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On January 5, 1989, private respondents

ZENAIDA M. SANTOS, petitioner,
instituted an action for reconveyance of
property with preliminary injunction against
petitioner in the Regional Trial Court of Manila,
and ANTONIO SANTOS, respondents.
where they alleged that the two deeds of sale
QUISUMBING, J.: executed on January 19, 1959 and November
20, 1973 were simulated for lack of
This petition for review[1] seeks to annul
consideration. They were executed to
and set aside the decision dated March 10,
accommodate Salvador in generating funds for
1998 of the Court of Appeals that affirmed the
his business ventures and providing him with
decision of the Regional Trial Court of Manila,
greater business flexibility.
Branch 48, dated March 17, 1993. Petitioner
also seeks to annul the resolution that denied In her Answer, Zenaida denied the material
her motion for reconsideration. allegations in the complaint and as special and
affirmative defenses, argued that Salvador was
Petitioner Zenaida M. Santos is the widow
the registered owner of the property, which
of Salvador Santos, a brother of private
could only be subjected to encumbrances or
respondents Calixto, Alberto, Antonio, all
liens annotated on the title; that the
surnamed Santos and Rosa Santos-Carreon.
respondents right to reconveyance was already
The spouses Jesus and Rosalia Santos barred by prescription and laches; and that the
owned a parcel of land registered under TCT complaint stated no cause of action.
No. 27571 with an area of 154 square meters,
On March 17, 1993, the trial court decided
located at Sta. Cruz Manila. On it was a four-
in private respondents favor, thus:
door apartment administered by Rosalia who
rented them out. The spouses had five
WHEREFORE, viewed from all the foregoing
children, Salvador, Calixto, Alberto, Antonio
considerations, judgment is hereby made in
and Rosa.
favor of the plaintiffs and against the
On January 19, 1959, Jesus and Rosalia defendants:
executed a deed of sale of the properties in favor
of their children Salvador and Rosa. TCT No. a) Declaring Exh. B, the deed of sale executed
27571 became TCT No. 60819. Rosa in turn by Rosalia Santos and Jesus Santos on
sold her share to Salvador on November 20, January 19, 1959, as entirely null and void for
1973 which resulted in the issuance of a new being fictitious or simulated and inexistent and
TCT No. 113221. Despite the transfer of the without any legal force and effect;
property to Salvador, Rosalia continued to lease
and receive rentals from the apartment units. b) Declaring Exh. D, the deed of sale executed
by Rosa Santos in favor of Salvador Santos on
On November 1, 1979, Jesus died. Six
November 20, 1973, also as entirely null and
years after or on January 9, 1985, Salvador
void for being likewise fictitious or simulated
died, followed by Rosalia who died the following
and inexistent and without any legal force and
month. Shortly after, petitioner Zenaida,
claiming to be Salvadors heir, demanded the
rent from Antonio Hombrebueno,[2] a tenant of c) Directing the Register of Deeds of Manila to
Rosalia. When the latter refused to pay, cancel Transfer Certificate of Title No. T-
Zenaida filed an ejectment suit against him 113221 registered in the name of Salvador
with the Metropolitan Trial Court of Manila, Santos, as well as, Transfer Certificate of Title
Branch 24, which eventually decided in No. 60819 in the names of Salvador Santos,
Zenaidas favor. Rosa Santos, and consequently thereafter,

reinstating with the same legal force and effect Filipino custom, petitioner, at least, should
as if the same was not cancelled, and which have shown evidence to prove that her husband
shall in all respects be entitled to like faith and declared the property for tax purposes in his
credit; Transfer Certificate of Title No. T-27571 name or paid the land taxes, acts which
registered in the name of Rosalia A. Santos, strongly indicate control and possession. The
married to Jesus Santos, the same to be appellate court disposed:
partitioned by the heirs of the said registered
owners in accordance with law; and WHEREFORE, finding no reversible error in the
decision appealed from, the same is hereby
d) Making the injunction issued in this case AFFIRMED. No pronouncement as to costs.
Without pronouncement as to costs.
Hence, this petition where petitioner avers
SO ORDERED.[3] that the Court of Appeals erred in:
The trial court reasoned that
notwithstanding the deeds of sale transferring
the property to Salvador, the spouses Rosalia
and Jesus continued to possess the property
and to exercise rights of ownership not only by
receiving the monthly rentals, but also by
paying the realty taxes. Also, Rosalia kept the
owners duplicate copy of the title even after it
was already in the name of Salvador. Further,
the spouses had no compelling reason in 1959
to sell the property and Salvador was not PUBLIC INSTRUMENT IS NOT EQUIVALENT
financially capable to purchase it. The deeds of
sale were therefore fictitious. Hence, the action
to assail the same does not prescribe.[4] III
Upon appeal, the Court of Appeals affirmed
the trial courts decision dated March 10, ...NOT FINDING THAT THE CAUSE OF ACTION
1998. It held that in order for the execution of OF ROSALIA SANTOS HAD PRESCRIBED
a public instrument to effect tradition, as AND/OR BARRED BY LACHES.
provided in Article 1498 of the Civil Code,[5] the
vendor shall have had control over the thing IV
sold, at the moment of sale. It was not enough
to confer upon the purchaser the ownership ...IGNORING PETITIONERS ALLEGATION TO
and the right of possession. The thing sold THE EFFECT THAT PLAINTIFF DR. ROSA [S.]
must be placed in his control. The subject CARREON IS NOT DISQUALIFIED TO TESTIFY
deeds of sale did not confer upon Salvador the AS TO THE QUESTIONED DEEDS OF SALE
ownership over the subject property, because CONSIDERING THAT SALVADOR SANTOS
even after the sale, the original vendors HAS LONG BEEN DEAD.[7]
remained in dominion, control, and possession
In this petition, we are asked to resolve the
thereof. The appellate court further said that if
the reason for Salvadors failure to control and
possess the property was due to his
acquiescence to his mother, in deference to

1. Are payments of realty taxes and sale, did so out of respect for her and out of
retention of possession indications of generosity, a factual matter beyond the
continued ownership by the original owners? province of this Court.[14]Significantly, in Alcos
vs. IAC, 162 SCRA 823, 837 (1988), we noted
2. Is a sale through a public instrument
that the buyers immediate possession and
tantamount to delivery of the thing sold?
occupation of the property corroborated the
3. Did the cause of action of Rosalia Santos truthfulness and authenticity of the deed of
and her heirs prescribe? sale.Conversely, the vendors continued
possession of the property makes dubious the
4. Can petitioner invoke the Dead Mans
contract of sale between the parties.
On the second issue, is a sale through a
On the first issue, petitioner contends that
public instrument tantamount to delivery of the
the Court of Appeals erred in holding that
thing sold? Petitioner in her memorandum
despite the deeds of sale in Salvadors favor,
invokes Article 1477[15] of the Civil Code which
Jesus and Rosalia still owned the property
provides that ownership of the thing sold is
because the spouses continued to pay the
transferred to the vendee upon its actual or
realty taxes and possess the property. She
constructive delivery. Article 1498, in turn,
argues that tax declarations are not conclusive
provides that when the sale is made through a
evidence of ownership when not supported by
public instrument, its execution is equivalent
evidence. She avers that Salvador allowed his
to the delivery of the thing subject of the
mother to possess the property out of respect
contract. Petitioner avers that applying said
to her in accordance with Filipino values.
provisions to the case, Salvador became the
It is true that neither tax receipts nor owner of the subject property by virtue of the
declarations of ownership for taxation purposes two deeds of sale executed in his favor.
constitute sufficient proof of ownership. They
Nowhere in the Civil Code, however, does it
must be supported by other effective
provide that execution of a deed of sale is a
proofs.[9] These requisite proofs we find present
conclusive presumption of delivery of
in this case. As admitted by petitioner, despite
possession. The Code merely said that the
the sale, Jesus and Rosalia continued to
execution shall be equivalent to delivery. The
possess and administer the property and enjoy
presumption can be rebutted by clear and
its fruits by leasing it to third persons.[10] Both
convincing evidence.[16] Presumptive delivery
Rosa and Salvador did not exercise any right of
can be negated by the failure of the vendee to
ownership over it.[11] Before the second deed of
take actual possession of the land sold.[17]
sale to transfer her 1/2 share over the property
was executed by Rosa, Salvador still sought the In Danguilan vs. IAC, 168 SCRA 22, 32
permission of his mother.[12] Further, after (1988), we held that for the execution of a
Salvador registered the property in his name, public instrument to effect tradition, the
he surrendered the title to his mother.[13] These purchaser must be placed in control of the
are clear indications that ownership still thing sold. When there is no impediment to
remained with the original owners. In Serrano prevent the thing sold from converting to
vs. CA, 139 SCRA 179, 189 (1985), we held that tenancy of the purchaser by the sole will of the
the continued collection of rentals from the vendor, symbolic delivery through the
tenants by the seller of realty after execution of execution of a public instrument is
alleged deed of sale is contrary to the notion of sufficient. But if, notwithstanding the
ownership. execution of the instrument, the purchaser
cannot have the enjoyment and material
Petitioner argues that Salvador, in allowing
tenancy nor make use of it himself or through
her mother to use the property even after the

another in his name, then delivery has not been case. The complaint filed by respondents in the
effected. court a quo was for the reconveyance of the
subject property to the estate of Rosalia since
As found by both the trial and appellate
the deeds of sale were simulated and
courts and amply supported by the evidence on
fictitious. The complaint amounts to a
record, Salvador was never placed in control of
declaration of nullity of a void contract, which
the property. The original sellers retained their
is imprescriptible. Hence, respondents cause of
control and possession. Therefore, there was
action has not prescribed.
no real transfer of ownership.
Neither is their action barred by
Moreover, in Norkis Distributors, Inc. vs.
laches. The elements of laches are: 1) conduct
CA, 193 SCRA 694, 698-699 (1991), citing the
on the part of the defendant, or of one under
land case of Abuan vs. Garcia, 14 SCRA 759
whom he claims, giving rise to the situation of
(1965), we held that the critical factor in the
which the complaint seeks a remedy; 2) delay
different modes of effecting delivery, which
in asserting the complainants rights, the
gives legal effect to the act is the actual
complainant having had knowledge or notice of
intention of the vendor to deliver, and its
the defendants conduct as having been
acceptance by the vendee. Without that
afforded an opportunity to institute a suit; 3)
intention, there is no tradition. In the instant
lack of knowledge or notice on the part of the
case, although the spouses Jesus and Rosalia
defendant that the complainant would assert
executed a deed of sale, they did not deliver the
the right in which he bases his suit; and 4)
possession and ownership of the property to
injury or prejudice to the defendant in the event
Salvador and Rosa. They agreed to execute a
relief is accorded to the complainant, or the suit
deed of sale merely to accommodate Salvador
is not held barred.[18] These elements must all
to enable him to generate funds for his
be proved positively. The conduct which caused
business venture.
the complaint in the court a quo was
On the third issue, petitioner argues that petitioners assertion of right of ownership as
from the date of the sale from Rosa to Salvador heir of Salvador. This started in December
on November 20, 1973, up to his death on 1985 when petitioner demanded payment of
January 9, 1985, more or less twelve years had the lease rentals from Antonio Hombrebueno,
lapsed, and from his death up to the filing of the tenant of the apartment units. From
the case for reconveyance in the court a quo on December 1985 up to the filing of the complaint
January 5, 1989, four years had lapsed. In for reconveyance on January 5, 1989, only less
other words, it took respondents about sixteen than four years had lapsed which we do not
years to file the case below. Petitioner argues think is unreasonable delay sufficient to bar
that an action to annul a contract for lack of respondents cause of action. We likewise find
consideration prescribes in ten years and even the fourth element lacking. Neither petitioner
assuming that the cause of action has not nor her husband made considerable
prescribed, respondents are guilty of laches for investments on the property from the time it
their inaction for a long period of time. was allegedly transferred to the latter. They
also did not enter into transactions involving
Has respondents cause of action
the property since they did not claim ownership
prescribed? In Lacsamana vs. CA, 288 SCRA
of it until December 1985. Petitioner stood to
287, 292 (1998), we held that the right to file
lose nothing. As we held in the same case
an action for reconveyance on the ground that
of Lacsamana vs. CA, cited above, the concept
the certificate of title was obtained by means of
of laches is not concerned with the lapse of time
a fictitious deed of sale is virtually an action for
but only with the effect of unreasonable
the declaration of its nullity, which does not
lapse. In this case, the alleged 16 years of
prescribe. This applies squarely to the present
respondents inaction has no adverse effect on

which purchase from Wilfredo Dy the said tractor and sustained the judgment of the Regional Trial assume the mortgage debt of the latter. Despite the offer of full payment by the petitioner to Libra for the tractor.. Investment Corporation (Libra). and ANTONIO V. seeks to expunge the testimony of Rosa Santos- COURT OF APPEALS. Thus. Wilfredo Dy SCRA 222. 1993. The the loan. petitioner. 144 brothers. to invoke said rule. Trial ensued and Rosa testified as a validly consummated and ordered a complaint witness for respondents and was cross. the immediate release could not be effected because Wilfredo Dy had obtained financing . in favor of herein private respondents.R. Libra thru its against petitioner. 23.[19] It is too late for petitioner. Both truck and examines a private respondent on matters tractor were mortgaged to Libra as security for occurring during the deceaseds lifetime. 1998 of the Court of Appeals. At this time. Cipriano Ares approved the petitioner's request. 1979. Rule 130 of the Revised Rules of Court. PERFECTO DY. 92989 July 8. Wilfredo Dy executed a deed of absolute sale in favor of the petitioner over the tractor in question. By her failure to appeal from the order allowing Rosa to The facts as established by the records are as testify. The assailed decision dated March letter to Libra requesting that he be allowed to 10. Carreon before the trial court in view of Sec. the subject tractor was in the possession of Libra Finance due to Wilfredo Dy's failure to pay the amortizations. 1979. Lastly. she waived her right to invoke the dead follows: mans statute. 231 (1986). on September 4. is AFFIRMED. he wrote a DENIED.. Court dated March 17. 1990. J.: Statute. petitioner in her memorandum vs. 1991 laches. GONZALES. Sometime in 1979. examined by petitioners counsel. however. 1990 decision of motion to disqualify respondent Rosa as a the Court of Appeals which ruled that the witness. In Goi vs. CA. her counsel cross- examined Rosa on matters that occurred The petitioner.the petitioner to make respondents guilty of G.Petitioner did not appeal petitioner's purchase of a farm tractor was not therefrom. Perfecto Dy and Wilfredo Dy are during Salvadors lifetime. Court of Appeals cannot be faulted in ignoring petitioner on Rosas disqualification. manager. The trial court in its order This is a petition for review on certiorari seeking dated February 5. JR. 1979. No. denied petitioners the reversal of the March 23. the instant petition is his brother so on August 20. Further. GELAC TRADING INC. we held that protection purchased a truck and a farm tractor through under the dead mans statute is effectively financing extended by Libra Finance and waived when a counsel for a petitioner cross. Costs In a letter dated August 27. otherwise known as the Dead Mans GUTIERREZ. for its recovery dismissed. JR. SO ORDERED. The petitioner wanted to buy the tractor from WHEREFORE. respondents.

541. Inc. 35-36) thus settling in full the indebtedness of Wilfredo Dy with the financing firm. to purchase the truck so that hiring a tractor. and to pay the cost. pronouncing that AFORESAID TRACTOR TO PETITIONER the plaintiff is the owner of the tractor. Gelac sold the tractor to one ERRED IN NOT AFFIRMING THE TRIAL of its stockholders. v. 1980 that the petitioner learned PETITIONER WHEN SAID TRACTOR about GELAC having already taken custody of WAS LEVIED ON BY THE SHERIFF the subject tractor. GELAC TRADING INC. question still belonged to Wilfredo Dy when it was seized and levied by the sheriff by virtue of Meanwhile. Later. Payment On appeal. Consequently. Libra insisted that it be cleared first complaint with costs against the petitioner. Civil Case No.000 for moral full payment could be made for both. 1979. . in favor of the petitioner. WHETHER OR NOT THE HONORABLE Cebu. the PURSUANT TO AN ALIAS WRIT OF petitioner filed an action to recover the subject EXECUTION ISSUED IN ANOTHER tractor against GELAC Trading with the CASE IN FAVOR OF RESPONDENT Regional Trial Court of Cebu City. judgment is hereby MERE CONJECTURE AND SURMISE IN rendered in favor of the plaintiff and HOLDING THAT THE SALE OF THE against the defendant. Wilfredo Dy".not only for said tractor but also for a truck and return the same to the plaintiff herein.000. sheriff was able to seize and levy on the tractor which was in the premises of Libra in Carmen. The dispositive portion of the decision reads as follows: WHETHER OR NOT THE HONORABLE COURT OF APPEALS EMBARKED ON WHEREFORE. Antonio Gonzales. the RTC rendered judgment B. directing the defendants jointly and severally to pay to the plaintiff the The petitioner was able to convince his sister. The before Libra could release the chattels in Court of Appeals held that the tractor in question. a PNB check was issued in damages. the Court of Appeals reversed the having been effected through an out-of-town decision of the RTC and dismissed the check.80 was pending in another court in Cebu. R-16646. the provincial A. amount of P1. The tractor was subsequently sold at COURT OF APPEALS public auction where Gelac Trading was the MISAPPREHENDED THE FACTS AND lone bidder. The petitioner now comes to the Court raising the following questions: On the strength of an alias writ of execution issued on December 27.00 as expenses for Carol Dy-Seno. the amount of P22. (Rollo. Libra insisted on full payment for both. On damages. 1988.00 in favor of Libra. case to recover the sum of P12. 1979. R-16646 entitled the alias writ of execution issued in Civil Case "Gelac Trading. P50.269. On April 8. pp. and directing DY'S CREDITORS.000 for exemplary November 22. WAS DONE IN FRAUD OF WILFREDO subject matter of this case. COURT'S FINDING THAT OWNERSHIP OF THE FARM TRACTOR HAD It was only when the check was cleared on ALREADY PASSED TO HEREIN January 17. P50. THERE BEING NO the defendants Gelac Trading EVIDENCE OF SUCH FRAUD AS Corporation and Antonio Gonzales to FOUND BY THE TRIAL COURT. a collection No.

the of the sale depended upon the clearance and validity of the sale would still not be affected. 525). Jr. as the chattel mortgagor can not sell the subject In the case of Servicewide Specialists Inc. agreement that the possession is transferred p. p. (Rollo. by purchase or otherwise. he Article 1496 of the Civil Code states that the is obliged under pain of penal liability. acquire the properties referred to therein. has the power to alienate the same. while they the petitioner that Articles 1498 and 1499 are subsist. 2 of the Revised Penal Code. Thus. later. (Francisco. however. FINDING OF THE TRIAL COURT THAT therefore. And even if no delivery was effected since the consummation consent was obtained from the mortgagee. (1972). He had the SLAPPED AGAINST THEM BY THE right to sell it although he was under the TRIAL COURT. Vicente. we see no reason why Wilfredo Dy. the property. executing them but also upon those who Article 1498 states: . The sale between the brothers was therefore valid The rule is settled that the chattel and binding as between them and to the mortgagor continues to be the owner of mortgagee. Volume IV-B Part 1. the instruments of from the vendor to the vendee.. There is no dispute that the consent of Intermediate Appellate Court. to ownership of the thing sold is acquired by the secure the written consent of the vendee from the moment it is delivered to him mortgagee. ALREADY KNEW OF THE FILING OF THE INSTANT CASE WAS VIOLATIVE xxx xxx xxx OF THE HUMAN RELATIONS PROVISIONS OF THE CIVIL CODE AND The mortgagor who gave the property as RENDERED THEM LIABLE FOR THE security under a chattel mortgage did not part MORAL AND EXEMPLARY DAMAGES with the ownership over the same. not only upon the parties applicable in the case at bar. and therefore. 1980 AT mortgagee under the Deed of Chattel WHICH TIME BOTH RESPONDENTS Mortgage. WHETHER OR NOT THE HONORABLE COURT OF APPEALS The absence of the written consent of the MISAPPREHENDED THE FACTS AND mortgagee to the sale of the mortgaged ERRED IN NOT SUSTAINING THE property in favor of a third person. Libra allowed the petitioner to purchase the tractor and xxx xxx xxx assume the mortgage debt of his brother.C. tractor. 1979. encashment of the check which was issued in payment of the subject tractor. affects not the validity of the THE SALE OF THE TRACTOR BY sale but only the penal liability of the RESPONDENT GELAC TRADING TO ITS mortgagor under the Revised Penal Code CO-RESPONDENT ANTONIO V. 13) obligation to secure the written consent of the mortgagee or he lays himself open to criminal The respondents claim that at the time of the prosecution under the provision of Article 319 execution of the deed of sale. no constructive par. as well. and the binding effect of such sale on the GONZALES ON AUGUST 2. in any of the ways specified in Articles 1497 to Revised Rules of Court in the 1501 or in any other manner signing an Philippines. v. Thus. (174 SCRA 80 Libra Finance was obtained in the instant case. We agree with mortgage are binding. [1989]). we stated that: In a letter dated August 27.

93 Phil. the contract of mortgage. he automatically steps into the shoes subject tractor could not be made. It was aware of the the latter already had it in his transfer of rights to the petitioner. Undeniably. Art. 767 [1953]) There is no property may likewise be made by the showing that Libra Finance has already mere consent or agreement of the foreclosed the mortgage and that it was the new contracting parties. 1499) Libra. The law implies that The clearing or encashment of the check which the mortgagee is entitled to possess the produced the effect of payment determined the mortgaged property because possession is full payment of the money obligation and the necessary in order to enable him to have the release of the chattel mortgage. of the original mortgagor. Libra cannot be transferred to the possession gave its consent to the sale of the subject of the vendee at the time of the sale. Apostol. However. possession for any other reason. or if tractor to the petitioner. Article 1499. clearly be inferred. v. The only remedy given to the xxx xxx xxx mortgagee is to have said property sold at public auction and the proceeds of the sale Article 1499 provides: applied to the payment of the obligation secured by the mortgagee. the from him upon his default. (See Martinez v. Neither could it be execution thereof shall be equivalent to said that Libra was the owner of the subject the delivery of the thing which is the tractor because the mortgagee can not become object of the contract. It was never intended nor could it be foreclosure. 1498. if the thing sold owner of the subject tractor. The delivery of movable PNB. The transaction between the brothers is While it is true that Wilfredo Dy was not in distinct and apart from the transaction actual possession and control of the subject between Libra and the petitioner. he has the right of considered as payment of the purchase price foreclosure upon default by the mortgagor in because the relationship between Libra and the the performance of the conditions mentioned in petitioner is not one of sale but still a mortgage. actual delivery of the property. In the or agreement of the parties when the thing sold case at bar. 765. Here. His right of ownership shall be subject pursuant to Article 1498 and upon the consent to the mortgage of the thing sold to him. (Article 2088. In fact. Civil Code) Said property continues to belong to the mortgagor. his right of ownership was not divested through a public instrument. the petitioner was fully aware of the cannot be immediately transferred to the existing mortgage of the subject tractor to possession of the vendee. It was not property sold. (1463a) Where a third person purchases the mortgaged In the instant case. when he was obtaining Libra's consent to the sale. (See Industrial there was constructive delivery already upon Finance Corp. he volunteered to assume The respondent court avers that the vendor the remaining balance of the mortgage debt of must first have control and possession of the Wilfredo Dy which Libra undeniably agreed to. if from the deed the owner of or convert and appropriate to the contrary does not appear or cannot himself the property mortgaged. The . As mortgagee. (Art. determinative of the consummation of the sale. it was Libra The payment of the check was actually Finance which was in possession of the subject intended to extinguish the mortgage obligation tractor due to Wilfredo's failure to pay the so that the tractor could be released to the amortization as a preliminary step to petitioner. When the sale is made tractor. 177 SCRA 521 the execution of the public instrument [1989]). thing before he could transfer ownership by constructive delivery.

We agree with the trial court's findings that the The sale of the subject tractor was actuations of GELAC Trading were indeed consummated upon the execution of the public violative of the provisions on human relations. upon or sought to be levied upon. from taking other legal remedies to prosecute By a public instrument dated June 11. it must of the sale depended upon the encashment of be established by clear convincing evidence. A. J. For the power of the court in the execution of its judgment WHEREFORE. the sum of P3. 1991). described in the instrument. for replevin with the RTC. No.R. It is inconsequential whether a third party vs. for each coconut tree in fraudulent. supra) This is precisely Felix. The decision of the Court of Appeals judgment debtor. (Consolidated Bank and Trust Corp.: levied properties is not precluded. At this time As found by the trial court. it continued by the judgment debtor and which are not to sell the subject tractor to one of its exempt by law from execution should be levied stockholders on August 2. the what the petitioner did when he filed the action defendant Balbino Tioco. G. well of the transfer of the property to the Hence.000 is no sufficient evidence to show that the sale on July 15. the check is untenable. this fact alone does not Act. 9 SCRA 663 [1963]). 1979. tractor. 1979. While it is true that Wilfredo and certificate of title under the Land Registration Perfecto are brothers. Relationship is not a badge of fraud bearing and P5 for each such tree not in (Goquiolay v. four parcels of land. bearing. A person other than the judgment debtor who claims ownership or right over FISHER. the plaintiff sold to the defendant Marciana v. instrument on September 4. No. that might be growing on said four parcels of land on the date of the issuance of . GELAC knew very constructive delivery was already effected. and bound herself to pay the findings of fact of the trial court. 1990 is SET ASIDE Trust Corp. that the consummation Moreover. however. the deed. ADDISON.contention. v. the first of P2. Well settled is the filed with the RTC by the petitioner.R. with the consent of her husband. claim has been filed or not by the petitioner MARCIANA FELIX and BALBINO during the time the sheriff levied on the subject TIOCO.000 of the tractor was in fraud of Wilfredo and thirty days after the issuance to her of a creditors. 1988 is REINSTATED. 1980 when it received by Wilfredo Dy when it was levied upon by the summons based on the complaint for replevin sheriff in December. defendants-appellees. 1914. January 23. Court of Appeals. and further. The defendant Felix paid. L-12342 August 3.1âwphi1 There remainder in installments. the sheriff levied on the tractor and took legal custody thereof no one ever protested or filed a G. his claim. rule that only properties unquestionably owned Notwithstanding said summons. dated April 8. and the second of P5. the subject tractor was no longer owned petitioners on July 14. fraud can not be presumed. plaintiff-appellant. and the decision of the Regional Trial Court 78771. 1914. 1980. at the time of the execution of the Anent the second and third issues raised. the petition is hereby extends only over properties belonging to the GRANTED. Sycip. The respondents further claim that at that time SO ORDERED. (Consolidated Bank and promulgated on March 23.000 on account of the Court accords great respect and weight to the purchase price. A. Court of Appeals. within ten years from the date give rise to the presumption that the sale was of such title P10. 1918 third party claim. therefore.

holding the contract of sale to be demands made upon him for this purpose. after a declaration of the price. at the request of the plaintiff present contract of purchase and sale. and more than two- products that she might obtain from the four thirds of these two were found to be in the parcels "from the moment she takes possession possession of one Juan Villafuerte. In order to make this survey it was necessary to obtain from the Land Court a writ In January. plaintiff had absolutely failed to deliver to the defendant the lands that were the subject The trial court rendered judgment in behalf of matter of the sale. From this judgment sale of said lands. 1914. but he surveyed to me. price should not exceed P85. in which and accompanied by him. of injunction against the occupants.title to her. jointly application were subsequently dismissed. and to pay an indemnity for the losses trial judge rested his conclusion solely on the and damages which the defendant alleged she indisputable fact that up to that time the lands had suffered through the plaintiff's non. A. in order to survey the case Marciana Felix shall be obliged to return land sold to the defendant. 1915. the upon. record. who of them until the Torrens certificate of title be claimed to be the owner of the parts so issued in her favor. She rescinded and ordering the return to the therefore asked that she be absolved from the plaintiff the P3. filed an application first installment of P2. this latter may rescind the went to Lucena. the vendor. 1914. within one execution of the deed of the sale the plaintiff.000 that had been paid to him on account. from the date of the certificate of title in favor of 5). the Torrens system. Addison.000. answered the complaint and failure to present the required plans within the alleged by way of special defense that the period of the time allowed for the purpose. in June. He did not survey the other parcels. A. It was further for the purpose of designating and delivering stipulated that the purchaser was to deliver to the lands sold. refund the P3. notwithstanding the the defendant. at the stipulated rate of plaintiff. favor of Marciana Felix. . A. which are those occupied products of the four parcels sold. demandable in with the Land Court for the registration in her accordance with the terms of the contract of name of four parcels of land described in the sale aforementioned. together with interest thereon at the rate rescission of the contract of the purchase and of 10 per cent per annum. Marciana Felix. In August. went to Lucena. sums that she may have paid me. . on July 15." occupied by him. the plaintiff be ordered to the plaintiff appealed. for with her husband. this latter may rescind . together with the interest agreed In decreeing the rescission of the contract. and on the terms of the second paragraph of clause (h) of the contract. and of deed of sale executed in her favor by the the interest in arrears.000. the net value of all the only two parcels. The evidence adduced shows that after the whereby it is stipulated that ". The defendant. the surveyor Santamaria Marciana Felix. notes. and for the filed suit in Court of First Instance of Manila to purpose of the issuance of this writ the compel Marciana Felix to make payment of the defendant. Addison. The plaintiff admitted that the purchaser would have to bring suit to obtain It was also covenanted that "within one year possession of the land (sten. and that. p. sold had not been registered in accordance with fulfillment of the contract." plaintiff. with the condition that the total accompanied by a representative of the latter. 1914. at year from the date of the certificate of title in the request of the purchaser. together with as they were not designated to him by the interest at the rate of 10 per cent per annum. The proceedings in the matter of this 8 per cent per annum. and I shall mainly by the brothers Leon and Julio obliged to return to her.000 paid on account of the complaint. He was able to designate only the vendor 25 per centum of the value of the two of the four parcels. A. all the Villafuerte.

" instruments is equivalent to the delivery of the thing which is the object of the contract. Civ. . in The appellant objects. more than two-thirds of their The supreme court of Spain. . that the order that this symbolic delivery may produce cross-complaint is not founded on the the effect of tradition. interpreting article area was in the hostile and adverse possession 1462 of the Civil Code. It is rescind the contract by virtue of the special not enough to confer upon the purchaser agreement not only did not exist from the the ownership and the right of possession. "the word "delivery" considered as fulfilled (arts. If in the cross-complaint it delivery has not been effected. With respect to sufficient to permit of the apprehension of the two of the parcels of land. When one year after the registration of the land. Rep. vol. but. in his name.) It is true that the same article fictitious tradition necessarily implies the real . November 10. although we are not in agreement with the reasoning found in the decision The execution of a public instrument is appealed from. which does not and cannot mean that this Code. to the plaintiff. we consider it to be correct in sufficient for the purposes of the abandonment its result. .. at the moment of the sale.. and rightly.. perhaps the condition would have been French Civil code. The one year's deliberation granted symbolic delivery through the execution of a to the purchaser was to be counted "from the public instrument is sufficient. in fact. p. the purchaser cannot have the subject to a condition. but there is no impediment whatever to prevent the does not accrue until the land is registered." (Civ. (Civ. p. 1462. then fiction yields to reality — the of that condition. . and expresses a complex idea . because such tenancy and consequently the defendant cannot be heard to enjoyment are opposed by the interposition of invoke a right which depends on the existence another will. had been alleged that the fulfillment of the condition was impossible for reasons imputable As Dalloz rightly says (Gen. Code). 43. The thing is instrument. contention. it is necessary that the hypothesis of the conventional rescission relied vendor shall have had such control over the upon by the court. The record shows that the plaintiff made by the vendor. but on the failure to deliver thing sold that. date of the certificate of title . delivery and the taking control of it by the person to whom the delivery is made.the present contract of purchase and sale ." However. vol. 1118. the execution of this latter is considered to be delivered when it is placed "in equivalent to the delivery of the thing sold: the hands and possession of the vendee. 1903. but it is not always did not deliver the thing sold.. The record show that up to the present and make use of it himself or through another time that condition has not been fulfilled. its the land sold. art. to show them to the purchaser. Rep. and if this allegation had been 174) in his commentaries on article 1604 of the proven. 96. held in its decision of of a third person. and as regards the other two. The thing sold passing into the tenancy of the wording of the clause. but this issue was not of the thing by the person who makes the presented in the defendant's answer. namely. 560) that this article "merely declares that when the The Code imposes upon the vendor the sale is made through the means of a public obligation to deliver the thing sold. the issuance of enjoyment and material tenancy of the thing the title. The moment of the execution of the contract up to thing sold must be placed in his control. declares that the execution of a public . 1117. substantiates the purchaser by the sole will of the vendor." Therefore the notwithstanding the execution of the right to elect to rescind the contract was instrument. But if. . he was not even able thing by the purchaser. He argues that the right to material delivery could have been made. the abandonment 1119.

received by him on account of the price of the fulfillment arises the purchaser's right to sale. that the the plaintiff and the defendant on June 11. It is true. petitioner. for it is the assumption that she was to have. and that from such non. Inasmuch as the rescission is made by virtue of though. to be the possessor in fact.. but from this it cannot be petitioner and the respondent. together with interest thereon at the legal demand. he who purchases by the provisions of law and not by contractual means of a public instrument should be agreement. that the thing was in the possession of a third vs. So ordered. mere execution of the instrument was not a 1914. The order to be able to enjoy the property sold. .000 the thing sold. steps to obtain the material possession of the thing sold. respondents. the proceedings. contract that the purchaser should deliver to the vendor one-fourth "of the products . Street. even implicitly. arts.. presumption gives way before proof to the contrary.) of both instances against the appellant. while its ownership still said period. in the case at bar. (Civ. Malcolm and Avanceña. if it does not). assisted by her husband.. of the complaint until payment. person claiming to have property rights therein. such agreement would be perfectly valid. on appeal. there is nothing in the instrument which would JOSE TAGACAY. then. is rescinded. in court. as she has demanded. the rescission rate of 6 per annum from the date of the filing of the sale and the return of the price. a third person may be in possession of the same thing. upheld the respondent. Of course if the sale had been made under the express agreement of imposing upon the Torres. with the costs Code.tradition of the thing sold. 1962. indicate. CRUZ. J. concur. wherefore. as a general rule. it is not the conventional but the deemed . and it were proven that she knew FELIX DANGUILAN. Johnson. the material possession and pertains to the vendor (and with greater reason enjoyment of the four parcels of land." This of a farm lot and a residential lot which she obviously shows that it was not forseen that the claimed she had purchased from Domingo purchaser might be deprived of her possession Melad in 1943 and were now being unlawfully during the course of the registration withheld by the defendant. 1506 and 1124. it was expressly stipulated in the issues once and for all. 1 In his answer. On case is now before us for a resolution of the the contrary. . INTERMEDIATE APPELLATE COURT. during incontrovertible that. but that the transaction rested on petitioner denied the allegation and averred that he was the owner of the said lots of which . The trial court concluded that she had to await the final believed the petitioner but the respondent decision of the Court of Land Registration. But APOLONIA MELAD. the respondent filed a aforesaid four parcels from the moment when complaint against the petitioner in the then she takes possession of them until the Torrens Court of First Instance of Cagayan for recovery certificate of title be issued in her favor. purchaser the obligation to take the necessary JJ. yet this legal interest that is demandable. that such was the agreement. of the On January 29.: that the obligation was incumbent upon the defendant Marciana Felix to apply for and The subject of this dispute is the two lots owned obtain the registration of the land in the new by Domingo Melad which is claimed by both the registry of property." It is therefore held that the contract of purchase and sale entered into by and between It is evident. as the appellant argues. and the plaintiff is ordered fulfillment of the vendors' obligation to deliver to make restitution of the sum of P3.

her only other witness.he had been in open. by virtue of which Domingo Melad had with the couple in their house on the residential conveyed the two parcels of land to the lot and helped Domingo with the cultivation of petitioner. She had agreed on condition that presumption was in favor of the one actually he would deliver part of the harvest from the occupying the same. 10 1958. The 1946 Felix Danguilan approached her and decision concluded that where there was doubt asked permission to cultivate the land and to as to the ownership of the property. The deliveries having stopped. She daughter of Domingo Melad. 2 The case was dismissed for failure to prosecute but was The decision of the trial court was based mainly refiled in 1967. Domingo Melad signed in 1941 a that they were donations of real property and private instrument in which he gave the as such should have been effected through a defendant the farm and in 1943 another private public instrument. continuous and adverse plaintiff nor her mother lived in the land with possession. 3 on the issue of possession. of legal age. purportedly signed by believable and that the plaintiff's evidence was Domingo Melad and duly notarized. Weighing the evidence presented by the parties. married. bury him upon his death. 4 She said the amount was earned moved out of the property in 1946 and left it in by her mother as a worker at the Tabacalera the possession of the defendant was factory. She claimed to be the illegitimate contradictory to her claim of ownership. do hereby declare in this . whom he and his wife Juana Malupang had taken into their home as their ward as they had The respondent court held that Exhibits 2-b no children of their own. She moved out of the farm only when in rebuttal that he was her administrator. 1943. DOMINGO MELAD. It then set aside the instrument in which he also gave him the appealed decision and declared the residential lot." It was held conveyed the said properties to her for the sum that the plaintiff's own declaration that she of P80. plaintiff 's mother. Two of said witnesses declared that neither the I. having acquired them from Domingo Melad. which "unpersuasive and unconvincing. she then consulted the municipal judge who advised her The review by the respondent court 11 of this to file the complaint against Danguilan. He and his wife lived and 3-a. which he did from that year to defendant. Domingo's niece. on the understanding that the respondents the true and lawful owners of the latter would take care of the grantor and would disputed property. The reason was the farm. with whom she was also inconsistent when she testified first and her mother were living when he died in that the defendant was her tenant and later in 1945. considered the lone decisive issue. the plaintiff presented a deed of sale judge 9 held that the defendant was more dated December 4. the At the trial. and it was only toward For his part. 8 Domingo Melad in 1941 and 1943. were null and void. the defendant testified that he was the end that it went to and resolved what it the husband of Isidra Melad. The decision was manifestly less than thorough. For the most part it merely affirmed the factual corroborated this testimony. the stay therein. 5 findings of the trial court except for an irrelevant modification.00. 6 Danguilan presented three other witnesses 7 to The said exhibits read as follows: corroborate his statements and to prove that he had been living in the land since his marriage EXHIBIT 2-b is quoted as to Isidra and had remained in possession follows: 12 thereof after Domingo Melad's death in 1945. which in this case was the farm to her.

I hereby lives with me and this is the sign this receipt this 18th day of length—175 m. a resident donations of real properties to be effected of Centro. It is our view. on the that I will die and also for all other north. however. DOMINGO MELAD.receipt the truth of my giving to Centro. Penablanca. as the private respondent contends. that I hereby declare and bury me when I die and this is bind myself that there is no one to why I have thought of executing whom I will deliver this land this document. The case at bar of Cagayan. Penablanca. Province through a public instrument. Penablanca. Cresencio Danguilan.) ILLEGIBLE properties were given to the petitioner in exchange for his obligation to take care of the EXHIBIT 3-a is quoted as donee for the rest of his life and provide for his follows: 13 burial. 150 m. Hence. one to whom I will give my land except to Felix Danguilan for he IN WITNESS HEREOF. he will be responsible the west. because I have no child. do hereby swear and comes squarely under the doctrine laid down declare the truth that I have in Manalo v. Arellano Street. it was not covered by the rule in Article 749 of the Civil Code requiring I. (T. my agricultural Felix Danguilan.) ILLEGIBLE September 1941. considering the language of the two instruments. (SGD. De Mesa. 2. that it is true that I have south. WITNESSES: We do not think. I hereby sign my name below and also WITNESSES: those present in the execution of this receipt this 14th day of (SGD. (SGD. Province of have thought of giving him my Cagayan. that I Macusi. that Domingo Melad did (SGD. Cagayan. While truly donations.) ISIDRO MELAD moved by pure liberality. that the donee was 1. Pablo Pelagio and the because of this land I am giving to area of this lot is 35 meters going him.) DOMINGO MELAD intend to donate the properties to the petitioner. 14 where the Court held: delivered my residential lot at . to Felix Danguilan. my son-in-law land located at Barrio Fugu. width and length nieces and nephews but they are beginning west to east is 40 not living with us and there is no meters. Philippine Islands. and the width is December 1943. on the things needed and necessary for south by Pastor Lagundi and on me. that land because he will be the one to this land is registered under my take care of SHELTERING me or name. 1941.M. (T.) FELIX DANGUILAN the conveyances were onerous donations as the 3. that the except to him as he will be the one boundaries of this lot is—on the responsible for me in the event east. September 14.M.) DANIEL ARAO Penablanca Cagayan.) DOMINGO MELAD IN WITNESS WHEREOF. (SGD.

the evidence has been adduced to support her respondent considered Domingo Melad the contention that the values exchanged were owner of the properties and that she had never disproportionate or unequal. 18It was also alleged that even after the and not mere private writings. There can be no doubt that the that made the transaction an onerous donation in question was made donation. It is alleged and not described above. therefore. it mother. lands donated and the services for which they before that instrument was signed and in fact were being exchanged. occupied the same. wife) during the latter part of Domingo Melad's life. in order to determine whether or not The deed of sale was allegedly executed when said donation is valid and the respondent was only three years old and effective it should be sufficient to the consideration was supposedly paid by her demonstrate that." This was. no supposed execution of the said contract. even assuming the validity of the exchange between the donor and the donee deed of sale. While it is true that the due denied that he died when he was almost one execution of a public instrument is presumed. the respondent court have affirmed the factual appellate court could have devoted a little more allegation that the petitioner did take care of time to examining Exhibit "E" and the Domingo Melad and later arranged for his circumstances surrounding its execution burial in accordance with the condition before pronouncing its validity in the manner imposed by the donor. herself. one may well wonder although not recorded in a public why the transfer was not made to the mother instrument. the respondent court had only the be occasioned by the death and following to say: "Exhibit 'E' taken together with burial of the donor Placida the documentary and oral evidence shows that Manalo. The sale was made out in favor of The private respondent argues that as there Apolonia Melad although she had been using was no equivalence between the value of the the surname Yedan her mother's surname. both the trial court and the Considering these serious challenges. We may assume that there was a fair At any rate. suspicious circumstance. a rather Gregorio de Mesa carried out in superficial way of resolving such a basic and his own behalf and for his wife important issue. since the donors made it Regarding the private respondent's claim that conditional upon the donees' she had purchased the properties by virtue of a bearing the expenses that might deed of sale. we think. which in this case was himself and so provided for the donee (and his not refuted. 17The averment was should be considered pure or gratuitous also made that the contract was simulated and donations of real rights. they should prepared after Domingo Melad's death in have been effected through a public instrument 1945. as a contract. 16 This was itself a requires and is valid and effective. for a valuable consideration. a condition and the preponderance of evidence is in favor of the obligation which the donee appellants. hence. the two transactions even after she got married. hundred years old. the record shows that the private respondent did not take possession of the . However. who was after all the one paying for the lands. 19 On the other hand. Leoncia Manalo. 15 which would mean that the presumption is disputable and will yield to the petitioner farmed the land practically by contradictory evidence. Maria Yedan from her earnings as a embraces the conditions the law wage worker in a factory.

and moved mudis pactis sed traditione out to another lot belonging to her step. Cesar. v.disputed properties and indeed waited until Therefore. . Wilson. 38 Phil. 51). 39 Phil. which was a Court: public instrument. Not volume 10. the one against his vendor for specific property right. therefore. And as As was held in Garchitorena v. Wilson. in our Civil Code it is a 1962 to file this action for recovery of the lands fundamental principle in all from the petitioner. purchaser-owner. and properly so. Mariano Garchitorena doctrine of the transfer of cannot presume to recover the property by mere consent but property from its present limits the effect of the agreement possessors. it requisite for the purpose of becomes incontestable that even acquiring the ownership of the if included in the contract. real right" (and the ownership is 8 Phil. necessary and indispensable Masallo vs. In short. Almeda: 21 the logical application of this disposition article 1095 Since in this jurisdiction it is a prescribes the following: "A fundamental and elementary creditor has the rights to the principle that ownership does not fruits of a thing from the time the pass by mere stipulation but only obligation to deliver it arises. to the due execution of the is not one of revindicacion. In brother. 134). is only derived performance of the sale to him. by her own sworn admission. and the execution of a surely such) "until the property public document does not has been delivered to him. article 609 of said code. pages 339 and 340: having become the owner for lack "Our law does not admit the of delivery. but contract.. dominia rerum transferuntur". Art. by and her actual possession thereof in concept of testate or intestate succession. matters of contracts and a well- she transferred the same to the petitioner in known doctrine of law that "non 1946. by gift. 20 Her claim that the petitioner was conformity with said doctrine as her tenant (later changed to administrator) was established in paragraph 2 of disbelieved by the trial court. the Court has held: . from the delivery of a thing . in consequence of certain contracts. 404. 1095. However. As for the argument that symbolic delivery was v. The ownership. Mariano Garchitorena. Felix. and. 22 Justice Mapa declared for the effected through the deed of sale. If she did have possession. he shall not acquire a Fidelity and Surety Co. " In the aforecited case of Fidelity and Deposit Co. she failed to ownership and other property show that she consummated the contract of rights are acquired and sale by actual delivery of the properties to her transmitted by law. As ownership of the property in Manresa states in his dispute did not pass thereby to Commentaries on the Civil Code.." constitute sufficient delivery where the property involved is in In accordance with such the actual and adverse disposition and provisions the possession of third persons delivery of a thing constitutes a (Addison vs. by delivery (Civil Code. His action. the same by virtue of a contract.. by tradition". that "the for its inconsistency..

in show or prove a better right. It is not enough to and Medialdea. But if. The only issue posed by this appeal is whether notwithstanding the execution of or not. art. 23 Hundred Pesos (P2. . situated in Hamindangon. be placed in his control. because On February 4. it is necessary that the court is SET ASIDE and that of the trial court vendor shall have had REINSTATED. for reality—the delivery has not been and in consideration of Two Thousand Eight effected.00). order that this symbolic delivery may produce the effect of WHEREFORE. Gancayco. Estejada 24 where the thing is considered to be delivered Court announced: when it is placed "in the hands and possession of the vendee. Griño-Aquino been made. from the nature of the action pleaded as the instrument. at the moment of the sale. 1963.When vs. J. The Code imposes upon the decision should still incline in favor of the vendor the obligation petitioner pursuant to the doctrine announced to deliver the thing sold. but. that the corresponding be discarded as being inherently weak. the respective claims of the parties were both to Pastrana. there is no impediment whatever ESTER T. and cannot be obliged to object of the contract. plaintiffs-appellants. that the same article declares that judgment must be for the the execution of a public defendant. 1962. The in Santos & Espinosa v. the cannot have the enjoyment and aforesaid action is one of forcible entry. they bought from There is no dispute that it is the petitioner and appellees Eustaquia Bocar and Catalina Bocar not the private respondent who is in actual a parcel of agricultural land with an area of possession of the litigated properties.. The thing sold must MOSAR. notarized on the same date. VILLABLANCA.6814 hectares.800. ZOSIMO to prevent the thing sold passing VILLABLANCA. It is so ordered. the decision of the respondent tradition. confer upon the purchaser the ownership and the right of CALIXTO PASAGUI and FAUSTA possession. EUSTAQUIA BOCAR and into the tenancy of the purchaser CATALINA BOCAR defendants-appellees. Even if 2. that." If the claim of both the plaintiff (Civil Code. It is true and the defendant are weak. with costs against the private such control over the thing sold respondent. the document of sale was executed. the purchaser appears in the allegations of the complaint. appellants Calixto such tenancy and enjoyment are Pasagui and Fausta Mosar filed a complaint opposed by the interposition of with the Court of First Instance at Tacloban another will. for the latter being in instrument is equivalent to the possession is presumed to be the delivery of the thing which is the owner. then fiction yields to City. symbolic delivery through the ANTONIO. JJ.: execution of a public instrument is sufficient. Leyte. alleging that onNovember 15. 1462). its material delivery could have Narvasa (Chairman). by the sole will of the vendor. within material tenancy of the thing and the exclusive jurisdiction of the municipal make use of it himself or through court. and recorded in the Registry of . concur. another in his name.

defendant spouses Ester T. Zosimo Villablanca. are included plaintiffs-appellants bought on November 12. defendants in the complaint by virtue of the 1962 from defendants-appellees Eustaquia warranty clause contained in the document of Bocar and Catalina Bocar the parcel of land in sale.00. "illegally and without action is one of forcible entry within the original any right. ." . appellees moved to Villablanca. Bocar were also included as defendants. that a defendants to surrender the possession of the deed of sale was executed. the trial court issued an decision be rendered. harvesting coconuts from the subject matter. took possession of the above Court of First Instance had no jurisdiction over described property.800.00) as damages for the 27. the action being one of the coconut plantation therein. Appellants opposed the Motion of its possession herein plaintiffs. 1963. damage. 1963 and the second was likewise denied usurpation by them of said property". plaintiffs-appellants pray that a On May 13. 1963. In ascertaining whether or not the and Zosimo Villablanca. Eustaquia Bocar and Catalina intimidation. Leyte. as provided for by Art. (b) entry which belongs to the exclusive defendants Ester T. the complaint does not allege them the above-described property and its that the plaintiffs were in physical possession possession" the latter failed or refused to return of the land and have been deprived of that said parcel of land to the former. case of eviction. Villablanca and her husband. that despite consulted. The first plaintiffs the amount of EIGHT HUNDRED Motion for Reconsideration was denied on May PESOS (P800. illegally and without any right dismiss the complaint on the ground that the whatsoever. and. that for the there is no allegation that the deprivation of purpose of enforcing the vendors' warranty in possession was effected through "force. Villablanca and her husband.that "during this first week of pay damages in the amounts specified. "to pay to said Municipal Court) of Pastrana. thus depriving character of the relief sought are the ones to be plaintiffs" of its possession. and that Eustaquia and Catalina strategy. causing them possession through force. threat. and (c) on July 5. defendants Ester T. It simply avers that Bocar. notarized and parcel of land above-described to them and to registered. intimidation. 1 . as appears from the allegations in the 1963. that during the first week of February. and causing to Dismiss asserting that the action is not one them damages for the amount of EIGHT for forcible entry inasmuch as in the complaint. vendors of the property. Zosimo On February 21. From the aforementioned defendants Eustaquia Bocar and Catalina orders. therefore. thus depriving forcible entry. threat. 1555 of the Civil Code. in It is well-settled that what determines the case of eviction or loss of ownership to said jurisdiction of the municipal court in a forcible . February.00)".. P2. 1963. Villablanca and her jurisdiction of the Justice of the Peace (now husband. strategy or stealth.800. Plaintiffs prayed for a decision ordering question for the amount of P2. above property harvesting coconuts from the the averments of the complaint and the coconut plantation thereon. demands made by the plaintiffs upon the above-mentioned defendants "to surrender to In the case at bar. appeal on a pure question of law was Bocar "to pay the plaintiffs the amount of interposed to this Court. plus incidental expenses. HUNDRED PESOS (P800. 1963. .Deeds of Tacloban. entry case is the nature of the action pleaded 1962. Leyte on November 16.00. "to surrender the possession of the the complaint that the case is one for forcible above described property to said plaintiffs". took possession of the exclusive jurisdiction of the municipal court. ordering (a) defendants order dismissing the complaint for lack of Ester T. whatsoever. Zosimo jurisdiction. it appearing from the allegations in Villablanca. or stealth. Villablanca complaint.

As a matter of fact. November 12. the passing of the property from the hands of the vendor into those of the vendee. planting himself mortgagee from the liability of returning the on the ground and excluding therefrom the mortgage payments already made. return by the mortgagee of the amortization intimidation. threats. it is evident that Petitioner Power Commercial & Industrial plaintiffs-appellants are not only seeking to get Development Corporation." . have jurisdictions. 3 It appears from the COURT OF APPEALS. strategy and stealth. It is true that the execution of the deed of absolute sale in a public instrument is WHEREFORE. For this of the price and payment of damages by the purpose. Rule for rescission of such contract and (2) for a 70 of the Revised Rules of Court. needed a bigger office alternative cause of action.above described property on the part of ownership" of the said property. For. SPOUSES records of the case at bar that plaintiffs- REYNALDO and ANGELITA R. subject of the sale. their purpose in filing the complaint in Civil Case No. Moreover.. namely: force. It is. it is not only necessary that the plaintiff should allege Is the sellers failure to eject the lessees his prior physical possession of the property from a lot that is the subject of a contract of but also that he was deprived of his possession sale with assumption of mortgage a ground (1) by any of the means provided in section 1.[2] prior possessor would imply the use of force. an industrial the possession of the property. Eighth which he is and has been the legal owner for a Division. the order of dismissal is hereby equivalent to delivery of the land subject of the set aside. no such inference could be made as plaintiffs-appellants had not claimed The Facts that they were in actual physical possession of the property prior to the entry of the Villablancas. the courts of first instance.R. vs. .. CV Case No. appellants had not acquired physical QUIAMBAO and PHILIPPINE possession of the land since its purchase on NATIONAL BANK. respondents. 1979. J.2 This presumptive delivery only holds true a quo for further proceedings. 5 The such question in this petition for review bare allegation in the complaint that the on certiorari of the March 27. therefore. DECISION 3285 is precisely to "get the possession of the property. it entered into vendors "in case of eviction or loss of a contract of sale with the spouses Reynaldo . 1962. and the case remanded to the court sale. in CA-G. . payments made by the buyer who assumed if the dispossession did not take place by any such mortgage? of these means. 32298 long period has been held to be insufficient. not Petitioner posits an affirmative answer to the municipal courts. on January 31. 1995 plaintiff has been "deprived" of the land of Decision[1] of the Court of Appeals. not the summary action of forcible entry within the context of the Rules.: considered as one for forcible entry. they seek the return space and warehouse for its products. plaintiffs."4 In order that an action may be PANGANIBAN. Costs against when there is no impediment that may prevent defendants-appellees. but as an asbestos manufacturer. petitioner.6 It upholding the validity of the contract of sale is true that the mere act of a trespasser in with assumption of mortgage and absolving the unlawfully entering the land. In the case at bar. It can be negated by the reality that the vendees actually POWER COMMERCIAL AND INDUSTRIAL failed to obtain material possession of the land CORPORATION.

Series of 1979 of Notary On June 26. S-6686 located at the corner of We hereby also warrant that we are the lawful Bagtican and St. 1979. Altamirano registered with the Deed of Absolute Sale With Assumption of Register of Deeds of Pasig (Makati). to us in charges. the existing against any claims whatsoever of any and all mortgage on the land. subject. and we hereby agree and respondents P108.D.00 as down payment. Rizal xxx. submitted to PNB said deed with a from all liens and encumbrances. part of the purchase price. Quiambao.77 to Respondent provisions hereunder provided to wit: Philippine National Bank (PNB for brevity).000. Petitioner evidenced by document No.[4] We hereby certify that the aforesaid property is On February 15.000. its successors and assigns. m. formal application for assumption of mortgage. was paid to respondent spouses. No. 1979. hereby agreeing to abide by any offices located at 252-C Vito Cruz Extension. The contract involved a 612-sq. he paid P79.the same having no respondents. described property with all the improvements existing thereon unto the said Power On the same date. a 100% secure the agreement and approval of the said Filipino Corporation. Mrs. to the said mortgagee bank. In full satisfaction third persons. San Antonio and absolute owners of the above described Village. Paul Streets. parcel of land covered by Transfer Certificate of Title No. Further. Cubao. Quezon City for the amount of one a loan of P145. thus hand paid in cash.000. to the thereof. P80. for petitioners failure to submit the papers necessary for approval . C. Philippine.145. Commercial and Industrial Development then General Manager of petitioner- Corporation. Constantino. Mortgage which contained the following terms and conditions:[3] That the said Power Commercial and Industrial Development Corporation assumes to pay in That for and in consideration of the sum of Two full the entire amount of the said mortgage Hundred Ninety-Five Thousand Pesos above described plus interest and bank (P295. That the above described property is mortgaged On June 1. TRANSFER that failure to do so shall give to the bank first and CONVEY by way of absolute sale the above lieu (sic) over the herein described property. as Corporation. PNB informed not subject to nor covered by the provisions of respondent spouses that. warrant to defend its title and peaceful and the balance of P295. however. agricultural lessee and/or tenant. the parties executed a Public Herita L.000. 1980. agreeing we hereby by these presents SELL. The parties agreed that property. found on page agreed to assume payment of the loan. herein private the Land Reform Code -. free from any lien and/or petitioner would pay private encumbrance. mortgaged again said land to PNB to guarantee Branch.00) Philippine Currency. to our entire satisfaction.and Angelita R. petitioner assumed. and which we hereby holding the herein vendor free from all claims acknowledge to be payment in full and received by the said bank. 163. respondent spouses to the Philippine National Bank. and all requirements of the said bank. free corporation. Makati City.00 upon the possession thereof in favor of the said Power execution of the deed of transfer of the title over Commercial and Industrial Development the property. 34 of Book No. organized and existing Philippine National Bank to the herein sale of under and by virtue of Philippine Laws with this property.000. its successors and assigns. XV. by POWER COMMERCIAL AND INDUSTRIAL That both parties herein agree to seek and DEVELOPMENT CORPORATION.00.00 of which hundred forty-five thousand pesos.

and that by us was on December 24. petitioner filed Civil outstanding loan. dated June 26. Thus. latter to rescind the sale.14. It was last renewed return to plaintiff the amount of P187. Then. 1980 said loan was to be paid in full within fifteen for P20. while this case [8] intention that all the people who are currently was pending. PNB sent petitioner with Assumption of Mortgage executed between a letter as follows:[7] plaintiff and defendants Spouses Quiambao. are currently in physical occupancy of the (l)ot 1982. 1980.000. during the public auction. which is why it is our desire and approved.00 was February 19. 24. 1980. and in view of such failure and of the denial of the latters It was our understanding that this lot was free assumption of mortgage. 1990.283. the trial court[9] ruled and title be transferred to our name so that we that the failure of respondent spouses to deliver may undertake the necessary procedures to actual possession to petitioner entitled the make use of this lot ourselves.00.880.145. 1980 and P20. interest of 12% per annum from date of filing of herein complaint. the mortgage was foreclosed. the Court been able to keep his commitment. 1982 until the same is fully paid. charges. in its With regard to the presence of the people who reply to PNBs letter of February 19. 1979.77 on December 24. 45217 against respondent spouses for received a letter from petitioner which reads:[6] rescission and damages before the Regional Trial Court of Pasig. PNB Case No.pursuant to the formers letter dated January A review of our records show that it has been 15. On December 23. (1) Declaring the rescission of the Deed of Sale On February 19. it will be hereby renders judgment in favor of plaintiff necessary for us to take legal possession of this and against defendants: lot inorder (sic) to take physical possession.000. The last payment received deemed fully due and demandable. .00 plus P79. that the arrearages amounting to P25. and that the mortgage On July 12. March 17. In order to place your account (15) days from notice. The the previous owner would be responsible for the dispositive portion of said decision states:[10] removal of the people who were there. On May 31. 1982. 1983. Reynaldo Quiambao which was assumed by you on June (2) Ordering defendants Spouses Quiambao to 4. 1979 for P101.[5] in current form. xxx our assumption of mortgage be given favorable consideration.283. The physically present and in occupation of said lot property was subsequently bought by PNB should be removed immediately. that is. the application for assumption of past due from last maturity with interest mortgage was considered withdrawn. we request you to remit payments to cover interest.14 on December 23. an amended complaint was filed impleading PNB as party For this purpose we respectfully request that defendant. (T)his refers to the loan granted to Mr. 1980 to mature on June 4. petitioner demanded the return of the xxx it is our desire as buyers and new owners payments it made on the ground that its of this lot to make use of this lot for our own assumption of mortgage was never purpose. (P108. PNB was obliged to and clear of problems of this nature.08 as of outstanding balance of P145.826. 1982.144. 1982. and at Petitioner paid PNB P41. and that return the payments made by the latter.77) with legal 1981. Branch 159. Inasmuch as the previous owner has not IN VIEW OF ALL THE FOREGOING. payments which were to be applied to the On March 17. 1980.45 on June least part of the principal.500.

it specifically assigns the and P20. Hence. Quiambao and PNB are dismissed for lack of merit. Respondent Court of Appeals gravely erred in failing to consider in its No pronouncement as to costs.[13] Issues The provision adverted to by petitioner does not impose a condition or an obligation to eject Petitioner contends that: (1) there was a the lessees from the lot. nor was the occupation appreciate the difference between a condition thereof by said lessees a violation of the and a warranty and the consequences of such warranty against eviction.(3) Ordering defendant PNB to return to obligating PNB to return such payments. its effects and consequences were not specified either. breach of a condition for two reasons: first. No costs. Respondent Court of Appeals reversed the trial court. the recourse to this Court . there was no distinction. warranty under Article 1547 in relation to Article 1545 of the Civil The counterclaim of both defendants spouses Code applies in the case-at-bar. the contract.whether resolutory or suspensive -. and second. In the assailed Decision. substantial breach to justify the rescission of said contract or the return of the payments made. PNB. the Decision appealed from is hereby REVERSED and the complaint filed by The alleged failure of respondent spouses Power Commercial and Industrial Development to eject the lessees from the lot in question and Corporation against the spouses Reynaldo and to deliver actual and physical possession Angelita Quiambao and the Philippine National thereof cannot be considered a substantial Bank is DISMISSED. In its plaintiff the amount of P62. erred in failing to consider in its the same not being warranted under the facts decision that a breach of implied and circumstances of the case.14) with 12% interest thereon following errors of law on the part of from date of herein judgment until the same is Respondent Court:[12] fully paid. where the principle of solutio indebiti applies is On appeal by respondent-spouses and obtaining in the case-at-bar.163. B. Respondent Court of Appeals gravely No award of other damages and attorneys fees.59 (P41. such failure was not stipulated as a condition - Hence.45 Memorandum. . It fails to condition of the sale.283.880. decision that a mistake in payment giving rise to a situation SO ORDERED. . The dispositive portion of said Decision Conspicuous Absence of an Imposed reads:[11] Condition WHEREFORE. it held that the deed of sale between respondent spouses The Courts Ruling and petitioner did not obligate the former to eject the lessees from the land in question as a The petition is devoid of merit. and (2) there was a mistake in payment made by petitioner. The deed of sale substantial breach of the contract between the provides in part:[14] parties warranting rescission.

delivery remains an indispensable arise. ejecting the squatters. to the the payment of the consideration by private provisions hereunder provided to wit: respondent. In Ang vs. did by the petitioners of the obligation to sell. free from any lien and/or nonfulfillment a ground for rescission.e. the transfer of ownership as the primary purpose obligation to pay the balance would not of sale. the agreement or to waive that condition of transfer of possession of said lot was ejectment in consonance with Article 1545 of impossible due to the presence of occupants on the Civil Code. petitioner was well aware of if the above-quoted provision can be so the presence of the tenants at the time it described. In the case cited.[16] Petitioner itself caused the to by Reynaldo. its successors and assigns.A. specifically stipulated that the ejectment was a Although most authorities consider condition to be fulfilled. requisite as our law does not admit the doctrine of transfer of property by mere consent. their contract should have warrant to defend its title and peaceful expressly stipulated so. petitioner actually filed suit to eject the If the parties intended to impose on occupants. If they encumbrance.[21] The . at the execution of the deed of sale. Futhermore. The terms of the contract are so clear as deed of sale that the sellers were guaranteeing to leave no room for any other interpretation..[15] Any obscurity in a contract. must be construed against the party entered into the sales transaction.[20] petitioners counsel during obscurity because it omitted this alleged the sales negotiation even undertook the job of condition when its lawyer drafted said contract. This is not so in the case at bar.[17] where the ejectment of the Effective Symbolic Delivery occupants of the lot sold by private respondent was the operative act which set into motion the period of petitioners compliance with his own The Court disagrees with petitioners obligation. it should have the buyer(s) and new owner(s) of this lot. Anthony Powers. included in the contract a provision similar to that referred to in Romero vs. obligation to remove and clear the lot sold. eviction. We find this misleading. and not to a condition that was not because there was already a proviso in said met. 1980 admitted that it was tenants from the lot sold. to pay the balance of the allegation that the respondent spouses failed to purchase price. because the breach was not By his own admission. As testified who caused it. substantial and fundamental to the fulfillment General Manager of petitioner-corporation. Petitioner asserts that the within the stipulated period gave the other legal fiction of symbolic delivery yielded to the party the right to either refuse to proceed with truth that. the against any claims whatsoever of any and all performance of which would have given rise to third persons. In fact. however. Rescission was not allowed. petitioner in its letter to respondent spouses the obligation to eject the PNB of December 23. possession thereof in favor of the said Power C.[19] the peaceful possession by the buyer of the land in question. the contract the lot sold. rescission was sought on the ground [18] Commercial and Industrial Development that the petitioners had failed to fulfill their Corporation.We hereby also warrant that we are the lawful Absent a stipulation therefor. we cannot and absolute owners of the above described say that the parties intended to make its property. the provision adverted to in the the contract that Respondent Reynaldo was contract pertains to the usual warranty against guaranteeing the ejectment of the occupants. subject. and we hereby agree and did intend this. Failure to remove the squatters deliver the lot sold. however.. i. Finally. not ask the corporations lawyers to stipulate in As stated. Court of Appeals. otherwise.

symbolic delivery through the execution of a (2) This eviction is by a final judgment. because such tenancy and and made co-defendant in the suit enjoyment are opposed by the interposition of for eviction at the instance of the another will. In the absence of these requisites. purchaser by the sole will of the vendor. the parties did not stipulate or infer otherwise. The Court has consistently held of the warranty against eviction. public instrument is sufficient. Its efficacy can. of Obvious to us in the ambivalent stance of the land as petitioner would like us to petitioner is its failure to establish any breach believe.the vendee. It correctly pointed out by Respondent Court. Despite its that:[23] protestation that its acquisition of the lot was to enable it to set up a warehouse for its x x x (I)n order that this symbolic delivery may asbestos products and that failure to deliver produce the effect of tradition. not possession. It is the case do not show that the requisites for not enough to confer upon the purchaser such breach have been satisfied. as a species of constructive delivery. it is necessary actual possession thereof defeated this that the vendor shall have had purpose.[24] This deed operates as (1) actual (Article 1497) or (2) constructive a formal or symbolic delivery of the property (Articles 1498-1501).[26] nor does it deprive actual possession thereof. the filing of the and not that it has been evicted therefrom. But if. Nothing more effects the transfer of ownership through the is required. be prevented if the vendor does not possess control over the thing sold. delivery or possession is not legally required and the execution of the deed of sale is deemed . execution of a public document. The lot sold had been placed under it has not yet ejected the occupants of said lot. still no breach of warranty against such control over the thing sold that xxx its eviction can be appreciated because the facts of material delivery could have been made. The key word is control. then fiction yields to reality -. however.[25] delivery has not been effected. The this warranty requires the concurrence of the thing sold must be placed in his control.Civil Code provides that delivery can either be equivalent to delivery.[22] in Requisites of Breach of Warranty Against which case this legal fiction must yield to Eviction reality. thus. and enjoyment and material tenancy of the thing and make use of it himself or through another (4) The vendor has been summoned in his name. delivery was effected through the execution of Petitioner argues in its memorandum that said deed. When following circumstances: there is no impediment whatever to prevent the (1) The purchaser has been deprived of thing sold passing into the tenancy of the the whole or part of the thing sold. the signified that its new owner intended to obtain presence of lessees does not constitute an for itself and to terminate said occupants encumbrance of the land. document as proof of ownership. the purchaser cannot have the vendor. Prior physical petitioner of its control thereof. Symbolic delivery (Article sold and authorizes the buyer to use the 1498). a breach of the warranty against eviction under Article Considering that the deed of sale between 1547 cannot be declared. (3) The basis thereof is by virtue of a notwithstanding the execution of the right prior to the sale made by the instrument. the control of petitioner. A breach of the ownership and the right of possession. As ejectment suit was subsequently done.

without the written pro quo. petitioner insists that its payment of Code. it being understood that the petitioners fault. alienation or encumbrance is made shall be jointly and severally liable for said mortgage obligations. solutio indebiti does not apply in this the amortization was a mistake because PNB case. alienation or Because petitioner failed to impugn its encumbrance. it cannot be said that it did not have Contrary to the contention of petitioner a duty to pay to PNB the amortization on the that a return of the payments it made to PNB is mortgage. pay. the property herein reversal of the assailed Decision. xxx. or the party in deprivation of ownership and control finally whose favor the alienation or encumbrance is occurred when it failed and/or discontinued to be made. But even if petitioner was a third party in and not through liberality or some other regard to the mortgage of the land purchased. We note.[31] But as obligation:[30] shown earlier. However. warranted under Article 2154 of the Also. This doctrine applies where: (1) a disapproved its assumption of mortgage after it payment is made when there exists no binding failed to submit the necessary papers for the relation between the payor. Absence of Mistake In Payment Therefore.This fact alone disproves petitioners obligation to pay the amortizations on the insistence that there was a mistake in mortgage under the contract of sale and the payment. C) made it solidarily and. who has no duty to approval of such assumption. the payment of the mortgage was an obligation petitioner assumed under the (e) The Mortgagor shall neither lease the contract of sale. to be valid and subsisting. or the party in whose favor the law. petitioner was under sale. But this deprivation is due to constituted. is quid the same in any manner. principle that no one shall enrich himself therefore. on the contrary both the vendor integrity. 2). that petitioners encumbrance that the vendee. the obligation of this mortgage in the same causing the lot to be foreclosed and sold at terms and condition under which it is public auction. under the and the vendee. any and all the requirements of PNB in connection with the real estate The quasi-contract of solutio indebiti is one mortgage. such payments deed of real estate mortgage. mortgaged. should take the property subject to paying the amortizations on the mortgage.[28] both parties agreed to abide by buyer(s) and new owner(s) of the lot. or any portion thereof. cause. Under the deed of were necessary to protect its interest as a the sale (Exh. On the contrary. Petitioner was aware that the deed of of the concrete manifestations of the ancient mortgage (Exh. and the person who received the payment. the contract is presumed. as in this case. primarily[29] liable for the mortgage unjustly at the expense of another.[27] the payment of the loan by petitioner was a condition clearly imposed by the contract of In this case. alienation or . There is no unjust enrichment mortgaged property xxx nor sell or dispose of where the transaction. is xxx sold. it shall be the obligation of the Mortgagor to impose as a condition of the sale. value for value. however. if not All told. obligation to the Mortgagee under this mortgage by such sale. consent of the Mortgagee. and not to any act attributable Mortgagor is not in any manner relieved of his to the vendor-spouses. respondent Court did not commit withstanding this stipulation and during the any reversible error which would warrant the existence of this mortgage. and (2) the payment is made through mistake.

J. Makati City. Chua secured from Philippine Bank of Commerce Valdes-Choy advertised for sale her (PBCom) a managers check paraphernal house and lot (Property) with an for P480. The balance of TEN MILLION SEVEN The Case HUNDRED THOUSAND (P10. Chua responded to the writing[9] the PBCom Operations Group of advertisement. PBCom Assistant of Makati City in the name of Valdes. Chua and of P10. Metro CARPIO. reads: SO ORDERED.700. The arrange the payments. After several meetings. Chua Chuas stop payment order. TOMAS K. Chua sought to compel Valdes- Seller Choy to consummate the sale of her paraphernal house and lot in Makati City. This provided that all papers the Court of Appeals in an action for specific are in proper order.000. VicePresident Julie C. x x x.00 payable in cash. meters). 206011 in the amount of ONE APPEALS and ENCARNACION HUNDRED THOUSAND PESOS ONLY VALDES-CHOY. The TOMAS K. and Valdes-Choy agreed on a purchase price In the afternoon of 13 July 1989. (P100. vs. COURT OF Check No. petitioner.[7] The Facts In the morning of 13 July 1989.[8] On the same day.000. Valdes-Choy met with their respective counsels On 30 June 1989.000.00 was covered by Transfer Certificate of Title No. San PBCom a verbal stop payment order claiming Lorenzo Village. Strangely. San Lorenzo Village.00. is AFFIRMED. after 162955 (TCT) issued by the Register of Deeds receipt of Chuas verbal order.000. after securing the area of 718 square meters located at No. Makati. Capital Gains Tax for the account of the seller. the petition is receipt (Receipt) evidencing the hereby DENIED. Valdes-Choy received to execute the necessary documents and from Chua a check for P100. signed by Valdes-Choy as seller.000. lost and/or misplaced. DECISION Hidalgo. Chua (Chua) CONFORME: ENCARNACION VALDES against respondent Encarnacion Valdes-Choy (Valdes-Choy). RECEIPT RECEIVED from MR. Pe notified in Choy. CHUA.800.[6] performance[2] filed in the Regional Trial Court[3] by petitioner Tomas K. CHUA Court of Appeals reversed the decision[4] rendered by the trial court in favor of Buyer Chua. and Chua as buyer. 40 managers check.00) as EARNEST MONEY for the sale of the property located at 40 Tampingco cor.00. The Property is that this managers check for P480.: Manila (Area : 718 sq. Chua immediately gave Tampingco Street corner Hidalgo Street. WHEREFORE.000. Failure This is a petition for review to pay balance on or before 15 July 1989 forfeits on certiorari seeking to reverse the decision[1] of the earnest money. CHUA PBCom TOMAS K.00) is payable on or before 15[5] July 1989. respondents. and the assailed Decision transaction.[10] Valdes-Choy as .

[11] The second Deed of Sale covered the furnishings.800.0 00. covered by price.00.00 of Sale covered the house and lot for the VVVVVVVVVVVV purchase price of P8.000. Valdes-Choy Choy.00. however. Chua handed to Valdes-Choy the PBCom managers x x x.215.00) as Partial Payment for the Chua showed to Valdes-Choy a PBCom sale of the property located at 40 Tampingco managers check for P10.215. 162955 of the Registry of Deeds of managers check to Valdes-Choy because the Makati.000.29 to P485.000.215.000. Makati. San Lorenzo Village.00 On the same day.000.00 submitting to PBCom an affidavit of loss[15] of the PBCom Managers Check _________________ for P480. Valdes- sufficient funds to pay the tax. CHUA PBCom.000.00. The first Deed CHOY P10. It was then also that ONLY (P485.00 payable to the Commissioner of Internal Revenue for the July 14.000. On 14 July 1989.000. Chua EARNEST MONEY P100. TOMAS K. Valdes-Choy and Chua returned to the office of Valdes-Choys counsel Received from MR.000.000. did not give this PBCom TCT No. 14 July 1989.[14] SELLING PRICE P10.000.000. PBCom Assistant Vice- ___585. 1989 capital gains tax. 325851 in the amount of FOUR the counsel who undertook to pay the capital HUNDRED EIGHTY FIVE THOUSAND PESOS gains tax. This HUNDRED THOUSAND PESOS only.000. however. 5.800.000.000. Chua required that the Property be The total purchase price of the above- registered first in his name before he would mentioned property is TEN MILLION EIGHT turn over the check to Valdes-Choy. 14 July 1989. TCT was still registered in the name of Valdes- Choy. deposited issued a receipt showing that Chua had a the P485. This purchased a Traders Royal Bank managers receipt reads: check for P480. testified that the managers check was nevertheless honored BALANCE DUE TO because Chua subsequently verbally advised the bank that he was lifting the stop-payment .00 after account with Traders Royal Bank.[13] check for P485.000.00 so Valdes-Choy could pay the capital gains tax as she did not have On the same day. Hidalgo St.00 Cor. PLUS P80.00 President Pe.vendor and Chua as vendee signed two Deeds ENCARNACION VALDEZ- of Absolute Sale (Deeds of Sale).00 for documentary fixtures and movable properties contained in stamps paid in advance by seller ___80.000. accompanied by Chua. the parties met again at 00 the office of Valdes-Choys counsel. broken angered Valdes-Choy who tore up the Deeds of down as follows: Sale. She then deducting the advances made by Chua.00 managers check to her remaining balance of P10. meters)..00.00 confirmed his stop payment order by PARTIAL PAYMENT 485. and handed the Traders Royal Bank check to Check No.00 the house for the purchase price of P2.000. Metro Manila. The parties also computed [12] P10 the capital gains tax to amount . claiming that what Chua required was not part of their agreement. representing the balance of the purchase Metro Manila (Area 718 sq. Chua.

the Deeds. vendee. to the Makati Register of court rendered judgment in favor of Chua. I.00 balance. Should the defendant fail or refuse to Court not later than five (5) days from finality surrender the two deeds of sale over the of this decision: property and the fixtures that were prepared by Atty. the owners duplicate copy of TCT No. Mark Bocobo and executed by the parties. Mark a. the two deeds of sale prepared by Atty.000. Chua re-filed his owners duplicate copy of TCT No. 162955. duly executed by and compensatory damages for the plaintiff. to make representations with the BIR for the the buyer before she is fully paid. After trial in due course. to present the deed of sale executed in favor which the trial court dismissed on 22 November of the plaintiff. since this is an action for and if needed update the real estate taxes all to specific performance where the plaintiff. sign and execute the said deeds of sale for and b. hereby authorized and empowered to prepare. the sum of P100.215.000. the trial capital gains tax. On 17 July 1989. Ordering the Branch Clerk of this Court or purchase price. but nothing came out of to pay the same from the funds deposited with it. wants to pursue the sale.00 for stamps already included).[17] Upon the balance of the consideration (with the sum such deposit. 5. dispositive portion of which reads: c. Ordering the defendant to pay to the plaintiff. to pay the required registration fees and Applying the provisions of Article 1191 of the stamps (if not yet advanced by the defendant) new Civil Code. tax receipt evidencing payment of real estate taxes. the issuance of a new TCT in the name of Chua even without receiving the balance of the 3. Chua filed a complaint for specific performance against Valdes-Choy b.000. judgment is d. Within five (5) days from compliance by the payment of the balance of the purchase price. surrender to the plaintiff the new Torrens hereby rendered: title over the property.[16] notarized or not. the deadline for the 2. ordering the plaintiff to Valdes-Choy suggested to her counsel that to deliver to the Branch Clerk of Court of this break the impasse Chua should deposit in Court the sum of P10.000.order due to his special arrangement with the defendant in favor of the plaintiff. whether bank. 1989.Valdes-Choy believed this was her duly authorized representative: the only way she could protect herself if the certificate of title is transferred in the name of a. real complaint for specific performance with estate tax receipt and proof of payment of damages. defendant of the above.295. c. On 29 November 1989. and in order and that the fears of the defendant may be allayed and still have the sale materialize. 1.00 representing escrow the P10. her. the covering tax declaration and the latest in behalf of the defendant.00 representing moral Bocobo on July 13. and On 15 July 1989. as be taken from the funds deposited with her. and . Valdes-Choy was willing to cause of P80. Valdes-Choys payment of capital gains tax for the sale of the counsel promised to relay her suggestion to house and lot (not to include the fixtures) and Chua and his counsel. Ordering the defendant to deliver to the 4. together with the 1989. a. 162955 the Branch Clerk of Court of this Court is registered in her name.

the decision appealed from is hereby REVERSED and SET ASIDE.000. name of Chua.000. the sum of P50.000. and from the funds said plaintiff has deposited with the Court. The trial court found that the transaction reached an impasse when Valdes-Choy wanted 2. To pay to the plaintiff the sum plaintiffs attorneys fees and cost of litigation. and II. the amounts paid under this judgment to the another one is rendered: plaintiff. Authorizing the Branch Clerk of Court of this of P300. the amounts covered at paragraph 5 4.000.00 in the concept of exemplary Court to release to the plaintiff. compulsory counter-claim. Ordering the release of the P10. 1989 until fully paid. sale. 8.000. 89-5772. of P100. Appeals which reversed the decision of the trial court.000. No interest is imposed on the payment to be return/refund the amount of P485.b. and c.295.00 with interest at the legal rate new TCT covering the Property is issued in the from July 14. defendant: 1. the instant petition.00 in the concept of moral damages and the additional sum 6. Ordering the defendant to surrender to the plaintiff or his representatives the premises (2) Declaring the amount of P100. To refund to the plaintiff the sum to be first paid the full consideration before a of P485. with the furnishings intact within seventy-two representing earnest money as forfeited in (72) hours from receipt of the proceeds of the favor of defendant-appellant.00 as reimbursement for 3. 7. updating of real estate taxes. (1) Dismissing Civil Case No. judgment is hereby rendered ordering the Hence. To refund to the plaintiff the earnest money The Trial Courts Ruling in the sum of P100. and transfer of title.[18] following amounts: Valdes-Choy appealed to the Court of a.[19] causes not attributable to the plaintiff. In the event that specific (5) Ordering the plaintiff-appellee to pay the performance cannot be done for reasons or costs. Chua did not want to pay the consideration in full unless . To pay to the plaintiff the sum above.00 to made by the plaintiff because he had always plaintiff-appellee without interest.000.000. 1989 until fully paid. the expenses incurred in the registration of new judgment. On the other hand.00 as reimbursement of attorneys fees and cost of litigation. with interest at the legal rate from June 30. of P700. The Court of Appeals handed down a b.000. and WHEREFORE.00.00 to the defendant after deducting therefrom the SO ORDERED. (3) Ordering defendant-appellant to 9. the capital gains tax paid to the BIR. been ready to pay the balance and the premises had been used or occupied by the defendant for (4) Dismissing defendant-appellants the duration of this case.00. disposing as follows: the sale. to be taken damages.

00 was payable not later than Appeals ruled that Chuas stance to pay the full 15 July 1989. was convinced that Chua demonstrated his The Court of Appeals declared that the trial capacity and readiness to pay the balance on court erred in considering Chuas showing to 13 July 1989 with the production of the PBCom Valdes-Choy of the PBCom managers check managers check for P10. .000. showed that he was prepared to pay Valdes- Choy the consideration in full on 13 July 1989. payment of the balance of P10. The that Valdes-Choy did not perform her Court of Appeals pointed out that Chua did not correlative obligation under the contract to sell want to give up the check unless the property to put all the papers in order.000. Chua demanded by Chua. (2) Valdes-Choy may stay in the consideration only after the Property is Property until 13 August 1989. there is a whale of difference between the phrases all papers are in proper order as The trial court held that Chua complied written on the Receipt. He purchased from reason not to pay on the agreed date. for P10.[20] Although Chua noted that as of 14 July 1989. do so. The trial court was already in his name. the trial court found obligation to pay on or before 15 July 1989. this could tax had not been paid because Valdes-Choys not be equated with actual payment which he counsel who was suppose to pay the tax did not refused to do.215.00 duplicate copy of the TCT. The Court of Appeals noted that payment is made.000. The Court of Appeals explained that the latest realty tax receipt.215.00 on the agreed date was due to Valdes-Choys fault. Contrary to the findings of the trial court.215.000.00 as compliance with Chuas On the other hand.000. the tax declarations.00 was to pay the tax receipt.00 The Court of Appeals Ruling earnest money. Valdes- PBCom two managers checks both payable to Choy was in a position to deliver the owners Valdes-Choy. issuance of a new certificate of title in Chuas name. The trial court declared that Valdes- The Court of Appeals did not consider the Choy was in a position to deliver only the non-payment of the capital gains tax as failure owners duplicate copy of the TCT. The trial court payment of the capital gains tax has no bearing concluded that these documents were all on the validity of the Deeds of Sale. The trial court held that the parties entered into a contract to sell on 30 June 1989. as evidenced by the Receipt for the P100. The trial court pointed out that the contract to sell was subject to the following conditions: (1) the balance In reversing the trial court. The first check for P485. and (3) all registered in his name was not the agreement papers must be in proper order before full of the parties.000. two days before the deadline of 15 July the Court of Appeals found that all the papers 1989.00. It is only useless without the Bureau of Internal Revenue after the deeds are signed and notarized receipt evidencing full payment of the capital can the final computation and payment of the gains tax which is a pre-requisite to the capital gains tax be made.000. The trial court liens and encumbrances.700. the signed by Valdes-Choy to put the papers in proper Deeds of Sale. the capital gains demonstrated his capacity to pay.a new TCT is first issued in his name.215. The second Sale. The Property was also free from all balance of the purchase price. and the order.000. and transfer of title as with the terms of the contract to sell. Chua even added P80. The trial The trial court held that Chuas non- court faulted Valdes-Choy for this impasse. the signed Deeds of was to pay the capital gains tax.00 for the were in order and that Chua had no valid documentary stamp tax. the tax declarations. and the latest realty check for P10. the Court of of P10.

000. WHETHER THE WITHHOLDING OF between Valdes-Choy and Chua. and (b) whether Chua can the Property is registered in Chuas name. There is also no PROPERTY. requisite to the issuance of a new certificate of title. the Receipt for the P100. there is no controversy that 1592 OF THE NEW CIVIL CODE. Or.00 earnest money embodied the terms of the binding contract 3. WHETHER THERE IS LEGAL AND FACTUAL right to forfeit the earnest money. able and willing to deliver to Chua the owners duplicate copy of the TCT. compel Valdes-Choy to cause the issuance of a as the trial court put it. .00 as earnest money from OBSERVING THE PROVISIONS OF ARTICLE Chua. with Valdes-Choy as whether the transaction between Chua and payee. Valdes-Choy 2.000.215. that the balance of P10. the tax declarations. fails to pay the balance of P10.000.000.[21] date. WHETHER THERE IS A PERFECTED Deeds of Sale. Chua did show to Valdes-Choy the PBCom managers check The issues for our resolution are: (a) for P10. 5.00 is payable on or BE RAISED AS GROUND FOR THE before 15 July 1989. there is no controversy that as PURCHASE PRICE ON THE PART OF CHUA embodied in the Receipt. capital gains tax. Chua refused to give this Valdes-Choy is a perfected contract of sale or a check to Valdes-Choy until a new TCT covering mere contract to sell. However.215.00. and (3) if Chua OF SALE. PAYMENT OF THE BALANCE OF THE Further.00 on or before 15 July 1989. WHETHER THE TRIAL COURTS Both the trial and appellate courts found JUDGMENT IS IN ACCORD WITH LAW.162955. 206011 THE CONTRACT IN CONTROVERSY WITHOUT for P100. Valdes-Choy has the 4. until there is proof of new TCT in Chuas name even before payment payment of the capital gains tax which is a pre- of the full purchase price. She was following issues: ready.000. the signed 1. (2) the capital gains tax is AUTOMATIC RESCISSION OF THE CONTRACT for the account of Valdes-Choy.215.00 AS FORFEITED IN managers check for P485. Chua gave Valdes-Choy the PBCom AMOUNT OF P100.00 to pay the FAVOR OF VALDES-CHOY.00 was not REASON AND EQUITY DESERVING OF BEING actually paid to Valdes-Choy on the agreed REINSTATED AND AFFIRMED.000. Likewise.215.000.The Issues There is no dispute that Valdes-Choy is the absolute owner of the Property which is registered in her name under TCT No. and the CONTRACT OF SALE OF IMMOVABLE latest realty tax receipt. On 13 July 1989. In his Memorandum. On 13 July DECLARE THE EARNEST MONEY IN THE 1989. Chua raises the free from all liens and encumbrances. WHETHER VALDES-CHOY MAY RESCIND received PBCom Check No. provided that BASIS FOR THE COURT OF APPEALS TO all papers are in proper order. Valdes-Choy and (AS VENDEE) WAS JUSTIFIED BY THE Chua agreed on the following terms: (1) the CIRCUMSTANCES OBTAINING AND MAY NOT balance of P10. dispute that on 13 July 1989.000. The Courts Ruling First and Second Issues: Contract of Sale or Contract to Sell? The petition is bereft of merit.

ownership not having Nevertheless. failure of which a contract to sell.[23] In addition. as this is offensive to deadline.[25] until after the sale. Ownership over the Property was acceptance by Valdes-Choy precludes the latter retained by Valdes-Choy and was not to pass to from rejecting the binding effect of the contract Chua until full payment of the purchase price. To permit him to change his theory will be unfair to the adverse Second.[24] Valdes-Choy was embodied in a receipt rather than in a deed of sale. of sale. In such event. Third. as under the impression that Chua was about to evidenced by the Receipt. Chua has consistently characterized his to pass to the vendee until full payment of the agreement with Valdez-Choy. when a party payment of the purchase price. the title to the property price. title is retained by the vendor until full payment of the price. He argues for the first time agreement between the parties was a contract that his payment of earnest money and its to sell. This has been Chuas property and cannot recover it until and unless persistent contention in his pleadings before the contract is resolved or rescinded. whereas. He contends that there was is not a breach but an event that prevents the no reservation in the contract of sale that obligation of the vendor to convey title from Valdes-Choy shall retain title to the Property becoming effective. Choy can sell the Property to other interested parties. in a contract to sell.[27] passes to the vendee upon the delivery of the thing sold. we hold that the of Sale came later when Valdes-Choy was agreement between Chua and Valdes-Choy. in order to put to rest all passed between them. the Receipt provides that the earnest without following Article 1592[22] of the Civil money shall be forfeited in case the buyer fails Code which requires demand. justice and due reserving ownership in the seller until full process. the vendor loses ownership over the contract of sale. before rescission may take before 15 July 1989. either judicially to pay the balance of the purchase price on or or by notarial act. The distinction absence of a formal deed of conveyance is a between a contract of sale and contract to sell strong indication that the parties did not intend is well-settled: immediate transfer of ownership. is a contract to sell pay the balance of the purchase price. Otherwise stated. There was no agreement for an automatic rescission of the contract in case A perusal of the Receipt shows that the true of Chuas default. The signing of the Deeds doubts on the matter. in a contract the Receipt. An issue not the sale upon Chuas failure to remit the raised in the court below cannot be raised for balance of the purchase price before the the first time on appeal. as a contract to sell and not a of sale. in a contract to sell. Chua claims that Valdes-Choy may not validly rescind the contract of sale First. the party will not be permitted to fails to pay within a fixed period. but only a transfer after full payment of the purchase In a contract of sale. the agreement between Chua and party. Valdes- place. and the similar to giving the seller the right to rescind case is tried and decided on that theory in the unilaterally the contract the moment the buyer court below. The and not a contract of sale. ownership is. In the Chua now pleads for the first time that latter contract. Thus. This is also deliberately adopts a certain theory. the trial and appellate courts. payment of the price is a there is a perfected contract of sale rather than positive suspensive condition. as evidenced by purchase price. This is in the nature of a stipulation the basic rules of fair play. Valdes-Choy retained possession of by agreement. reserved in the vendor and is not the certificate of title and all other documents . There is in effect a right reserved in Chuas new theory is not well taken in light favor of Valdes-Choy not to push through with of well-settled jurisprudence.[26] change his theory on appeal.

has the right to The trial court interpreted the phrase to walk away from the transaction. However.relative to the sale. Article only be finally assessed by the Commission on 1592 does not apply to a contract to sell where Internal Revenue upon the presentation of the the seller reserves the ownership until full Deeds of Absolute Sale themselves.[30] Article 1592 of the Civil Code permits property shall be the sum of money the buyer to pay. In the money for its payment. he contends that Valdes-Choy may not contract to sell. even after the expiration of received plus the fair market value of the the period. When Chua refused to pay Third and Fourth Issues: Withholding of Valdes-Choy the balance of the purchase price. as long as no demand for rescission property (other than money) received. Payment of the Balance Valdes-Choy also refused to turn-over to Chua of the Purchase Price and Forfeiture of the these documents. and that of the contract has been made upon him either the computation of the capital gains tax can judicially or by notarial act. that [t]he amount seller without further remedies by the realized from the sale or other disposition of buyer. The Court of Appeals held contract of sale.Clearly. that earnest money forms part of the consideration as long as the papers are in proper order. money is a forfeitable deposit. The earnest money was given otherwise. however. the earnest money was given in a reason. The Receipt evidencing the forfeit the earnest money even if he did not pay contract to sell stipulates that the earnest on time. Chua insists that he was ready to pay the ownership of the Property. For the same this case. and thus Article 1482. with obligation to pay the balance. to be forfeited if There is a variance of interpretation on the the sale is not consummated should Chua fail phrase all papers are in proper order as written to pay the balance of the purchase price. without payment of the price. Chua. the last from arising and ownership is retained by the sentence of which provides.[29] balance of the purchase price but withheld It is true that Article 1482 of the Civil Code payment because Valdes-Choy did not fulfill provides that [W]henever earnest money is her contractual obligation to put all the papers given in a contract of sale. right to compel Chua to pay the balance of the purchase price. there is no of payment. the full Revenue Code of 1977. this article speaks of gains tax had been paid after he had advanced earnest money given in a contract of sale. If there is a money if Chua fails to pay the balance before contract of sale.[28] These are additional proof Earnest Money that the agreement did not transfer to Chua. it shall be considered in proper order. Chua claims that as part of the price and proof of the perfection Valdes-Choy failed to show that the capital of the contract. is not applicable. only if the sale is consummated upon full Valdes-Choy has the right to forfeit the earnest payment of the purchase price. of Since the agreement between Valdes-Choy which Section 33 of the National Internal and Chua is a mere contract to sell. There is no dispute though. The trial court failed to consider the condition prevents the obligation to sell Section 34-(a) of the said Code. with no include payment of the capital gains tax. although he will the Bureau of Internal Revenue receipt as proof forfeit the earnest money. Court of Appeals on this matter: which speaks of a contract of sale. is the governing payment of the purchase price partakes of a provision insofar as its computation is suspensive condition. The non-fulfillment of concerned.[31] which any premature computation of the . Valdes-Choy should have the the deadline.We quote verbatim the ruling of the in a contract to sell. The in the Receipt. either by actual or constructive delivery. However. Specifically. The trial court made much fuss in connection with the payment of the capital gains tax.

exhibit D. Indeed. - determinate thing. By the contract of sale one of the transferred upon delivery of the thing sold. 1495. execution of the contract of sale. At Prior to the existence of the contract of sale. Article 1458 of the Civil Code defines a sale in a public document. The vendor is bound to transfer the gains tax and drawn in the name of the ownership of and deliver. the suspensive condition is the full title in the name of the buyer. considered as part of the consideration of the In a contract of sale. contract of sale as follows: In a contract of sale. Since form and have been duly notarized that the the transfer of ownership is in exchange for the final computation of the capital gains tax can purchase price.00. which is of a contrary stipulation.The buyer may become full payment gives rise to Chuas right to the owner of the real property even if the demand the execution of the contract of sale. the obligations of the sale. and the other to pay therefor a price certain in money or its Delivery is not only a necessary condition for the equivalent. even if there is a contract to sell validity and effectiveness of the deeds of sale in between them. 325851.[32] The obligation of the seller is to transfer to the buyer ownership of the thing sold. seller are specified in Article 1495 of the Civil from which she in turn. the obligation of the certificate of title. enjoyment of the thing. It is only upon the existence of the contract ownership is transferred not by the issuance of of sale that the seller becomes obligated to a new certificate of title in the name of the transfer the ownership of the thing sold to the buyer but by the execution of the instrument of buyer. in the absence 1989. was deposited in the name of appellant. (Emphasis supplied) transmission of ownership.000. In the sale We see no reason to disturb the ruling of of real property. simultaneously fulfilled at the time of the the PBC Check No. The delivery. therefore. and transfer of payment of the purchase price by gains tax becomes of no moment. certificate of title is still registered in the name of the seller. There is a the happening of the suspensive condition. It is also upon the existence of question are concerned. any rate. ownership is Art. as well as warrant Commissioner of Internal Revenue. as follows: corresponding check in the amount representing the sum to be paid for capital Art. the computation and payment of the the seller is not obligated to transfer ownership capital gains tax has no bearing insofar as the to the buyer. As contracting parties obligates himself to the noted civil law commentator Arturo M. but is a mode of acquiring dominion and determines the x x x. the seller is not obligated to the Court of Appeals. the birth of the real right. (Emphasis supplied) would not be paid to the Government after all. Such ownership to the buyer. dated July 13. In difference between transfer of the certificate of this case. because it is only after the contract of sale that the buyer is obligated the contracts of sale are finally executed in due to pay the purchase price to the seller. which then the thing which is the object of the allayed any fear or doubt that that amount sale. 1458. but rather to transfer seller to sell becomes demandable only upon ownership of the real property. As between the seller and buyer. transfer in the name of the buyer a new In a contract to sell. these obligations must be follow as a matter of course. in the amount of P485. made in any of the forms provided in articles 1497 to . transfer the ownership of and to deliver a Tolentino explains it. purchased the Code.

Thus. if from the deed the full purchase price which is his obligation contrary does not appear or cannot clearly be under the contract to sell. state as his papers in proper order to the point that he follows: is in a position to transfer ownership of the real property to the buyer upon the signing of the Deed of Absolute Sale covering the lot: contract of sale. The vendee is bound to accept of the real property to the buyer. In a contract to sell. the seller is not purchase price on or before 15 July 1989. the property right. Valdes-Choy was in a ownership from vendor to vendee has taken position to comply with all her obligations as a place. able and willing to transfer In a contract of sale of real property. the of the buyer. signed Deeds of Sale also stipulated that the Neither is the seller obligated to cause the buyer shall pay the balance of the purchase issuance of a new certificate of title in the name price upon signing of the deeds.Clearly. a condition that is found Art. is the owners duplicate of the TCT to the buyer. 1498. a vendee in a contract of sale. 1582. Thus. both signed by Chua. which is also to pay the full purchase price at the agreed Similarly. at this point Valdes-Choy was ready. contract to sell. however.1505 signifies that the transmission of In the instant case. When the sale is made through a neither in the law nor in the contract to sell as public instrument. ownership of the Property to the buyer as delivery is effected when the instrument of sale required by the contract to sell. and to assume all the x x x. derived only from delivery of the thing. time. (Emphasis supplied) obligations of a vendor under a contract of sale In this case. she was prepared to turn-over consent. and notarized. The obligated to transfer ownership to the buyer. The delivery of the thing constitutes an seller under the contract to sell. and by Articles is executed in a public document. able and willing to pay the is the object of the contract. Article 1582 of the Civil Code provides once the seller is ready. Our law does not admit her counsel in the presence of the the doctrine of transfer of property by mere buyer. Chua was also not in inferred. Article 1498 of the Civil Code provides balance of the purchase price. Chua imposed that the condition that a new TCT should first be issued in his name. she indispensable requisite for the purpose of already signed the Deeds of Sale in the office of acquiring ownership. the seller is in a position to transfer ownership Art. a position to assume the principal obligation of x x x. refused to give to Valdes- is deemed made by the seller to the Choy the PBCom managers check for the buyer. However. At this point. then delivery of the real property Chua.[33] (Emphasis supplied) tax receipt. the contract to sell stipulated pursuant to the relevant articles of the Civil that Chua should pay the balance of the Code. delivery and to pay the price of the thing the seller complies with his undertaking to sell sold at the time and place stipulated in the the real property in accordance with the contract. in a contract to sell real property. When the 1458 and 1495 of the Civil Code to deed of absolute sale is signed by the parties consummate the contract of sale. xxx . the seller must put all Deeds of Sale. the ownership. x x along with the tax declarations and latest realty x. Second. First. the execution thereof shall evidenced by the Receipt. able and willing to sign that the deed of absolute sale before a notary public. at this point be equivalent to the delivery of the thing which Chua was not ready.

[40] proper order.[36] (2) signed Currency.000.000.[38] As between the seller However. Chua was therefore in default and has Registry of Deeds. does not confer ownership on Valdes-Choy of the contract to sell.800. can pay the tax. Chua refused to and the buyer.58% of the purchase price. 1376. 94. and Article 1582 of the Civil estate. The acknowledged by the VENDOR from the transfer of ownership takes effect upon the VENDEE.00).00. the transfer of ownership takes pay the balance of the purchase price as effect upon the execution of a public required by the contract to sell. The recording of the sale with the proper fixtures and other movable properties thereon. his heirs. not Customarily. Registry of Deeds[37] and the transfer of the free from all liens and certificate of title in the name of the buyer are encumbrances. Payment of the capital gains tax. the said furnitures. sale. transfers and signing and notarization of the deed of absolute conveys unto the VENDEE. On the shall be borne in mind in the interpretation of other hand. depending on the agreement of together with the improvements existing the parties.[39] Registration of the sale with the Code. and Art. on the agreed date.215. as far as the government is concerned.For and in consideration of the sum of EIGHT complete a sale of real estate: (1) owners MILLION PESOS (P8.[35] (Emphasis supplied) necessary only to bind third parties to the transfer of ownership. Philippine duplicate copy of the Torrens title. the VENDOR sells. The usage or custom of the place to pay as well the capital gains tax. The buyer can VENDEE. the VENDOR sells. the capital gains tax xxx remains a liability of the seller since it is a tax For and in consideration of the sum of TWO on the sellers gain from the sale of the real MILLION EIGHT HUNDRED THOUSAND estate. thereon. (Emphasis supplied) [34] capital gains tax paid immediately since this is a pre-requisite to the issuance of a new Torrens Deed of Absolute Sale covering the furnishings: title in his name. Nevertheless. Such a condition. Philippine however. his heirs. Article 1376 of the Civil Code In this case. receipt of which in full is hereby transfer of ownership to the buyer. receipt of which in full is hereby deed of absolute sale. Valdes-Choy had all her papers in acquiring ownership. the said parcel of land. the signed instrument conveying the real Deeds of Sale.000. Chuas condition that a new TCT be the ambiguities of a contract. and acknowledged by the VENDOR from the (3) latest realty tax receipt. or the issuance of a new only himself to blame for the rescission by certificate of title. Valdes-Choy was ready. is not a pre-requisite to the Currency.000. successors and assigns. Such registration or issuance of a Even if measured under existing usage or new certificate of title is not one of the modes of custom. the buyer. PESOS (P2. is not customary in a sale of real estate. free from all liens and The buyer has more interest in having the encumbrances. and shall fill the first issued in his name before he pays the omission of stipulations which are ordinarily balance of P10. transfers and retain the amount for the capital gains tax and conveys unto the VENDEE. (3) tax declaration.00). representing established. or the seller successors and assigns. in the absence of a contrary specified in the contract to sell as evidenced by agreement. able provides that: and willing to submit to Chua all the papers that customarily would complete the sale. pay it upon authority of the seller. the submission by an individual the Receipt. cannot be considered part of the seller to the buyer of the following papers would omissions of stipulations which are ordinarily .

While this case was dismissed on 22 November 1989. INC. part of Valdes-Choy to transfer ownership of 1987. The Spouses Raul and Rosalie Flores were the owners of two parcels of land situated Chua acquired no right to compel Valdes-Choy along Aurora Boulevard. SR. it drew no response from Chua. CERVANTES. Chua cannot compel Valdes-Choy to consummate the sale of the This is a petition filed by Vive Eagle Property. over to him the owners duplicate copy of the 150308 TCT. Chairman. It was only a matter of time before the GENUINO ICE CO.CALLEJO.. to transfer ownership of the Property to him covered by because the suspensive condition .R. the tax VIRGILIO O. declarations. On October 10. the Spouses Flores and Tatic Square the Property to Chua. J. Valdes-Choy February 1995 is AFFIRMED in toto.. In conditional obligations. respectively.the full Transfer Certificates of Title (TCT) Nos. the money to pay the same and Valdes-Choy . as well as the extinguishment or loss of those already The Antecedents acquired shall depend upon the happening of the event which constitutes the condition..R. capital gains tax as Chua himself had advanced AUSTRIA-MARTINEZ. he did not waste any time in DECISION re-filing the same on 29 November 1989. Cubao. 51933. CV No.did not and 241846. There is also no International Corporation (TATIC) executed an obligation on the part of Valdes-Choy to cause Agreement to Sell in which the said spouses the issuance of a new TCT in the name of Chua bound and obliged themselves to sell the . acquisition of rights. the Decision of the Court of pending the issuance of a new certificate of title Appeals in CA-G. CV No. Accordingly. this is not increasingly becoming customary is to deposit one of the obligations of a vendor. 241845 payment of the purchase price .026 and 2. J.R. Chua had no reason to fear being swindled. Present: receipt.[41] What is since unless expressly stipulated. suggested this solution but unfortunately. SO ORDERED.versus . capital gains tax would be paid. which is a suspensive condition.. with an area of 1. Valdes-Choy was prepared to turn. the signed Deeds of Sale. 2001 Decision[1] and October 4. Chua acted Respondents. and the latest realty tax Petitioners. 2001 Resolution of the Court of ART. INC. There was no hindrance to paying the PUNO.963 happen. No. 37652 dated 23 in the name of the buyer.established by usage or custom. SR. 2004 precipitately in filing the action for specific performance a mere two days after the deadline x------------------------------- of 15 July 1989 when there was an -------------------x impasse. since Chua refused to pay the CALLEJO. Inc. VIVE EAGLE LAND. Quezon City. and Bureau of Internal Revenue covering the COURT OF APPEALS and Promulgated: amount.There is no correlative obligation on the square meters. 1181.: consideration in full on the agreed date. (VELI) and Virgilio Cervantes for the provides that - review of the July 19. in escrow the balance of the purchase price WHEREFORE. the Appeals (CA) in CA-G. and G.. November 26. had procured a managers check payable to the TINGA. Article 1181 of the Civil Code Land.

as broker. and/or charged over the two (2) and the Bank executed a Memorandum of parcels of land including the Agreement (MOA). Official receipts of Tobias. 1988. which was amount covered by this estimated at P790.757. from any creditors or third persons. including the payment of CAPITAL BANK. The Promissory Note in favor of parties agreed that the expenses to be incurred CAPITAL BANK in the amount by Tobias and TATIC would be deducted from corresponding thereto. wherein the Spouses Flores. whether past or within thirty (30) days from April present. 8. (2) parcels of land from any and all liens and to TATIC. The Bank agreed to grant the application obligations and claims. this objective.[2] 7. The BROKER and TATIC including future claims and/or SQUARE shall undertake to liability from any person or entity remove any and all within thirty (30) days from April occupants/tenants of the two (2) 12.63 past or present.00: Promissory Note shall be deducted from the balance of the 6. 1988. undertook to pay any and all payments thereof shall be the taxes and assessments imposed and/or presented and delivered to charged over the lots. (Bank) to finance its purchase of the said free and clear from any and all lots. Tobias (who acted as broker). the titles of the two properties are Inc. 1988. from any bank or provided that the torrens titles over the subject financial institution or any other properties would be registered under the name creditor. Towards this end. 12. the Spouses Flores.827. Isidro S. 1988 with the assistance TATIC SQUARE will execute a and cooperation of the Spouses Flores. documents/papers. taxes and assessments imposed TATIC. warranted that the titles of secure tax clearance from the the two properties were free and clear from any proper government agency/ies and all obligations and claims. The BROKER undertakes purchase price payable by TATIC to clear the titles covering the two SQUARE to the OWNERS. The latter then applied for The OWNERS warrant that a loan with the Capital Rural Bank of Makati. The the purchase price of the property. or third persons. Tobias also assessments on the two parcels of undertook to remove any and all land may be advanced by tenants/occupants on the lots within sixty CAPITAL BANK provided that days from April 12. and to secure tax clearances from the proper government agencies within The payment of any taxes and thirty days from April 12. 1988. 9. of the latter as the subject lots would be used as collateral for the payment of the said loan. The BROKER shall undertake to pay any and all On April 13. the parcels of land whether legally or OWNER shall endeavor to provide illegally residing thereat within the BROKER the sixty (60) days from April 12. which are 1988 with the assistance and necessary and proper to carry out cooperation of the OWNERS. payment of capital gains tax and as vendees-owners.000. Any and all expenses to be incurred in complying with the . capital gains tax. whether of TATIC in the amount of P5.

7 and 8 shall be to remove all the deducted from the purchase price occupants/tenants whether of the two parcels of land. TATIC.[3] 2. the other expenses purchase price of the sale of the connected therewith shall be entire project. (P5.00 in obligations of TATIC SQUARE favor of TATIC. turned over the custody of the principal amount of FIVE owners copy of their titles to the Bank.[4] The Spouses Flores.700. with CAPITAL BANK in the thereafter. VELI hereby absorbs executed a deed of absolute sale over the two and assumes to pay the loan parcels of land for the price of P5.[5] MILLION SEVEN HUNDRED FIFTY-SEVEN THOUSAND Although the torrens titles over the lots EIGHT HUNDRED TWENTY- were still in the custody of the Bank. would deliver possession thereof to the petitioner. likewise. TATIC SQUARE shall Deed of Sale of the entire project cause the registration and (Annex B hereof). taken and/or deducted from the amount due the BROKER. the remaining balance of the purchase price in .00 would not be remaining balance of the sufficient. land are free from any and all liens and encumbrances except the mortgage which may be subsisting in favor of CAPITAL 4. as vendee. the legally or illegally residing thereat expenses of which is estimated to within sixty (60) days from April be SEVEN HUNDRED NINETY 12. TATIC SQUARE represents UP CONDOMINIUM including its and warrants that the titles accessories and appurtenance covering the two (2) parcels of thereto. TATIC SQUARE. 1988.000. VELI shall transfer of the titles covering the promptly pay on its due date two (2) parcels of land in its name.295. Otherwise.88.827.000. in which TATIC sold the properties to the may be imposed thereon by petitioner for P6.757. the Spouses Flores A hereof).224.000. release of the mortgage The latter warranted in the said deed that there constituted over the property were valid titles to the property and that it upon full payment of the loan. In accordance with the BANK.00). Addendum in which they agreed on the represents and warrants that it is following: the absolute owner of the entire project known as TATIC WALK- 1. The parties executed a deed entitled 3. and petitioner VELI. VELI shall THOUSAND PESOS have the right and authority to (P790. receipt of which CAPITAL BANK including the was acknowledged in the said deed by TATIC. undertakings mentioned in TATIC SQUARE undertakes paragraphs 6. TATIC SQUARE. interests and other charges that 1988. In consideration of the execution of the Deed of Sale over the two (2) parcels of land (Annex On the same day. If the said amount withhold payment of the of P790. as SEVEN & 63/100 vendor.63) plus whatever executed a deed of absolute sale[6] on April 14.

we expenses necessary will be constrained to file legal to effect said action for specific performance transfer. On the same day. 241846 only was concerned.. 1988 by the Spouses squatters/occupants on the property. VELI. inter alia.[11] Cervantes.000.00.[9] the titles of the property to and in its name. petitioner On November 11.00 and deliver to us the receipt and/or clearance I. FIRST CAUSE OF thereof. the respondent filed sale[8] over the parcel of land covered by TCT a Complaint against petitioner VELI and its No. all its rights No. as vendee. president. after trial. and (c) to Flores and the deed of absolute sale executed pay the capital gains tax and other by TATIC in its favor.000. 1990.000. judgment be rendered in its favor. and damages against your . rejected the formers through its president.000. after due proceedings. 241846 despite the lapse of a reasonable and interests under the Deed of Absolute Sale time.00. Virgilio Cervantes.000. judgment be rendered against defendants In view of the foregoing to.[7] In a letter to the respondent. Inc. executed a deed of absolute On June 24. insofar as that lot covered assessments due to effectuate the transfer of by TCT No. through counsel. WHEREFORE. the amount of P400.. the respondent. VELI. company to our client or to give b) To pay the them a BIR clearance regarding capital gains tax payment of all said taxes within and other five (5) days from receipt hereof. The respondent respondent and petitioner VELI executed a alleged. that petitioner VELI failed (a) deed of assignment of rights in which the latter to transfer title to and in the name of the assigned in favor of the respondent. The respondent prayed that.[10] the next preceding paragraph. jointly and severally.000. and respondent Genuino Ice Co. thus: In the meantime. wrote petitioner VELI and considered. for and in respondent over the property covered by TCT consideration of P4. as vendor.00 company in order to protect the subject to adjustment set forth in interest of our client. for specific receipt of which was acknowledged by performance and damages in the Regional Trial petitioner VELI. it is most respectfully made the following demands: prayed that. demand is hereby made indemnify plaintiff as follows: upon you to pay to the BIR the capital gains tax amounting to P285. (b) to cause the eviction/removal of the executed on April 13. 1988. the Court (RTC) of Quezon City. plus the interests for all ACTION registration fees on account of delay in the payment of the a) To effect or capital gains tax and the 1% cause the transfer of documentary stamp tax for the title in favor of the sale of the property from your plaintiff. requirements or otherwise. petitioner Virgilio demand. 241846 for the price of P4. facts. much to our regret. premises through counsel.

and TATIC and d) Costs of petitioner VELI. 2001.000. The fallo of the b) In the decision. and that the respondent was not privy to in the amount the deeds of absolute sale executed by the of P250. pay attorneys fees of P20. the petitioners appealed premises. Plaintiff further prays for TATIC and petitioner VELI. Further. The CA held that the petitioners alleged that the respondent had no petitioners were liable for the expenses for the cause of action against them because (a) registration of the sale. were liable for the payment of the capital gains c) Attorneys fees tax.00 b) To pay and to pay the costs. foregoing accomplished to considered. if eviction is not WHEREFORE. The payment of the capital gains III. reads: alternative. the said deeds. to PESOS. unlawful occupants amended per its Order dated April 17. It also ruled that the .00 shall be deemed THOUSAND forfeited in favor of plaintiff.[14] FIVE HUNDRED THOUSAND The trial court held that the petitioners PESOS. favor of the respondent. transfer of the title to the plaintiff. defendants are hereby ordered to remove or a) To pay actual evict or cause the removal or damages in the eviction of the squatters or amount of no less unlawful occupants of the area. on July 19. the appealed decision. (b) the Spouses Flores and Tobias were liable for the payment of capital a) To direct gains tax. and (c) the Spouses Flores and defendants to cause Tobias were responsible for the eviction of the the removal or occupants/squatters from the property. affirming. as amended.000. neither could the respondent enforce the same against the Spouses Flores. the In their answer[13] to the complaint. II. such relief or reliefs as may be just and equitable under the In due course. exemplary damages in the amount of SO ORDERED. 1995.[12] to the CA which rendered judgment. THIRD CAUSE OF tax shall be paid by the ACTION defendants. the amount HUNDRED of P300. Spouses Flores and TATIC. SECOND CAUSE OF petitioner VELI was exempt from the payment ACTION of capital gains tax.000 in favor ordering defendants to cause the of plaintiff. than FIVE otherwise. with modification.000. in for (sic) the area. eviction of the squatters or The trial court rendered judgment. and as such is not bound by suits. judgment is hereby forfeit the amount rendered in favor of plaintiff of P300.

the latter acquired the rights and the property and the issuance of the titles to interests of petitioner VELI under the deeds of and under the name of the respondent. The 1988 agreement and the first deed of sale petitioners insist that the respondent acquired executed by the Spouses Flores and Tobias. is liable for Tobias. and by TATIC in favor of petitioner VELI. and to cause the eviction of the tenants/occupants from the The petitioners. liable for the expenses for the registration of the 1988 Deed of Absolute Sale in Favor third deed of sale. contemporaneous with and subsequent to the Petitioner VELI is Obliged to Cause execution of the said deed. likewise. under the MOA Flores. the deed of assignment of rights executed by petitioner The petitioners assail the ruling of the VELI in favor of the respondent. 1988. the April 14. the Issuance of a under the name of the respondent. sale between petitioner VELI and TATIC. the expenses for the registration of the third deed of sale in favor of the respondent. Such acts Tenants/Occupants from the Property include the execution of the following: the at the Expense of the Petitioner. and its predecessors. TATIC and Code. the the rights and interests of its predecessors. the latter obliged itself to cause and absolute sale executed by TATIC and the spend for the registration of the second deed of petitioners because it was not a party thereto. raise the following issues for Also. 1988 agreement of the petitioners and to wit: first. in the instant petition property within sixty days from April 12. 1988. remaining squatters from the land. as vendor. the Bank and TATIC. capital gains tax for the sale between petitioner VELI and the respondent. the transfer of titles to and of Respondent. the April 13. Tobias (the petitioner VELI simply because the respondent broker). TATIC and Tobias. the petitioners had and for the issuance of torrens titles over the the right to enforce the said contracts against properties in the name of the vendees. and to secure a torrens title over the erred in ruling that the respondent is not property to and under the name of the latter.[15] favor of petitioner VELI. was not a party to the said deeds. for review.respondent was not bound by the deed of TATIC. April 14. and the deeds CA that. latter obliged themselves to spend for the and. petitioner VELI. as well as the acts of the parties before. 241846. It bears stressing that there are petitioners. under the three separate deeds of absolute sale on record. under the deed not the petitioners are obliged to evict the of sale they executed in favor of the respondent. emphasize that. as The petitioners contend that the CA vendee. 1988 deed of absolute . and and that the latter were obliged to cause the the issuance of the titles over the property in eviction of the squatters from the property. being the vendee/owner of the property registration of the said deed of absolute sale covered by TCT No. (b) sale executed by the Spouses Flores in favor of whether or not the petitioners are liable for the TATIC. addendum to the said deed of sale. under the deed of assignment of rights resolution: (a) whether or not petitioner VELI is executed by petitioner VELI and the obliged to pay for the expenses for transfer of respondent. they cannot be held the Registration of the November 11. for payment Torrens Title in the Name of of the capital gains tax and the eviction of the Respondent and the Eviction of the tenants/occupants on the property. The petitioners. and by TATIC and executed by the Spouses Flores. and (c) whether or The petitioners aver that. bound by the deeds executed by the Spouses The petitioners contend that. further obliged themselves to cause the eviction of the tenants/occupants from the property We are not in full accord with the within sixty days from April 12. under Article 1487 of the New Civil executed by the Spouses Flores.

000. to petitioner VELI under the second deed of sale secure a torrens title over the property to and by virtue of the deed of assignment of rights under the name of the respondent. Article 1487 Moreover. under Article stressed that there is no showing in the records 1487[16] of the New Civil Code. apply if. the April 14. executed by the Spouses Flores and TATIC. to transfer title over the property and deliver and third. said sale. Tobias and TATIC the registration of the sale should be conformed to the said deed of assignment of shouldered by the vendor unless there is a rights or that the same was registered in the stipulation to the contrary. the respondent and petitioner registration of the first deed of absolute sale. TATIC and the Bank. or to cause executed by the petitioners and the respondent. the execution. and to pay the capital gains tax on the time the petitioner executed the deed of sale in said sales. On the other hand. the property was of the Spouses Flores. the latter was given tenants/occupants from the property within the right to withhold P300. over of a notarized deed of absolute sale shall be the property covered by TCT No. the same shall not Spouses Flores. Tobias and TATIC bound and favor of the respondent. 1988 deed of the same to the vendee. 1988 MOA executed by the subject of the contract.[17] VELI and the respondent. TATIC did not purchase price until after petitioner VELI bind itself to pay the capital gains tax for the cleared the property of squatters. under the third deed of absolute acquired the rights and interests of TATIC sale.00 of the sixty days from April 12. 1988. Tobias. as vendee. the expenses for that the Spouses Flores. petitioner VELI is liable conditions of the said deeds. In the absence of office of the Register of Deeds in accordance any stipulation of the parties relating to the with Article 1625[20] of the New Civil Code. be concluded that. thereby delivered to the respondent. the eviction of the tenants/occupants on the the latter cannot enforce the terms and property. by petitioner shall be applied in a supplementary manner. It must be for the said expenses because. Indeed. tenants/occupants on the property within sixty thus. Nevertheless. the contrary does not the Spouses Flores and Tobias obliged appear or cannot clearly be inferred. of such deed of assignment of rights did not relieve the said . from the deed. 1988. as the vendor. is obliged executed by TATIC in favor of petitioner VELI. In the themselves to spend for and cause the present case. It is clear that at the vendee. and the respondent. as possession of the property. TATIC obliged itself to Petitioner VELI is obliged to cause the spend for the registration of the second deed of eviction of the tenants/occupants unless there absolute sale and the issuance of the titles over is a contrary agreement of the parties. While Article 1498[19] of absolute sale between petitioner VELI. 1988 deed of absolute sale Code. Under Article 1495[18] of the New Civil second. It cannot. the property to and under the name of under the addendum executed by petitioner petitioner VELI. to VELI agreed that the latter would cause the cause the issuance of the torrens titles over the eviction of the tenants/occupants and deliver property to and under the name of TATIC. through the execution days from April 12. as the New Civil Code provides that the execution vendor. petitioner VELI did not oblige itself to under the first deed of sale and that of spend for the registration of the said deed. the November 11. with the assistance of the third deed of sale. While it is true that the respondent Indeed. Under equivalent to the delivery of the property the April 13. 1988 agreement of TATIC and petitioner VELI. expenses for the registration of the sale and the transfer of the title to the vendee. there were obliged themselves to cause the eviction of the tenants/occupants in the property. petitioner VELI. and to cause the eviction of the VELI and the respondent. under the April 14.

195 (November 15. the It is settled that only laws existing at the Transferee hereby retains and time of the execution of a contract are holds from the Transferor the applicable thereto and not later statutes. petitioner VELI claimed that such tax of tenants/occupants. the Bureau of Internal Petitioner VELI is Not Liable Revenue (BIR). and property was treated as ordinary income. and 415- assessed on the presumed gain derived by 87 (December 23.[21] 34(h) of the 1977 NIRC. however. 1983). In fact.petitioner of its obligation to clear the property letter. 237 was still in effect. Gains Tax for the Third Sale exchanged or disposed of their real properties. This is because the could not be assessed against it or against following agreement was embodied in their TATIC for the reason that they are corporations addendum: and. definitely ruled that citizens and resident aliens. 177 (September 17.[23] When the first and (P300. 159 that in answer to the respondents demand September 13. 127 (July 12. for disposition of property. as well as estates the corporations were exempt from the and trusts. Their income from property.000. One of the opinions of the capital gains tax. the 1977 National Internal Revenue Code after the premises have been rid (NIRC). 1986).[22] Under the first sale. 1987). under the deed of BIR Commissioner reads: absolute sale for the second sale. 1985 . the payment of capital gains tax from the sale. the Transferee shall capital gains tax. TATIC was not obliged to pay the said tax. therefore. A capital gains tax is a final tax 12. of and cleared from squatters 37 and occupying therein.00). exchange of disposition of real property devolved only upon individual taxpayers. 191 (November payment of capital gains tax for the third deed 15. In the second sale.000. 1983). 1985). in response to the queries of for Payment of the Capital several corporations which had sold. more particularly in BIR Ruling Nos. The Court notes Ruling No. as amended by Batas Pambansa Blg. exempt from the payment of capital gains tax for any sale or exchange or NOW THEREFORE. Under Sections 21(e)[24] and 34(h)[25] of the That after the said parcel 1977 NIRC. the Spouses Flores. from the purchase second deeds of absolute sale took place in price due the Transferor until 1988. were liable for the payment of squatters. from the sale or exchange of real payment of capital gains tax.00) based on its obligation to transfer title over the without need of further act or property to the vendee under Sections 21(e) and deed. per the the sale or exchange or disposition of real agreement of the Spouses Flores. 159 We agree with the petitioners contention (September that petitioner VELI is not liable for the 13. as amended. and in consideration of the foregoing premises. amount of Three Hundred unless the latter are specifically intended to Thousand & 00/100 Pesos have retroactive effect. However. of land has been cleared of as vendors. 60 (May of sale. and Tobias. 1986). Executive Order No. TATIC. the said spouses were obliged to pay the was taxed as such. 1983). immediately remit to the TATIC was not similarly liable because while Transferor the aforesaid sum of Article 1487 of the Civil Code provides that the Three Hundred Thousand & seller is obliged to pay the capital gains tax 00/100 Pesos (P300.

37 reads as follows: In reply to your letter dated September 11. payment received bears to the pursuant to Section 24(a)[26] of the 1977 NIRC. between petitioner VELI and the such gains in accordance with the respondent. being a provisions of Section 43(b). Provided.P. which the installment respect to the sale of the property in dispute. However. I have the (h) The provision of honor to inform you that Revenue paragraph (b) of this Section to Regulations No. the gains derived by your client. ANCHETA controlled corporations shall be Acting Commissioner determined either under Section 21 hereof or under this Section. herein on any gains returnable under Section 24(d) of the 1997 NIRC. on gains from sales or other the same Code. further.. Bataan. Blg. as amended by Batas other disposition of real property Pambansa Blg. 37 is explicit that by citizens of the Philippines or only natural persons or resident alien individuals shall individuals are liable to the final be subject to the final income tax capital gains tax prescribed rates prescribed as follows: therein. Provided. petitioner VELI. under the installment method will previously Section 34(h) of the 1977 NIRC. 1985. 8-79 the contrary notwithstanding. That the tax liability.) or to government-owned and RUBEN B. Provided. the corporation. is not subject to 20% the final capital gains tax prescribed by Section 34(h) of the Such tax shall be in lieu of Tax Code. automatically disqualify the petitioner VELI is obliged to pay capital gains seller-taxpayer from paying the . That failure on the part of the seller to pay tax imposed We do not agree with the ruling of the CA that. at This is the reason why. was not obliged to pay the capital amount of the tax which shall be gains tax. neither TATIC nor petitioner VELI paid taxpayer. Such being the case.000 Balanga. petitioner VELI. the NET CAPITAL GAINS RATES Religious of the Virgin Mary from On the first P100. as amended by Batas the tax imposed under Section 21 Pambansa Blg. finally.e. as amended.000 or less 10% the sale of its real property in On any amount over P100. as amended. as seller. whatever gain or loss it incurred with imposed. in the third if the taxpayer elects to report sale. dispositions of real property to the government or any of its Very truly yours. total selling price. political subdivisions or agencies (Sgd. ordinary corporate income tax however. in the second the option of the sale. 37 but to the of this Code. i. paid on each installment shall be should have included in its ordinary income tax the proportion of the tax herein return. That any capital gains tax. net implementing Section 34(h) of the capital gains from the sale or Tax Code. if prescribed under Section 24(a) of any. Similarly. Section 34(h) of the 1977 NIRC. tax for its sale of the property to the Gentlemen: respondent. as amended by B.

if any. 1988. is found in the Title Chapter III Tax on Individuals. Section 27 payment of the tax herein thereof. The provisions of Section 39(B) (D) Rates of Tax on Certain notwithstanding. and is herein quoted: Section 27. of Real Property. whichever is higher. the applicable law is Section the Commissioner with a copy of 34(h). the vendee shall furnish effect. it vendor retains title to the was the 1977 NIRC as amended. Section 24(d) of the 1997 NIRC. (1) In General. latter provision reads: Section 24(D) of the 1997 NIRC. The tax herein estates and trusts: Provided. is Buildings. in case of deferred-payment petitioner VELI and the respondent occurred in sales of real property where the November 11. including demandable. immediately be due and by individuals. been realized on the sale. Rates of Income Tax on Domestic (D) Capital Gains from Sale Corporations.[28] The imposed. the sale between paid. at the has certified that such transfer option of the taxpayer. exchange. which was in property. which the instrument of sale within the requires corporations to pay capital gains tax same period prescribed for at rates provided for in Chapter IV. A final tax of six hereby imposed upon capital percent (6%) is hereby imposed gains presumed to have been on the gain presumed to have realized from the sale. imposed shall be returned and That the tax liability. disposition of real property to the government or any of its political No registration of any document subdivisions or agencies or to transferring real property shall be government-owned or controlled effected by Register of Deeds corporations shall be determined unless the Commissioner or his either under Section 24(A)or duly authorized representative under this Subsection. or other disposition of real exchange or disposition of lands property located in the and/or buildings which are not Philippines. if any. a final tax of six Passive Incomes. Exchange or accordance with Section 6(E) of Disposition of Lands and/or this Code. on paid in accordance with Sections gains from sales or other 45(c)[27] and 51(a)(4) of this Code. including pacto de corporation and are treated as . which CHAPTER IV TAX ON refers to the capital gains from sale of real CORPORATIONS property. has been reported and the tax herein imposed. cannot be applied retroactively. Hence. classified as capital actually used in the business of a assets. percent (6%) based on the gross selling price or current fair (5) Capital Gains Realized market value as determined in from the Sale. At that point in time. tax in installments and the retro sales and other forms of unpaid portion of the tax shall conditional sales. has been As pointed out earlier.

51933 is herebyAFFIRMED WITH MODIFICATION. Inc. .[29] IN LIGHT OF ALL THE FOREGOING. The decision of the Court of Appeals in CA-G. as amended. pursuant to Sections 24(a) and 45 of the 1977 NIRC. The gains that a corporation earned in the sale. exchange or disposition of the real properties it made should be included in the Corporations return. to pay capital gains tax for the November 11. is DELETED. Inc. based on the gross selling price or fair market value as determined in accordance with Section 6(E) of this Code. of such lands and/or buildings. That portion of the Decision of the Court of Appeals mandating petitioner Vive Eagle Land. CV No.R. 241846 to respondent Genuino Ice Co. whichever is higher.. capital assets. the petition is PARTIALLY GRANTED. SO ORDERED. No costs. 1988 sale of the property covered by TCT No.