly credited against the redemption price when said debtor or
mortgagor effects the redemption. 17

Consequently, the principle applies in the instant case that issues though not specifically raised in the
pleadings in the appellate court, may, in the interest of justice, be properly considered by said court in
deciding a case, if they are questions raised in the trial court and are matters of record having some
bearing on the issue submitted which the parties failed to raise or the lower court ignored. 18

WHEREFORE, the petition is DENIED. The decision and resolution of the Court of Appeals dated 13
December 1977 and 2 May 1978 in CA-G.R. No. 57714-R are hereby AFFIRMED. With costs against
petitioners.

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 102909 September 6, 1993


SPOUSES VICENTE and LOURDES PINGOL, petitioners,
vs.
HON. COURT OF APPEALS and HEIRS OF FRANCISCO N. DONASCO, namely: MELINDA D.
PELAYO, MARIETTA D. SINGSON, MYRNA D. CUEVAS, NATIVIDAD D. PELAYO, YOLANDA D.
CACERES and MARY DONASCO, respondents.

Bernardo S. Chan for petitioners.

Orlando A. Galope for respondents.


1
DAVIDE, JR., J.:

An action denominated as one for specific performance and damages was brought by the private
respondents against the petitioners before the Regional Trial Court (RTC) of Caloocan City which, after due
trial, rendered a decision in favor of the petitioners. On appeal, the respondent Court reversed the trial
court's decision.

It is from this judgment that the petitioners have appealed to this Court by way of a petition for review
on certiorari.

The material facts of this case are simple and undisputed.

Petitioner Vicente Pingol is the owner of Lot No. 3223 of the Cadastral Survey of Caloocan, with an area of
549 square meters, located at Bagong Barrio, Caloocan City and more particularly described in Transfer
Certificate of Title (TCT) No. 7435 of the Registry of Deeds of Caloocan City. On 17 February 1969, he
executed a "DEED OF ABSOLUTE SALE OF ONE-HALF OF (1/2) [OF] AN UNDIVIDED PORTION OF A
PARCEL OF LAND" in favor of Francisco N. Donasco which was acknowledged before a notary public. The
parcel of land referred to herein is Lot No. 3223 and the pertinent portions of the document read as
follows:

That for and in consideration of the sum of TWENTY THOUSAND AND FIVE HUNDRED
THIRTY (P20,530.00) PESOS, Philippine Currency, the VENDOR hereby these presents SELL,
CONVEY AND CONVEY by way of Absolute Sale the one-half (1/2) portion, equivalent to Two
Hundred Seventy Four and point Fifty (274.50) square meters, to VENDEE, the above-
mentioned property, his heirs, assigns and successors-in- interest;

That the VENDOR hereby confesses and acknowledges the receipt of TWO THOUSAND
(P2,000.00) PESOS from VENDEE as advanced (sic) and partial payment to the above-cited
consideration of the Sale herein mentioned, leaving therefor a balance of Eighteen Thousand
and Five Hundred Thirty (P18,530) Pesos to be paid in several equal installments within a
period of six (6) years, beginning January, 1970;

That after computing the above-mentioned equal installments, the VENDEE agrees and
undertakes to pay unto the VENDOR a monthly amount equivalent to Two Hundred Fifty
Seven (sic) and Thirty Six Centavos (P257.36) within a period of Seventy One (71) months
and on the Seven Two [sic] (72) month, the amount of (P257.44) as the last and final
installment thereof;

That the VENDEE agrees that in case of default in the payment of the installment due the
same shall earn a legal rate of interest, and to which the VENDOR likewise agrees;

That the VENDEE undertakes to pay unto the VENDOR the herein monthly installment within
the first five (5) days of each month and the same shall be made available and to be paid at
the residence of the VENDOR, payment to be made either directly to the VENDOR, his wife
or his authorized representative or factor;

That in case of partition of the above-described property between herein VENDOR and
VENDEE the same shall be divided into two (2) equal parts, the VENDOR gets the corner
facing J. De Jesus and Malolos Avenue and the VENDEE shall get the portion with fifteen 15
meters frontage facing J. De Jesus Street only.1

Pursuant to the contract, Donasco paid P2,000.00 to Pingol. The one-half portion, designated as Lot No.
3223-A, was then segregated from the mother lot, and the parties prepared a subdivision plan (Exhibit
"C") which was approved by the Land Registration Commission.2

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Francisco immediately took possession of the subject lot and constructed a house thereon. In January
1970, he started paying the monthly installments but was able to pay only up to 1972.

On 13 July 1984, Francisco Donasco died. At the time of his demise, he had paid P8,369.00, plus the
P2,000.00 advance payment, leaving a balance of P10,161.00 on the contract price. 3 Lot No. 3223-A
remained in the possession of Donasco's heirs.

On 19 October 1988, the heirs of Francisco Donasco filed an action for "Specific Performance and
Damages, with Prayer for Writ of Preliminary Injunction" against the spouses Vicente and Lourdes Pingol
(petitioners herein) before the RTC of Caloocan City. The action was docketed as Civil Case No. 13572 and
raffled off to Branch 125 of the said court.

In their complaint, 4 the plaintiffs (private respondents herein) averred that after the death of their father,
they offered to pay the balance of P10,161.00 plus the stipulated legal rate of interest thereon to Vicente
Pingol but the latter rebuffed their offer and has "been demanding for a bigger and unreasonable amount,
in complete variance to what is lawfully due and payable." They stated that they had "exerted earnest
efforts to forge or reach an amicable and peaceful settlement with the defendants" for the payment of the
property in question but to no avail. They further alleged that the defendants were committing "acts of
forcible entry and encroachment" upon their land and asked that a writ of preliminary injunction be issued
to restrain the defendants from the acts complained of.

Plaintiffs then prayed that the defendants be ordered, inter alia:

a. . . . to accept the amount of P10,161.00, more or less, plus the stipulated legal rate of
interest due thereon, as full and complete payment of the balance for the agreed
price/consideration on the one- half (1/2) portion of the parcel of land . . .; [and]

b. . . . to execute the final deed of sale on the one-half (1/2) portion of the lot . . . in
accordance with the partition reflected in the survey and subdivision plan, . . . . 5

In their answer with counterclaim, 6 defendants admitted the execution of the aforementioned deed of
sale, the segregation of the portion sold and the preparation and approval of the subdivision plan, but set
up the following special and affirmative defenses: (1) plaintiffs' cause of action had already prescribed; (2)
the deed of sale embodied a conditional contract of sale "as the consideration is to be paid on installment
basis within a period of six years beginning January, 1970"; (3) the subdivision plan was prepared on the
assumption that Francisco Donasco would be able to comply with his obligation; (4) when Francisco died,
he had not fully paid the total consideration agreed upon; and (5) considering the breach by Francisco of
his contractual obligation way back in 1976, the sale was deemed to have been cancelled and the
continuous occupancy of Francisco after 1976 and by his heirs thereafter was by mere tolerance of Vicente
Pingol. They then asked that the plaintiffs be ordered to vacate the premises and to pay them attorney's
fees and a reasonable compensation for the use of the land.

In their Reply and Answer to Counterclaim, 7 the plaintiffs pointed out that there is no provision in the
deed of sale for its cancellation in case of default in the payment of the monthly installments and invoked
Article 1592 of the New Civil Code. They specifically denied the allegations in the counterclaim.

The issues having been joined, the case was then tried on the merits.

On 22 January 1990, the trial court rendered a decision 8 dismissing the complaint and ordering the
plaintiffs to pay the defendants P350.00 as reasonable monthly rental for the use of the premises from the
filing of the complaint, P10,000.00 by way of attorney's fees, and the costs of the suit. It held that: (1)
the deed of absolute sale in question, marked and offered in evidence as Exhibit "A," is a contract to sell,
not a contract of sale, since Vicente Pingol had no intention to part with the ownership of the loan unless
the full amount of the agreed price had been paid; (2) the contract was deemed to have been cancelled
from the moment the late father of the plaintiffs defaulted in the payment of the monthly installments; (3)
title and ownership over the lot did not pass to Francisco Donasco and his heirs since the contract to sell

1
was never consummated; and (5) assuming, arguendo, that the plaintiffs have a cause of action for
specific performance, such action had already prescribed since the complaint was filed only on 19 October
1988 or more than ten years from the time that they could have lawfully demanded performance. 9

Plaintiffs elevated the case to the Court of Appeals where the appeal was docketed as CA-G.R. CV No.
25967. On 12 November 1991, the said court rendered a decision 10 reversing the appealed decision and
decreeing as follows:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE and another
one is rendered:

(1) Ordering appellee-vendor Vicente Pingol to accept the sum of P10,161.00, plus the legal
interest due thereon from the date of institution of this action on October 19, 1988;

(2) Upholding the validity of the "DEED OF ABSOLUTE SALE OF ONE- HALF (1/2) (of) AN
UNDIVIDED PORTION OF A PARCEL OF LAND" (Exh. A), and by virtue and on the strength of
which declaring the "Heirs of the Deceased Francisco N. Domingo" as the owners of the
274.50 sq. m. land, denominated as Lot 3223-A, (LRC) Psd-146255 under the technical
description (exh. D) and reflected in the Plan of Subdivision Survey which was approved By
Commissioner of Land Registration on August 13, 1971 (exh. C), representing one-half
portion [of] lot 3223, situated at the corner of Malolos Avenue and G. de Jesus St., Bagong
Barrio, Caloocan City, and covered by TCT No. 7435 of the Registry of Deeds of Caloocan
City (exh. B); and

(3) Ordering the defendants-appellees to pay the costs.

SO ORDERED. 11

The Court of Appeals ruled that the deed of sale in question reveals the clear intention of Vicente Pingol to
part with the ownership of the one-half portion of the land by way of an absolute sale; that the failure to
fully pay the agreed price was not a ground for the cancellation of the sale; and that the plaintiffs' action
is imprescriptible since it is akin to an action to quiet title to property in one's possession.12

Dissatisfied with the decision of the Court of Appeals, the defendants, hereinafter referred to as the
petitioners, filed this petition for certiorari on 9 January 1992. Plaintiffs, hereinafter referred to as the
private respondents, filed their comment thereto on 10 September 1992 to which the petitioners filed a
reply 11 November 1992. We gave due course to the petition and required the parties to submit their
respective memoranda, 13 which they subsequently complied with.

Petitioners contend that the Court of Appeals erred:

IN HOLDING THAT THE DOCUMENT (EXHIBIT "A") DENOMINATED AS "ABSOLUTE DEED OF


SALE OF ONE-HALF () OF AN UNDIVIDED PORTION OF A PARCEL OF LAND" IS AN
ABSOLUTE DEED OF SALE SUFFICIENT TO CONFER OWNERSHIP ON THE VENDEE AND HIS
SUCCESSORS-IN-INTEREST, DESPITE THE FACT THAT BY ITS TERMS AND CONDITIONS,
LIKE THE PRICE BEING PAYABLE ON INSTALLMENTS WITHIN A FIXED PERIOD, THE SAME
IS A CONDITIONAL DEED OF SALE.

II

IN HOLDING THAT NOTWITHSTANDING THE FACT THAT THE VENDEE FAILED TO COMPLY
WITH THE TERMS OF THE CONTRACT (EXHIBIT "A") SPECIFICALLY TO COMPLETE THE
PAYMENT OF THE CONSIDERATION ON THE DATE STIPULATED IN THE CONTRACT WHICH
WAS SUPPOSED TO BE IN JANUARY 1976, COMPLETE PAYMENT THEREOF CAN STILL BE
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ENFORCED IN AN ACTION INSTITUTED BY THE HEIRS OF THE VENDEE FILED ON OCTOBER
19, 1988 OR A PERIOD OF MORE THAN TWELVE (12) YEARS FROM THE TIME COMPLETE
PAYMENT SHOULD HAVE BEEN MADE;

III

IN HOLDING THAT THE PRIVATE RESPONDENTS' ACTION IS ONE WHICH IS AN OFFER TO


COMPLETE THE PAYMENT LEFT UNPAID BY PRIVATE RESPONDENTS' FATHER WHICH DOES
NOT PRESCRIBE;

IV

IN HOLDING THAT PRIVATE RESPONDENTS' CAUSE OF ACTION HAS NOT PRESCRIBE. 14

The decisive issue in this case is whether Exhibit "A" embodies a contract of sale or a contract to sell. The
distinction between the two is important for in a contract of sale, the title passes to the vendee upon the
delivery of the thing sold, whereas in a contract to sell, by agreement, ownership is reserved in the vendor
and is not to pass until the full payment of the price. 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, failure of which is not a breach but an event that prevented the obligation of the vendor to
convey title from becoming
effective.15

A perusal of Exhibit "A" leads to no other conclusion than that it embodies a contract of sale. The plain and
clear tenor of the "DEED OF ABSOLUTE SALE OF ONE-HALF (1/2) [OF] AN UNDIVIDED PORTION OF A
PARCEL OF LAND" is that "the VENDOR hereby . . . SELL, CONVEY AND CONVEY by way Absolute Sale the
one-half (1/2) portion . . . to the VENDEE . . . his heirs, assigns and successors-in-interest." That the
vendor, petitioner Vicente Pingol, had that clear intention was further evidenced by his failure to reserve
his title thereto until the full payment of the price.

In Dignos vs. Court of Appeals, 16 we held that a deed of sale is absolute in nature although denominated
as a "Deed of Conditional Sale" where there is no stipulation in the deed that title to the property sold is
reserved in the seller until the full payment of the price, nor is there a stipulation giving the vendor the
right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Exhibit
"A" contains neither stipulation. What is merely stated therein is that "the VENDEE agrees that in case of
default in the payment of the installments due the same shall earn a legal rate of interest, and to which
the VENDOR likewise agrees."

Furthermore, as found by the Court of Appeals, the acts of the parties, contemporaneous and subsequent
to the contract, clearly show that an absolute deed of sale was intended, by the parties and not a contract
to sell:

[P]ursuant to the deed, the vendor delivered actual and constructive possession of the
property to the vendee, who occupied and took such possession, constructed a building
thereon, had the property surveyed and subdivided and a plan of the property was prepared
and submitted to the Land Registration Commission which approved it preparatory to
segregating the same and obtaining the corresponding TCT in his name. Since the sale,
appellee continuously possessed and occupied the property as owner up to his death on July
13, 1984 and his heirs, after his death, continued the occupancy and possession of the
property up to the present. Those contemporaneous and subsequent events are
demonstrative acts that the vendor since the sale recognized the vendee as the absolute
owner of the property sold. All those attributes of ownership are admitted by defendants in
their answer, specifically in paragraphs 7 and 9 of their special and affirmative defenses.17

1
The contract here being one of absolute sale, the ownership of the subject lot was transferred to the buyer
upon the actual and constructive delivery thereof. The constructive delivery of the subject lot was made
upon the execution of the deed of sale 18 while the actual delivery was effected when the private
respondents took possession of and constructed a house on Lot No. 3223-A.

The delivery of the object of the contract divested the vendor of the ownership over the same and he
cannot recover the title unless the contract is resolved or rescinded pursuant to Article 1592 of the New
Civil Code which provides that:

In the sale of immovable property, even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the rescission of the contract shall of right
take place, the vendee may pay, even after the expiration of the period, as long as no
demand for rescission of the contract has been made upon him either judicially or by a
notarial act. After the demand, the court may not grant him a new term.

Both the trial court and the Court of Appeals did not find that a notarial or judicial rescission of the
contract had been made. Although Vicente Pingol asserts that he had declared to Francisco Donasco that
he was cancelling the contract, he did not prove that his demand for rescission was made either judicially
or by a notarial act.

Petitioners fault the respondent Court for holding that the action of the petitioners is not barred by the
statute of limitations. They argue that the private respondents' action, being based upon a written
contract, has prescribed since it was brought only in 1988 or more than ten years from the time when the
latter could have lawfully demanded performance. 19

We disagree.

Although the private respondents' complaint before the trial court was denominated as one for specific
performance, it is in effect an action to quiet title. In this regard, the following excerpt from Bucton vs.
Gabar 20 is apropos:

The real and ultimate basis of petitioners' action is their ownership of one- half of the lot
coupled with their possession thereof, which entitles them to a conveyance of the property.
In Sapto, et al. v. Fabiana [103 Phil. 683, 686-87 (1958)], this Court, speaking thru Mr.
Justice J.B.L. Reyes, explained that under the circumstances no enforcement of the contract
is needed, since the delivery of possession of the land sold had consummated the sale and
transferred title to the purchaser, and that, actually, the action for conveyance is one to
quiet title, i.e., to remove the cloud upon the appellee's ownership by the refusal of the
appellants to recognize the sale made by their predecessors.

That a cloud has been cast on the title of the private respondents is indubitable. Despite the fact that the
title had been transferred to them by the execution of the deed of sale and the delivery of the object of
the contract, the petitioners adamantly refused to accept the tender of payment by the private
respondents and steadfastly insisted that their obligation to transfer title had been rendered ineffective.

A vendee in an oral contract to convey land who had made part payment thereof, entered upon the land
and had made valuable improvements thereon, is entitled to bring suit to clear his title against the vendor
who had refused to transfer the title to him. It is not necessary that the vendee has an absolute title, an
equitable title being sufficient to clothe him with personality to bring an action to quiet title. 21

Prescription thus cannot be invoked against the private respondents for it is aphoristic that an action to
quiet title to property in one's possession is
imprescriptible. 22 The rationale for this rule has been aptly stated thus:

The owner of real property who is in possession thereof may wait until his possession is
invaded or his title is attacked before taking steps to vindicate his right. A person claiming
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title to real property, but not in possession thereof, must act affirmatively and within the
time provided by the statute. Possession is a continuing right as is the right to defend such
possession. So it has been determined that an owner of real property in possession has a
continuing right to invoke a court of equity to remove a cloud that is a continuing menace to
his title. Such a menace is compared to a continuing nuisance or trespass which is treated
as successive nuisances or trespasses, not barred by statute until continued without
interruption for a length of time sufficient to affect a change of title as a matter of law. 23

Private respondents shall, however, be liable to pay the legal rate of interest on the unpaid balance of the
purchase price from the date default or on 6 January 1976, when the entire balance should have been
paid, pursuant to the provision in the deed of sale.

WHEREFORE, except as above modified, the Decision appealed from is hereby AFFIRMED. As modified, the
interest on the unpaid balance of P10,161.00, at the legal rate, shall be computed from 6 January 1976.
Upon the payment by the private respondents to the petitioners of the said amount and the interest
thereon, the latter are ordered to deliver Transfer Certificate of Title No. 7435 to the Register of Deeds of
Caloocan City who shall cancel the same and issue two new transfer certificates of title in lieu thereof, one
of which shall be in the name of the herein private respondents covering Lot No. 3223-A and the other in
the name of the petitioners covering the remainder of the lot.

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-36359 January 31, 1974


FELIX BUCTON AND NICANORA GABAR BUCTON, petitioners,
vs.
ZOSIMO GABAR, JOSEFINA LLAMOSO GABAR AND THE HONORABLE COURT OF
APPEALS, respondents.

1
Rizalindo V. Diaz for petitioners.

Alfredo Ber. Pallarca for respondents.

ANTONIO, J.:1wph1.t

Appeal from the decision of the Court of Appeals in CA-G.R. No. 49091-R, dated January 10,
1973, reversing the judgment of the trial court and dismissing the complaint filed by herein
petitioners, and from said appellate court's resolution, dated February 5, 1973, denying
petitioners' motion for reconsideration.

The facts of the case, as found by the trial court, which have not been disturbed by respondent
Court of Appeals, are as follows:

Plaintiff Nicanora Gabar Bucton (wife of her co-plaintiff Felix Bucton) is the sister
of defendant Zosimo Gabar, husband of his co-defendant Josefina Llamoso Gabar.

This action for specific performance prays, inter-alia, that defendants-spouses be


ordered to execute in favor of plaintiffs a deed of sale of the western half of a
parcel of land having an area of 728 sq. m. covered by TCT No. II (from OCT No.
6337) of the office of the Register of Deeds of Misamis Oriental.

Plaintiffs' evidence tends to show that sometime in 1946 defendant Josefina


Llamoso Gabar bought the above-mentioned land from the spouses Villarin on
installment basis, to wit, P500 down, the balance payable in installments. Josefina
entered into a verbal agreement with her sister-in-law, plaintiff Nicanora Gabar
Bucton, that the latter would pay one-half of the price (P3,000) and would then
own one-half of the land. Pursuant to this understanding Nicanora on January 19,
1946 gave her sister-in-law Josefina the initial amount of P1,000, for which the
latter signed a receipt marked as Exhibit A.

Subsequently, on May 2, 1948 Nicanora gave Josefina P400. She later signed a
receipt marked as Exhibit B.

On July 30, 1951 plaintiffs gave defendants P1,000 in concept of loan, for which
defendant Zosimo Gabar signed a receipt marked as Exhibit E.

Meanwhile, after Josefina had received in January, 1946 the initial amount of
P1,000 as above stated, plaintiffs took possession of the portion of the land
indicated to them by defendants and built a modest nipa house therein. About two
years later plaintiffs built behind the nipa house another house for rent. And,
subsequently, plaintiffs demolished the nipa house and in its place constructed a
house of strong materials, with three apartments in the lower portion for rental
purposes. Plaintiffs occupied the upper portion of this house as their residence,
until July, 1969 when they moved to another house, converting and leasing the
upper portion as a dormitory.

In January, 1947 the spouses Villarin executed the deed of sale of the land
abovementioned in favor of defendant Josefina Llamoso Gabar, Exhibit I, to whom
was issued on June 20, 1947 TCT No. II, cancelling OCT No. 6337. Exhibit D.

Plaintiffs then sought to obtain a separate title for their portion of the land in
question. Defendants repeatedly declined to accommodate plaintiffs. Their excuse:
the entire land was still mortgaged with the Philippine National Bank as guarantee
for defendants' loan of P3,500 contracted on June 16, 1947: Exhibit D-1.

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Plaintiffs continued enjoying their portion of the land, planting fruit trees and
receiving the rentals of their buildings. In 1953, with the consent of defendants
(who were living on their portion), plaintiffs had the entire land surveyed and
subdivided preparatory to obtaining their separate title to their portion. After the
survey and the planting of the concrete monuments defendants erected a fence
from point 2 to point 4 of the plan, Exhibit I, which is the dividing line between the
portion pertaining to defendants, Exhibit I-1, and that pertaining to plaintiffs,
Exhibit I-2.

In the meantime, plaintiffs continued to insist on obtaining their separate title.


Defendants remained unmoved, giving the same excuse. Frustrated, plaintiffs
were compelled to employ Atty. Bonifacio Regalado to intercede; counsel tried but
failed. Plaintiffs persevered, this time employing Atty. Aquilino Pimentel, Jr. to
persuade defendants to comply with their obligation to plaintiffs; this, too, failed.
Hence, this case, which has cost plaintiffs P1,500 in attorney's fees.

Defendants' evidence based only on the testimony of defendant Josefina


Llamoso Gabar denies agreement to sell to plaintiffs one-half of the land in
litigation. She declared that the amounts she had received from plaintiff Nicanora
Gabar Bucton first, P1,000, then P400 were loans, not payment of one-half of
the price of the land (which was P3,000). This defense is devoid of merit.

When Josefina received the first amount of P1,000 the receipt she signed, Exhibit
A, reads:

1
Received from Mrs. Nicanora Gabar the sum of one thousand (P1,000) pesos,
victory currency, as part payment of the one thousand five hundred (P1,500.00)
pesos, which sum is one-half of the purchase value of Lot No. 337, under Torrens
Certificate of Title No. 6337, sold to me by Mrs. Carmen Roa Villarin.

"(Sgd.) Josefina Ll. Gabar".

On the basis of the facts quoted above the trial court on February 14, 1970, rendered judgment
the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered for plaintiffs:

1) Ordering defendants within thirty days from receipt hereof to execute a deed of
conveyance in favor of plaintiffs of the portion of the land covered by OCT No. II,
indicated as Lot 337-B in the Subdivision Plan, Exhibit I, and described in the
Technical Description, Exhibit 1-2; should defendants for any reason fail to do so,
the deed shall be executed in their behalf by the Provincial Sheriff of Misamis
Oriental or his Deputy;

2) Ordering the Register of Deeds of Cagayan de Oro, upon presentation to him of


the above-mentioned deed of conveyance, to cancel TCT No. II and in its stead to
issue Transfer Certificates of Title, to wit, one to plaintiffs and another to
defendants, based on the subdivision Plan and Technical Description above-
mentioned; and ordering defendants to present and surrender to the Register of
Deeds their TCT No. II so that the same may be cancelled; and

3) Ordering defendants to pay unto plaintiffs attorney's fees in the amount of


P1,500 and to pay the costs.

SO ORDERED.

Appeal was interposed by private respondents with the Court of Appeals, which reversed the
judgment of the trial court and ordered petitioners' complaint dismissed, on the following legal
disquisition:

Appellees' alleged right of action was based on the receipt (Exh. A) which was
executed way back on January 19, 1946. An action arising from a written contract
does not prescribe until after the lapse of ten (10) years from the date of action
accrued. This period of ten (10) years is expressly provided for in Article 1144 of
the Civil Code.

From January 19, 1946 to February 15, 1968, when the complaint was filed in this
case, twenty-two (22) years and twenty-six (26) days had elapsed. Therefore, the
plaintiffs' action to enforce the alleged written contract (Exh. A) was not brought
within the prescriptive period of ten (10) years from the time the cause of action
accrued.

The land in question is admittedly covered by a torrens title in the name of


Josefina Llamoso Gabar so that the alleged possession of the land by the plaintiffs
since 1947 is immaterial because ownership over registered realty may not be
acquired by prescription or adverse possession (Section 40 of Act 496).

z
It is not without reluctance that in this case we are constrained to sustain the
defense of prescription, for we think that plaintiffs really paid for a portion of the
lot in question pursuant to their agreement with the defendants that they would
then own one-half of the land. But we cannot apply ethical principles in lieu of
express statutory provisions. It is by law provided that:

"ART. 1144. The following actions must be brought within ten years
from the time the right of action accrues:

1. Upon a written contract;

2. Upon an obligation created by law;

3. Upon a judgment."

If eternal vigilance is the price of safety, one cannot sleep on one's right and
expect it to be preserved in its pristine purity.

Petitioners' appeal is predicated on the proposition that owners of the property by purchase
from private respondents, and being in actual, continuous and physical possession thereof
since the date of its purchase, their action to compel the vendors to execute a formal deed of
conveyance so that the fact of their ownership may be inscribed in the corresponding
certificate of title, had not yet prescribed when they filed the present action.

We hold that the present appeal is meritorious.

1. There is no question that petitioner Nicanora Gabar Bucton paid P1,500.00 to respondent
Josefina Gabar as purchase price of one-half of the lot now covered by TCT No. II, for
respondent Court of Appeals found as a fact "that plaintiffs really paid for a portion of the lot in
question pursuant to their agreement with the defendants that they would own one-half (1/2)
of the land." That sale, although not consigned in a public instrument or formal writing, is
nevertheless valid and binding between petitioners and private respondents, for the time-
honored rule is that even a verbal contract of sale or real estate produces legal effects between
the parties.1 Although at the time said petitioner paid P1,000.00 as part payment of the
purchase price on January 19, 1946, private respondents were not yet the owners of the lot,
they became such owners on January 24, 1947, when a deed of sale was executed in their
favor by the Villarin spouses. In the premises, Article 1434 of the Civil Code, which provides
that "[w]hen a person who is not the owner of a thing sells or alienates and delivers it, and
later the seller or grantor acquires title thereto, such title passes by operation of law to the
buyer or grantee," is applicable.2 Thus, the payment by petitioner by Nicanora Gabar Bucton of
P1,000.00 on January 19, 1946, her second payment of P400.00 on May 2, 1948, and the
compensation, up to the amount of P100.00 (out of the P1,000.00-loan obtained by private
respondents from petitioners on July 30, 1951), resulted in the full payment of the purchase
price and the consequential acquisition by petitioners of ownership over one-half of the lot.
Petitioners therefore became owners of the one-half portion of the lot in question by virtue of a
sale which, though not evidenced by a formal deed, was nevertheless proved by both
documentary and parole evidence.

2. The error of respondent Court of Appeals in holding that petitioners' right of action had
already prescribed stems from its belief that the action of petitioners is based on the receipt
Exh. "A" which was executed way back on January 19, 1946, and, therefore, in the view of said
appellate court, since petitioners' action was filed on February 15, 1968, or after the lapse of
twenty-two (22) years and twenty-six (26) days from, the date of said document, the same is
already barred according to the provisions of Article 1144 of the New Civil Code. The aforecited
document (Exh. "A"), as well as the other documents of similar import (Exh. "B" and Exh. "E"),

1
are the receipts issued by private respondents to petitioners, evidencing payments by the latter
of the purchase price of one-half of the lot.

The real and ultimate basis of petitioners' action is their ownership of one-half of the lot
coupled with their possession thereof, which entitles them to a conveyance of the property.
In Sapto, et al. v. Fabiana,3 this Court, speaking thru Mr. Justice J.B.L. Reyes, explained that, under the
circumstances no enforcement of the contract is needed, since the delivery of possession of the land sold
had consummated the sale and transferred title to the purchaser, and that, actually, the action for
conveyance is one to quiet title, i.e., to remove the cloud upon the appellee's ownership by the refusal of
the appellants to recognize the sale made by their predecessors. We held therein that "... it is an
established rule of American jurisprudence (made applicable in this jurisdiction by Art. 480 of the New
Civil Code) that actions to quiet title to property in the possession of the plaintiff are imprescriptible (44
Am. Jur. p. 47; Cooper vs. Rhea, 20 L.R.A. 930; Inland Empire Land Co. vs. Grant County, 138 Wash.
439, 245 Pac. 14).

The prevailing rule is that the right of a plaintiff to have his title to land quieted, as against
one who is asserting some adverse claim or lien thereon, is not barred while the plaintiff or
his grantors remain in actual possession of the land, claiming to be owners thereof, the
reason for this rule being that while the owner in fee continues liable to an action,
proceeding, or suit upon the adverse claim, he has a continuing right to the aid of a court of
equity to ascertain and determine the nature of such claim and its effect on his title, or to
assert any superior equity in his favor. He may wait until his possession is disturbed or his
title in attacked before taking steps to vindicate his right. But the rule that the statute of
limitations is not available as a defense to an action to remove a cloud from title can only be
invoked by a complainant when he is in possession. One who claims property which is in the
possession of another must, it seems, invoke remedy within the statutory period. (44 Am.
Jur., p. 47)

The doctrine was reiterated recently in Gallar v. Husain, et al.,4 where We ruled that by the delivery of the
possession of the land, the sale was consummated and title was transferred to the appellee, that the
action is actually not for specific performance, since all it seeks is to quiet title, to remove the cloud cast
upon appellee's ownership as a result of appellant's refusal to recognize the sale made by his predecessor,
and that as plaintiff-appellee is in possession of the land, the action is imprescriptible. Considering that
the foregoing circumstances obtain in the present case, We hold that petitioners' action has not
prescribed.

WHEREFORE, the decision and resolution of respondent Court of Appeals appealed from are hereby
reversed, and the judgment of the Court of First Instance of Misamis Oriental, Branch IV, in its Civil Case
No. 3004, is revived. Costs against private respondents.

Zaldivar (Chairman), Fernando, Barredo, Fernandez, Aquino, JJ., concur.1wph1.t