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SALES CASES

Aznar v. Yapdiangco – Title or Mode

Under Article 712 of the Civil Code, "ownership and other real rights over property are acquired and transmitted by
law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition." As
interpreted by this Court in a host of cases, by this provision, ownership is not transferred by contract merely but by
tradition or delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery
or tradition is the mode of accomplishing the same (Gonzales v. Rojas, 16 Phil. 51; Ocejo, Perez and Co. v.
International Bank, 37 Phil. 631, Fidelity and Deposit Co. v. Wilson, 8 Phil. 51; Kuenzle & Streiff v. Wacke &
Chandler, 14 Phil. 610; Easton v. Diaz Co., 32 Phil. 180).

For the legal acquisition and transfer of ownership and other property rights, the thing transferred must be
delivered, inasmuch as, according to settled jurisprudence, the tradition of the thing is a necessary and
indispensable requisite in the acquisition of said ownership by virtue of contract. (Walter Laston v. E. Diaz &
Co. & the Provincial Sheriff of Albay, supra.)

So long as property is not delivered, the ownership over it is not transferred by contract merely but by
delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or
tradition is the method of accomplishing the same, the title and the method of acquiring it being different in
our law. (Gonzales v. Roxas, 16 Phil. 51)

SANCHEZ V. RIGOS

In other words, since there may be no valid contract without a cause or consideration, the promisor is not bound by
his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes,
however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale.

HEIRS OF ESCANLAR V.CA

The sale of rights, interests and participation as to 1/2 portion pro indiviso of the two subject lots is acontract of sale
for the following reasons:First , private respondents as sellers did not reserve untothemselves the ownership of the
property until full payment of the unpaid balanceof P225,000.00.
Second , there is no stipulation giving the sellers the right to unilaterally rescind thecontract the moment the buyer
fails to pay within the fixed period. Prior to the sale, petitioners were in possession of the subject property as
lessees. Upon sale to them of the rights, interests and participationas to the 1/2 portion pro indiviso, they remained in
possession, not in concept of lessees anymore but asowners now through symbolic delivery known astraditio brevi
manu. Under Article 1477 of the CivilCode, the ownership of the thing sold is acquired by the vendee upon actual or
constructive deliverythereof.In a contract of sale, the non-payment of the price is a resolutory condition
which extinguishes thetransaction that, for a time, existed and discharges the obligations created thereunder. The
remedy of anunpaid seller in a contract of sale is to seek either specific performance or rescission.In contracts to sell,
ownership is retained by the seller and is not to pass until the full payment of the price. Such payment is a positive
suspensive condition, the failure of which is not a breach of contract butsimply an event that prevented the obligation
of the vendor to convey title from acquiring bindingforce. To illustrate, although a deed of conditional sale is
denominated as such, absent a provisothat titleto the property sold is reserved in the vendor until full payment of the
purchase price nor a stipulationgiving the vendor the right to unilaterally rescind the contract the moment the vendee
fails to pay within afixed period, by its nature, it shall be declared a deed of absolute sale.The petitions are hereby
GRANTED. The decision of the Court of Appeals under review is herebyREVERSED AND SET ASIDE
INCHAUSTI V. CROMWELL

Yes, the baled hemp constitutes a contract of sale. In the case at bar, the baled form before the agreement of sale
were made and would have been in existence even if none of the individual sales in question had been
consummated. The hemp, even if sold to someone else, will be sold in bales. When a person stipulates for the future
sale of articles which he is habitually making, and which at the time are not made or finished, it is essentially a
contract of sale and not a contract for piece of work. It is otherwise when the article is made pursuant to agreement. If
the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale to anyone, and
no change or modification of it is made at the defendant’s request, it is a contract of sale, even though it may be
entirely made after, and in consequence of, the defendant’s order for

Aguilar v. Rubiato Facts: Rubiato was the owner of parcels of land and was desirous of obtaining a loan. He thereafter
signed a power of attorney in favor of a certain Vila to secure a loan and to execute any writing for the mortgage of
land. Vila pursuant to the power of attorney then sold the land to Aguilar, with the right of repurchase within one year
and Rubiato was to remain in possession of the land as lessee. One year expired and Aguilar filed a case to
consolidate ownership over the lands. Issue: Whether the contract was of sale or loan. Held: It was a contract of loan.
In addition to the evidence, there is one very cogent reason which impels us to the conclusion that Rubiato is only
responsible to the plaintiff for a loan. It is — that the inadequacy of the price which Vila obtained for the eight parcels
of land belonging to Rubiato is so great that the minds revolts at it. Xxx The members of this court after most
particular and cautious consideration, having in view all the facts and all the naturals tendencies of mankind, consider
that Rubiato is only responsible to the plaintiff for the loan of P800

NAVARRA V. PLANTERS DEVELOPMENT BANK

Navarras assert that the following exchange of correspondence between them and Planters Bank constitutes the
offer and acceptance. The July 1985 letter being the offer from Navarra and the Aug 1985 letter-reply from the Bank
the acceptance. BUT SUCH WERE NOT “CERTAIN OFFER” and “ABSOLUTE ACCEPTANCE”.

While the foregoing letters indicate the amount of P300,000.00 as down payment, they are, however, completely
silent as to how the succeeding installment payments shall be made. At most, the letters merely acknowledge that
the down payment of P300,000.00 was agreed upon by the parties. However, this fact cannot lead to the conclusion
that a contract of sale had been perfected. Quite recently, this Court held that before a valid and binding contract of
sale can exist, the manner of payment of the purchase price must first be established since the agreement on the
manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure
to agree on the price.

Navarras’ letter/offer failed to specify a definite amount of the purchase price for the sale/repurchase of the subject
properties. It merely stated that the "purchase price will be based on the redemption value plus accrued interest at
the prevailing rate up to the date of the sales contract." The ambiguity of this statement only bolsters the uncertainty
of the Navarras’ so-called "offer" for it leaves much rooms for such questions.

Also not clear insofar as concerned the exact number of years that will comprise the long-term payment scheme. As
we see it, the absence of a stipulated period within which the repurchase price shall be paid all the more adds to the
indefiniteness of the Navarras’ offer.

Further, the tenor of Planters Bank’s letter-reply negates the contention of the Navarras that the Bank fully accepted
their offer. The letter specifically stated that there is a need to negotiate on the other details of the transaction before
the sale may be formalized. Such statement in the Bank’s letter clearly manifests lack of agreement between the
parties as to the terms of the purported contract of sale/repurchase, particularly the mode of payment of the purchase
price and the period for its payment. The law requires acceptance to be absolute and unqualified.

Ang Yu Asuncion et al. vs. Court of Appeals and Buen Realty Corp.
(G.R. No. 109125, December 2, 1994)

Ponente: Vitug

Topic: Sales; Contract of sale v. Contract to sell; remedies for violation of right of first refusal

Facts:

Petitioners Ang Yu Asuncion et. al. are lessees of residential and commercial spaces owned by the Unjiengs. They
have been leasing the property and possessing it since 1935 and have been paying rentals.

In 1986, the Unjiengs informed Petitioners Ang Yu Asuncion that the property was being sold and that Petitioners
were being given priority to acquire them (Right of First Refusal). They agreed on a price of P5M but they had not yet
agreed on the terms and conditions. Petitioners wrote to the Unjiengs twice, asking them to specify the terms and
conditions for the sale but received no reply. Later, the petitioners found out that the property was already about to be
sold, thus they instituted this case for Specific Performance [of the right of first refusal].

The Trial Court dismissed the case. The trial court also held that the Unjieng’s offer to sell was never accepted by the
Petitioners for the reason that they did not agree upon the terms and conditions of the proposed sale, hence, there
was no contract of sale at all. Nonetheless, the lower court ruled that should the defendants subsequently offer their
property for sale at a price of P11-million or below, plaintiffs will have the right of first refusal.

The Court of Appeals affirmed the decision of the Trial Court.

In the meantime, in 1990, the property was sold to De Buen Realty, Private Respondent in this case. The title to the
property was transferred into the name of De Buen and demanded that the Petitioners vacate the premises.

Because of this, Petitioners filed a motion for execution of the CA judgement. At first, CA directed the Sheriff to
execute an order directing the Unjiengs to issue a Deed of Sale in the Petitioner’s favour and nullified the sale to De
Buen Realty. But then, the CA reversed itself when the Private Respondents Appealed.
Issues:

1. Whether or not the Contract of Sale is perfected by the grant of a Right of First Refusal.
2. Whether or not a Right of First Refusal may be enforced in an action for Specific Performance.
Held:
1. No. A Right of First Refusal is not a Perfected Contract of Sale under Art. 1458 or an option under
Par. 2 Art 1479 or an offer under Art. 1319. In a Right of First Refusal, only the object of the contract is
determinate. This means that novinculum juris is created between the seller-offeror and the buyer-offeree.
2. No. Since a contractual relationship does not exist between the parties, a Right of First Refusal
may not be enforced through an action for specific performance. Its conduct is governed by the law on
human relations under Art. 19-21 of the Civil Code and not by contract law.

Therefore, the Supreme Court held that the CA could not have decreed at the time the execution of any deed of sale
between the Unjiengs and Petitioners.

Other Rules, Comments and Discussion:

This case is notable because it lays down the rules on options contracts and right of first refusal as well as promises
to buy and sell. First, the Supreme Court discussed the stages of the formation of a sales contract, these are:

1. Negotiation – covers the period from the time the prospective contracting parties indicate interest in
the contract to the time the contract is concluded (perfected).
2. Perfection – takes place upon the concurrence of the essential elements thereof. In a sales
contract this is governed by Art. 1458
3. Consummation – begins when the parties perform their respective undertakings under the contract
culminating in the extinguishment thereof
Until the contract is perfected (No. 2), it cannot, as an independent source of obligation, serve as a binding juridical
relation. A sales contract is perfected when a person, called the seller, obligates himself, for a price certain, to deliver
and to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees (Art 1458).

Under Art. 1458, there is no perfection of a sale under a “Contract to Sell”. A Contract to Sell is characterized as a
conditional sale and the breach of the suspensive condition will prevent the obligation to transfer title from acquiring
obligatory force.

Promises to Buy and Sell

Unconditional mutual promise to buy and sell – As long as the object is made determinate and the price is fixed, can
be obligatory on the parties, and compliance therewith may accordingly be exacted. The Right of First Refusal falls
under this classification.
Accepted unilateral promise – If it specifies the thing to be sold and the price to be paid and when coupled with a
valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of
option. This contract is legally binding. (Par. 2 Art. 1458) Note however, that the option is a contract separate and
distinct from the contract of sale. Once the option is exercised before it is withdrawn, a bilateral promise to sell and to
buy ensues and both parties are then reciprocally bound to comply with their respective undertakings.

Offers with a Period

Where a period is given to the offeree within which to accept the offer, the following rules generally govern:

1. If the period is not itself founded upon or supported by a consideration – Offeror may withdraw offer
at any time before its acceptance (or knowledge of its acceptance). However, the right to withdraw must not
be exercised whimsically or arbitrarily otherwise it can give rise to damages under Art. 19 of the New Civil
Code
2. If period is founded on a separate consideration – This is a perfected contract of option. Withdrawal
of the offer within the period of the option is deemed a breach of the contract of option (not the sale). “If, in
fact, the optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optionee-
offeree, the latter may not sue for specific performance on the proposed contract (“object” of the option)
since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders himself liable
for damages for breach of the option.”
3. Earnest money – This is not an offer with a period. Earnest money is distinguished from the option
contract if the consideration given will be considered as a part of the purchase price of the object of the sale.
Earnest money is evidence of a perfected contract of sale. (Art. 1482)
Right of First Refusal
This is “an innovative juridical relation” because it is neither a perfected contract of sale under Art. 1458 nor an option
contract under par. 2 Art 1479. The object might be made determinate, the exercise of the right, however, is
dependent on the offeror’s eventual intention to enter into a binding juridical relation with another but also on terms
and conditions such as price. There is no juridical tie or vinculum juris.

Breach of the right cannot justify correspondingly an issuance of a writ of execution under a court judgement that
recognizes its existence, such as in Ang Yu Asuncion. An action for Specific Performance is not allowed under a
Right of First Refusal because doing so would negate the indispensable element of consensuality in the perfection of
contracts.

This right is not inconsequential because it gives right to an action for damages under Art. 19.

Other Acts that Won’t Bind

Public advertisements or solicitations – Construed as mere invitations to make offers and/or proposals.
Related Cases

The cases of Equatorial v. Mayfair and Parañaque Kings v. Court of Appeals held that if a sale happens in violation of
a Right of First Refusal where the buyer is aware of the existence of that right in favor of another (such as when it is
written in a lease contract), the sale may be rescinded and the seller may be forced to offer the property to the party
with the Right of First Refusal.

G.R. No. L-9871 January 31, 1958


ATKINS, KROLL and CO., INC.,
vs.
B. CUA HIAN TEK

FACTS:

Atkins Kroll & Co. sent a letter to B. Cu HianTek on September 13, 1951, offering cartons of Luneta brand Sardines
subject to reply by September 23, 1951. HianTek unconditionally accepted the said offer through a letter delivered on
September 21, 1951, but Atkins failed to deliver the commodities due to the shortage of catch of sardines by the
packers in California.
HianTek, therefore, filed an action for damages in the CFI of Manila which granted the same in his favor.
Atkins herein contends that there was no such contract of sale but only an option to buy, which was not enforceable
for lack of consideration because it is provided under the 2nd paragraph of Article 1479 of the New Civil Code that
"an accepted unilatateral promise to buy or to sell a determinate thing for a price certain is binding upon the
promisor if the promise is supported by a consideration distinct from the price.” Atkins also insisted that the
offer was a mere offer of option, because the "firm offer" was a continuing offer to sell until September 23.

ISSUE:
Whether a contract of sale was constituted between the parties or only a unilateral promise to buy.

COURT RULING:

SC held that there was a contract of sale between the parties. ATKIN’s argument assumed that only a unilateral
promise arose when the respondent accepted the offer is incorrect because a bilateral contract to sell and to buy was
created upon HIAN TEK’s acceptance.
B. CuaHianTek’s letter-reply to Atkins indicated that he accepted "the firm offer for the sale. After accepting the
promise and before he exercises his option, the holder of the option is not bound to buy. In this case at bar, however,
upon TEK’s acceptance of herein ATKIN's offer, a bilateral promise to sell and to buy ensued, and the respondent
had immediately assumed the obligations of a purchaser.

EQUATORIAL REALTY V. MAYFAIR (November 21, 1996)


FACTS:

Petitioner Carmelo and Bauermann Inc. leased its parcel of land with 2-storey building to respondent Mayfair Theater
Inc.

They entered a contract which provides that if the LESSOR should desire to sell the leased premises, the LESSEE
shall be given 30-days exclusive option to purchase the same.
Carmelo informed Mayfair that it will sell the property to Equatorial. Mayfair made known its interest to buy the
property but only to the extent of the leased premises.

Notwithstanding Mayfair’s intention, Carmelo sold the property to Equatorial.

ISSUE:

WON the sale of the property to Equatorial is valid.

HELD:

The sale of the property should be rescinded because Mayfair has the right of first refusal. Both Equatorial and
Carmelo are in bad faith because they knew of the stipulation in the contract regarding the right of first refusal.

The stipulation is a not an option contract but a right of first refusal and as such the requirement of a separate
consideration for the option, has no applicability in the instant case. The consideration is built in the reciprocal
obligation of the parties.

In reciprocal contract, the obligation or promise of each party is the consideration for that of the other. (Promise to
lease in return of the right to first refusal)

With regard to the impossibility of performance, only Carmelo can be blamed for not including the entire property in
the right of first refusal. Court held that Mayfair may not have the option to buy the property. Not only the leased area
but the entire property.

Sampaguita Pictures, Inc. vs. Jalwindor Manufacturers, Inc.

Sampaguita Pictures, Inc. vs. Jalwindor Manufacturers, Inc.


93 SCRA 420
October 1979

FACTS:

Both the plaintiff-appellant Sampaguita Pictures Inc. (Sampaguita) and defendant-appellee Jalwindor Manufacturers
Inc. (Jalwindor) were domestic corporations duly organized under the Philippine laws. Sampaguita leased to Capitol
“300” Inc. (Capitol) the roof deck of its building with the agreement that all permanent improvements Capitol will make
on said property shall belong to Sampaguita without any part on the latter to reimburse Capitol for the expenses of
said improvements. Shortly, Capitol purchased on credit from Jalwindor glass and wooden jalousies, which the latter
itself delivered and installed in the leased premises, replacing the existing windows.

On June 1, 1964, Jalwindor filed with the CFI of Rizal, Quezon City an action for collection of a sum of money with a
petition for preliminary attachment against Capitol for its failure to pay its purchases. Later, Jalwindor and Capitol
submitted to the trial court a Compromised Agreement wherein Capitol acknowledged its indebtedness of P9,531.09,
payable in monthly installments of at least P300.00 a month beginning December 15,1964 and that all the materials
that Capitol purchased will be considered as security for such undertaking. Meanwhile, Sampaguita filed a complaint
for ejectment and for collection of a sum of money against Capitol for the latter’s failure to pay rentals from March
1964 to April 1965, and the City Court of Quezon City ordered Capitol on June 8, 1965 to vacate the premises and to
pay Sampaguita.

On the other hand, Capitol likewise failed to comply with the terms of the Compromise Agreement, and on July 31,
1966, the Sheriff of Quezon City made levy on the glass and wooden jalousies. Sampaguita filed a third-party claim
alleging that it is the owner of said materials and not Capitol, but Jalwindor filed an idemnity bond in favor of the
Sheriff and the items were sold at public auction on August 30, 1966, with Jalwindor as the highest bidder for
P6,000.00. Sampaguita filed with the CFI of Rizal, Quezon City an action to nullify the Sheriff's sale and for an
injunction to prevent Jalwindor from detaching the glass and wooden jalousies. Jalwindor was ordered to maintain
the status quo pending final determination of the case, and on October 20, 1967, the lower court dismissed the
complaint and ordered Sampaguita to pay Jalwindor the amount of P500.00 as attorney's fees.

ISSUE:

Was there a delivery made and, therefore, a transfer of ownership of the thing sold?

COURT RULING:

The Supreme Court reversed the decision of the lower court declaring Sampaguita as declared the lawful owner of
the disputed glass and wooden jalousies, permanently enjoining Jalwindor from detaching said items from the roof
deck of the Sampaguita Pictures Building, and ordered Jalwindor to pay Sampaguita the sum of P1,000.00 for and as
attorney's fees.
When a property levied upon by the sheriff pursuant to a writ of execution is claimed by a third person in a sworn
statement of ownership thereof, as prescribed by the rules, an entirely different matter calling for a new adjudication
arises. The items in question were illegally levied upon since they do not belong to the judgment debtor. The power
of the Court in execution of judgment extends only to properties unquestionably belonging to the judgment debtor.
The fact that Capitol failed to pay Jalwindor the purchase price of the items levied upon did not prevent the transfer of
ownership to Capitol and, later, to Sampaguita by virtue of the agreement in their lease contract. Therefore, the
complaint of Sampaguita to nullify the Sheriff's sale is well founded, and should prosper.

CARMELITA FUDOT VS CATTLEYA LAND


G.R. No. 171008 September 13, 2007
FACTS:

 In Jul 1992 respondents asked someone to check on the titles of 9 lots which includes the subject land which
they intend to buy from spouses tecson. Finding no defect respondent purchase the lots through a conditional
sale and executed an absolute deed of sale in Aug 30, 1993 for the same lots. Both deeds were registered on
Nov 6, 1992 and Oct 4, 1993. The register of deeds however refused to annotate the deed of sale on the titles
because of an existing notice of attachment pending before a RTC in bohol. The said attachment were canceled
by virtue of compromise agreement between tecson and their creditor. Thus, titles to 6 out of the 9 lots were
issued and title to the 3 remaining lots were refused to be issued.

 Jan 23, 1995 petitioner presented for registration before the register of deeds the owners copy of the title to the
subject property together with the deed of sale executed by the tecsons in favor of petitioner. Respondent
oppose the application. However, the register of deeds had already registered the deed of sale in favor of
petitioner and issued a new title in her name.

 May 5, 1995 respondent filed a complaint for quieting of title and/or recovery of ownership, cancellation of title
with damages before the RTC. The court ruled in favor of respondent. According to the court the respondent had
recorded in good faith the deed of sale in its favor ahead of petitioner. Petitioner appealed. CA dismissed the
appeal.
ISSUE:
Whether or not there is Double sale
HELD:
In the first place, there is no double sale to speak of. Art. 1544 of the Civil Code, Which provides the rule on double
sale, applies only to a situation where the same property is validly sold to different Vendees. In this case, there is
only one valid sale to advert to, that between the spouses Tecson and respondent.
The trial court declared that the sale between the spouses Tecson and petitioner is invalid, as it bears the forged
signature of Asuncion. Said finding is based on the unrebutted testimony of Asuncion and the trial courts visual
analysis and comparison of the signatures in her Complaint-in-Intervention and the purported deed of sale. This
finding was upheld by the Court of Appeals, as it ruled that the purported sale in petitioners favor is null and void,
taking into account Asuncions deposition. In particular, the Court of Appeals noted petitioners failure to attend the
taking of the oral deposition and to give written interrogatories. In short, she did not take the necessary steps to rebut
Asuncions definitive assertion.

Petitioner argues she has a better right over the property in question, as the holder of and the first one to present, the
owners copy of the title for the issuance of a new TCT. The Court is not persuaded.

The act of registration does not validate petitioners otherwise void contract. Registration is a mere ministerial act by
which a deed, contract, or instrument is sought to be inscribed in the records of the Office of the Register of Deeds
and annotated at the back of the certificate of title covering the land subject of the deed, contract, or instrument.
While it operates as a notice of the deed, contract, or instrument to others, it does not add to its validity nor converts
an invalid instrument into a valid one as between the parties, nor amounts to a declaration by the state that the
instrument is a valid and subsisting interest in the land. The registration of petitioners void deed is not an impediment
to a declaration by the courts of its invalidity.

Even assuming that there was double sale in this case, petitioner would still not prevail. In interpreting this provision,
the Court declared that the governing principle is primus tempore, potior jure (first in time, stronger in right).
Knowledge gained by the first buyer of the second sale cannot defeat the first buyers rights, except where the second
buyer registers in good faith the second sale ahead of the first as provided by the aforequoted provision of the Civil
Code. Such knowledge of the first buyer does not bar him from availing of his rights under the law, among them to
register first his purchase as against the second buyer. However, knowledge gained by the second buyer of the first
sale defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration
with bad faith. It is thus essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer
must act in good faith in registering his deed of sale.

The Supreme court ruled in favor of Respondent.

SECOND DIVISION

G.R. No. 123547 May 21, 2001


REV. FR. DANTE MARTINEZ, petitioner,
vs.
HONORABLE COURT OF APPEALS, HONORABLE JUDGE JOHNSON BALLUTAY, PRESIDING JUDGE,
BRANCH 25, REGIONAL TRIAL COURT OF CABANA TUAN CITY, HONORABLE JUDGE ADRIANO TUAZON,
JR., PRESIDING JUDGE, BRANCH 28, REGIONAL TRIAL COURT OF CABANATUAN CITY, SPOUSES
REYNALDO VENERACION and SUSAN VENERACION, SPOUSES MAXIMO HIPOLITO and MANUELA DE LA
PAZ and GODOFREDO DE LA PAZ, respondents.

MENDOZA, J.:

This is a petition for review on certiorari of the decision, dated 7, 1995, and resolution, dated January 31, 1996, of the
Court of Appeals, which affirmed the decisions of the Regional Trial Court, Branches 251 and 28,2 Cabanatuan City,
finding private respondents spouses Reynaldo and Susan Veneracion owners of the land in dispute, subject to
petitioner's rights as a builder in good faith.

The facts are as follows:

Sometime in February 1981, private respondents Godofredo De la Paz and his sister Manuela De la Paz, married to
Maximo Hipolito, entered into an oral contract with petitioner Rev. Fr. Dante Martinez, then Assistant parish priest of
Cabanatuan City, for the sale of Lot No. 1337-A-3 at the Villa Fe Subdivision in Cabanatuan City for the sum of
P15,000.00. The lot is located along Maharlika Road near the Municipal Hall of Cabanatuan City. At the time of the
sale, the lot was still registered in the name of Claudia De la Paz, mother of private respondents, although the latter
had already sold it to private respondent Manuela de la Paz by virtue of a Deed of Absolute Sale dated May 26, 1976
(Exh. N/Exh. 2-Veneracion).3 Private respondent Manuela subsequently registered the sale in her name on October
22, 1981 and was issued TCT No. T-40496 (Exh. 9).4 When the land was offered for sale to petitioner, private
respondents De la Paz were accompanied by their mother, since petitioner dealt ' with the De la Fazes as a family
and not individually. He was assured by them that the lot belonged to Manuela De la Paz. It was agreed that
petitioner would give a downpayment of P3,000.00 to private respondents De la Paz and that the balance would be
payable by installment. After giving the P3,000.00 downpayment, petitioner started the construction of a house on the
lot after securing a building permit from the City Engineer's Office on April 23, 1981, with the written consent of the
then registered owner, Claudia de la Paz (Exh. B/Exh, 1).5 Petitioner likewise began paying the real estate taxes on
said property (Exh. D, D-l, D-2).6 Construction on the house was completed on October 6, 1981 (Exh. V).7 Since
then, petitioner and his family have maintained their residence there.8

On January 31, 1983, petitioner completed payment of the lot for which private respondents De la Paz executed two
documents. The first document (Exh. A) read:

1-31-83

Ang halaga ng Lupa sa Villa Fe Subdivision na ipinagbili kay Fr. Dante Martinez ay P15,000.00 na
pinangangako namin na ibibigay ang Deed of Sale sa ika-25 ng Febrero 1983.

[SGD.] METRING HIPOLITO

[SGD.] JOSE GODOFREDO DE LA PAZ9

The second writing (Exh. O) read:

Cabanatuan City
March 19, 1986

TO WHOM IT MAY CONCERN:

This is to certify that Freddie dela Paz has agreed to sign tomorrow (March 20) the affidavit of sale of lot
located at Villa Fe Subdivision sold to Fr. Dante Martinez.

[Sgd.] Freddie dela Paz

FREDDIE DELA PAZ10

However, private respondents De la Paz never delivered the Deed of Sale they promised to petitioner.

In the meantime, in a Deed of. Absolute Sale with Right to Repurchase dated October 28, 1981 (Exh. 10),11 private
respondents De la Paz sold three lots with right to repurchase the same within one year to private respondents
spouses Reynaldo and Susan Veneracion for the sum of P150,000.00. One of the lots sold was the lot previously
sold to petitioner.12

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

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

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

The matter was then referred to the Katarungang Pambarangay of San Juan, Cabanatuan City for conciliation, but
the parties failed to reach an agreement (Exh. M/Exh. 13).18 As a consequence, on May 12, 1986, private respondent
Reynaldo Veneracion brought an action for ejectment in the Municipal Trial Court, Branch III, Cabanatuan City
against petitioner and his mother (Exh. 14).19
On the other hand, on June 10, 1986, petitioner caused a notice of lis pendens to be recorded on TCT No. T-44612
with the Register of Deeds of Cabanatuan City (Exh. U).20

During the pre-trial conference, the parties agreed to have the case decided under the Rules on Summary Procedure
and defined the issues as follows:

1. Whether of not defendant (now petitioner) may be judicially ejected.

2. Whether or not the main issue in this case is ownership.

3. Whether or not damages may be awarded.21

On January 29, 1987, the trial court rendered its decision, pertinent portions of which are quoted as follows:

With the foregoing findings of the Court, defendants [petitioner Rev. Fr. Dante Martinez and his mother] are
the rightful possessors and in good faith and in concept of owner, thus cannot be ejected from the land in
question. Since the main issue is ownership, the better remedy of the plaintiff [herein private respondents
Veneracion] is Accion Publiciana in the Regional Trial Court, having jurisdiction to adjudicate on ownership.

Defendants' counterclaim will not be acted upon it being more than P20,000.00 is beyond this Court's power
to adjudge.

WHEREFORE, judgment is hereby rendered, dismissing plaintiff's complaint and ordering plaintiff to pay
Attorney's fee of P5,000.00 and cost of suit.

SO ORDERED.22

On March 3, 1987, private respondents Veneracion filed a notice of appeal with the Regional Trial Court, but failed to
pay the docket fee. On June 6, 1989, or over two years after the filing of the notice of appeal, petitioner filed a Motion
for Execution of the Judgment, alleging finality of judgment for failure of private respondents Veneracion to perfect
their appeal and failure to prosecute the appeal for an unreasonable length of time.

Upon objection of private respondents Veneracion, the trial court denied on June 28, 1989 the motion for execution
and ordered the records of the case to be forwarded to the appropriate Regional Trial Court. On July 11, 1989,
petitioner appealed from this order. The appeal of private respondents Veneracion from the decision of the MTC and
the appeal of petitioner from the order denying petitioner's motion for execution were forwarded to the Regional Trial
Court, Branch 28, Cabanatuan City. The cases were thereafter consolidated under Civil Case No. 670-AF.

On February 20, 1991, the Regional Trial Court rendered its decision finding private respondents Veneracion as the
true owners of the lot in dispute by virtue of their prior registration with the Register of Deeds, subject to petitioner's
rights as builder in good faith, and ordering petitioner and his privies to Vacate the lot after receipt of the cost of the
construction of the house, as well as to pay the sum of P5,000.00 as attorney's fees and the costs of the suit. It,
however, failed to rule on petitioner's appeal of the Municipal Trial Court's order denying their Motion for Execution of
Judgment.

Meanwhile, on May 30, 1986, while the ejectment case was pending before the Municipal Trial Court, petitioner
Martinez filed a complaint for annulment of sale with damages against the Veneracions and De la Pazes with the
Regional Trial Court, Branch 25, Cabanatuan City. On March 5, 1990, the trial court rendered its decision finding
private respondents Veneracion owners of the land in dispute, subject to the rights of petitioner as a builder in good
faith, and ordering private respondents De la Paz to pay petitioner the sum of P50,000.00 as moral damages and
P10,000.00 as attorney's fees, and for private respondents to pay the costs of the suit.

On March 20, 1991, petitioner then filed a petition for review with the Court of Appeals of the RTC's decision in Civil
Case No. 670-AF (for ejectment). Likewise, on April 2, 1991, petitioner appealed the trial court's decision in Civil
Case No. 44-[AF]-8642-R (for annulment of sale and damages) to the Court of Appeals. The cases were designated
as CA G.R. SP. No. 24477 and CA G.R. CY No. 27791, respectively, and were subsequently consolidated. The
Court of Appeals affirmed the trial courts' decisions, without ruling on petitioner's appeal from the Municipal Trial
Court's order denying his Motion for Execution of Judgment. It declared the Veneracions to be owners of the lot in
dispute as they were the first registrants in good faith, in accordance with Art. 1544 of the Civil Code. Petitioner
Martinez failed to overcome the presumption of good faith for the following reasons:

1. when private respondent Veneracion discovered the construction on the lot, he immediately informed
private respondent Godofredo about it and relied on the latter's assurance that he will take care of the
matter.

2. the sale between petitioner Martinez and private respondents De la Paz was not notarized, as required by
Arts. 1357 and 1358 of the Civil Code, thus it cannot be said that the private respondents Veneracion had
knowledge of the first sale.23

Petitioner's motion for reconsideration was likewise denied in a resolution dated January 31, 1996.24 Hence this
petition for review. Petitioner raises the following assignment of errors:

I THE PUBLIC RESPONDENTS HONORABLE COURT OF APPEALS AND REGIONAL TRIAL COURT
JUDGES JOHNSON BALLUTAY AND ADRIANO TUAZON ERRED IN HOLDING THAT PRIVATE
RESPONDENTS REYNALDO VENERACION AND WIFE ARE BUYERS AND REGISTRANTS IN GOOD
FAITH IN RESOLVING THE ISSUE OF OWNERSHIP AND POSSESSION OF THE LAND IN DISPUTE.

II THAT PUBLIC RESPONDENTS ERRED IN NOT RESOLVING AND DECIDING THE APPLICABILITY OF
THE DECISION OF THIS HONORABLE COURT IN THE CASES OF SALVORO VS. TANEGA, ET AL., G.
R. NO. L 32988 AND IN ARCENAS VS. DEL ROSARIO, 67 PHIL 238, BY TOTALLY IGNORING THE SAID
DECISIONS OF THIS HONORABLE COURT IN THE ASSAILED DECISIONS OF THE PUBLIC
RESPONDENTS.

III THAT THE HONORABLE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO THE
PETITION FOR REVIEW IN CA G. R. SP. NO. 24477.

IV THAT THE HONORABLE COURT OF APPEALS IN DENYING PETITIONER'S PETITION FOR REVIEW
AFORECITED INEVITABLY SANCTIONED AND/OR WOULD ALLOW A VIOLATION OF LAW AND
DEPARTURE FROM THE USUAL COURSE OF JUDICIAL PROCEEDINGS BY PUBLIC RESPONDENT
HONORABLE JUDGE ADRIANO TUAZON WHEN THE LATTER RENDERED A DECISION IN CIVIL CASE
NO. 670-AF [ANNEX "D"] REVERSING THE DECISION OF THE MUNICIPAL TRIAL COURT JUDGE
SENDON DELIZO IN CIVIL CASE NO. 9523 [ANNEX "C"] AND IN NOT RESOLVING IN THE SAME CASE
THE APPEAL INTERPOSED BY DEFENDANTS ON THE ORDER OF THE SAME COURT DENYING THE
MOTION FOR EXECUTION.

V THAT THE RESOLUTION [ANNEX "B"] (OF THE COURT OF APPEALS) DENYING PETITIONER'S
MOTION FOR RECONSIDERATION [ANNEX "1"] WITHOUT STATING CLEARLY THE FACTS AND THE
LAW ON WHICH SAID RESOLUTION WAS BASED, (IS ERRONEOUS).
These assignment of errors raise the following issues:

1. Whether or not private respondents Veneracion are buyers in good faith of the lot in dispute as to make
them the absolute owners thereof in accordance with Art. 1544 of the Civil Code on double sale of
immovable property.

2. Whether or not payment of the appellate docket fee within the period to appeal is not necessary for the
perfection of the appeal after a notice of appeal has been filed within such period.

3. Whether or not the resolution of the Court of Appeals denying petitioner's motion for reconsideration is
contrary to the constitutional requirement that a denial of a motion for reconsideration must state the legal
reasons on which it is based.

First. It is apparent from the first and second assignment of errors that petitioner is assailing the findings of fact and
the appreciation of the evidence made by the trial courts and later affirmed by the respondent court. While, as a
general rule, only questions of law may be raised in a petition for review under Rule 45 of the Rules of Court, review
may nevertheless be granted under certain exceptions, namely: (a) when the conclusion is a finding grounded
entirely on speculation, surmises, or conjectures; (b) when the inference made is manifestly mistaken, absurd, or
impossible; (c) where there is a grave abuse of discretion; (d) when the judgment is based on a misapprehension of
facts; (e) when the findings of fact are conflicting; (f) when the Court of Appeals, in making its findings, went beyond
the issue of the case and the same is contrary to the admissions of both appellant and appellee; (g) when the
findings of the Court of Appeals are contrary to those of the trial court; (h) when the findings of fact are conclusions
without citation of specific evidence on which they are based; (I) when the facts set forth in the petition as well as in
the petitioner's main and reply briefs are not disputed by the respondents; (j) when the finding of fact of the Court of
Appeals is premised on the supposed absence of evidence but is contradicted by the evidence on record; and (k)
when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if
properly considered, would justify a different conclusion.25

In this case, the Court of Appeals based its ruling that private respondents Veneracion are the owners of the disputed
lot on their reliance on private respondent Godofredo De la Paz's assurance that he would take care of the matter
concerning petitioner's occupancy of the disputed lot as constituting good faith. This case, however, involves double
sale and, on this matter, Art. 1544 of the Civil Code provides that where immovable property is the subject of a
double sale, ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it to the
Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default
thereof, to the person who presents the oldest title.26 The requirement of the law, where title to the property is
recorded in the Register of Deeds, is two-fold: acquisition in good faith and recording in good faith. To be entitled to
priority, the second purchaser must not only prove prior recording of his title but that he acted in good
faith, i.e., without knowledge or notice of a prior sale to another. The presence of good faith should be ascertained
from the circumstances surrounding the purchase of the land.27

1. With regard to the first sale to private respondents Veneracion, private respondent Reynaldo Veneracion testified
that on October 10, 1981, 18 days before the execution of the first Deed of Sale with Right to Repurchase, he
inspected the premises and found it vacant.28 However, this is belied by the testimony of Engr. Felix D. Minor, then
building inspector of the Department of Public Works and Highways, that he conducted on October 6, 1981 an ocular
inspection of the lot in dispute in the performance of his duties as a building inspector to monitor the progress of the
construction of the building subject of the building permit issued in favor of petitioner on April 23, 1981, and that he
found it 100 % completed (Exh. V).29 In the absence of contrary evidence, he is to be presumed to have regularly
performed his official duty.30 Thus, as early as October, 1981, private respondents Veneracion already knew that
there was construction being made on the property they purchased.
2. The Court of Appeals failed to determine the nature of the first contract of sale between the private respondents by
considering their contemporaneous and subsequent acts.31 More specifically, it overlooked the fact that the first
contract of sale between the private respondents shows that it is in fact an equitable mortgage.

The requisites for considering a contract of sale with a right of repurchase as an equitable mortgage are (1) that the
parties entered into a contract denominated as a contract of sale and (2) that their intention was to secure an existing
debt by way of mortgage.32 A contract of sale with right to repurchase gives rise to the presumption that it is an
equitable mortgage in any of the following cases: (1) when the price of a sale with a right to repurchase is unusually
inadequate; (2) when the vendor remains in possession as lessee or otherwise; (3) when, upon or after the expiration
of the right to repurchase, another instrument extending the period of redemption or granting a new period is
executed; (4) when the purchaser retains for himself a part of the purchase price; (5) when the vendor binds himself
to pay the taxes on the thing sold; (6) in any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.33 In case
of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.34

In this case, the following circumstances indicate that the private respondents intended the transaction to be an
equitable mortgage and not a contract of sale: (1) Private respondents Veneracion never took actual possession of
the three lots; (2) Private respondents De la Paz remained in possession of the Melencio lot which was co-owned by
them and where they resided; (3) During the period between the first sale and the second sale to private respondents
Veneracion, they never made any effort to take possession of the properties; and (4) when the period of redemption
had expired and private respondents Veneracion were informed by the De la Pazes that they are offering the lots for
sale to another person for P200,000.00, they never objected. To the contrary, they offered to purchase the two lots
for P180,000.00 when they found that a certain Mr. Tecson was prepared to purchase it for the same amount. Thus,
it is clear from these circumstances that both private respondents never intended the first sale to be a contract of
sale, but merely that of mortgage to secure a debt of P150,000.00.

With regard to the second sale, which is the true contract of sale between the parties, it should be noted that this
Court in several cases,35 has ruled that a purchaser who is aware of facts which should put a reasonable man upon
his guard cannot turn a blind eye and later claim that he acted in good faith. Private respondent Reynaldo himself
admitted during the pre-trial conference in the MTC in Civil Case No. 9523 (for ejectment) that petitioner was already
in possession of the property in dispute at the time the second Deed of Sale was executed on June 1, 1983 and
registered on March 4, 1984. He, therefore, knew that there were already occupants on the property as early as
1981. The fact that there are persons, other than the vendors, in actual possession of the disputed lot should have
put private respondents on inquiry as to the nature of petitioner's right over the property. But he never talked to
petitioner to verify the nature of his right. He merely relied on the assurance of private respondent Godofredo De la
Paz, who was not even the owner of the lot in question, that he would take care of the matter. This does not meet the
standard of good faith.

3. The appellate court's reliance on Arts. 1357 and 1358 of the Civil Code to determine private respondents
Veneracion's lack of knowledge of petitioner's ownership of the disputed lot is erroneous.

Art. 135736 and Art. 1358,37 in relation to Art. 1403(2)38 of the Civil Code, requires that the sale of real property must
be in writing for it to be enforceable. It need not be notarized. If the sale has not been put in writing, either of the
contracting parties can compel the other to observe such requirement.39 This is what petitioner did when he
repeatedly demanded that a Deed of Absolute Sale be executed in his favor by private respondents De la Paz. There
is nothing in the above provisions which require that a contract of sale of realty must be executed in a public
document. In any event, it has been shown that private respondents Veneracion had knowledge of facts which would
put them on inquiry as to the nature of petitioner's occupancy of the disputed lot.
Second. Petitioner contends that the MTC in Civil Case No. 9523 (for ejectment) erred in denying petitioner's Motion
for Execution of the Judgment, which the latter filed on June 6, 1989, two years after private respondents Veneracion
filed a notice of appeal with the MTC on March 3, 1987 without paying the appellate docket fee. He avers that the trial
court's denial of his motion is contrary to this Court's ruling in the cases of Republic v. Director of
Lands,40 and Aranas v. Endona41 in which it was held that where the appellate docket fee is not paid in full within the
reglementary period, the decision of the MTC becomes final and unappealable as the payment of docket fee is not
only a mandatory but also a jurisdictional requirement.

Petitioner's contention has no merit. The case of Republic v. Director of Lands deals with the requirement for appeals
from the Courts of First Instance, the Social Security Commission, and the Court of Agrarian Relations to the Court of
Appeals. The case of Aranas v. Endona, on the other hand, was decided under the 1964 Rules of Court and prior to
the enactment of the Judiciary Reorganization Act of 1981 (B. P. Blg. 129) and the issuance of its Interim Rules and
Guidelines by this Court on January 11, 1983. Hence, these cases are not applicable to the matter at
issue.1âwphi1.nêt

On the other hand, in Santos v. Court of Appeals,42 it was held that although an appeal fee is required to be paid in
case of an appeal taken from the municipal trial court to the regional trial court, it is not a prerequisite for the
perfection of an appeal under §2043 and §2344 of the Interim Rules and Guidelines issued by this Court on January
11, 1983 implementing the Judiciary Reorganization Act of 1981 (B.P. Blg. 129). Under these sections, there are only
two requirements for the perfection of an appeal, to wit: (a) the filing of a notice of appeal within the reglementary
period; and (b) the expiration of the last day to appeal by any party. Even in the procedure for appeal to the regional
trial courts,45 nothing is mentioned about the payment of appellate docket fees.

Indeed, this Court has ruled that, in appealed cases, the failure to pay the appellate docket fee does not
automatically result in the dismissal of the appeal, the dismissal being discretionary on the part of the appellate
court.46 Thus, private respondents Veneracions' failure to pay the appellate docket fee is not fatal to their appeal.

Third. Petitioner contends that the resolution of the Court of Appeals denying his motion for reconsideration was
rendered in violation of the Constitution because it does not state the legal basis thereof.

This contention is likewise without merit.

Art. VIII, Sec. 14 of the Constitution provides that "No petition for review or motion for reconsideration of a decision of
the court shall be refused due course or denied without stating the basis therefor." This requirement was fully
complied with when the Court of Appeals, in denying. reconsideration of its decision, stated in its resolution that it
found no reason to change its ruling because petitioner had not raised anything new.47 Thus, its resolution denying
petitioner's motion for reconsideration states:

For resolution is the Motion for Reconsideration of Our Decision filed by the petitioners.

Evidently, the motion poses nothing new. The points and arguments raised by the movants have been
considered and passed upon in the Decision sought to be reconsidered. Thus, We find no reason to disturb
the same.

WHEREFORE, the motion is hereby DENIED.

SO ORDERED.48

Attorney's. fees should be awarded as petitioner was compelled to litigate to protect his interest due to private
respondents' act or omission.49
WHEREFORE, the decision of the Court of Appeals is REVERSED and a new one is RENDERED:

(1) declaring as null and void the deed of sale executed by private respondents Godofredo and Manuela De
la Paz in favor of private respondents spouses Reynaldo and Susan Veneracion;

(2) ordering private respondents Godofredo and Manuela De la Paz to execute a deed of absolute sale in
favor of petitioner Rev. Fr. Dante Martinez;

(3) ordering private respondents Godofredo and Manuela De la Paz to reimburse private respondents
spouses Veneracion the amount the latter may have paid to the former;

(4) ordering the Register of Deeds of Cabanatuan City to cancel TCT No. T-44612 and issue a new one in
the name of petitioner Rev. Fr. Dante Martinez; and

(5) ordering private respondents to pay petitioner jointly and severally the sum of P20,000.00 as attorney's
fees and to pay the costs of the suit.

SO ORDERED.1âwphi1.nêt

FIRST DIVISION

[G.R. No. 92310. September 3, 1992.]

AGRICULTURAL AND HOME EXTENSION DEVELOPMENT GROUP, represented by Nicasio D. Sanchez, Sr.,
substituted by Milagros S. Bucu, Petitioner, v. COURT OF APPEALS, and LIBRADO
CABAUTAN, Respondents.

Gideon C. Bondoc for Petitioner.

Balgos & Perez for Private Respondent.

SYLLABUS

1. CIVIL LAW; SPECIAL CONTRACTS; SALE; RULE IN CASE OF DOUBLE SALE; APPLICATION IN CASE AT
BAR. — Under Article 1544 of the Civil Code of the Philippines: Art. 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in
good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the
ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith. It is not disputed that the first sale to Gundran was
not registered while the second sale to Cabautan was registered. Following the above-quoted provision, the courts
below were justified in according preferential rights to the private respondent, who had registered the sale in his
favor, as against the petitioner’s co-venturer whose right to the same property had not been recorded.

2. ID.; ID.; ID.; PURCHASER IN GOOD FAITH; DEFINED. — A purchaser in good faith is defined as "one who buys
the property of another without notice that some other person has a right to or interest in such property and pays a
full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some
other person in the property."cralaw virtua1aw library

3. ID.; ID.; ID.; ID.; SALE OF PROPERTY REGISTERED UNDER THE TORRENS SYSTEM; EFFECT OF NOTICE
OF LIS PENDENS ANNOTATED ON THE CERTIFICATE. — The petitioner claims, however, that Cabautan was a
purchaser in bad faith because he was fully aware of the notices of lis pendens at the back of TCT No. 287416 and of
the earlier sale of the land to Gundran. An examination of TCT No. 287416 discloses no annotation of any sale, lien,
encumbrance or adverse claim in favor of Gundran or the petitioner. Well-settled is the rule that when the property
sold is registered under the Torrens system, registration is the operative act to convey or affect the land insofar as
third persons are concerned. Thus, a person dealing with registered land is only charged with notice of the burdens
on the property which are noted on the register or certificate of title. While it is true that notices of lis pendens in favor
of other persons were earlier inscribed on the title, these did not have the effect of establishing a lien or encumbrance
on the property affected. Their only purpose was to give notice to third persons and to the whole world that any
interest they might acquire in the property pending litigation would be subject to the result of the suit.

DECISION

CRUZ, J.:

We are asked again to determine who as between two successive purchasers of the same land should be
recognized as its owner. The answer is simple enough. But we must first, as usual, plow through some alleged
complications.

The pertinent background facts are as follows:chanrob1es virtual 1aw library

On March 29, 1972, the spouses Andres Diaz and Josefa Mia sold to Bruno Gundran a 19-hectare parcel of land in
Las Piñas, Rizal, covered by TCT No. 287416. The owner’s duplicate copy of the title was turned over to Gundran.
However, he did not register the Deed of Absolute Sale because he said he was advised in the Office of the Register
of Deeds of Pasig of the existence of notices of lis pendens on the title.chanrobles law library

On November 20, 1972, Gundran and the herein petitioner, Agricultural and Home Development Group, entered into
a Joint Venture Agreement for the improvement and subdivision of the land. This agreement was also not annotated
on the title.

On August 30, 1976, the spouses Andres Diaz and Josefa Mia again entered into another contract of sale of the
same property with Librado Cabautan, the herein private Respondent.

On September 3, 1976, by virtue of an order of the Court of First Instance of Rizal, a new owner’s copy of the
certificate of title was issued to the Diaz spouses, who had alleged the loss of their copy. On that same date, the
notices of lis pendens annotated on TCT No. 287416 were canceled and the Deed of Sale in favor of private
respondent Cabautan was recorded. A new TCT No. S-33850/T-172 was thereupon issued in his name in lieu of the
canceled TCT No. 287416.

On March 14, 1977, Gundran instituted an action for reconveyance before the Court of First Instance of Pasay City *
against Librado Cabautan and Josefa Mia seeking, among others, the cancellation of TCT No. 33850/T-172 and the
issuance of a new certificate of title in his name.

On August 31, 1977, the petitioner, represented by Nicasio D. Sanchez, Sr., filed a complaint in intervention with
substantially the same allegations and prayers as that in Gundran’s complaint.

In a decision dated January 12, 1987, 1 Gundran’s complaint and petitioner’s complaint in intervention were
dismissed for lack of merit. So was the private respondent’s counterclaims, for insufficiency of evidence.

Upon appeal, this decision was affirmed by the respondent Court of Appeals, with the modification that Josefa Mia
was ordered to pay Gundran the sum of P90,000.00, with legal interest from September 3, 1976, plus the costs of
suit. 2

Under Article 1544 of the Civil Code of the Philippines:chanrob1es virtual 1aw library

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good faith, if it should be movable property.chanrobles virtual
lawlibrary

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

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

It is not disputed that the first sale to Gundran was not registered while the second sale to Cabautan was registered.

Following the above-quoted provision, the courts below were justified in according preferential rights to the private
respondent, who had registered the sale in his favor, as against the petitioner’s co-venturer whose right to the same
property had not been recorded.

The petitioner claims, however, that Cabautan was a purchaser in bad faith because he was fully aware of the
notices of lis pendens at the back of TCT No. 287416 and of the earlier sale of the land to Gundran.chanrobles virtual
lawlibrary

A purchaser in good faith is defined as "one who buys the property of another without notice that some other person
has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or
before he has notice of the claim or interest of some other person in the property." 3

An examination of TCT No. 287416 discloses no annotation of any sale, lien, encumbrance or adverse claim in favor
of Gundran or the petitioner. Well-settled is the rule that when the property sold is registered under the Torrens
system, registration is the operative act to convey or affect the land insofar as third persons are concerned. 4 Thus, a
person dealing with registered land is only charged with notice of the burdens on the property which are noted on the
register or certificate of title. 5

While it is true that notices of lis pendens in favor of other persons were earlier inscribed on the title, these did not
have the effect of establishing a lien or encumbrance on the property affected. Their only purpose was to give notice
to third persons and to the whole world that any interest they might acquire in the property pending litigation would be
subject to the result of the suit.

Cabautan took this risk. Significantly, three days after the execution of the deed of sale in his favor, the notices of lis
pendens were canceled by virtue of the orders of the Court of First Instance of Rizal, Branch 23, dated April 1, 1974,
and April 4, 1974. Cabautan therefore acquired the land free of any liens or encumbrances and so could claim to be
a purchaser in good faith and for value.

The petitioner insists that it was already in possession of the disputed property when Cabautan purchased it and that
he could not have not known of that possession. Such knowledge should belie his claim that he was an innocent
purchaser for value. However, the courts below found no evidence of the alleged possession, which we must also
reject in deference to this factual finding.chanrobles virtual lawlibrary

The petitioner’s reliance on Casis v. Court of Appeals 6 is misplaced.

The issue at bar is whether private respondent Cabautan is an innocent purchaser for value and so entitled to the
priority granted under Article 1544 of the Civil Code. The Casis case, on the other hand, involved the issues of
whether or not: 1) certiorari was the proper remedy of the petitioner: 2) the previous petition for certiorari which
originated from the quieting of title case was similar to and, hence, a bar to the petition for certiorari arising from the
forcible entry case; and 3) the court a quo committed grave abuse of discretion amounting to lack or excess of
jurisdiction in issuing the order which dissolved the restraining order issued in connection with the ejectment case.
The Court was not called upon in that case to determine who as between the two purchasers of the subject property
should be preferred.

The petitioner invokes the ruling of the lower court in that case to the effect that the registration of the sale in favor of
the second purchaser and the issuance of a new certificate of title in his favor did not in any manner vest in him any
right of possession and ownership over the subject property because the seller, by reason of their prior sale, had
already lost whatever right or interest she might have had in the property at the time the second sale was made.

This excerpt was included in the ponencia only as part of the narration of the background facts and was not thereby
adopted as a doctrine of the Court. It was considered only for the purpose of ascertaining if the court below had
determined the issue of the possession of the subject property pending resolution of the question of ownership.
Obviously, the Court could not have adopted that questionable ruling as it would clearly militate against the provision
of Article 1544.chanrobles.com:cralaw:red

Worthy of note at this juncture is the observation of Justice Edgardo L. Paras, to wit:chanrob1es virtual 1aw library

True, no one can sell what he does not own, but this is merely the general rule. Is Art. 1544 then an exception to the
general rule? In a sense, yes, by reason of public convenience (See Aitken v. Lao, 36 Phil. 510); in still another
sense, it really reiterates the general rule in that insofar as innocent third persons are concerned, the registered
owner (in the case of real property) is still the owner, with power of disposition. 7

The language of Article 1544 is clear and unequivocal. In light of its mandate and of the facts established in this case,
we hold that ownership must be recognized in the private respondent, who bought the property in good faith and, as
an innocent purchaser for value, duly and promptly registered the sale in his favor.

WHEREFORE, the petition is DENIED and the questioned decision AFFIRMED in toto, with costs against the
petitioner.

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 196117 August 13, 2014

KRYSTLE REALTY DEVELOPMENT CORPORATION, represented by CHAIRMAN OF THE BOARD, WILLIAM


C. CU, Petitioner,
vs.
DOMINGO ALIBIN, as substituted by his heirs, namely: BEATRIZ A. TORZAR, VIRGINIA A. TARA YA,
ROSARIO A. MARCO, JESUS A. ALIBIN, and JAY ALIBIN, as substituted by his children, namely: JAYNES
ALIBIN, JAY ALIBIN, and JESUS ALIBIN, JR., Respondents.

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

G.R. No. 196129

CARIDAD RODRIGUEZA, as substituted by RUFINO RODRIGUEZA, Petitioner,


vs.
DOMINGO ALIBIN, as substituted by his heirs, namely: BEATRIZ A. TORZAR, VIRGINIA A. TARA YA,
ROSARIO A. MARCO, JESUS A. ALIBIN, and JAY ALIBIN, as substituted by his children, namely: JAYNES
ALIBIN, JAY ALIBIN, and JESUS ALIBIN, JR., Respondents.

DECISION

PERLAS -BERNABE, J.:

Assailed in these consolidated petitions for review oncertiorari1 are the Decision2 dated October 29, 2010 and the
Resolution3 dated March 11, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 92765 which affirmed the
Decision4 dated November 18, 2008 ofthe Regional Trial Court (RTC) of Legazpi City, Branch 7 inCivil Case No.
9033 for the annulment of the Deed of Sale5 dated August 23, 1962 executed in favor of petitioner Caridad
Rodrigueza, and of Transfer Certificates of Title (TCT) Nos. 40467, 40468 and 404696 issued by the Registry
ofDeeds of Legazpi City.

The Facts

Respondent Domingo Alibin (Domingo)owned an undivided one-half portion of Lot No. 1680 (subject lot) containing
an aggregate area of 9,188 square meters, situated at Tahao, Legazpi City, Albay, and registered in his name and
that of Mariano Rodrigueza (Mariano) under Original Certificate of Title (OCT) No. 0-206.7 On the strength of a
contract to sell8 which was notarized on July 10, 1962 and a Deed of Sale9 dated August 23, 1962 purporting to
convey Domingo’s one-half (1/2) share of the said lot to Caridad Rodrigueza (Caridad), as well as a Deed of Absolute
Sale10 dated December 5, 1994 whereby Mariano and Caridad (the Rodriguezas) transferred their respective rights
to the subject lot infavor of petitioner Krystle Realty Development Corporation (Krystle Realty), the original certificate
of title was cancelled. In lieu thereof, three (3) TCTs were issued all on the same day of December 5, 1994, as
follows: TCT Nos. 40467 and 40468 in the names of the Rodriguezas at one-half (1/2) share each, and TCT No.
4046911 in the name of Krystle Realty covering the entire lot.12

Claiming that he had notsold his share to Caridad nor received any consideration for the alleged transfer, and that
the signature on the deed of sale was not his, Domingo sought to annul the said deed, as well as TCT Nos. 40467,
40468, and 40469, in Civil Case No. 9033 before the RTC of Legazpi City, Branch 4. He died, however, during the
pendency of the case, and was consequently substituted by his heirs, herein respondents Beatriz A. Torzar, Virginia
A. Taraya, Rosario A. Marco, Jesus A. Alibin, and Jay Alibin, as substituted by his children, namely: Jaynes Alibin,
Jay Alibin, and Jesus Alibin, Jr. (respondents).13

Caridad, on the other hand, insisted that she had paid Domingo in two (2) installments: 500.00 as down payment on
July 10, 1962, and the balance of 400.00 on August 23, 1962 during which he signed the Deed of Sale. She then
took possession of Domingo’s one-half (1/2) portion of the subject lot and declared the same for taxation
purposes.14 For its part, Krystle Realty claimed that it was a purchaser in good faith, and that the action, if at all,
should be directed against Caridad. In addition, it argued that the action of respondents had already prescribed
considering that the questioned deed of sale between Caridad and Domingo was executed on August 23, 1962,
whereas the latter’s complaint was filed only on February 15, 1995.15

Caridad likewise died, and was substituted first by her brother, Mariano, and upon the latter’s death, by Rufino
Rodrigueza.16

The parties agreed to submit to a handwriting expert of the National Bureau of Investigation (NBI) the determination
of the genuineness of Domingo’s signature on the deed of sale. Subsequently, the NBI issued Questioned Document
Report No. 60-19617 dated June 14, 1996 stating that the questioned and the standard/sample signatures of
Domingo submitted to it for examination were written by one and the same person.18

On the basis of the said finding, and upon motion of Krystle Realty, the RTC of Legazpi City, Branch 4 rendered a
Judgment19 on October 2, 1996 dismissingthe case, which prompted Domingo to file a petition for certiorari before
the Court, docketed as G.R. No. 127995.20 The petition was dismissed, however, in a Resolution dated April 28, 1997
for noncompliance with certain formalrequirements for its filing.21 Meanwhile, Domingo’s appeal, docketed as CA-
G.R. CV No. 54912, from the aforesaid judgment of the RTC proceeded, and was decided in his favor by the CA in a
Decision22 dated June 22, 1998,which set aside and remanded the case to the court a quofor further proceedings.
The CA ruled that, even if the question of forgery was to be considered as already settled, there are other issues of
fact and law that should still be resolved, such as the absence of consideration in the questioned sale, the supposed
irregularities which attended the execution of the deed of sale, and the legality of the issuance of the certificates of
title. Hence, the judgment of the RTC, which could have only been rendered in the absence of a veritable issue on a
material fact, was improper under the circumstances.23

The RTC Ruling

After due trial, the RTC of Legazpi City, Branch 7 rendered a Decision24 on November 18, 2008 (a) annulling the
Deed of Sale dated August 23, 1962; (b) declaring respondents as the rightful owners of the onehalf (1/2) undivided
portion of the subjectlot, and Krystle Realty as to the remaining one-half (1/2) portion; (c) ordering the cancellation of
TCT Nos. 40467, 40468, and 40469 and, in lieu thereof, the issuance of new TCTs in the names of respondents and
of Krystle Realty; (d) dismissing the counterclaims against respondents; and (e) awarding attorney’s fees and costs
of suit in favor of respondents.

The RTC invalidated the Deed of Sale dated August 23, 1962 after conducting its own independent examination and
finding that the signature of Domingo on said deed is different from his true signatures as appearing on the
documents submitted in evidence by Caridad herself. It did not give credence to the testimony of Eliudoro
Constantino (Constantino), a document examiner of the NBI, who concluded that the specimen signatures he and his
team examinedwere written by one and the same person, without, however, giving a categorical conclusionthat such
specimen signatures were indeed those of Domingo. In this relation, the RTC pointed out that Constantino’s own
signature as examiner did not appear on the three-page Questioned Documents Report No. 60-196 describing the
findings of their examination, but only in an additional paper which was not included in the original report first
delivered to the court, prompting the latter to conclude that said additional paper was "belatedly inserted." Moreover,
the examiner who actually prepared the aforementioned Report, i.e., Flordeliza A. Labanon, was not presented as a
witness, and no plausible explanation for such omission.25

The RTC further observed certainanomalies which attended the transactions involving the eventual transfer of title to
Krystle Realty.1âwphi1 Particularly, the relevant documents pertaining to the subject lot that were supposed to be
kept in the Registry ofDeeds of Legazpi City in the ordinary course of business could no longer be found, and the
former records officer, Estrella Ramirez, who can best explain said transactions was not called to the witness stand
either by the Rodriguezas or Krystle Realty. Neither did they produce these documents in court, asin fact, even if the
deeds of sale purportedly executed by Domingo in favor of Caridad were previously marked in evidence, the offer
thereof was consequently "waived because of the absence of said documents."26 Moreover, the trial court perceived
it to be "quite unusual" that the Deed of Absolute Sale executed by the Rodriguezas in favor of Krystle Realtywas
dated December 5, 1994, and the TCT of the latter was issued on the very same day at 10:00 a.m.27

Finally, the RTC declared Krystle Realty to be a purchaser in bad faith in view of the admission of its representative,
Mr. William Cu, that he was aware of the fact that Domingo was part owner of the subject lot and that he even asked
a certain Rudy Gueco to talkto Domingo about the sale of his one-half (1/2) share.28

Aggrieved, Krystle Realty and Caridad elevated their cases on appeal before the CA, docketed as CA-G.R. CV No.
92765.

The CA Ruling

The CA affirmed the findingsof the RTC in a Decision29 dated October 29, 2010 on the ground that respondents were
able to establish that the Deed of Sale dated August 23, 1962 was not valid and, hence, should be annulled.30It
further held that the transactions involving the sale of Domingo’s one-half (1/2) undivided share were "anomalous,"
and Krystle Realty was "not a purchaser in good faith."31 Considering the questionable haste and irregularities
attending the registration of the alleged sale of Domingo’s share, the cancellation of OCT No. 0-206, and the
issuance of TCT Nos. 40467, 40468, and 40469 all on the same day, i.e.,December 5, 2004, the CA concluded that
Krystle Realty and the Rodriguezas were "obviously in cahoots" with the formerRegister of Deeds of Legazpi City,
Atty. Elmer A. Rañeses.32

On the issue of estoppeland lachesraised by Krystle Realty, the CA ruled that, since Domingo neither consented to
the alleged sale nor signed the purported Deed of Sale dated August 23, 1962 in favor of Caridad, there was no
contract to speak of, and the action to declare its inexistence does not prescribe pursuant to Article 1410 of the Civil
Code.33

Motions for reconsideration were subsequently filed by Caridad and Krystle Realty which were, however, deniedby
the CA in a Resolution34 dated March 11, 2011 for lack of merit. Accordingly, Krystle Realty instituted the present
petition in G.R. No. 196117, and Caridad, as substituted by Rufino Rodrigueza, the petition in G.R. No. 196129, both
of which were eventually consolidated.35

The Issue Before the Court

The pivotal issue in this case iswhether or not the CA correctly affirmed the nullification of the Deedof Sale dated
August 23, 1962 and the declaration of Krystle Realty as a purchaser in bad faith.

The Court’s Ruling

It is a settled rule that the Court isnot a trier of facts and, hence, does not normally undertake the re-examination of
the evidence presented by the contending parties during the trial of the case, considering that the factual findings of
the CA are generally conclusive and binding on the Court,36 especially if they do not contradict those of the trial court,
as in this case.

Contrary to the contention of petitioners, the CA has not overlooked any relevant fact which, if properly considered,
would justify a different conclusion. That the parties herein agreed to submit the determination of the genuineness of
Domingo’s signature to a handwriting expert of the NBI does not, by any stretch of the imagination,authorize the RTC
to accept the findings of such expert hook, line, and sinker. The trial court is the most capable trier of facts and, as
such, should not abdicate its judicial duty to decide.

As correctly pointed out by the CA, the authenticity of a signature is a matter that is not so highly technical as to
preclude a judge from examining the signature himself and ruling upon the question of whether the signature on a
document is forged or not.37 The opinion of a handwriting expert, therefore, does not mandatorily bind the court,38the
expert's function being to place before the court data upon which it can form its own opinion.39

In this case, both the RTC and the CA conducted independent examinations of the specimen signatures, which is
authorized by law,40 and unanimously concluded that the questioned signature on the Deed of Sale dated August 23,
1962 is different from the standard signatures of Domingo as appearing on documents submitted in evidence by
petitioner Caridad Rodrigueza. Absent any cogent reasonto deviate from such finding of forgery, which is the basis
for the annulment of the said deed, the same should be deemed conclusive and binding upon the Court. Separately,
on Krystle Realty’s claim that it is a buyer in good faith, the Court finds that the latter cannot veer away from the
admission of its representative, Mr. William Cu, i.e., that he was aware of Domingo’s interest in the subject lot, and
that Caridad had no title in her name at the time of the sale, thus, giving rise to the conclusion that it (Krystle Realty)
had been reasonably apprised of the ownership controversy over the subject lot. This notwithstanding, records show
that Krystle Realty proceeded with the transaction without further examining the seller’s title and thus, could not claim
to have purchased the subjectlot in good faith. Verily, one is considered a buyer in bad faith not only when he
purchases real estate with knowledge of a defect or lack of titlein his seller but also when he has knowledge of facts
which should have alerted him to conduct further inquiry or investigation,41 as Krystle Realty in this case. Further, the
irregularities attending the issuance of TCT Nos.40467, 40468, and 40469 as pointed out by the CA are equally
indicative of lack of good faith on Krystle Realty’s part. Indeed, what it failed to realize is that, as one asserting the
status of a buyer in good faith and for value, it had the burden of proving such status, which goes beyond a mere
invocation of the ordinary presumption of good faith.42

The Court likewise rejects the belated claim of res judicata anchored on the dismissal of the petition for certiorariin
G.R. No. 127995 filed by Domingo as per its Resolution dated April 28, 1997, which became final and executory on
June 16, 1997.43 As the records disclose, petitioners never raised this issue in the appeal in CA-G.R. CV No. 54912
before the CA, and even in the subsequent proceedings before the RTC and the CA in CA-G.R. CV No.
92765.44Settled is the rule that points of law, theories, issues and arguments not brought to the attention of the lower
court need not be considered by a reviewing court, as they cannot be raised for the first time at that late stage. Basic
considerations of fairness and due process impel this rule.45

WHEREFORE, the consolidated petit10ns are DENIED. Accordingly, the Decision dated October 29, 2010 and the
Resolution dated March 11, 2011 of the Court of Appeals in CA-G.R. CV No. 92765 are hereby AFFIRMED.

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Baguio City

SECOND DIVISION
G.R. No. 193787 April 7, 2014

SPOUSES JOSE C. ROQUE AND BEATRIZ DELA CRUZ ROQUE, with deceased Jose C. Roque represented
by his substitute heir JOVETTE ROQUE-LIBREA, Petitioners,
vs.
MA. PAMELA P. AGUADO, FRUCTUOSO C. SABUG, JR., NATIONAL COUNCIL OF CHURCHES IN THE
PHILIPPINES (NCCP), represented by its Secretary General SHARON ROSE JOY RUIZ-DUREMDES, LAND
BANK OF THE PHILIPPINES (LBP), represented by Branch Manager EVELYN M. MONTERO, ATTY. MARIO
S.P. DIAZ, in his Official Capacity as Register of Deeds for Rizal, Morong Branch, and CECILIO U. PULAN, in
his Official Capacity as Sheriff, Office of the Clerk of Court, Regional Trial Court, Binangonan,
Rizal,Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated May 12, 2010 and the Resolution3 dated
September 15, 2010 of the Court of Appeals (CA) in CA G.R. CV No. 92113 which affirmed the Decision4 dated July
8, 2008 of the Regional Trial Court of Binangonan, Rizal, Branch 69 (RTC) that dismissed Civil Case Nos. 03-022
and 05-003 for reconveyance, annulment of sale, deed of real estate mortgage, foreclosure and certificate of sale,
and damages.

The Facts

The property subject of this case is a parcel of land with an area of 20,862 square meters (sq. m.), located in Sitio
Tagpos, Barangay Tayuman, Binangonan, Rizal, known as Lot 18089.5

On July 21, 1977, petitioners-spouses Jose C. Roque and Beatriz dela Cruz Roque (Sps. Roque) and the original
owners of the then unregistered Lot 18089 – namely, Velia R. Rivero (Rivero), Magdalena Aguilar, Angela Gonzales,
Herminia R. Bernardo, Antonio Rivero, Araceli R. Victa, Leonor R. Topacio, and Augusto Rivero (Rivero, et al.) –
executed a Deed of Conditional Sale of Real Property6 (1977 Deed of Conditional Sale) over a 1,231-sq. m. portion
of Lot 18089 (subject portion) for a consideration of ₱30,775.00. The parties agreed that Sps. Roque shall make an
initial payment of ₱15,387.50 upon signing, while the remaining balance of the purchase price shall be payable upon
the registration of Lot 18089, as well as the segregation and the concomitant issuance of a separate title over the
subject portion in their names. After the deed’s execution, Sps. Roque took possession and introduced improvements
on the subject portion which they utilized as a balut factory.7

On August 12, 1991, Fructuoso Sabug, Jr. (Sabug, Jr.), former Treasurer of the National Council of Churches in the
Philippines (NCCP), applied for a free patent over the entire Lot 18089 and was eventually issued Original Certificate
of Title (OCT) No. M-59558 in his name on October 21, 1991. On June 24, 1993, Sabug, Jr. and Rivero, in her
personal capacity and in representation of Rivero, et al., executed a Joint Affidavit9 (1993 Joint Affidavit),
acknowledging that the subject portion belongs to Sps. Roque and expressed their willingness to segregate the same
from the entire area of Lot 18089.

On December 8, 1999, however, Sabug, Jr., through a Deed of Absolute Sale10 (1999 Deed of Absolute Sale), sold
Lot 18089 to one Ma. Pamela P. Aguado (Aguado) for ₱2,500,000.00, who, in turn, caused the cancellation of OCT
No. M-5955 and the issuance of Transfer Certificate of Title (TCT) No. M-96692 dated December 17, 199911 in her
name.
Thereafter, Aguado obtained an ₱8,000,000.00 loan from the Land Bank of the Philippines (Land Bank) secured by a
mortgage over Lot 18089.12 When she failed to pay her loan obligation, Land Bank commenced extra-judicial
foreclosure proceedings and eventually tendered the highest bid in the auction sale. Upon Aguado’s failure to
redeem the subject property, Land Bank consolidated its ownership, and TCT No. M-11589513 was issued in its
name on July 21, 2003.14

On June 16, 2003, Sps. Roque filed a complaint15 for reconveyance, annulment of sale, deed of real estate
mortgage, foreclosure, and certificate of sale, and damages before the RTC, docketed as Civil Case No. 03-022,
against Aguado, Sabug, Jr., NCCP, Land Bank, the Register of Deeds of Morong, Rizal, and Sheriff Cecilio U. Pulan,
seeking to be declared as the true owners of the subject portion which had been erroneously included in the sale
between Aguado and Sabug, Jr., and, subsequently, the mortgage to Land Bank, both covering Lot 18089 in its
entirety.

In defense, NCCP and Sabug, Jr. denied any knowledge of the 1977 Deed of Conditional Sale through which the
subject portion had been purportedly conveyed to Sps. Roque.16

For her part, Aguado raised the defense of an innocent purchaser for value as she allegedly derived her title (through
the 1999 Deed of Absolute Sale) from Sabug, Jr., the registered owner in OCT No. M-5955, covering Lot 18089,
which certificate of title at the time of sale was free from any lien and/or encumbrances. She also claimed that Sps.
Roque’s cause of action had already prescribed because their adverse claim was made only on April 21, 2003, or
four (4) years from the date OCT No. M-5955 was issued in Sabug, Jr.’s name on December 17, 1999.17

On the other hand, Land Bank averred that it had no knowledge of Sps. Roque’s claim relative to the subject portion,
considering that at the time the loan was taken out, Lot 18089 in its entirety was registered in Aguado’s name and no
lien and/or encumbrance was annotated on her certificate of title.18

Meanwhile, on January 18, 2005, NCCP filed a separate complaint19 also for declaration of nullity of documents and
certificates of title and damages, docketed as Civil Case No. 05-003. It claimed to be the real owner of Lot 18089
which it supposedly acquired from Sabug, Jr. through an oral contract of sale20 in the early part of 1998, followed by
the execution of a Deed of Absolute Sale on December 2, 1998 (1998 Deed of Absolute Sale).21 NCCP also alleged
that in October of the same year, it entered into a Joint Venture Agreement (JVA) with Pilipinas Norin Construction
Development Corporation (PNCDC), a company owned by Aguado’s parents, for the development of its real
properties, including Lot 18089, into a subdivision project, and as such, turned over its copy of OCT No. M-5955 to
PNCDC.22 Upon knowledge of the purported sale of Lot 18089 to Aguado, Sabug, Jr. denied the transaction and
alleged forgery. Claiming that the Aguados23 and PNCDC conspired to defraud NCCP, it prayed that PNCDC’s
corporate veil be pierced and that the Aguados be ordered to pay the amount of ₱38,092,002.00 representing the
unrealized profit from the JVA.24 Moreover, NCCP averred that Land Bank failed to exercise the diligence required to
ascertain the true owners of Lot 18089. Hence, it further prayed that: (a) all acts of ownership and dominion over Lot
18089 that the bank might have done or caused to be done be declared null and void; (b) it be declared the true and
real owners of Lot 18089; and (c) the Register of Deeds of Morong, Rizal be ordered to cancel any and all certificates
of title covering the lot, and a new one be issued in its name.25 In its answer, Land Bank reiterated its stance that Lot
18089 was used as collateral for the ₱8,000,000.00 loan obtained by the Countryside Rural Bank, Aguado, and one
Bella Palasaga. There being no lien and/ or encumbrance annotated on its certificate of title, i.e., TCT No. M-115895,
it cannot be held liable for NCCP’s claims. Thus, it prayed for the dismissal of NCCP’s complaint.26

On September 7, 2005, Civil Case Nos. 02-022 and 05-003 were ordered consolidated.27

The RTC Ruling


After due proceedings, the RTC rendered a Decision28 dated July 8, 2008, dismissing the complaints of Sps. Roque
and NCCP.

With respect to Sps. Roque’s complaint, the RTC found that the latter failed to establish their ownership over the
subject portion, considering the following: (a) the supposed owners-vendors, i.e., Rivero, et al., who executed the
1977 Deed of Conditional Sale, had no proof of their title over Lot 18089; (b) the 1977 Deed of Conditional Sale was
not registered with the Office of the Register of Deeds;29 (c) the 1977 Deed of Conditional Sale is neither a deed of
conveyance nor a transfer document, as it only gives the holder the right to compel the supposed vendors to execute
a deed of absolute sale upon full payment of the consideration; (d) neither Sps. Roque nor the alleged owners-
vendors, i.e., Rivero, et al., have paid real property taxes in relation to Lot 18089; and (e) Sps. Roque’s occupation of
the subject portion did not ripen into ownership that can be considered superior to the ownership of Land
Bank.30 Moreover, the RTC ruled that Sps. Roque’s action for reconveyance had already prescribed, having been
filed ten (10) years after the issuance of OCT No. M-5955.31

On the other hand, regarding NCCP’s complaint, the RTC observed that while it anchored its claim of ownership over
Lot 18089 on the 1998 Deed of Absolute Sale, the said deed was not annotated on OCT No. M-5955. Neither was
any certificate of title issued in its name nor did it take possession of Lot 18089 or paid the real property taxes
therefor. Hence, NCCP’s claim cannot prevail against Land Bank’s title, which was adjudged by the RTC as an
innocent purchaser for value. Also, the RTC disregarded NCCP’s allegation that the signature of Sabug, Jr. on the
1999 Deed of Absolute Sale in favor of Aguado was forged because his signatures on both instruments bear
semblances of similarity and appear genuine. Besides, the examiner from the National Bureau of Investigation, who
purportedly found that Sabug, Jr.’s signature thereon was spurious leading to the dismissal of a criminal case against
him, was not presented as a witness in the civil action.32

Finally, the RTC denied the parties’ respective claims for damages.33

The CA Ruling

On appeal, the Court of Appeals (CA) affirmed the foregoing RTC findings in a Decision34 dated May 12, 2010. While
Land Bank was not regarded as a mortgagee/purchaser in good faith with respect to the subject portion considering
Sps. Roque’s possession thereof,35 the CA did not order its reconveyance or segregation in the latter’s favor because
of Sps. Roque’s failure to pay the remaining balance of the purchase price. Hence, it only directed Land Bank to
respect Sps. Roque’s possession with the option to appropriate the improvements introduced thereon upon payment
of compensation.36

As regards NCCP, the CA found that it failed to establish its right over Lot 18089 for the following reasons: (a) the
sale to it of the lot by Sabug, Jr. was never registered; and (b) there is no showing that it was in possession of Lot
18089 or any portion thereof from 1998. Thus, as far as NCCP is concerned, Land Bank is a mortgagee/purchaser in
good faith.37

Aggrieved, both Sps. Roque38 and NCCP39 moved for reconsideration but were denied by the CA in a
Resolution40dated September 15, 2010, prompting them to seek further recourse before the Court.

The Issue Before the Court

The central issue in this case is whether or not the CA erred in not ordering the reconveyance of the subject portion
in Sps. Roque’s favor.

Sps. Roque maintain that the CA erred in not declaring them as the lawful owners of the subject portion despite
having possessed the same since the execution of the 1977 Deed of Conditional Sale, sufficient for acquisitive
prescription to set in in their favor.41 To bolster their claim, they also point to the 1993 Joint Affidavit whereby Sabug,
Jr. and Rivero acknowledged their ownership thereof.42 Being the first purchasers and in actual possession of the
disputed portion, they assert that they have a better right over the 1,231- sq. m. portion of Lot 18089 and, hence,
cannot be ousted therefrom by Land Bank, which was adjudged as a ortgagee/purchaser in bad faith, pursuant to
Article 1544 of the Civil Code.43

In opposition, Land Bank espouses that the instant petition should be dismissed for raising questions of fact, in
violation of the proscription under Rule 45 of the Rules of Court which allows only pure questions of law to be
raised.44 Moreover, it denied that ownership over the subject portion had been acquired by Sps. Roque who
admittedly failed to pay the remaining balance of the purchase price.45 Besides, Land Bank points out that Sps.
Roque’s action for reconveyance had already prescribed.46

Instead of traversing the arguments of Sps. Roque, NCCP, in its Comment47 dated December 19, 2011, advanced its
own case, arguing that the CA erred in holding that it failed to establish its claimed ownership over Lot 18089 in its
entirety. Incidentally, NCCP’s appeal from the CA Decision dated May 12, 2010 was already denied by the
Court,48 and hence, will no longer be dealt with in this case.

The Court’s Ruling

The petition lacks merit.

The essence of an action for reconveyance is to seek the transfer of the property which was wrongfully or
erroneously registered in another person’s name to its rightful owner or to one with a better right.49 Thus, it is
incumbent upon the aggrieved party to show that he has a legal claim on the property superior to that of the
registered owner and that the property has not yet passed to the hands of an innocent purchaser for value.50

Sps. Roque claim that the subject portion covered by the 1977 Deed of Conditional Sale between them and Rivero,
et al. was wrongfully included in the certificates of title covering Lot 18089, and, hence, must be segregated
therefrom and their ownership thereof be confirmed. The salient portions of the said deed state:

DEED OF CONDITIONAL SALE OF REAL PROPERTY

KNOW ALL MEN BY THESE PRESENTS:

xxxx

That for and in consideration of the sum of THIRTY THOUSAND SEVEN HUNDRED SEVENTY FIVE PESOS
(₱30,775.00), Philippine Currency, payable in the manner hereinbelow specified, the VENDORS do hereby sell,
transfer and convey unto the VENDEE, or their heirs, executors, administrators, or assignors, that unsegregated
portion of the above lot, x x x.

That the aforesaid amount shall be paid in two installments, the first installment which is in the amount of
__________ (₱15,387.50) and the balance in the amount of __________ (₱15,387.50), shall be paid as soon as the
described portion of the property shall have been registered under the Land Registration Act and a Certificate of Title
issued accordingly;

That as soon as the total amount of the property has been paid and the Certificate of Title has been issued, an
absolute deed of sale shall be executed accordingly;
x x x x51

Examining its provisions, the Court finds that the stipulation above-highlighted shows that the 1977 Deed of
Conditional Sale is actually in the nature of a contract to sell and not one of sale contrary to Sps. Roque’s belief.52 In
this relation, it has been consistently ruled that where the seller promises to execute a deed of absolute sale upon the
completion by the buyer of the payment of the purchase price, the contract is only a contract to sell even if their
agreement is denominated as a Deed of Conditional Sale,53 as in this case. This treatment stems from the legal
characterization of a contract to sell, that is, a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell
the subject property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, such as, the
full payment of the purchase price.54 Elsewise stated, in a contract to sell, ownership is retained by the vendor and is
not to pass to the vendee until full payment of the purchase price.55 Explaining the subject matter further, the Court,
in Ursal v. CA,56 held that:

[I]n contracts to sell the obligation of the seller to sell becomes demandable only upon the happening of the
suspensive condition, that is, the full payment of the purchase price by the buyer. It is only upon the existence of the
contract of sale that the seller becomes obligated to transfer the ownership of the thing sold to the buyer. Prior to the
existence of the contract of sale, the seller is not obligated to transfer the ownership to the buyer, even if there is a
contract to sell between them.

Here, it is undisputed that Sps. Roque have not paid the final installment of the purchase price.57 As such, the
condition which would have triggered the parties’ obligation to enter into and thereby perfect a contract of sale in
order to effectively transfer the ownership of the subject portion from the sellers (i.e., Rivero et al.) to the buyers (Sps.
Roque) cannot be deemed to have been fulfilled. Consequently, the latter cannot validly claim ownership over the
subject portion even if they had made an initial payment and even took possession of the same.58

The Court further notes that Sps. Roque did not even take any active steps to protect their claim over the disputed
portion. This remains evident from the following circumstances appearing on record: (a) the 1977 Deed of Conditional
Sale was never registered; (b) they did not seek the actual/physical segregation of the disputed portion despite their
knowledge of the fact that, as early as 1993, the entire Lot 18089 was registered in Sabug, Jr.’s name under OCT
No. M-5955; and (c) while they signified their willingness to pay the balance of the purchase price,59Sps. Roque
neither compelled Rivero et al., and/or Sabug, Jr. to accept the same nor did they consign any amount to the court,
the proper application of which would have effectively fulfilled their obligation to pay the purchase price.60 Instead,
Sps. Roque waited 26 years, reckoned from the execution of the 1977 Deed of Conditional Sale, to institute an action
for reconveyance (in 2003), and only after Lot 18089 was sold to Land Bank in the foreclosure sale and title thereto
was consolidated in its name. Thus, in view of the foregoing, Sabug, Jr. – as the registered owner of Lot 18089 borne
by the grant of his free patent application – could validly convey said property in its entirety to Aguado who, in turn,
mortgaged the same to Land Bank. Besides, as aptly observed by the RTC, Sps. Roque failed to establish that the
parties who sold the property to them, i.e., Rivero, et al., were indeed its true and lawful owners.61 In fine, Sps. Roque
failed to establish any superior right over the subject portion as against the registered owner of Lot 18089, i.e., Land
Bank, thereby warranting the dismissal of their reconveyance action, without prejudice to their right to seek damages
against the vendors, i.e., Rivero et al.62 As applied in the case of Coronel v. CA:63

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the
subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at
bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite
the fulfilment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be
deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property.
There is no double sale in such case.1âwphi1 Title to the property will transfer to the buyer after registration because
there is no defect in the owner-seller’s title per se, but the latter, of course, may be sued for damages by the
intending buyer. (Emphasis supplied)

On the matter of double sales, suffice it to state that Sps. Roque’s reliance64 on Article 154465 of the Civil Code has
been misplaced since the contract they base their claim of ownership on is, as earlier stated, a contract to sell, and
not one of sale. In Cheng v. Genato,66 the Court stated the circumstances which must concur in order to determine
the applicability of Article 1544, none of which are obtaining in this case, viz.:

(a) The two (or more) sales transactions in issue must pertain to exactly the same subject matter, and must
be valid sales transactions;

(b) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent
conflicting interests; and

(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have
bought from the same seller.

Finally, regarding Sps. Roque’s claims of acquisitive prescription and reimbursement for the value of the
improvements they have introduced on the subject property,67 it is keenly observed that none of the arguments
therefor were raised before the trial court or the CA.68 Accordingly, the Court applies the well-settled rule that litigants
cannot raise an issue for the first time on appeal as this would contravene the basic rules of fair play and justice. In
any event, such claims appear to involve questions of fact which are generally prohibited under a Rule 45 petition.69

With the conclusions herein reached, the Court need not belabor on the other points raised by the parties, and
ultimately finds it proper to proceed with the denial of the petition.

WHEREFORE, the petition is DENIED. The Decision dated May 12, 2010 and the Resolution dated September 15,
2010 of the Court of Appeals in CAG.R. CV No. 92113 are hereby AFFIRMED.

SO ORDERED.

SECOND DIVISION

[G.R. No. 152219. October 25, 2004]

NUTRIMIX FEEDS CORPORATION, petitioner, vs. COURT OF APPEALS and SPOUSES EFREN AND MAURA
EVANGELISTA, respondents.

DECISION
CALLEJO, SR., J.:
For review on certiorari is the Decision[1] of the Court of Appeals in CA-G.R. CV No. 59615 modifying, on
appeal, the Joint Decision[2] of the Regional Trial Court of Malolos, Bulacan, Branch 9, in Civil Case No. 1026-M-
93[3] for sum of money and damages with prayer for issuance of writ of preliminary attachment, and Civil Case No.
49-M-94[4] for damages. The trial court dismissed the complaint of the respondents, ordering them to pay the
petitioner the unpaid value of the assorted animal feeds delivered to the former by the latter, with legal interest
thereon from the filing of the complaint, including attorneys fees.

The Factual Antecedents

On April 5, 1993, the Spouses Efren and Maura Evangelista, the respondents herein, started to directly procure
various kinds of animal feeds from petitioner Nutrimix Feeds Corporation. The petitioner gave the respondents a
credit period of thirty to forty-five days to postdate checks to be issued in payment for the delivery of the feeds. The
accommodation was made apparently because of the company presidents close friendship with Eugenio Evangelista,
the brother of respondent Efren Evangelista. The various animal feeds were paid and covered by checks with due
dates from July 1993 to September 1993. Initially, the respondents were good paying customers. In some instances,
however, they failed to issue checks despite the deliveries of animal feeds which were appropriately covered by sales
invoices. Consequently, the respondents incurred an aggregate unsettled account with the petitioner in the amount
of P766,151.00. The breakdown of the unpaid obligation is as follows:
Sales Invoice Number Date Amount
21334 June 23, 1993 P 7,260.00
21420 June 26, 1993 6,990.00
21437 June 28, 1993 41,510.00
21722 July 12, 1993 45,185.00
22048 July 26, 1993 44,540.00
22054 July 27, 1993 45,246.00
22186 August 2, 1993 84,900.00
Total: P275,631.00
=========
Bank Check Number Due Date Amount
United Coconut
Planters Bank BTS052084 July 30, 1993 P 47,760.00
-do- BTS052087 July 30, 1993 131,340.00
-do- BTS052091 July 30, 1993 59,700.00
-do- BTS062721 August 4, 1993 47,860.00
-do- BTS062720 August 5, 1993 43,780.00
-do- BTS062774 August 6, 1993 15,000.00
-do- BTS062748 September 11, 1993 47,180.00
-do- BTS062763 September 11, 1993 48,440.00
-do- BTS062766 September 18, 1993 49,460.00
Total: P490,520.00
=========
When the above-mentioned checks were deposited at the petitioners depository bank, the same were,
consequently, dishonored because respondent Maura Evangelista had already closed her account. The petitioner
made several demands for the respondents to settle their unpaid obligation, but the latter failed and refused to pay
their remaining balance with the petitioner.
On December 15, 1993, the petitioner filed with the Regional Trial Court of Malolos, Bulacan, a complaint,
docketed as Civil Case No. 1026-M-93, against the respondents for sum of money and damages with a prayer for
issuance of writ of preliminary attachment. In their answer with counterclaim, the respondents admitted their unpaid
obligation but impugned their liability to the petitioner. They asserted that the nine checks issued by respondent
Maura Evangelista were made to guarantee the payment of the purchases, which was previously determined to be
procured from the expected proceeds in the sale of their broilers and hogs. They contended that inasmuch as the
sudden and massive death of their animals was caused by the contaminated products of the petitioner, the
nonpayment of their obligation was based on a just and legal ground.
On January 19, 1994, the respondents also lodged a complaint for damages against the petitioner, docketed as
Civil Case No. 49-M-94, for the untimely and unforeseen death of their animals supposedly effected by the
adulterated animal feeds the petitioner sold to them. Within the period to file an answer, the petitioner moved to
dismiss the respondents complaint on the ground of litis pendentia. The trial court denied the same in a
Resolution[5] dated April 26, 1994, and ordered the consolidation of the case with Civil Case No. 1026-M-93. On May
13, 1994, the petitioner filed its Answer with Counterclaim, alleging that the death of the respondents animals was
due to the widespread pestilence in their farm. The petitioner, likewise, maintained that it received information that
the respondents were in an unstable financial condition and even sold their animals to settle their obligations from
other enraged and insistent creditors. It, moreover, theorized that it was the respondents who mixed poison to its
feeds to make it appear that the feeds were contaminated.
A joint trial thereafter ensued.
During the hearing, the petitioner presented Rufino Arenas, Nutrimix Assistant Manager, as its lone witness. He
testified that on the first week of August 1993, Nutrimix President Efren Bartolome met the respondents to discuss
the possible settlement of their unpaid account. The said respondents still pleaded to the petitioner to continue to
supply them with animal feeds because their livestock were supposedly suffering from a disease.[6]
For her part, respondent Maura Evangelista testified that as direct buyers of animal feeds from the petitioner,
Mr. Bartolome, the company president, gave them a discount of P12.00 per bag and a credit term of forty-five to
seventy-five days.[7] For the operation of the respondents poultry and piggery farm, the assorted animal feeds sold by
the petitioner were delivered in their residence and stored in an adjacent bodega made of concrete wall and
galvanized iron sheet roofing with monolithic flooring.[8]
It appears that in the morning of July 26, 1993, three various kinds of animal feeds, numbering 130 bags, were
delivered to the residence of the respondents in Sta. Rosa, Marilao, Bulacan. The deliveries came at about 10:00
a.m. and were fed to the animals at approximately 1:30 p.m. at the respondents farm in Balasing, Sta. Maria,
Bulacan. At about 8:30 p.m., respondent Maura Evangelista received a radio message from a worker in her farm,
warning her that the chickens were dying at rapid intervals. When the respondents arrived at their farm, they
witnessed the death of 18,000 broilers, averaging 1.7 kilos in weight, approximately forty-one to forty-five days old.
The broilers then had a prevailing market price of P46.00 per kilo.[9]
On July 27, 1993, the respondents received another delivery of 160 bags of animal feeds from the petitioner,
some of which were distributed to the contract growers of the respondents. At that time, respondent Maura
Evangelista requested the representative of the petitioner to notify Mr. Bartolome of the fact that their broilers died
after having been fed with the animal feeds delivered by the petitioner the previous day. She, likewise, asked that a
technician or veterinarian be sent to oversee the untoward occurrence. Nevertheless, the various feeds delivered on
that day were still fed to the animals. On July 27, 1993, the witness recounted that all of the chickens and hogs
died.[10] Efren Evangelista suffered from a heart attack and was hospitalized as a consequence of the massive death
of their animals in the farm. On August 2, 1993, another set of animal feeds were delivered to the respondents, but
the same were not returned as the latter were not yet cognizant of the fact that the cause of the death of their animals
was the polluted feeds of the petitioner.[11]
When respondent Maura Evangelista eventually met with Mr. Bartolome on an undisclosed date, she attributed
the improbable incident to the animal feeds supplied by the petitioner, and asked Mr. Bartolome for indemnity for the
massive death of her livestock. Mr. Bartolome disavowed liability thereon and, thereafter, filed a case against the
respondents.[12]
After the meeting with Mr. Bartolome, respondent Maura Evangelista requested Dr. Rolando Sanchez, a
veterinarian, to conduct an inspection in the respondents poultry. On October 20, 1993, the respondents took ample
amounts remaining from the feeds sold by the petitioner and furnished the same to various government agencies for
laboratory examination.
Dr. Juliana G. Garcia, a doctor of veterinary medicine and the Supervising Agriculturist of the Bureau of Animal
Industry, testified that on October 20, 1993, sample feeds for chickens contained in a pail were presented to her for
examination by respondent Efren Evangelista and a certain veterinarian.[13] The Clinical Laboratory Report revealed
that the feeds were negative of salmonella[14] and that the very high aflatoxin level[15] found therein would not cause
instantaneous death if taken orally by birds.
Dr. Rodrigo Diaz, the veterinarian who accompanied Efren at the Bureau of Animal Industry, testified that
sometime in October 1993, Efren sought for his advice regarding the death of the respondents chickens. He
suggested that the remaining feeds from their warehouse be brought to a laboratory for examination. The witness
claimed that the feeds brought to the laboratory came from one bag of sealed Nutrimix feeds which was covered with
a sack.
Dr. Florencio Isagani S. Medina III, Chief Scientist Research Specialist of the Philippine Nuclear Research
Institute, informed the trial court that respondent Maura Evangelista and Dr. Garcia brought sample feeds and four
live and healthy chickens to him for laboratory examination. In his Cytogenetic Analysis, [16] Dr. Medina reported that
he divided the chickens into two categories, which he separately fed at 6:00 a.m. with the animal feeds of a different
commercial brand and with the sample feeds supposedly supplied by the petitioner. At noon of the same day, one of
the chickens which had been fed with the Nutrimix feeds died, and a second chicken died at 5:45 p.m. of the same
day. Samples of blood and bone marrow were taken for chromosome analysis, which showed pulverized
chromosomes both from bone marrow and blood chromosomes. On cross-examination, the witness admitted that the
feeds brought to him were merely placed in a small unmarked plastic bag and that he had no way of ascertaining
whether the feeds were indeed manufactured by the petitioner.
Another witness for the respondents, Aida Viloria Magsipoc, Forensic Chemist III of the Forensic Chemist
Division of the National Bureau of Investigation, affirmed that she performed a chemical analysis [17] of the animal
feeds, submitted to her by respondent Maura Evangelista and Dr. Garcia in a sealed plastic bag, to determine the
presence of poison in the said specimen. The witness verified that the sample feeds yielded positive results to the
tests for COUMATETRALYL Compound,[18] the active component of RACUMIN, a brand name for a commercially
known rat poison.[19] According to the witness, the presence of the compound in the chicken feeds would be fatal to
internal organs of the chickens, as it would give a delayed blood clotting effect and eventually lead to internal
hemorrhage, culminating in their inevitable death.
Paz Austria, the Chief of the Pesticide Analytical Section of the Bureau of Plants Industry, conducted a
laboratory examination to determine the presence of pesticide residue in the animal feeds submitted by respondent
Maura Evangelista and Dr. Garcia. The tests disclosed that no pesticide residue was detected in the samples
received[20] but it was discovered that the animal feeds were positive for Warfarin, a rodenticide (anticoagulant),
which is the chemical family of Coumarin.[21]
After due consideration of the evidence presented, the trial court ruled in favor of the petitioner. The dispositive
portion of the decision reads:

WHEREFORE, in light of the evidence on record and the laws/jurisprudence applicable thereon, judgment is hereby
rendered:

1) in Civil Case No. 1026-M-93, ordering defendant spouses Efren and Maura Evangelista to pay unto
plaintiff Nutrimix Feeds Corporation the amount of P766,151.00 representing the unpaid value of
assorted animal feeds delivered by the latter to and received by the former, with legal interest thereon
from the filing of the complaint on December 15, 1993 until the same shall have been paid in full, and
the amount of P50,000.00 as attorneys fees. Costs against the aforenamed defendants; and
2) dismissing the complaint as well as counterclaims in Civil Case No. 49-M-94 for inadequacy of evidence
to sustain the same. No pronouncement as to costs.

SO ORDERED.[22]

In finding for the petitioner, the trial court ratiocinated as follows:

On the strength of the foregoing disquisition, the Court cannot sustain the Evangelistas contention that Nutrimix is
liable under Articles 1561 and 1566 of the Civil Code governing hidden defects of commodities sold. As already
explained, the Court is predisposed to believe that the subject feeds were contaminated sometime between their
storage at the bodega of the Evangelistas and their consumption by the poultry and hogs fed therewith, and that the
contamination was perpetrated by unidentified or unidentifiable ill-meaning mischief-maker(s) over whom Nutrimix
had no control in whichever way.

All told, the Court finds and so holds that for inadequacy of proof to the contrary, Nutrimix was not responsible at all
for the contamination or poisoning of the feeds supplied by it to the Evangelistas which precipitated the mass death
of the latters chickens and hogs. By no means and under no circumstance, therefore, may Nutrimix be held liable for
the sundry damages prayed for by the Evangelistas in their complaint in Civil Case No. 49-M-94 and answer in Civil
Case No. 1026-M-93. In fine, Civil Case No. 49-M-94 deserves dismissal.

Parenthetically, vis--vis the fulminations of the Evangelistas in this specific regard, the Court does not perceive any
act or omission on the part of Nutrimix constitutive of abuse of rights as would render said corporation liable for
damages under Arts. 19 and 21 of the Civil Code. The alleged callous attitude and lack of concern of Nutrimix have
not been established with more definitiveness.

As regards Civil Case No. 1026-M-93, on the other hand, the Court is perfectly convinced that the deliveries of
animal feeds by Nutrimix to the Evangelistas constituted a simple contract of sale, albeit on a continuing basis and on
terms or installment payments.[23]

Undaunted, the respondents sought a review of the trial courts decision to the Court of Appeals (CA), principally
arguing that the trial court erred in holding that they failed to prove that their broilers and hogs died as a result of
consuming the petitioners feeds.
On February 12, 2002, the CA modified the decision of the trial court. The fallo of the decision reads:

WHEREFORE, premises considered, the appealed decision is hereby MODIFIED such that the complaint in Civil
Case No. 1026-M-93 is DISMISSED for lack of merit.

SO ORDERED.[24]

In dismissing the complaint in Civil Case No. 1026-M-93, the CA ruled that the respondents were not obligated
to pay their outstanding obligation to the petitioner in view of its breach of warranty against hidden defects. The CA
gave much credence to the testimony of Dr. Rodrigo Diaz, who attested that the sample feeds distributed to the
various governmental agencies for laboratory examination were taken from a sealed sack bearing the brand name
Nutrimix. The CA further argued that the declarations of Dr. Diaz were not effectively impugned during cross-
examination, nor was there any contrary evidence adduced to destroy his damning allegations.
On March 7, 2002, the petitioner filed with this Court the instant petition for review on the sole ground that
THE HONORABLE COURT OF APPEALS ERRED IN CONCLUDING THAT THE CLAIMS OF HEREIN
PETITIONER FOR COLLECTION OF SUM OF MONEY AGAINST PRIVATE RESPONDENTS MUST BE DENIED
BECAUSE OF HIDDEN DEFECTS.

The Present Petition

The petitioner resolutely avers that the testimony of Dr. Diaz can hardly be considered as conclusive evidence
of hidden defects that can be attributed to the petitioner. Parenthetically, the petitioner asserts, assuming that the
sample feeds were taken from a sealed sack bearing the brand name Nutrimix, it cannot decisively be presumed that
these were the same feeds brought to the respondents farm and given to their chickens and hogs for consumption.
It is the contention of the respondents that the appellate court correctly ordered the dismissal of the complaint in
Civil Case No. 1026-M-93. They further add that there was sufficient basis for the CA to hold the petitioner guilty of
breach of warranty thereby releasing the respondents from paying their outstanding obligation.

The Ruling of the Court

Oft repeated is the rule that the Supreme Court reviews only errors of law in petitions for review on certiorari
under Rule 45. However, this rule is not absolute. The Court may review the factual findings of the CA should they be
contrary to those of the trial court. Conformably, this Court may review findings of facts when the judgment of the CA
is premised on a misapprehension of facts.[25]
The threshold issue is whether or not there is sufficient evidence to hold the petitioner guilty of breach of
warranty due to hidden defects.
The petition is meritorious.
The provisions on warranty against hidden defects are found in Articles 1561 and 1566 of the New Civil Code of
the Philippines, which read as follows:

Art. 1561. The vendor shall be responsible for warranty against hidden defects which the thing sold may have, should
they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an
extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for
it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not
visible if the vendee is an expert who, by reason of his trade or profession, should have known them.

Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he
was not aware thereof.

This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults
or defects in the thing sold.

A hidden defect is one which is unknown or could not have been known to the vendee. [26] Under the law, the
requisites to recover on account of hidden defects are as follows:
(a) the defect must be hidden;
(b) the defect must exist at the time the sale was made;
(c) the defect must ordinarily have been excluded from the contract;
(d) the defect, must be important (renders thing UNFIT or considerably decreases FITNESS);
(e) the action must be instituted within the statute of limitations.[27]
In the sale of animal feeds, there is an implied warranty that it is reasonably fit and suitable to be used for the
purpose which both parties contemplated.[28] To be able to prove liability on the basis of breach of implied warranty,
three things must be established by the respondents. The first is that they sustained injury because of the product;
the second is that the injury occurred because the product was defective or unreasonably unsafe; and finally,
the defect existed when the product left the hands of the petitioner.[29] A manufacturer or seller of a product
cannot be held liable for any damage allegedly caused by the product in the absence of any proof that the product in
question was defective.[30] The defect must be present upon the delivery or manufacture of the product;[31] or when
the product left the sellers or manufacturers control;[32] or when the product was sold to the purchaser;[33] or the
product must have reached the user or consumer without substantial change in the condition it was sold. Tracing the
defect to the petitioner requires some evidence that there was no tampering with, or changing of the animal feeds.
The nature of the animal feeds makes it necessarily difficult for the respondents to prove that the defect was existing
when the product left the premises of the petitioner.
A review of the facts of the case would reveal that the petitioner delivered the animal feeds, allegedly containing
rat poison, on July 26, 1993; but it is astonishing that the respondents had the animal feeds examined only on
October 20, 1993, or barely three months after their broilers and hogs had died. On cross-examination, respondent
Maura Evangelista testified in this manner:
Atty. Cruz:
Q Madam Witness, you said in the last hearing that believing that the 250 bags of feeds delivered to (sic)
the Nutrimix Feeds Corporation on August 2, 1993 were poison (sic), allegedly your husband Efren
Evangelista burned the same with the chicken[s], is that right?
A Yes, Sir. Some, Sir.
Q And is it not a fact, Madam Witness, that you did not, as according to you, used (sic) any of these
deliveries made on August 2, 1993?
A We were able to feed (sic) some of those deliveries because we did not know yet during that time that it
is the cause of the death of our chicks (sic), Sir.
Q But according to you, the previous deliveries were not used by you because you believe (sic) that they
were poison (sic)?
A Which previous deliveries, Sir[?]
Q Those delivered on July 26 and 22 (sic), 1993?
A Those were fed to the chickens, Sir. This is the cause of the death of the chickens.
Q And you stated that this last delivery on August 2 were poison (sic) also and you did not use them, is
that right?
Atty. Roxas:
That is misleading.
Atty. Cruz:
She stated that.
Atty. Roxas:
She said some were fed because they did not know yet of the poisoning.
Court:
And when the chickens died, they stopped naturally feeding it to the chickens.
Atty. Cruz:
Q You mean to say, Madam Witness, that although you believe (sic) that the chickens were allegedly
poisoned, you used the same for feeding your animals?
A We did not know yet during that time that the feeds contained poison, only during that time when we
learned about the same after the analysis.
Q Therefore you have known only of the alleged poison in the Nutrimix Feeds only after you have caused
the analysis of the same?
A Yes, Sir.
Q When was that, Madam Witness?
A I cannot be sure about the exact time but it is within the months of October to November, Sir.
Q So, before this analysis of about October and November, you were not aware that the feeds of Nutrimix
Feeds Corporation were, according to you, with poison?
A We did not know yet that it contained poison but we were sure that the feeds were the cause of the
death of our animals.[34]
We find it difficult to believe that the feeds delivered on July 26 and 27, 1993 and fed to the broilers and hogs
contained poison at the time they reached the respondents. A difference of approximately three months enfeebles
the respondents theory that the petitioner is guilty of breach of warranty by virtue of hidden defects. In a span of three
months, the feeds could have already been contaminated by outside factors and subjected to many conditions
unquestionably beyond the control of the petitioner. In fact, Dr. Garcia, one of the witnesses for the respondents,
testified that the animal feeds submitted to her for laboratory examination contained very high level of aflatoxin,
possibly caused by mold (aspergillus flavus).[35] We agree with the contention of the petitioner that there is no
evidence on record to prove that the animal feeds taken to the various governmental agencies for laboratory
examination were the same animal feeds given to the respondents broilers and hogs for their consumption.
Moreover, Dr. Diaz even admitted that the feeds that were submitted for analysis came from a sealed bag. There is
simply no evidence to show that the feeds given to the animals on July 26 and 27, 1993 were identical to those
submitted to the expert witnesses in October 1993.
It bears stressing, too, that the chickens brought to the Philippine Nuclear Research Institute for laboratory tests
were healthy animals, and were not the ones that were ostensibly poisoned. There was even no attempt to have the
dead fowls examined. Neither was there any analysis of the stomach of the dead chickens to determine whether the
petitioners feeds really caused their sudden death. Mere sickness and death of the chickens is not satisfactory
evidence in itself to establish a prima facie case of breach of warranty.[36]
Likewise, there was evidence tending to show that the respondents combined different kinds of animal feeds
and that the mixture was given to the animals. Respondent Maura Evangelista testified that it was common practice
among chicken and hog raisers to mix animal feeds. The testimonies of respondent Maura Evangelista may be thus
summarized:
Cross-Examination
Atty. Cruz:
Q Because, Madam Witness, you ordered chicken booster mash from Nutrimix Feeds Corporation
because in July 1993 you were taking care of many chickens, as a matter of fact, majority of the
chickens you were taking care [of] were chicks and not chickens which are marketable?
A What I can remember was that I ordered chicken booster mash on that month of July 1993 because we
have some chicks which have to be fed with chicken booster mash and I now remember that on the
particular month of July 1993 we ordered several bags of chicken booster mash for the consumption
also of our chicken in our other poultry and at the same time they were also used to be mixed with
the feeds that were given to the hogs.
Q You mean to say [that], as a practice, you are mixing chicken booster mash which is specifically made
for chick feeds you are feeding the same to the hogs, is that what you want the Court to believe?
A Yes, Sir, because when you mix chicken booster mash in the feeds of hogs there is a better
result, Sir, in raising hogs.[37]
Re-Direct Examination
Atty. Roxas:
Q Now, you mentioned that shortly before July 26 and 27, 1993, various types of Nutrimix feeds were
delivered to you like chicks booster mash, broiler starter mash and hog finisher or hog grower mash.
What is the reason for simultaneous deliveries of various types of feeds?
A Because we used to mix all those together in one feeding, Sir.
Q And what is the reason for mixing the chick booster mash with broiler starter mash?
A So that the chickens will get fat, Sir.
Re-Cross Examination
Atty. Cruz:
Q Madam Witness, is it not a fact that the mixing of these feeds by you is your own concuction (sic) and
without the advice of a veterinarian expert to do so?
A That is common practice among raisers to mix two feeds, Sir.
Q By yourself, Madam Witness, who advised you to do the mixing of these two types of feeds for feeding
your chickens?
A That is common practice of chicken raisers, Sir.[38]
Even more surprising is the fact that during the meeting with Nutrimix President Mr. Bartolome, the respondents
claimed that their animals were plagued by disease, and that they needed more time to settle their obligations with
the petitioner. It was only after a few months that the respondents changed their justification for not paying their
unsettled accounts, claiming anew that their animals were poisoned with the animal feeds supplied by the petitioner.
The volte-face of the respondents deserves scant consideration for having been conjured as a mere afterthought.
In essence, we hold that the respondents failed to prove that the petitioner is guilty of breach of warranty due to
hidden defects. It is, likewise, rudimentary that common law places upon the buyer of the product the burden of
proving that the seller of the product breached its warranty.[39] The bevy of expert evidence adduced by the
respondents is too shaky and utterly insufficient to prove that the Nutrimix feeds caused the death of their animals.
For these reasons, the expert testimonies lack probative weight. The respondents case of breach of implied warranty
was fundamentally based upon the circumstantial evidence that the chickens and hogs sickened, stunted, and died
after eating Nutrimix feeds; but this was not enough to raise a reasonable supposition that the unwholesome feeds
were the proximate cause of the death with that degree of certainty and probability required.[40] The rule is well-settled
that if there be no evidence, or if evidence be so slight as not reasonably to warrant inference of the fact in issue or
furnish more than materials for a mere conjecture, the court will not hesitate to strike down the evidence and rule in
favor of the other party.[41] This rule is both fair and sound. Any other interpretation of the law would unloose the
courts to meander aimlessly in the arena of speculation.[42]
It must be stressed, however, that the remedy against violations of warranty against hidden defects is either to
withdraw from the contract (accion redhibitoria) or to demand a proportionate reduction of the price (accion quanti
minoris), with damages in either case.[43] In any case, the respondents have already admitted, both in their
testimonies and pleadings submitted, that they are indeed indebted to the petitioner for the unpaid animal feeds
delivered to them. For this reason alone, they should be held liable for their unsettled obligations to the petitioner.
WHEREFORE, in light of all the foregoing, the petition is GRANTED. The assailed Decision of the Court of
Appeals, dated February 12, 2002, is REVERSED and SET ASIDE. The Decision of the Regional Trial Court of
Malolos, Bulacan, Branch 9, dated January 12, 1998, is REINSTATED. No costs.
SO ORDERED.

SECOND DIVISION

[G.R. No. 61043. September 2, 1992.]

DELTA MOTOR SALES CORPORATION, Plaintiff-Appellee, v. NIU KIM DUAN and CHAN FUE
ENG, Defendants-Appellants.

Francisco C. Bonoan for Plaintiff-Appellee.

Agapito M. Joaquin, for Defendants-Appellants.

SYLLABUS

1. CIVIL LAW; SALES; TREATMENT OF THE INSTALLMENT PAYMENTS AS RENTALS; STIPULATION


IN A CONTRACT THAT THE INSTALLMENTS PAID SHALL NOT BE RETURNED TO THE VENDEE
HELD VALID PROVIDED IT IS NOT UNCONSCIONABLE. — Defendants-appellants cannot complain that
their downpayment of P774.00 and installment payments of P5,655.92 were treated as rentals — even
though the total amount of P6,429,92 which they had paid, approximates one-third (1/3) of the cost of the
three (3) air-conditioners. A stipulation in a contract that the installments paid shall not be returned to the
vendee is valid insofar as the same may not be unconscionable under the circumstances is sanctioned by
Article 1486 of the New Civil Code. The monthly installment payable by defendants-appellants was
P774.00. The P5,655.92 installment payments correspond only to seven (7) monthly installments. Since
they admit having used the air-conditioners for twenty-two (22) months, this means that they did not pay
fifteen (15) monthly installments on the said air-conditioners and were thus using the same FREE for said
period — to the prejudice of plaintiff-appellee. Under the circumstances, the treatment of the installment
payments as rentals cannot be said to be unconscionable.

2. REMEDIES OF THE VENDOR IN A SALE OF PERSONAL PROPERTY PAYABLE IN


INSTALLMENTS; REMEDIES ARE ALTERNATIVE AND NOT CUMULATIVE. — The vendor in a sale of
personal property payable in installments may exercise one of three remedies, namely, (1) exact the
fulfillment of the obligation, should the vendee fail to pay; (2) cancel the sale upon the vendee’s failure to
pay two or more installments; (3) foreclose the chattel mortgage, if one has been constituted on the
property sold, upon the vendee’s failure to pay two or more installments. The third option or remedy,
however, is subject to the limitation that the vendor cannot recover any unpaid balance of the price and
any agreement to the contrary is void (Art. 1484) The three (3) remedies are alternative and NOT
cumulative. If the creditor chooses one remedy, he cannot avail himself of the other two.

DECISION

NOCON, J.:

Elevated to this Court by the Court of Appeals, in its Resolution of May 20, 1982, on a pure question of
law, 1 is the appeal therein by defendants-appellants, Niu Kim Duan and Chan Fue Eng assailing the trial
court’s decision promulgated on October 11, 1977, 2 which ordered them to pay plaintiff-appellee, Delta
Motor Sales Corporation, the amount of P6,188.29 with a 14% per annum interest which was due on the
three (3) "Daikin" air-conditioners defendants-appellants purchased from plaintiff-appellee under a Deed of
Conditional Sale, after the same was declared rescinded by the trial court. They were likewise ordered to
pay plaintiff-appellee P1,000.00 for and as attorney’s fees.chanrobles virtual lawlibrary

The events which led to the filing of the case in the lower court were summarized by the Court of Appeals,
as follows:jgc:chanrobles.com.ph

"‘On July 5, 1975, the defendants purchased from the plaintiff three (3) units of ‘DAIKIN’ air-conditioner all
valued at P19,350.00 as evidenced by the Deed of Conditional Sale, Exhibit A; that the aforesaid deed of
sale had the following terms and conditions:chanrob1es virtual 1aw library

‘(a) the defendants shall pay a down payment of P774.00 and the balance of P18,576.00 shall [be] paid by
them in twenty four (24) installments; (b) the title to the properties purchased shall remain with the plaintiff
until the purchase price thereof is fully paid; (c) if any two installments are not paid by the defendants on
their due dates, the whole of the principal sum remaining unpaid shall become due, with interest at the rate
of 14% per annum: and (d) in case of a suit, the defendants shall pay an amount equivalent to 25% of the
remaining unpaid obligation as damages, penalty and attorney’s fees; that to secure the payment of the
balance of P18,576.00 the defendants jointly and severally executed in favor of the plaintiff a promissory
note, Exhibit C; that the three (3) air-conditioners were delivered to and received by the defendants as
shown by the delivery receipt, Exhibit B; that after paying the amount of P6,966.00, the defendants failed
to pay at least two (2) monthly installments; that as of January 6, 1977, the remaining unpaid obligation of
the defendants amounted to P12,920.08; that statements of accounts were sent to the defendants and the
plaintiff’s collectors personally went to the former to effect collections but they failed to do so; that because
of the unjustified refusal of the defendants to pay their outstanding account and their wrongful detention of
the properties in question, the plaintiff tried to recover the said properties extra-judicially but it failed to do
so; that the matter was later referred by the plaintiff to its legal counsel for legal action; that in its verified
complaint dated January 28, 1977, the plaintiff prayed for the issuance of a writ of replevin, which the
Court granted in its Order dated February 28, 1977, after the plaintiff posted the requisite bond; that on
April 11, 1977, the plaintiff, by virtue of the aforesaid writ, succeeded in retrieving the properties in
question: that as of October 3, 1977, the outstanding account of the defendants is only in the amount of
P6,188.29 as shown by the computation, Exhibit F, after deducting the interests in arrears, cover charges,
replevin bond premiums, the value of the units repossessed and the like; and, that in view of the failure of
the defendants to pay their obligations, the amount of P6,966.00 which had been paid by way of
installments were treated as rentals for the units in question for two (2) years pursuant to the provisions of
paragraph 5 of the Deed of Conditional Sale, Exhibit A.’ (pp. 5-7, Record; pp. 4-6, Appellant’s
Brief)." chanrobles law library

As above-stated, the trial court ruled in favor of Plaintiff-Appellee.

Defendants-appellants assail the Deed of Conditional Sale under which they purchased the three (3)
Daikin air-conditioners from plaintiff-appellee as being contrary to law, morals, good custom, public order
or public policy. In particular, they point to the contract’s paragraphs 5 and 7 as iniquitous, which
paragraphs state that:jgc:chanrobles.com.ph

"5. Should BUYER fail to pay any of the monthly installments when due, or otherwise fail to comply with
any of the terms and conditions herein stipulated, this contract shall automatically become null and void
and all sums so paid by BUYER by reason thereof shall be considered as rental and the SELLER shall
then and there be free to take possession thereof without liability for trespass or responsibility for any
article left in or attached to the PROPERTY:chanrob1es virtual 1aw library

x x x

"7. Should SELLER rescind this contract for any of the reasons stipulated in the preceding paragraph, the
BUYER, by these presents obligates himself to peacefully deliver the PROPERTY to the SELLER in case
of rescission, and should a suit be brought in court by the SELLER to seek judicial declaration of
rescission and take possession of the PROPERTY, the BUYER hereby obligates himself to pay all the
expenses to be incurred by reason of such suit and in addition to pay the sum equivalent to 25% of the
remaining unpaid obligation as damages, penalty and attorney’s fees;" 3

Defendants-appellants claim that for the use of the plaintiff-appellee’s three air-conditioners, from July 5,
1975 4 to April 11, 1977, 5 or for a period of about 22 months, they, in effect, paid rentals in the amount of
P6,429,92, 6 or roughly one-third (1/3) of the entire price of said air-conditioners which was P19,350.00.
They also complain that for the said period the trial court is ordering them to pay P6,188.29 as the balance
due for the three air-conditioners repossessed. Defendants-appellants were likewise ordered to pay
P1,000.00 as attorney’s fees when plaintiff-appellee never sought for attorney’s fees in its complaint. They
satirically pointed out that by putting "a few touches here and there, the same units can be sold again to
the next imprudent customer" 7 by plaintiff-appellee. Thus, enforcement of the Deed of Conditional Sale
will unjustly enrich plaintiff-appellee at the expense of defendants-appellants.chanrobles law library : red

Defendants-appellants cannot complain that their downpayment of P774.00 and installment payments of
P5,655.92 8 were treated as rentals — even though the total amount of P6,429,92 which they had paid,
approximates one-third (1/3) of the cost of the three (3) air-conditioners. A stipulation in a contract that the
installments paid shall not be returned to the vendee is valid insofar as the same may not be
unconscionable under the circumstances is sanctioned by Article 1486 of the New Civil Code. 9 The
monthly installment payable by defendants-appellants was P774.00. 10 The P5,655.92 installment
payments correspond only to seven (7) monthly installments. Since they admit having used the air-
conditioners for twenty-two (22) months, this means that they did not pay fifteen (15) monthly installments
on the said air-conditioners and were thus using the same FREE for said period — to the prejudice of
plaintiff-appellee. Under the circumstances, the treatment of the installment payments as rentals cannot be
said to be unconscionable.
II

The vendor in a sale of personal property payable in installments may exercise one of three remedies,
namely, (1) exact the fulfillment of the obligation, should the vendee fail to pay; (2) cancel the sale upon
the vendee’s failure to pay two or more installments; (3) foreclose the chattel mortgage, if one has been
constituted on the property sold, upon the vendee’s failure to pay two or more installments. The third
option or remedy, however, is subject to the limitation that the vendor cannot recover any unpaid balance
of the price and any agreement to the contrary is void (Art. 1484) 11

The three (3) remedies are alternative and NOT cumulative. If the creditor chooses one remedy, he cannot
avail himself of the other two.chanrobles lawlibrary : rednad

It is not disputed that the plaintiff-appellee had taken possession of the three air-conditioners, through a
writ of replevin when defendants-appellants refused to extra-judicially surrender the same. This was done
pursuant to paragraphs 5 and 7 of its Deed of Conditional Sale when defendants-appellants failed to pay
at least two (2) monthly installments, so much so that as of January 6, 1977, the total amount they owed
plaintiff-appellee, inclusive of interest, was P12,920.08. 12 The case plaintiff-appellee filed was to seek a
judicial declaration that it had validly rescinded the Deed of Conditional Sale. 13

Clearly, plaintiff-appellee chose the second remedy of Article 1484 in seeking enforcement of its contract
with defendants-appellants. This is shown from the fact that its Exhibit "F" which showed the computation
of the outstanding account of defendants-appellants as of October 3, 1977 took into account "the value of
the units repossessed." 14 Having done so, it is barred from exacting payment from defendants-appellants
of the balance of the price of the three air-conditioning units which it had already repossessed. It cannot
have its cake and eat it too. 15

WHEREFORE, the judgment of the trial court in Civil Case No. 25578 is hereby SET ASIDE and the
complaint filed by plaintiff-appellee Delta Motor Sales Corporation is hereby DISMISSED. No costs.

SO ORDERED.
FIRST DIVISION

[G.R. No. 140468. January 16, 2003]

OLYMPIA HOUSING, INC., petitioner, vs. PANASIATIC TRAVEL CORPORATION and MA. NELIDA GALVEZ-
YCASIANO, respondents.

DECISION
VITUG, J.:

The petition for review on certiorari before the Court assails the decision, promulgated on 11 June 1999, and
the resolution, promulgated on 14 October 1999, of the Court of Appeals in CA-G.R. CV Case No. 53516.
The case originated from a complaint for Recovery of Possession (Accion Publiciana) filed by Olympia Housing,
Inc., against Panasiatic Travel Corporation, Maria Nelida Ycasiano and the latters husband. The object in litigation is
a condominium unit sold at the price of P2,340,000.00 payable on installments at the rate of P33,657.40 per month.

On the basis of the facts encapsulated by the trial court, it would appear that

On August 8, 1984, plaintiff and defendant Ma. Nelida Galvez-Ycasiano entered into a Contract to Sell,
whereby the former agreed to sell to the latter condominium unit no. D-12, comprising an area of 160.50
square meters, more or less, situated on the ground floor of Olympia Condominium located at Makati, Metro
Manila, covered by Condominium Certificate of Title No. 6711, for the agreed price of P2,340,000.00
payable in installments of P33,657.40 per month.

The schedule of payments [were] as follows:

Date Particulars Amount

July 17, 1984 Reservation/Deposit P100,000.00

July 19, 1984 50% Down payment P1,070,000.00

Balance of 50% payable in sixty (60) monthly installments at 24% per annum base on diminishing
balance.

Monthly amortization to commence on Sept. 17,


1984.........................................P33,657.40/month

Interest of 2% is included in regular monthly amortization, past due amortization shall bear interest of
2% per month plus penalty charge of 2% per month.

Pursuant to the Contract to Sell, defendant Ma. Nelida Galvez-Ycasiano made a reservation/deposit in the amount of
P100,000.00 on July 17, 1984 and 50% down payment in the amount of P1,070,000.00 on July 19, 1984.

Defendants made several payments in cash and thru credit memos issued by plaintiff representing plane tickets
bought by plaintiff from defendant Panasiatic Travel Corp., which is owned by defendant Ma. Nelida Galvez-
Ycasiano, who credited/offset the amount of the said plane tickets to defendants account due to plaintiff.

Plaintiff alleged that far from complying with the terms and conditions of said Contract to Sell, defendants failed to
pay the corresponding monthly installments which as of June 2, 1988 amounted to P1,924,345.52. Demand to pay
the same was sent to defendant Ma. Nelida Galvez-Ycasiano, but the latter failed to settle her obligation.

For failure of defendant to pay her obligation plaintiff allegedly rescinded the contract by a Notarial Act of Rescission.

At present, the subject condominium unit is being occupied by defendant Panasiatic Travel Corp., hence the suit for
Recovery of Possession (Accion Publiciana) with prayer for attorneys fees, exemplary damages and reasonable
rentals for the unit from July 28,1988 at the rate of P32,100.00 per month until the condominium unit is finally
vacated.

Defendant Ma. Nelida Galvez-Ycasiano, while admitting the existence of the contract to sell, interposed the defense
that she has made substantial payments of the purchase price of the subject condominium unit amounting to
P1,964,452.82 in accordance with the provisions of the contract to sell; that she decided to stop payment of the
purchase price in the meantime because of substantial differences between her and the plaintiff in the computation of
the balance of the purchase price.

xxx xxx xxx

Evidence adduced by plaintiff such as the statement of account of defendant Ma. Nelida Galvez-Ycasiano (Exh. C)
has been established by plaintiffs witness, Mrs. Isabelita Rivera, which indeed shows that on several occasions
defendant either failed to pay on time or was completely in default in the payment of the monthly installment of the
subject condominium unit.

It can be deduced from said documentary evidence that defendant should start paying the installment on September
17, 1984, but defendant paid on September 21, 1984 the amount of P51,238.00 thru credit memo. Witness claimed
that a credit memo is a document issued by Olympia Housing Inc. to Panasiatic Travel Corp. for the amount of ticket
purchased instead of paying in cash they just issued credit memo in order that it would be offset on the monthly
amortization due to Olympia Housing Corp. She claimed that they based it on the invoice that they [were] sending
them.

Witness further claimed that since the amount due was only P33,657.40 what she did to the excess of P51,238.00
was to apply it to the next installment. The next installment was due on October 12, 1984 in the amount of
P26,158.00 representing the excess. It was paid thru credit memo no. 031 on October 17, 1984. In fact, there was
still an excess of P10,081.20. The third installment was due on November 17, 1984. Defendant made partial payment
because the excess payment of P10,081.20 was applied to the third installment. The 4th installment was due on
December 17, 1984; the defendant did not pay instead she paid On January 9, 1985 the amount of P51,619.08 in
cash per O.R. No. 295. Before this payment on January 9, 1985 defendant owed plaintiff P59,931.81 based on the
amortization. The basis [was] the unpaid amortization due and payable plus 2% interest and 2% penalty charges per
month. After payment, the amount due was P8,312.73. The 5th installment was due on January 17, 1985. No
payment was made on the 6th, 7th 8th installments which were due on January, February, March, April 17, 1985
respectively. The 9th installment was due on May 17, 1985, it was not paid. Defendant made a payment on June
1985 for P33,231.90 in cash per O.R. No. 439. The next payment was made on June 8, 1985 for P25,574.59. After
these two payments, there was still an outstanding amount due of P32,552.44. No payment was made on the 10th
and 11th installments. The next payment was made on July 24, 1985 for P60,000.00. After this payment the
outstanding amount due was P43,881.76. She made payment on August 16, 1985 for P30,067.00 thru credit memo
no. 045. After this payment the outstanding amount due was P15,160.46. She did not on the 12th installment, instead
she paid on August 28, 1985 for P26,043.00 thru credit memo no. 046. After this payment the outstanding amount
due was P23,511.07. She did not pay on the 13th installment, instead she paid on October 10, 1985 for P20,830.00
thru credit memo no. 006. After this payment the outstanding amount due was P38,728.61. She did not pay on the
14th installment, instead payment was made on November 10, 1985 for P16,212.00 thru credit memo no. 010. After
this payment the outstanding amount due was P58,851.83. No payments were made on the 15th, 16th and 17th
installments. She paid on January 30, 1986 for P33,657.40 in cash per O.R. No. 842. After this payment the
outstanding balance was P138,233.23. No payment was made on the 18th and 19th installment which fell due on
February 17 and March 17, 1986. The next payment was made on April 15, 1986 for P25,263.23. After this payment
the outstanding balance was P198,425.88. She did not pay for six (6) consecutive months from April 17 to
September 17, 1986 corresponding to the 20th up to the 25th installment. The next payment was made on October
14, 1986 for P82,780.33 in cash per O.R. No. 1628. After this payment the outstanding amount due was
P350,712.73. The 26th and 27th installments were not paid. She paid on November 24, 1986 for P134,629.60. After
this payment the outstanding balance was P306,306.66. Witness claimed that the basis for the computation was the
unpaid amortization due payable for the particular period plus 2% interest and 2% penalty charge per month. In
computing the interest she used the simple method. The 28th up to the 31st installments were not paid. The next
payment was made on April 30, 1987 for P22,213.00 thru credit memo no. 134. After this payment the outstanding
balance was P471,317.60. The basis for this computation is the unpaid amortization due plus 2% interest and 2%
penalty charge per month. The 33rd, 34th and 35th installments were not paid. The next payment was made on July
22, 1987 for P19,752.00 thru credit memo no. 146. After this payment the outstanding balance was P664,822.78.
The 36th and 37th installments were not paid.[1]

On 31 January 1995, the Regional Trial Court, Branch V, of Makati City ruled thusly-

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. As the complaint has been prematurely filed without complying with the mandate of Republic Act No. 6552, the
complaint is hereby dismissed;

2. That the obligation of defendant Maria Nelida Galvez Ycasiano has now become due and demandable, said
defendant is hereby ordered to pay the sum of P4,007,473.49 as of November 30, 1994 plus 18% interest per
annum, computed from 1 December 1994, but within sixty days from receipt of a copy of this decision;

3. Upon payment thereof, for plaintiff to issue the corresponding certificate of title in favor of defendant;

4. In the event that said amount in full is not paid including the current amount due including the interest sans
penalties, then immediately thereafter, without necessity of demand, the defendants must vacate the premises and
all payments will be charged as rentals to the property.

No award of damages and attorneys fees for any parties is being adjudged.

No costs.[2]

Thereupon, respondents tendered the amount of P4,304,026.53 to petitioner via Metrobank Cashiers Check
No. CC008857. Petitioner refused to accept the payment, constraining respondents to consign at the disposal of the
court a quo the check on 26 April 1995. In an order, dated 05 June 1996, the check was allowed to be substituted by
another cashiers check payable to the Clerk of Court of the Makati Regional Trial Court. Complying with yet another
court order of 04 January 1996, respondents deposited the amount of P4,304,026.53 with the Land Bank of the
Philippines and subsequently submitted to the court the corresponding bank book as well as the banks verification.
Meanwhile, both parties appealed the judgment of the trial court. In its now questioned decision of 11 June
1999, the appellate court sustained the trial court.
The denial of the motion for reconsideration prompted petitioner to file the instant petition for review
on certiorari, raising the following assignment of errors, to wit:
I

THE COURT OF APPEALS ACTED IN A MANNER NOT IN ACCORD WITH LAW AND APPLICABLE
JURISPRUDENCE OF THE SUPREME COURT WHEN IT FAILED AND/OR REFUSED TO RULE UPON THE
EFFECT OF THE FILING OF THE COMPLAINT AND THE NOTARIAL ACT OF RESCISSION ATTACHED
THERETO VIS--VIS THE REQUIREMENTS OF R.A. 6552.

II

THE COURT OF APPEALS ACTED IN A MANNER NOT IN ACCORD WITH LAW AND APPLICABLE
JURISPRUDENCE OF THE SUPREME COURT IN REFUSING TO DECREE THE RESCISSION OF THE SUBJECT
CONTRACT TO SELL ON THE GROUND THAT PETITIONER FAILED TO PAY THE CASH SURRENDER VALUE
PRIOR TO THE FILING OF THE COMPLAINT.

III

THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURTS DECISION ALLOWING RESPONDENT
YCASIANO TO PAY ON HER ALREADY-DEFAULTED OBLIGATIONS AND, UPON SUCH PAYMENT, ORDERING
PETITIONER TO ISSUE THE CERTIFICATE OF TITLE TO HER.[3]

Respondents, upon the other hand, would insist that the petition should be held devoid of merit considering
that: first, the issues raised in the petition would strike at fundamentally factual questions beyond the province of a
petition for review on certiorari with this Court; second, there was no valid rescission of the contract to sell on account
of the failure of petitioner to give notice of rescission by notarial act, a requisite laid down in Republic Act No.
6552; third, the oft-invoked Layug vs. IAC[4] case would scarcely find application, it being a case for annulment of
contract, not one for the recovery of possession; fourth, no effective rescission had taken place on account of the
failure of petitioner to pay the cash surrender value, conformably with the terms of the law; and fifth, there being no
valid rescission, the contract remained valid and subsisting, still thereby obligating respondents to pay the
outstanding balance of the purchase price.
In its Reply Brief, petitioner asseverated that, while not categorically made, the Court, in Layug,[5] had held to be
sufficiently anchored, nevertheless, an action for judicial rescission even if no notarial act of rescission was priorly
executed and the non-payment of the cash surrender value before the filing of the complaint.[6] Moreover, petitioner
argued that while the complaint before the trial court was denominated as one for recovery of possession, the suit
could still be considered as a case for judicial rescission considering that the issue of whether or not it was entitled to
recover possession over the property subject matter of the contract to sell would require, for its resolution, passing
upon the initial issue of whether or not the contract was in fact rescinded by virtue of a notarial act.[7]
The petition must be denied.
The action for reconveyance filed by petitioner was predicated on an assumption that its contract to sell
executed in favor of respondent buyer had been validly cancelled or rescinded. The records would show that, indeed,
no such cancellation took place at any time prior to the institution of the action for reconveyance. What had been sent
by petitioner to respondent was a letter, dated 02 June 1988, that read:

02 June 1988

MS. NELIDA GALVEZ


Pan Asiatic Travel Corp.
3rd Floor, S & L Building
Roxas Boulevard, Manila

Dear Ms. Galvez:

We have sent you many letters in the past asking you to update your payments in accordance with the terms of our
Contract to Sell dated August 25, 1984 as follows:

Purchase Price, Unit No. D-12 P2,340,000.00


Terms of Payment:
- July 17, 1984, Reservation/
Deposit 100,000.00
- July 19, 1984, 50%
Down payment 1,070,000.00
- balance payable in 60
monthly installments with
24% p.a. interest on
diminishing balance.
Monthly payments to commence
Sept. 12, 1984 33,657.04/month

Note: Past due payments to bear interest of 2% per month plus penalty charge of 2% per month.

You are in default and your overdue account now stands as follows:

Purchase Price P2,340,000.00

Add: Interest on monthly


Amortizations 849,444.00
P3,189,444.00
Add: Interest and penalties
on overdues (Refer
to Exh. A) 679,002.34
P3,868,446.34
Less: Payments (Refer
To Exh. B) 1,944,100.82
TOTAL DUE AND DEMANDABLE P1,924,345.52
===========

Unless we receive payment in full within 30 days after service of this notice upon you, our Contract to Sell shall be
cancelled and/or rescinded.

Please give this matter its due attention.

Very truly yours,

(Sgd.) Illegible
(Type) FELIX H. LIMCAOCO, JR.
President[8]
As so aptly observed by the courts below, the foregoing communication to the buyer merely demanded
payment within thirty (30) days from receipt thereof with the threat that if the demand were not heeded, the contract
would forthwith be cancelled or rescinded. Nor did the appellate court erroneously ignore the notarial rescission
attached to the complaint for reconveyance. Apparently, the so-called notarial rescission was not sent to
respondents prior to the institution of the case for reconveyance but merely served on respondents by way of an
attachment to the complaint. In any case, a notarial rescission, standing alone, could not have invalidly effected, in
this case, the cancellation of the contract.
As the trial court elaborated in this case:

A careful study of the evidence presented does not show a notice of cancellation or the demand for rescission of the
contract by a notarial act. The plaintiff appears to be claiming that the June 2, 1988 letter is a notice of cancellation or
a demand for rescission of the contract by a notarial act. This could not be what the law contemplates. It should be a
notice of cancellation or demand for rescission of the contract by notarial act.
Further, the law requires also full payment of the cash surrender value to the buyer but there is no evidence adduced
by the plaintiff that they delivered to the defendant the cash surrender value. Admittedly, no such full payment of the
cash surrender value to the defendant was made. A mere promise to return is not what the law contemplates.[9]

The governing law is Republic Act No. 6552, otherwise known as the Realty Installment Buyer Protection Act,
which has become effective since 16 September 1972. Republic Act No. 6552 is a special law governing transactions
that involve, subject to certain exceptions, the sale on installment basis of real property. [10] The law has been enacted
mainly to protect buyers of real estate on installment payments against onerous and oppressive
conditions.[11] Section 3 of the statute provides:

Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including
residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under
Republic Act Number Thirty-eight hundred forty-four as amended by Republic Act Numbered Sixty three hundred
eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in
case he defaults in the payment of succeeding installments:

a) To pay without additional interest, the unpaid installments due within the total grace period earned by him, which is
hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That
this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if
any.

b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the
property equivalent to fifty per cent of the total payments made and, after five years of installments, an additional five
per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual
cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or
the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the
buyer.

Down payments, deposits or options on the contract shall be included in the computation of the total number of
installments made.

The enactment recognizes the right of the seller to cancel the contract but any such cancellation must be done
in conformity with the requirements therein prescribed.[12] In addition to the notarial act of rescission, the seller is
required to refund to the buyer the cash surrender value of the payments on the property.[13] The actual cancellation
of the contract can only be deemed to take place upon the expiry of a 30-day period following the receipt by the
buyer of the notice of cancellation or demand for rescission by a notarial act and the full payment of the cash
surrender value.
The Court agrees with petitioner that it is not precluded from going to the court to demand judicial rescission in
lieu of a notarial act of rescission. This much must be recognized. Thus, in Layug vs. Intermediate Appellate
Court[14] the Court has ruled that a demand for rescission by notarial act would appear to be merely circuitous,
consequently superfluous, with the filing by the seller of an action for annulment of contract and for recovery of
damages. Unfortunately for petitioner, it would be incorrect to apply Layug to the instant case. Layug is basically an
action for annulment of contract, a kindred concept of rescission, whereas the instant case before the Court is one for
recovery of possession on the thesis of a prior rescission of the contract covering the property.[15] Not only is an
action for reconveyance conceptually different from an action for rescission but that, also, the effects that flow from
an affirmative judgment in either case would be materially dissimilar in various respects. The judicial resolution of a
contract gives rise to mutual restitution which is not necessarily the situation that can arise in an action for
reconveyance. Additionally, in an action for rescission (also often termed as resolution), unlike in an action for
reconveyance predicated on an extrajudicial rescission (rescission by notarial act), the Court, instead of decreeing
rescission, may authorize for a just cause the fixing of a period.[16]
Nor should a party in litigation be permitted to freely and substantially change the theory or the cause of action
of his case[17] that, otherwise, can put to undue disadvantage the other party by not being accurately and timely
apprised of what he is up against. The character of an action is determined from the issues raised by the complaint,
from the nature of the right or grievance asserted, and from the relief sought in the complaint. [18] A change of theory
can result in grave alteration of the stand theretofore taken by the parties, and a court must not thereafter take it upon
itself to assume its own position on, or the factual and legal considerations of, the case.
WHEREFORE, all premises considered, the instant petition is DENIED and the appealed decision is
AFFIRMED. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., co

Republic of the Philippines


SUPREME COURT
Manila

EN BANC

G.R. No. L-21160 April 30, 1965

FELISA TAYAO, ET AL., plaintiffs-appellants,


vs.
PASCUALA DULAY, ET AL., defendants-appellees.

Apolonio B. Santos for plaintiffs-appellants.


De los Santos, De los Santos and De los Santos for defendants-appellees.

BAUTISTA ANGELO, J.:

This is an action to compel defendants to reconvey to plaintiffs a parcel of land situated in Pulilan, Bulacan which,
according to plaintiffs, was merely mortgaged by Apolonio Tayao, their predecessor-in-interest, to Pascuala Dulay on
December 8, 1926 in accordance with a public document entered into between Apolonio Tayao and Pascuala Dulay.

Defendants, in their answer, claim that the document relied upon by the plaintiffs is not a mortgage but a pacto de
retro sale which, because of Tayao's failure to repurchase the property within the period agreed upon, ripened into an
absolute sale thereby vesting the ownership and title of the property in Pascuala Dulay. The latter claims that she
had sold the property to her co-defendants Primitivo Reyes and Anatalia Cayetano who, on their part, claim to have
purchased it in good faith and for value. Defendants finally claim that since the execution of the document on
December 8, 1926 the land had been in the possession respectively of Pascuala Dulay and of spouses Primitivo
Reyes and Anatalia Cayetano continuously, openly, peacefully, adversely and in the concept of owner, having
declared the same in their names for taxation purposes and having paid religiously the taxes due thereon. They pray
that the complaint be dismissed.

After hearing, the court a quo dismissed the complaint with both parties bearing their own costs and expenses of
litigation. The case is now before us on appeal taken the plaintiffs.

Apolonio Tayao, during his lifetime, executed in favor of Pascuala Dulay a deed of sale with option to repurchase
covering a parcel of land for a consideration of P138.79. It was expressly agreed upon that the land object of the sale
cannot be repurchased during the first ten years following the execution of the sale although there is nothing therein
which limits the period within which the repurchase may take place. In view of this failure to stipulate the time within
which the repurchase may be made, plaintiffs now contend that the said clause should be considered as non-existent
being contrary to law with the result that the contract has now become a mere evidence of indebtedness.1äwphï1.ñët

Defendants apparently do not agree with this theory since they aver that the contract entered into between the
original parties is one which embodies a real sale with option to repurchase with the only particularity that it was there
agreed upon that such repurchase could not be effected until after the period of ten years from its execution. The fact
that this stipulation is contrary to law does not in itself convert the contract into a mere evidence of indebtedness and
much less one of mortgage for it would at most be considered as one where the repurchase is to be made within a
period not exceeding ten years in accordance with Article 1508 of the Civil Code of Spain which provides: "Should
there be an agreement, the period should not exceed ten years."

The case in point is that of Santos v. Heirs of Crisostomo, 41 Phil. 342, the facts of which are on all fours with the
present. In that case, one Jose Tiongson sold a parcel of land to spouses Teodorico Santos and Venancia Bautista
with option to repurchase for the sum of P211.00 with the express stipulation that the seller should not repurchase
the land "until after ten years of its enjoyment." In ruling that this stipulation is illicit for being contrary to the spirit of
the law, this Court declared that it did not have the effect of changing the character of the transaction for the most
that can be said is that the law should control the veiled intent of the parties in the sense that the period for the
exercise of the right of repurchase in case there is an agreement should not exceed ten years from the date of
contract, as may be gleaned from the following rationale of this Court:

We think, however, that the document is what it purports to be; and its character is not changed by the fact
that, as will presently be seen, the stipulation as to the time when repurchase may be effected contravenes
the provisions of article 1508 of the Civil Code. When the stipulation in question is examined, it will be
discovered that the intention of the parties was to suppress the exercise of the right of repurchase for the full
period of ten years from the date of the contract and, inferentially, to allow the exercise of that right after the
expiration of ten years. In the second paragraph of article 1508 of the Civil Code it is in effect provided that if
there should be an agreement with respect to the time of repurchase, the period shall not exceed ten years.
The stipulation under consideration offends against this provision in two particulars, namely, (1) in providing
that the right to repurchase may be exercised after ten years shall have elapsed, and (2) in prohibiting that
the exercise of the same right during the whole period when, according to the statue, it might be lawfully
exercised.

The stipulation is, therefore, illicit; and the result is that of the right of repurchase could, in fact, under the
second paragraph of article 1508 of the Civil Code, have been exercised in this case at any time after the
making of the contract and prior to the expiration of ten years. The law must here control over the revealed
intention of the parties.

In what has been said we do not mean to declare that the parties to a contract of sale with pacto de
retrocannot under any conditions lawfully suspend the exercise of the right of repurchase. Doubtless they
may do so, provided there remains an appreciable space of time for the exercise of the right within the
limitation allowed by law. For instance, if it were provided that repurchase should not be effected before five
nor after ten years from the date of contract, we see no reason for supposing the stipulation to be unlawful.
It is different where the parties attempt totally to suppress the right during the whole period when it might
lawfully be exercised.

It follows from what has been said that under the contract before us the right of repurchase expired and the
property consolidated in the purchaser, Teodorico T. Santos and his wife Venancia Bautista or the
successors of the latter, on March 4, 1914.
It appearing that neither plaintiffs nor their predecessor-in-interest have exercised their right of redemption within the
period of ten years allowed by Article 1508 of the Spanish Civil Code, it follows that their claim over the property has
already been forfeited, while the title of the defendants over it has become consolidated with all the rights thereunto
appertaining.

WHEREFORE, the decision appealed from is affirmed with the same allocation of costs and expenses of litigation.

Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala, Makalintal, Bengzon,, J.P., and
Zaldivar, JJ., concur.