G.R. No. 193787 April 7, 2014
), former
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.
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.
 [G.R. No. 103577. October 7, 1996]
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE
A. CORONEL, ANNABELLE C. GONZALES (for
herself and on behalf of Floraida C. Tupper, as
attorney-in-fact), CIELITO A. CORONEL,
FLORAIDA A. ALMONTE, and CATALINA BALAIS
MABANAG, petitioners, vs. THE COURT OF
APPEALS, CONCEPCION D. ALCARAZ and
RAMONA PATRICIA ALCARAZ, assisted by
GLORIA F. NOEL as attorney-in-fact, respondents.
DECISION
MELO, J.:
The petition before us has its roots in a complaint for
specific performance to compel herein petitioners (except the
last named, Catalina Balais Mabanag) to consummate the sale
of a parcel of land with its improvements located along
Roosevelt Avenue in Quezon City entered into by the parties
sometime in January 1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by
respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo
Coronel, et. al. (hereinafter referred to as Coronels) executed a
document entitled Receipt of Down Payment (Exh. A) in favor of
plaintiff Ramona Patricia Alcaraz (hereinafter referred to as
Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment
------------------------------------------
P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog,
Quezon City, the sum of Fifty Thousand Pesos purchase price
of our inherited house and lot, covered by TCT No. 119627 of
the Registry of Deeds of Quezon City, in the total amount
of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our
deceased father, Constancio P. Coronel, the transfer certificate
of title immediately upon receipt of the down payment above-
stated.
On our presentation of the TCT already in or name, We will
immediately execute the deed of absolute sale of said property
and Miss Ramona Patricia Alcaraz shall immediately pay the
balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand
(P50,000.00) pesos upon execution of the document
aforestated;
2. The Coronels will cause the transfer in their names of the title
of the property registered in the name of their deceased father
upon receipt of the Fifty Thousand (P50,000.00) Pesos down
payment;
3. Upon the transfer in their names of the subject property, the
Coronels will execute the deed of absolute sale in favor of
Ramona and the latter will pay the former the whole balance of
One Million One Hundred Ninety Thousand (P1,190,000.00)
Pesos.
On the same date (January 15, 1985), plaintiff-appellee
Concepcion D. Alcaraz (hereinafter referred to as Concepcion),
mother of Ramona, paid the down payment of Fifty Thousand
(P50,000.00) Pesos (Exh. B, Exh. 2).
On February 6, 1985, the property originally registered in the
name of the Coronels father was transferred in their names
under TCT No. 327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered
by TCT No. 327043 to intervenor-appellant Catalina B.
Mabanag (hereinafter referred to as Catalina) for One Million
Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the
latter has paid Three Hundred Thousand (P300,000.00) Pesos
(Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract
(Exh. A) with Ramona by depositing the down payment paid
by Concepcion in the bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint for
a specific performance against the Coronels and caused the
annotation of a notice of lis pendens at the back of TCT No.
327403 (Exh. E; Exh. 5).
On April 2, 1985, Catalina caused the annotation of a notice of
adverse claim covering the same property with the Registry of
Deeds of Quezon City (Exh. F; Exh. 6).
On April 25, 1985, the Coronels executed a Deed of Absolute
Sale over the subject property in favor of Catalina (Exh. G; Exh.
7).
On June 5, 1985, a new title over the subject property was
issued in the name of Catalina under TCT No. 351582 (Exh. H;
Exh. 8).
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court
(Branch 83, RTC, Quezon City) the parties agreed to submit the
case for decision solely on the basis of documentary
exhibits. Thus, plaintiffs therein (now private respondents)
proffered their documentary evidence accordingly marked as
Exhibits A through J, inclusive of their corresponding
submarkings. Adopting these same exhibits as their own, then
defendants (now petitioners) accordingly offered and marked
them as Exhibits 1 through 10, likewise inclusive of their
corresponding submarkings. Upon motion of the parties, the trial
court gave them thirty (30) days within which to simultaneously
submit their respective memoranda, and an additional 15 days
within which to submit their corresponding comment or reply
thereto, after which, the case would be deemed submitted for
resolution.
On April 14, 1988, the case was submitted for resolution
before Judge Reynaldo Roura, who was then temporarily
detailed to preside over Branch 82 of the RTC of Quezon
City. On March 1, 1989, judgment was handed down by Judge
Roura from his regular bench at Macabebe, Pampanga for
the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby
rendered ordering defendant to execute in favor of plaintiffs a
deed of absolute sale covering that parcel of land embraced in
and covered by Transfer Certificate of Title No. 327403 (now
TCT No. 331582) of the Registry of Deeds for Quezon City,
together with all the improvements existing thereon free from all
liens and encumbrances, and once accomplished, to
immediately deliver the said document of sale to plaintiffs and
upon receipt thereof, the plaintiffs are ordered to pay defendants
the whole balance of the purchase price amounting
to P1,190,000.00 in cash. Transfer Certificate of Title No.
331582 of the Registry of Deeds for Quezon City in the name of
intervenor is hereby canceled and declared to be without force
and effect. Defendants and intervenor and all other persons
claiming under them are hereby ordered to vacate the subject
property and deliver possession thereof to plaintiffs. Plaintiffs
claim for damages and attorneys fees, as well as the
counterclaims of defendants and intervenors are hereby
dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioners
before the new presiding judge of the Quezon City RTC but the
same was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the
decision and to render anew decision by the undersigned
Presiding Judge should be denied for the following reasons: (1)
The instant case became submitted for decision as of April 14,
1988 when the parties terminated the presentation of their
respective documentary evidence and when the Presiding
Judge at that time was Judge Reynaldo Roura. The fact that
they were allowed to file memoranda at some future date did not
change the fact that the hearing of the case was terminated
before Judge Roura and therefore the same should be
submitted to him for decision; (2) When the defendants and
intervenor did not object to the authority of Judge Reynaldo
Roura to decide the case prior to the rendition of the decision,
when they met for the first time before the undersigned
Presiding Judge at the hearing of a pending incident in Civil
Case No. Q-46145 on November 11, 1988, they were deemed
to have acquiesced thereto and they are now estopped from
questioning said authority of Judge Roura after they received
the decision in question which happens to be adverse to
them; (3) While it is true that Judge Reynaldo Roura was merely
a Judge-on-detail at this Branch of the Court, he was in all
respects the Presiding Judge with full authority to act on any
pending incident submitted before this Court during his
incumbency. When he returned to his Official Station at
Macabebe, Pampanga, he did not lose his authority to decide or
resolve cases submitted to him for decision or resolution
because he continued as Judge of the Regional Trial Court and
is of co-equal rank with the undersigned Presiding Judge. The
standing rule and supported by jurisprudence is that a Judge to
whom a case is submitted for decision has the authority to
decide the case notwithstanding his transfer to another branch
or region of the same court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the
Decision dated March 1, 1989 rendered in the instant case,
resolution of which now pertains to the undersigned Presiding
Judge, after a meticulous examination of the documentary
evidence presented by the parties, she is convinced that the
Decision of March 1, 1989 is supported by evidence and,
therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration
and/or to Annul Decision and Render Anew Decision by the
Incumbent Presiding Judge dated March 20, 1989 is hereby
DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
 (Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but
on December 16, 1991, the Court of Appeals (Buena, Gonzaga-
Reyes, Abad-Santos (P), JJ.) rendered its decision fully
agreeing with the trial court.
Hence, the instant petition which was filed on March 5,
1992. The last pleading, private respondents Reply
Memorandum, was filed on September 15, 1993. The case was,
however, re-raffled to undersigned ponente only on August 28,
1996, due to the voluntary inhibition of the Justice to whom the
case was last assigned.
While we deem it necessary to introduce certain
refinements in the disquisition of respondent court in the
affirmance of the trial courts decision, we definitely find the
instant petition bereft of merit.
The heart of the controversy which is the ultimate key in
the resolution of the other issues in the case at bar is the
precise determination of the legal significance of the document
entitled Receipt of Down Payment which was offered in
evidence by both parties. There is no dispute as to the fact that
the said document embodied the binding contract between
Ramona Patricia Alcaraz on the one hand, and the heirs of
Constancio P. Coronel on the other, pertaining to a particular
house and lot covered by TCT No. 119627, as defined in Article
1305 of the Civil Code of the Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two
persons whereby one binds himself, with respect to the other, to
give something or to render some service.
While, it is the position of private respondents that the
Receipt of Down Payment embodied a perfected contract of
sale, which perforce, they seek to enforce by means of an action
for specific performance, petitioners on their part insist that what
the document signified was a mere executory contract to sell,
subject to certain suspensive conditions, and because of the
absence of Ramona P. Alcaraz, who left for the United States of
America, said contract could not possibly ripen into a contract of
absolute sale.
Plainly, such variance in the contending parties contention
is brought about by the way each interprets the terms and/or
conditions set forth in said private instrument. Withal, based on
whatever relevant and admissible evidence may be available on
record, this Court, as were the courts below, is now called upon
to adjudge what the real intent of the parties was at the time the
said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
Sale, by its very nature, is a consensual contract because
it is perfected by mere consent. The essential elements of a
contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be
considered as a Contract of Sale because the first essential
element is lacking. In a contract to sell, the prospective seller
explicitly reserves the transfer of title to the prospective buyer,
meaning, the prospective seller does not as yet agree or
consent to transfer ownership of the property subject of the
contract to sell until the happening of an event, which for
present purposes we shall take as the full payment of the
purchase price. What the seller agrees or obliges himself to do
is to fulfill his promise to sell the subject property when the
entire amount of the purchase price is delivered to him. In other
words the full payment of the purchase price partakes of a
suspensive condition, the non-fulfillment of which prevents the
obligation to sell from arising and thus, ownership is retained by
the prospective seller without further remedies by the
prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]),
this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the
respondent was a contract to sell where the ownership or title is
retained by the seller and is not to pass until the full payment of
the price, such payment being a positive suspensive condition
and failure of which is not a breach, casual or serious, but
simply an event that prevented the obligation of the vendor to
convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price, the
prospective sellers obligation to sell the subject property by
entering into a contract of sale with the prospective buyer
becomes demandable as provided in Article 1479 of the Civil
Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor of the
promise is supported by a consideration distinct from the price.
 A contract to sell may thus be defined as a bilateral
contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite delivery
thereof to the prospective buyer, binds himself to sell the said
property exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, that is, full payment of the purchase
price.
A contract to sell as defined hereinabove, may not even
be considered as a conditional contract of sale where the seller
may likewise reserve title to the property subject of the sale until
the fulfillment of a suspensive condition, because in a
conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the suspensive
condition is not fulfilled, the perfection of the contract of sale is
completely abated (cf. Homesite and Housing Corp. vs. Court of
Appeals, 133 SCRA 777 [1984]). However, if the suspensive
condition is fulfilled, the contract of sale is thereby perfected,
such that if there had already been previous delivery of the
property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without
any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although
the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective
buyer by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and
a conditional contract of sale specially in cases where the
subject property is sold by the owner not to the party the seller
contracted with, but to a third person, as in the case at bench. In
a contract to sell, there being no previous sale of the property, a
third person buying such property despite the fulfillment of the
suspensive condition such as the full payment of the purchase
price, for instance, cannot be deemed a buyer in bad faith and
the prospective buyer cannot seek the relief of reconveyance of
the property. There is no double sale in such case. Title to the
property will transfer to the buyer after registration because
there is no defect in the owner-sellers title per se, but the latter,
of course, may be sued for damages by the intending buyer.
In a conditional contract of sale, however, upon the
fulfillment of the suspensive condition, the sale becomes
absolute and this will definitely affect the sellers title thereto. In
fact, if there had been previous delivery of the subject property,
the sellers ownership or title to the property is automatically
transferred to the buyer such that, the seller will no longer have
any title to transfer to any third person.Applying Article 1544 of
the Civil Code, such second buyer of the property who may
have had actual or constructive knowledge of such defect in the
sellers title, or at least was charged with the obligation to
discover such defect, cannot be a registrant in good faith. Such
second buyer cannot defeat the first buyers title. In case a title is
issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed
to the task of deciphering the real nature of the contract entered
into by petitioners and private respondents.
It is a canon in the interpretation of contracts that the
words used therein should be given their natural and ordinary
meaning unless a technical meaning was intended (Tan vs.
Court of Appeals, 212 SCRA 586 [1992]). Thus, when
petitioners declared in the said Receipt of Down Payment that
they --
Received from Miss Ramona Patricia Alcaraz of 146 Timog,
Quezon City, the sum of Fifty Thousand Pesos purchase price
of our inherited house and lot, covered by TCT No. 1199627
of the Registry of Deeds of Quezon City, in the total amount
of P1,240,000.00.
without any reservation of title until full payment of the entire
purchase price, the natural and ordinary idea conveyed is that
they sold their property.
When the Receipt of Down payment is considered in its
entirety, it becomes more manifest that there was a clear intent
on the part of petitioners to transfer title to the buyer, but since
the transfer certificate of title was still in the name of petitioners
father, they could not fully effect such transfer although the
buyer was then willing and able to immediately pay the
purchase price. Therefore, petitioners-sellers undertook upon
receipt of the down payment from private respondent Ramona
P. Alcaraz, to cause the issuance of a new certificate of title in
their names from that of their father, after which, they promised
to present said title, now in their names, to the latter and to
execute the deed of absolute sale whereupon, the latter shall, in
turn, pay the entire balance of the purchase price.
The agreement could not have been a contract to sell
because the sellers herein made no express reservation of
ownership or title to the subject parcel of land. Furthermore, the
circumstance which prevented the parties from entering into an
absolute contract of sale pertained to the sellers themselves
(the certificate of title was not in their names) and not the full
payment of the purchase price. Under the established facts and
circumstances of the case, the Court may safely presume that,
had the certificate of title been in the names of petitioners-
sellers at that time, there would have been no reason why an
absolute contract of sale could not have been executed and
consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the
case at bar did not merely promise to sell the property to private
respondent upon the fulfillment of the suspensive condition. On
the contrary, having already agreed to sell the subject property,
they undertook to have the certificate of title change to their
names and immediately thereafter, to execute the written deed
of absolute sale.
Thus, the parties did not merely enter into a contract to
sell where the sellers, after compliance by the buyer with certain
terms and conditions, promised to sell the property to the
latter. What may be perceived from the respective undertakings
of the parties to the contract is that petitioners had already
agreed to sell the house and lot they inherited from their father,
completely willing to transfer ownership of the subject house
and lot to the buyer if the documents were then in order. It just
so happened, however, that the transfer certificate of title was
then still in the name of their father. It was more expedient to
first effect the change in the certificate of title so as to bear their
names. That is why they undertook to cause the issuance of a
new transfer of the certificate of title in their names upon receipt
of the down payment in the amount of P50,000.00. As soon as
the new certificate of title is issued in their names, petitioners
were committed to immediately execute the deed of absolute
sale. Only then will the obligation of the buyer to pay the
remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is
most commonly entered into so as to protect the seller against a
buyer who intends to buy the property in installment by
withholding ownership over the property until the buyer effects
full payment therefor, in the contract entered into in the case at
bar, the sellers were the ones who were unable to enter into a
contract of absolute sale by reason of the fact that the certificate
of title to the property was still in the name of their father. It was
the sellers in this case who, as it were, had the impediment
which prevented, so to speak, the execution of an contract of
absolute sale.
What is clearly established by the plain language of the
subject document is that when the said Receipt of Down
Payment was prepared and signed by petitioners Romulo A.
Coronel, et. al., the parties had agreed to a conditional contract
of sale, consummation of which is subject only to the successful
transfer of the certificate of title from the name of petitioners
father, Constancio P. Coronel, to their names.
The Court significantly notes that this suspensive
condition was, in fact, fulfilled on February 6, 1985 (Exh. D; Exh.
4). Thus, on said date, the conditional contract of sale between
petitioners and private respondent Ramona P. Alcaraz became
obligatory, the only act required for the consummation thereof
being the delivery of the property by means of the execution of
the deed of absolute sale in a public instrument, which
petitioners unequivocally committed themselves to do as
evidenced by the Receipt of Down Payment.
Article 1475, in correlation with Article 1181, both of the
Civil Code, plainly applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there
is a meeting of minds upon the thing which is the object of the
contract and upon the price.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the
form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as
well as the extinguishment or loss of those already acquired,
shall depend upon the happening of the event which constitutes
the condition.
Since the condition contemplated by the parties which is
the issuance of a certificate of title in petitioners names was
fulfilled on February 6, 1985, the respective obligations of the
parties under the contract of sale became mutually demandable,
that is, petitioners, as sellers, were obliged to present the
transfer certificate of title already in their names to private
respondent Ramona P. Alcaraz, the buyer, and to immediately
execute the deed of absolute sale, while the buyer on her part,
was obliged to forthwith pay the balance of the purchase price
amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in
page 9 of their petition, petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves
to effect the transfer in our names from our
deceased father Constancio P. Coronel, the
transfer certificate of title immediately upon
receipt of the downpayment above-stated". The
sale was still subject to this suspensive
condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a
contract of sale subject to a suspensive condition. Only, they
contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of
first transferring the title to the property under their names, there
could be no perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they have set their own trap for themselves, for
Article 1186 of the Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what
is more controlling than these mere hypothetical arguments is
the fact that the condition herein referred to was actually and
indisputably fulfilled on February 6, 1985, when a new title
was issued in the names of petitioners as evidenced by TCT No.
327403 (Exh. D; Exh. 4).
 The inevitable conclusion is that on January 19, 1985, as
evidenced by the document denominated as Receipt of Down
Payment (Exh. A; Exh. 1), the parties entered into a contract of
sale subject to the suspensive condition that the sellers shall
effect the issuance of new certificate title from that of their
fathers name to their names and that, on February 6, 1985, this
condition was fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187
which pertinently provides -
Art. 1187. The effects of conditional obligation to give, once the
condition has been fulfilled, shall retroact to the day of the
constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine, in
each case, the retroactive effect of the condition that has been
complied with.
the rights and obligations of the parties with respect to the
perfected contract of sale became mutually due and
demandable as of the time of fulfillment or occurrence of the
suspensive condition on February 6, 1985. As of that point in
time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected
contract on January 19, 1985 because they were then not yet
the absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a
mode of transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which
the property, rights and obligations to the extent and value of the
inheritance of a person are transmitted through his death to
another or others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and
daughters of the decedent Constancio P. Coronel are
compulsory heirs who were called to succession by operation of
law. Thus, at the point their father drew his last breath,
petitioners stepped into his shoes insofar as the subject property
is concerned, such that any rights or obligations pertaining
thereto became binding and enforceable upon them. It is
expressly provided that rights to the succession are transmitted
from the moment of death of the decedent (Article 777, Civil
Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners claim that succession may
not be declared unless the creditors have been paid is rendered
moot by the fact that they were able to effect the transfer of the
title to the property from the decedents name to their names on
February 6, 1985.
Aside from this, petitioners are precluded from raising their
supposed lack of capacity to enter into an agreement at that
time and they cannot be allowed to now take a posture contrary
to that which they took when they entered into the agreement
with private respondent Ramona P. Alcaraz. The Civil Code
expressly states that:
Art. 1431. Through estoppel an admission or representation is
rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon.
Having represented themselves as the true owners of the
subject property at the time of sale, petitioners cannot claim now
that they were not yet the absolute owners thereof at that time.
Petitioners also contend that although there was in fact a
perfected contract of sale between them and Ramona P.
Alcaraz, the latter breach her reciprocal obligation when she
rendered impossible the consummation thereof by going to the
United States of America, without leaving her address,
telephone number, and Special Power of Attorney (Paragraphs
14 and 15, Answer with Compulsory Counterclaim to the
Amended Complaint, p. 2; Rollo, p. 43), for which reason, so
petitioners conclude, they were correct in unilaterally rescinding
the contract of sale.
We do not agree with petitioners that there was a valid
rescission of the contract of sale in the instant case. We note
that these supposed grounds for petitioners rescission, are mere
allegations found only in their responsive pleadings, which by
express provision of the rules, are deemed controverted even if
no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules
of Court). The records are absolutely bereft of any supporting
evidence to substantiate petitioners allegations. We have
stressed time and again that allegations must be proven by
sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882
[1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere
allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376
[1947]).
Even assuming arguendo that Ramona P. Alcaraz was in
the United States of America on February 6, 1985, we cannot
justify petitioners-sellers act of unilaterally and extrajudicially
rescinding the contract of sale, there being no express
stipulation authorizing the sellers to extrajudicially rescind the
contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988];
Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the
alleged absence of Ramona P. Alcaraz because although the
evidence on record shows that the sale was in the name of
Ramona P. Alcaraz as the buyer, the sellers had been dealing
with Concepcion D. Alcaraz, Ramonas mother, who had acted
for and in behalf of her daughter, if not also in her own
behalf. Indeed, the down payment was made by Concepcion D.
Alcaraz with her own personal Check (Exh. B; Exh. 2) for and in
behalf of Ramona P. Alcaraz. There is no evidence showing that
petitioners ever questioned Concepcions authority to represent
Ramona P. Alcaraz when they accepted her personal
check. Neither did they raise any objection as regards payment
being effected by a third person. Accordingly, as far as
petitioners are concerned, the physical absence of Ramona P.
Alcaraz is not a ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to
be in default, insofar as her obligation to pay the full purchase
price is concerned. Petitioners who are precluded from setting
up the defense of the physical absence of Ramona P. Alcaraz
as above-explained offered no proof whatsoever to show that
they actually presented the new transfer certificate of title in their
names and signified their willingness and readiness to execute
the deed of absolute sale in accordance with their
agreement.Ramonas corresponding obligation to pay the
balance of the purchase price in the amount of P1,190,000.00
(as buyer) never became due and demandable and, therefore,
she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a
contract involving reciprocal obligations may be considered in
default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in
delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.
xxx
In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment
one of the parties fulfill his obligation, delay by the other
begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the
contract of sale between petitioners and respondents.
With the foregoing conclusions, the sale to the other
petitioner, Catalina B. Mabanag, gave rise to a case of double
sale where Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who
may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to
the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in the possession; and, in the
absence thereof to the person who presents the oldest title,
provided there is good faith.
The record of the case shows that the Deed of Absolute
Sale dated April 25, 1985 as proof of the second contract of sale
was registered with the Registry of Deeds of Quezon City giving
rise to the issuance of a new certificate of title in the name of
Catalina B. Mabanag on June 5, 1985. Thus, the second
paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or
ownership to pass to the buyer, the exceptions being: (a) when
the second buyer, in good faith, registers the sale ahead of the
first buyer, and (b) should there be no inscription by either of the
two buyers, when the second buyer, in good faith, acquires
possession of the property ahead of the first buyer. Unless, the
second buyer satisfies these requirements, title or ownership will
not transfer to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted
authority on the subject, now a distinguished member of the
Court, Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time,
stronger in right). Knowledge by the first buyer of the second
sale cannot defeat the first buyers rights except when the
second buyer first registers in good faith the second sale
(Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge
gained by the second buyer of the first sale defeats his rights
even if he is first to register, since knowledge taints his
registration with bad faith (see also Astorga vs. Court of
Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs.
Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was
held that it is essential, to merit the protection of Art. 1544,
second paragraph, that the second realty buyer must act in
good faith in registering his deed of sale (citing Carbonell vs.
Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No.
95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence,
1993 Edition, p. 604).
Petitioners point out that the notice of lis pendens in the
case at bar was annotated on the title of the subject property
only on February 22, 1985, whereas, the second sale between
petitioners Coronels and petitioner Mabanag was supposedly
perfected prior thereto or on February 18, 1985. The idea
conveyed is that at the time petitioner Mabanag, the second
buyer, bought the property under a clean title, she was unaware
of any adverse claim or previous sale, for which reason she is a
buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and
materiality is not whether or not the second buyer in good faith
but whether or not said second buyer registers such second
sale in good faith, that is, without knowledge of any defect in the
title of the property sold.
As clearly borne out by the evidence in this case,
petitioner Mabanag could not have in good faith, registered the
sale entered into on February 18, 1985 because as early as
February 22, 1985, a notice of lis pendens had been annotated
on the transfer certificate of title in the names of petitioners,
whereas petitioner Mabanag registered the said sale sometime
in April, 1985. At the time of registration, therefore, petitioner
Mabanag knew that the same property had already been
previously sold to private respondents, or, at least, she was
charged with knowledge that a previous buyer is claiming title to
the same property. Petitioner Mabanag cannot close her eyes to
the defect in petitioners title to the property at the time of the
registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale after he has
acquired knowledge that there was a previous sale of the same
property to a third party or that another person claims said
property in a previous sale, the registration will constitute a
registration in bad faith and will not confer upon him any
right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca
vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43
Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between
petitioners and Ramona P. Alcaraz, perfected on February 6,
1985, prior to that between petitioners and Catalina B. Mabanag
on February 18, 1985, was correctly upheld by both the courts
below.
Although there may be ample indications that there was in
fact an agency between Ramona as principal and Concepcion,
her mother, as agent insofar as the subject contract of sale is
concerned, the issue of whether or not Concepcion was also
acting in her own behalf as a co-buyer is not squarely raised in
the instant petition, nor in such assumption disputed between
mother and daughter. Thus, We will not touch this issue and no
longer disturb the lower courts ruling on this point.
WHEREFORE, premises considered, the instant petition
is hereby DISMISSED and the appealed judgment AFFIRMED.
SO ORDERED.
[G.R. No. 115158. September 5, 1997]
EMILIA M. URACA, CONCORDIA D. CHING and ONG SENG,
represented by ENEDINO H. FERRER, petitioners,
vs. COURT OF APPEALS, JACINTO VELEZ, JR.,
CARMEN VELEZ TING, AVENUE
MERCHANDISING, INC., FELIX TING AND
ALFREDO GO, respondents.
DECISION
PANGANIBAN, J.:
Novation is never presumed; it must be sufficiently
established that a valid new agreement or obligation has
extinguished or changed an existing one. The registration of a
later sale must be done in good faith to entitle the registrant to
priority in ownership over the vendee in an earlier sale.
Statement of the Case
These doctrines are stressed by this Court as it resolves
the instant petition challenging the December 28, 1993
Decision[1] of Respondent Court of Appeals[2] in CA-G.R. SP No.
33307, which reversed and set aside the judgment of the
Regional Trial Court of Cebu City, Branch 19, and entered a
new one dismissing the petitioners complaint. The dispositive
portion of the RTC decision reads:[3]
WHEREFORE, judgment is hereby rendered:
1) declaring as null and void the three (3) deeds of sale
executed by the Velezes to Felix C. Ting, Manuel Ting and
Alfredo Go;
2) ordering Carmen Velez Ting and Jacinto M. Velez, Jr. to
execute a deed of absolute sale in favor of Concordia D. Ching
and Emilia M. Uraca for the properties in question
for P1,400,000.00, which sum must be delivered by the plaintiffs
to the Velezes immediately after the execution of said contract;
3) ordering Carmen Velez Ting and Jacinto M. Velez, Jr. to
reimburse Felix C. Ting, Manuel C. Ting and Alfredo Go
whatever amount the latter had paid to the former;
4) ordering Felix C. Ting, Manuel C. Ting and Alfredo Go to
deliver the properties in question to the plaintiffs within fifteen
(15) days from receipt of a copy of this decision;
5) ordering all the defendants to pay, jointly and severally, the
plaintiffs the sum of P20,000.00 as attorneys fees.
SO ORDERED.
The Antecedent Facts
The facts narrated by the Court of Appeals are as
follows:[4]
The Velezes (herein private respondents) were the owners of
the lot and commercial building in question located at Progreso
and M.C. Briones Streets in Cebu City.
Herein (petitioners) were the lessees of said commercial
building.[5]
On July 8, 1985, the Velezes through Carmen Velez Ting wrote
a letter to herein (petitioners) offering to sell the subject property
for P1,050,000.00 and at the same time requesting (herein
petitioners) to reply in three days.
On July 10, 1985, (herein petitioners) through Atty. Escolastico
Daitol sent a reply-letter to the Velezes accepting the aforesaid
offer to sell.
On July 11, 1985, (herein petitioner) Emilia Uraca went to see
Carmen Ting about the offer to sell but she was told by the latter
that the price was P1,400,000.00 in cash or managers check
and not P1,050,000.00 as erroneously stated in their letter-offer
after some haggling. Emilia Uraca agreed to the price
of P1,400,000.00 but counter-proposed that payment be paid in
installments with a down payment of P1,000,000.00 and the
balance of P400,000 to be paid in 30 days. Carmen Velez Ting
did not accept the said counter-offer of Emilia Uraca although
this fact is disputed by Uraca.
No payment was made by (herein petitioners) to the Velezes on
July 12, 1985 and July 13, 1985.
On July 13, 1985, the Velezes sold the subject lot and
commercial building to the Avenue Group (Private Respondent
Avenue Merchandising Inc.) for P1,050,000.00 net of taxes,
registration fees, and expenses of the sale.
At the time the Avenue Group purchased the subject property
on July 13, 1985 from the Velezes, the certificate of title of the
said property was clean and free of any annotation of adverse
claims or lis pendens.
On July 31, 1985 as aforestated, herein (petitioners) filed the
instant complaint against the Velezes.
On August 1, 1985, (herein petitioners) registered a notice of lis
pendens over the property in question with the Office of the
Register of Deeds.[6]
On October 30, 1985, the Avenue Group filed an ejectment case
against (herein petitioners) ordering the latter to vacate the
commercial building standing on the lot in question.
Thereafter, herein (petitioners) filed an amended complaint
impleading the Avenue Group as new defendants (after about 4
years after the filing of the original complaint).
The trial court found two perfected contracts of sale
between the Velezes and the petitioners, involving the real
property in question. The first sale was for P1,050,000.00 and
the second was for P1,400,000.00. In respect to the first sale,
the trial court held that [d]ue to the unqualified acceptance by
the plaintiffs within the period set by the Velezes, there
consequently came about a meeting of the minds of the parties
not only as to the object certain but also as to the definite
consideration or cause of the contract.[7] And even
assuming arguendo that the second sale was not perfected, the
trial court ruled that the same still constituted a mere
modificatory novation which did not extinguish the first
sale.Hence, the trial court held that the Velezes were not free to
sell the properties to the Avenue Group.[8] It also found that the
Avenue Group purchased the property in bad faith.[9]
Private respondents appealed to the Court of Appeals. As
noted earlier, the CA found the appeal meritorious. Like the trial
court, the public respondent held that there was a perfected
contract of sale of the property for P1,050,000.00 between the
Velezes and herein petitioners. It added, however, that such
perfected contract of sale was subsequently novated. Thus, it
ruled: Evidence shows that that was the original
contract. However, the same was mutually withdrawn, cancelled
and rescinded by novation, and was therefore abandoned by the
parties when Carmen Velez Ting raised the consideration of the
contract [by] P350,000.00, thus making the price P1,400,000.00
instead of the original price of P1,050,000.00. Since there was
no agreement as to the second price offered, there was likewise
no meeting of minds between the parties, hence, no contract of
sale was perfected.[10] The Court of Appeals added that,
assuming there was agreement as to the price and a second
contract was perfected, the later contract would be
unenforceable under the Statute of Frauds. It further held that
such second agreement, if there was one, constituted a mere
promise to sell which was not binding for lack of acceptance or a
separate consideration.[11]
The Issues
 Petitioners allege the following errors in the Decision of
Respondent Court:
I novation is never presumed; it must be proven as a fact either
Since it ruled in its decision that there was no meeting of the
minds on the second price offered (P1,400,000.00), hence no
contract of sale was perfected, the Court of Appeals erred in not
holding that the original written contract to buy and sell
for P1,050,000.00 the Velezes property continued to be valid
and enforceable pursuant to Art. 1279 in relation with Art. 1479,
first paragraph, and Art. 1403, subparagraph 2 (e) of the Civil
Code.
II
The Court of Appeals erred in not ruling that petitioners have
better rights to buy and own the Velezes property for registering
their notice of lis pendens ahead of the Avenue Groups
registration of their deeds of sale taking into account Art. 1544,
2nd paragraph, of the Civil Code.[12]
The Courts Ruling
The petition is meritorious.
First Issue: No Extinctive Novation
The lynchpin of the assailed Decision is the public
respondents conclusion that the sale of the real property in
controversy, by the Velezes to petitioners for P1,050,000.00,
was extinguished by novation after the said parties negotiated to
increase the price to P1,400,000.00. Since there was no
agreement on the sale at the increased price, then there was no
perfected contract to enforce. We disagree.
The Court notes that the petitioners accepted in writing
and without qualification the Velezes written offer to sell
at P1,050,000.00 within the three-day period stipulated
therein. Hence, from the moment of acceptance on July 10,
1985, a contract of sale was perfected since undisputedly the
contractual elements of consent, object certain and cause
concurred.[13] Thus, this question is posed for our
resolution: Was there a novation of this perfected contract?
Article 1600 of the Civil Code provides that (s)ales are
extinguished by the same causes as all other obligations, x x
x. Article 1231 of the same Code states that novation is one of
the ways to wipe out an obligation. Extinctive novation requires:
(1) the existence of a previous valid obligation; (2) the
agreement of all the parties to the new contract; (3) the
extinguishment of the old obligation or contract;and (4) the
validity of the new one.[14] The foregoing clearly show that
novation is effected only when a new contract has extinguished
an earlier contract between the same parties. In this light,
by express stipulation of the parties or by implication derived
from an irreconcilable incompatibility between old and new
obligations or contracts.[15] After a thorough review of the
records, we find this element lacking in the case at bar.
As aptly found by the Court of Appeals, the petitioners and
the Velezes did not reach an agreement on the new price
of P1,400,000.00 demanded by the latter. In this case, the
petitioners and the Velezes clearly did not perfect a new
contract because the essential requisite of consent was absent,
the parties having failed to agree on the terms of the
payment. True, petitioners made a qualified acceptance of this
offer by proposing that the payment of this higher sale price be
made by installment, with P1,000,000.00 as down payment and
the balance of P400,000.00 payable thirty days
thereafter. Under Article 1319 of the Civil Code,[16] such qualified
acceptance constitutes a counter-offer and has the ineludible
effect of rejecting the Velezes offer.[17] Indeed, petitioners
counter-offer was not accepted by the Velezes. It is well-settled
that (a)n offer must be clear and definite, while an acceptance
must be unconditional and unbounded, in order that their
concurrence can give rise to a perfected contract.[18] In line with
this basic postulate of contract law, a definite agreement on the
manner of payment of the price is an essential element in the
formation of a binding and enforceable contract of sale.[19] Since
the parties failed to enter into a new contract that could have
extinguished their previously perfected contract of sale, there
can be no novation of the latter. Consequently, the first sale of
the property in controversy, by the Velezes to petitioners
for P1,050,000.00, remained valid and existing.
In view of the validity and subsistence of their original
contract of sale as previously discussed, it is unnecessary to
discuss public respondents theses that the second agreement is
unenforceable under the Statute of Frauds and that the
agreement constitutes a mere promise to sell.
Second Issue: Double Sale of an Immovable
The foregoing holding would have been simple and
straightforward. But Respondent Velezes complicated the
matter by selling the same property to the other private
respondents who were referred to in the assailed Decision as
the Avenue Group.
Before us therefore is a classic case of a double sale --
first, to the petitioner; second, to the Avenue Group. Thus, the
Court is now called upon to determine which of the two groups
of buyers has a better right to said property.
 Article 1544 of the Civil Code provides the statutory
solution:
xxx xxx xxx
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.
Under the foregoing, the prior registration of the disputed
property by the second buyer does not by itself confer
ownership or a better right over the property. Article 1544
requires that such registration must be coupled with good
faith. Jurisprudence teaches us that (t)he governing principle
is primus tempore, potior jure (first in time, stronger in
right). Knowledge gained by the first buyer of the second sale
cannot defeat the first buyers rights except where the second
buyer registers in good faith the second sale ahead of the first,
as provided by the Civil Code. Such knowledge of the first buyer
does not bar her from availing of her rights under the law,
among them, to register first her purchase as against the
second buyer. But in converso knowledge gained by the second
buyer of the first sale defeats his rights even if he is first to
register the second sale, since such knowledge taints his prior
registration with bad faith This is the price exacted by Article
1544 of the Civil Code for the second buyer being able to
displace the first buyer; that before the second buyer can obtain
priority over the first, he must show that he acted in good faith
throughout (i.e. in ignorance of the first sale and of the first
buyers rights) ---- from the time of acquisition until the title is
transferred to him by registration or failing registration, by
delivery of possession.[20] (Emphasis supplied)
After a thorough scrutiny of the records of the instant
case, the Court finds that bad faith tainted the Avenue Groups
purchase on July 13, 1985 of the Velezes real property subject
of this case, and the subsequent registration thereof on August
1, 1995. The Avenue Group had actual knowledge of the
Velezes prior sale of the same property to the petitioners, a fact
antithetical to good faith. For a second buyer like the Avenue
Group to successfully invoke the second paragraph, Article
1544 of the Civil Code, it must possess good faith from the time
of the sale in its favor until the registration of the same.This
requirement of good faith the Avenue Group sorely failed to
meet. That it had knowledge of the prior sale, a fact undisputed
by the Court of Appeals, is explained by the trial court thus:
The Avenue Group, whose store is close to the properties in
question, had known the plaintiffs to be the lessee-occupants
thereof for quite a time. Felix Ting admitted to have a talk with
Ong Seng in 1983 or 1984 about the properties. In the cross-
examination, Manuel Ting also admitted that about a month
after Ester Borromeo allegedly offered the sale of the properties
Felix Ting went to see Ong Seng again. If these were so, it can
be safely assumed that Ong Seng had consequently told Felix
about plaintiffs offer on January 11, 1985 to buy the properties
for P1,000,000.00 and of their timely acceptance on July 10,
1985 to buy the same at P1,050,000.00.
The two aforesaid admissions by the Tings, considered together
with Uracas positive assertion that Felix Ting met with her on
July 11th and who was told by her that the plaintiffs had
transmitted already to the Velezes their decision to buy the
properties at P1,050,000.00, clinches the proof that the Avenue
Group had prior knowledge of plaintiffs interest. Hence, the
Avenue Group defendants, earlier forewarned of the plaintiffs
prior contract with the Velezes, were guilty of bad faith when
they proceeded to buy the properties to the prejudice of the
plaintiffs.[21]
The testimony of Petitioner Emilia Uraca supports this
finding of the trial court. The salient portions of her testimony
follow:
BY ATTY. BORROMEO: (To witness)
Q According to Manuel Ting in his testimony, even if
they know, referring to the Avenue Group, that
you were tenants of the property in question
and they were neighbors to you, he did not
inquire from you whether you were interested
in buying the property, what can you say
about that?
A It was Felix Ting who approached me and asked
whether I will buy the property, both the house
and the land and that was on July 10, 1985.
ATTY BORROMEO: (To witness)
Q What was your reply, if any?
A Yes, sir, I said we are going to buy this property
because we have stayed for a long time there
already and we have a letter from Carmen
Ting asking us whether we are going to buy
the property and we have already given our
answer that we are willing to buy.
COURT: (To witness)
Q What do you mean by that, you mean you told
Felix Ting and you showed him that letter of
Carmen Ting?
WITNESS:
A We have a letter of Carmen Ting where she
offered to us for sale the house and lot and I
told him that I have already agreed with
 Concordia Ching, Ong Seng and my self that
we buy the land. We want to buy the land and
the building.[22]
We see no reason to disturb the factual finding of the trial
court that the Avenue Group, prior to the registration of the
property in the Registry of Property, already knew of the first
sale to petitioners. It is hornbook doctrine that findings of facts of
the trial court, particularly when affirmed by the Court of
Appeals, are binding upon this Court[23] save for exceptional
circumstances[24] which we do not find in the factual milieu of the
present case. True, this doctrine does not apply where there is a
variance in the factual findings of the trial court and the Court of
Appeals. In the present case, the Court of Appeals did not
explicitly sustain this particular holding of the trial court, but
neither did it controvert the same.Therefore, because the
registration by the Avenue Group was in bad faith, it amounted
to no inscription at all. Hence, the third and not the second
paragraph of Article 1544 should be applied to this case.Under
this provision, petitioners are entitled to the ownership of the
property because they were first in actual possession, having
been the propertys lessees and possessors for decades prior to
the sale.
Having already ruled that petitioners actual knowledge of
the first sale tainted their registration, we find no more reason to
pass upon the issue of whether the annotation of lis
pendens automatically negated good faith in such registration.
WHEREFORE, the petition is GRANTED. The assailed
Decision of the Court of Appeals is hereby SET ASIDE and the
dispositive portion of the trial courts decision dated October 19,
1990 is REVIVEDwith the following MODIFICATION -- the
consideration to be paid under par. 2 of the disposition
is P1,050,000.00 and not P1,400,000.00. No Costs.
SO ORDERED.
NGEL M. PAGADUAN, AMELIA P. G.R. No. 176308
TUCCI, TERESITA P. DEL MONTE,
ORLITA P. GADIN, PERLA P. Present:
ESPIRITU, ELISA P. DUNN, LORNA
P. KIMBLE, EDITO N. PAGADUAN, CARPIO MORALES, J.*
and LEO N. PAGADUAN, Acting Chairperson,
Petitioners, TINGA,
VELASCO, JR.,
LEONARDO DE CASTRO,** and
- versus - BRION, JJ.
SPOUSES ESTANISLAO & FE Promulgated:
POSADAS OCUMA,
Respondents. May 8, 2009
x------------------------------------------------------------------------------------
-x
DECISION
TINGA, J.:
In this Petition for Review,[1] petitioners assail the Decision[2] of
the Court of Appeals dated September 18, 2006 which ruled that
petitioners action for reconveyance is barred by prescription and
consequently reversed the decision[3] dated June 25, 2002 of
the Regional Trial Court (RTC) of Olongapo City.
Petitioners Angel N. Pagaduan, Amelia P. Tucci,
Teresita P. del Monte, Orlita P. Gadin, Perla P. Espiritu, Elisa P.
Dunn, Lorna P. Kimble, Edito N. Pagaduan and Leo N.
Pagaduan are all heirs of the late Agaton Pagaduan.
Respondents are the spouses Estanislao Ocuma and Fe
Posadas Ocuma.
The facts are as follows:
The subject lot used to be part of a big parcel of land
that originally belonged to Nicolas Cleto as evidenced by
Certificate of Title (C.T.) No. 14. The big parcel of land was the
subject of two separate lines of dispositions. The first line of
dispositions began with the sale by Cleto to Antonio Cereso
on May 11, 1925. Cereso in turn sold the land to the siblings
with the surname Antipolo on September 23, 1943. The
Antipolos sold the property to Agaton Pagaduan, father of
petitioners, on March 24, 1961. All the dispositions in this line
were not registered and did not result in the issuance of new
certificates of title in the name of the purchasers.
 The second line of dispositions started on January 30,
1954, after Cletos death, when his widow Ruperta Asuncion as
his sole heir and new owner of the entire tract, sold the same to
Eugenia Reyes. This resulted in the issuance of Transfer
Certificate of Title (TCT) No. T-1221 in the name of Eugenia
Reyes in lieu of TCT No. T-1220 in the name of Ruperta
Asuncion.
On November 26, 1961, Eugenia Reyes executed a
unilateral deed of sale where she sold the northern portion with
an area of 32,325 square meters to respondents for P1,500.00
and the southern portion consisting of 8,754 square meters to
Agaton Pagaduan for P500.00. Later, on June 5, 1962, Eugenia
executed another deed of sale, this time conveying the entire
parcel of land, including the southern portion, in respondents
favor. Thus, TCT No. T-1221 was cancelled and in lieu thereof
TCT No. T-5425 was issued in the name of respondents.
On June 27, 1989, respondents subdivided the land into two
lots. The subdivision resulted in the cancellation of TCT No. T-
5425 and the issuance of TCT Nos. T-37165 covering a portion
with 31,418 square meters and T-37166 covering the remaining
portion with 9,661 square meters.
On July 26, 1989, petitioners instituted a complaint for
reconveyance of the southern portion with an area of 8,754
square meters, with damages, against respondents before the
RTC of Olongapo City.
On June 25, 2002, the trial court rendered a decision
in petitioners favor. Ruling that a constructive trust over the
property was created in petitioners favor, the court below
ordered respondents to reconvey the disputed southern portion
and to pay attorneys fees as well as litigation expenses to
petitioners. The dispositive portion of the decision reads:
WHEREFORE, foregoing
premises considered, judgment is hereby
rendered:
1. Ordering the defendants to
reconvey to the plaintiffs, a portion of their
property originally covered by Certificate of
Title No. T-54216[4] now TCT Nos. 37165
and 37166 an area equivalent to 8,754
square meters.
2. Ordering the defendant to pay
plaintiffs P15,000.00 as attorneys fees
and P5,000.00 for litigation expenses.
3. Defendants counterclaims are
dismissed.
SO ORDERED.[5]
Dissatisfied with the decision, respondents appealed it
to the Court of Appeals. The Court of Appeals reversed and set
aside the decision of the trial court; with the dispositive portion
of the decision reading, thus:
WHEREFORE, premises
considered, the appeal is granted.
Accordingly, prescription having set in, the
assailed June 25, 2002 Decision of the RTC
is reversed and set aside, and the Complaint
for reconveyance is hereby DISMISSED.
SO ORDERED.[6]
The Court of Appeals ruled that while the registration
of the southern portion in the name of respondents had created
an implied trust in favor of Agaton Pagaduan, petitioners,
however, failed to show that they had taken possession of the
said portion. Hence, the appellate court concluded that
prescription had set in, thereby precluding petitioners recovery
of the disputed portion.
Unperturbed by the reversal of the trial courts
decision, the petitioners come to this Court via a petition for
review on certiorari.[7] They assert that the Civil Code provision
on double sale is controlling. They submit further that since the
incontrovertible evidence on record is that they are in
possession of the southern portion, the ten (10)-year
prescriptive period for actions for reconveyance should not
apply to them.[8] Respondents, on the other hand, aver that the
action for reconveyance has prescribed since the ten (10)-year
period, which according to them has to be reckoned from the
issuance of the title in their name in 1962, has elapsed long
ago.[9]
The Court of Appeals decision must be reversed and
set aside, hence the petition succeeds.
An action for reconveyance respects the decree of registration
as incontrovertible but seeks the transfer of property, which has
been wrongfully or erroneously registered in other persons'
names, to its rightful and legal owners, or to those who claim to
have a better right. However, contrary to the positions of both
the appellate and trial courts, no trust was created under Article
1456 of the new Civil Code which provides:
Art. 1456. If property is acquired
through mistake or fraud, the person
obtaining it is, by force of
law, considered a trustee of an implied
trust for the benefit of the person from
whom the property comes. (Emphasis
supplied)
The property in question did not come from the
petitioners. In fact that property came from Eugenia Reyes. The
title of the Ocumas can be traced back from Eugenia Reyes to
Ruperta Asuncion to the original owner Nicolas Cleto. Thus, if
the respondents are holding the property in trust for anyone, it
would be Eugenia Reyes and not the petitioners.
Moreover, as stated in Berico v. Court of
Appeals,[10]Article 1456 refers to actual or constructive fraud.
Actual fraud consists in deception, intentionally practiced to
induce another to part with property or to surrender some legal
right, and which accomplishes the end designed.Constructive
fraud, on the other hand, is a breach of legal or equitable duty
which the law declares fraudulent irrespective of the moral guilt
of the actor due to the tendency to deceive others, to violate
public or private confidence, or to injure public interests. The
latter proceeds from a breach of duty arising out of a fiduciary or
confidential relationship. In the instant case, none of the
elements of actual or constructive fraud exists. The respondents
did not deceive Agaton Pagaduan to induce the latter to part with
the ownership or deliver the possession of the property to them.
Moreover, no fiduciary relations existed between the two parties.
This lack of a trust relationship does not inure to the
benefit of the respondents. Despite a host of jurisprudence that
states a certificate of title is indefeasible, unassailable and
binding against the whole world, it merely confirms or records
title already existing and vested, and it cannot be used to protect
a usurper from the true owner, nor can it be used for the
perpetration of fraud; neither does it permit one to enrich himself
at the expense of others.[11]
Rather, after a thorough scrutiny of the records of the
instant case, the Court finds that this is a case of double sale
under article 1544 of the Civil Code which reads:
ART. 1544. If the same thing should have
been sold to different vendees, the
ownership shall be transferred to the person
who may have first possession thereof in
good faith, if it should be movable property.
Should it be immovable property,
the ownership shall belong to the person
acquiring it who in good faith first recorded it
in the Registry of Property.
Should there be no inscription, the
ownership shall pertain to the person who in
good faith was first in possession; and, in
the absence thereof; to the person who
presents the oldest title, provided there is
good faith.
Otherwise stated, where it is an immovable property
that is the subject of a double sale, ownership shall be
transferred: (1) to the person acquiring it who in good faith first
recorded it in the Registry of Property; (2) in default thereof, to
the person who in good faith was first in possession; and (3) in
default thereof, to the person who presents the oldest title,
provided there is good faith. The requirement of the law then is
two-fold: acquisition in good faith and registration in good faith.[12]
In this case there was a first sale by Eugenia Reyes to
Agaton Pagaduan and a second sale by Eugenia Reyes to the
respondents.[13] For a second buyer like the respondents to
successfully invoke the second paragraph, Article 1544 of the
Civil Code, it must possess good faith from the time of the sale
in its favor until the registration of the same. Respondents
sorely failed to meet this requirement of good faith since they
had actual knowledge of Eugenias prior sale of the southern
portion property to the petitioners, a fact antithetical to good
faith. This cannot be denied by respondents since in the same
deed of sale that Eugenia sold them the northern portion to the
respondents for P1,500.00, Eugenia also sold the southern
portion of the land to Agaton Pagaduan for P500.00.[14]
As the respondents gained no rights over the land, it is
petitioners who are the rightful owners, having established that
their successor-in-interest Agaton Pagaduan had purchased the
property from Eugenia Reyes on November 26, 1961 and in fact
took possession of the said property. The action to recover the
immovable is not barred by prescription, as it was filed a little
over 27 years after the title was registered in bad faith by the
Ocumas as per Article 1141 of the Civil Code.[18]
WHEREFORE, the petition is GRANTED.
The Decision of the Court of Appeals dated January 25,
2006 and its Resolution dated May 5, 2006 are hereby
REVERSED and SET ASIDE. The Decision of the Regional
Trial Court is hereby REINSTATED.
SO ORDERED.

It is to be emphasized that the Agaton Pagaduan never

parted with the ownership and possession of that portion of Lot
No. 785 which he had purchased from Eugenia Santos. Hence,
the registration of the deed of sale by respondents was
ineffectual and vested upon them no preferential rights to the
property in derogation of the rights of the petitioners.

Respondents had prior knowledge of the sale of the

questioned portion to Agaton Pagaduan as the same deed of
sale that conveyed the northern portion to them, conveyed the
southern portion to Agaton Pagaduan.[15] Thus the subsequent
issuance of TCT No. T-5425, to the extent that it affects the
Pagaduans portion, conferred no better right than the registration
which was the source of the authority to issue the said title.
Knowledge gained by respondents of the first sale defeats their
rights even if they were first to register the second sale.
Knowledge of the first sale blackens this prior registration with
bad faith.[16] Good faith must concur with the
registration. Therefore, because the registration by the
[17]

respondents was in bad faith, it amounted to no registration at

all.
G.R. No. L-29972 January 26, 1976
ROSARIO CARBONELL, petitioner,
vs.
HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA
INFANTE and RAMON INFANTE, respondents.
MAKASIAR, J.
Petitioner seeks a review of the resolution of the Court of
Appeals (Special Division of Five) dated October 30, 1968,
reversing its decision of November 2, 1967 (Fifth Division), and
its resolution of December 6, 1968 denying petitioner's motion
for reconsideration.
The dispositive part of the challenged resolution reads:
Wherefore, the motion for reconsideration
filed on behalf of appellee Emma Infante, is
hereby granted and the decision of
November 2, 1967, is hereby annulled and
set aside. Another judgement shall be
entered affirming in toto that of the court a
quo, dated January 20, 1965, which
dismisses the plaintiff's complaint and
defendant's counterclaim.
Without costs.
The facts of the case as follows:
the price proposed by petitioner, on the condition that from the
purchase price would come the money to be paid to the bank.
Petitioner and respondent Jose Poncio then went to the
Republic Savings Bank and secured the consent of the
President thereof for her to pay the arrears on the mortgage and
to continue the payment of the installments as they fall due. The
amount in arrears reached a total sum of P247.26. But because
respondent Poncio had previously told her that the money,
needed was only P200.00, only the latter amount was brought
by petitioner constraining respondent Jose Poncio to withdraw
the sum of P47.00 from his bank deposit with Republic Savings
Bank. But the next day, petitioner refunded to Poncio the sum of
P47.00.
On January 27, 1955, petitioner and respondent Poncio, in the
presence of a witness, made and executed a document in the
Batanes dialect, which, translated into English, reads:
CONTRACT FOR ONE HALF LOT WHICH I
BOUGHT FROM
JOSE PONCIO
Beginning today January 27, 1955, Jose
Poncio can start living on the lot sold by him
to me, Rosario Carbonell, until after one
year during which time he will not pa
anything. Then if after said one can he could
not find an place where to move his house,
he could still continue occupying the site but
he should pay a rent that man, be agreed.

Prior to January 27, 1955, respondent Jose Poncio, a native of

the Batanes Islands, was the owner of the parcel of land herein
involve with improvements situated at 179 V. Agan St., San
Juan, Rizal, having an area of some one hundred ninety-five
(195) square meters, more or less, covered by TCT No. 5040
and subject to mortgage in favor of the Republic Savings Bank
for the sum of P1,500.00. Petitioner Rosario Carbonell, a cousin
and adjacent neighbor of respondent Poncio, and also from the
Batanes Islands, lived in the adjoining lot at 177 V. Agan Street.

Both petitioners Rosario Carbonell and respondent Emma

Infante offered to buy the said lot from Poncio (Poncio's Answer,
p. 38, rec. on appeal).

Respondent Poncio, unable to keep up with the installments due

on the mortgage, approached petitioner one day and offered to
sell to the latter the said lot, excluding the house wherein
respondent lived. Petitioner accepted the offer and proposed the
price of P9.50 per square meter. Respondent Poncio, after
having secured the consent of his wife and parents, accepted
 (Pp. 6-7 rec. on appeal). d
.
)
Thereafter, petitioner asked Atty. Salvador Reyes, also from the
Batanes Islands, to prepare the formal deed of sale, which she
brought to respondent Poncio together with the R amount of some
O
P400.00, the balance she still had to pay in addition to her
assuming the mortgaged obligation to Republic S Savings Bank.
A
R
Upon arriving at respondent Jose Poncio's house, however, the
I
latter told petitioner that he could not proceed any more with the
O
sale, because he had already given the lot to respondent Emma
Infants; and that he could not withdraw from his deal with
C
respondent Mrs. Infante, even if he were to go to jail. Petitioner
A
then sought to contact respondent Mrs. Infante but the latter
R
refused to see her.
B
O
On February 5, 1955, petitioner saw Emma Infante N erecting a all
around the lot with a gate. E
L
Petitioner then consulted Atty. Jose Garcia, who L advised her to
present an adverse claim over the land in question with the
Office of the Register of Deeds of Rizal. Atty. Garcia actually
sent a letter of inquiry to the Register of Deeds( and demand
letters to private respondents Jose Poncio and S Emma Infante.
g
In his answer to the complaint Poncio admitted d "that on January
30, 1955, Mrs. Infante improved her offer and) he agreed to sell
the land and its improvements to her for P3,535.00" (pp. 38-40,
ROA). C
O
In a private memorandum agreement dated January N 31, 1955,
respondent Poncio indeed bound himself to sell S to his
corespondent Emma Infante, the property forTthe sum of
P2,357.52, with respondent Emma Infante stillA assuming the
N
existing mortgage debt in favor of Republic Savings Bank in the
amount of P1,177.48. Emma Infante lives justCbehind the
houses of Poncio and Rosario Carbonell. I
O
On February 2, 1955, respondent Jose Poncio executed the
M
formal deed of sale in favor of respondent Mrs. Infante in the
E
total sum of P3,554.00 and on the same date, the latter paid
O
Republic Savings Bank the mortgage indebtedness of
N
P1,500.00. The mortgage on the lot was eventually discharged.
A
D
Informed that the sale in favor of respondent AEmma Infante had
not yet been registered, Atty. Garcia prepared an adverse claim
for petitioner, who signed and swore to an registered the same
on February 8, 1955. W
i
The deed of sale in favor of respondent Mrs. tInfante was
registered only on February 12, 1955. As a consequence
n
thereof, a Transfer Certificate of Title was issued
e to her but with
the annotation of the adverse claim of petitioner
s Rosario
Carbonell. s
Respondent Emma Infante took immediate possession of the lot
involved, covered the same with 500 cubic meters of garden soil
and built therein a wall and gate, spending the sum of
P1,500.00. She further contracted the services of an architect to
build a house; but the construction of the same started only in
1959 — years after the litigation actually began and during its
pendency. Respondent Mrs. Infante spent for the house the total
amount of P11,929.00.
On June 1, 1955, petitioner Rosario Carbonell, thru counsel,
filed a second amended complaint against private respondents,
praying that she be declared the lawful owner of the questioned
parcel of land; that the subsequent sale to respondents Ramon
R. Infante and Emma L. Infante be declared null and void, and
that respondent Jose Poncio be ordered to execute the
corresponding deed of conveyance of said land in her favor and
for damages and attorney's fees (pp. 1-7, rec. on appeal in the
C.A.).
Respondents first moved to dismiss the complaint on the
ground, among others, that petitioner's claim is unenforceable
under the Statute of Frauds, the alleged sale in her favor not
being evidenced by a written document (pp. 7-13, rec. on appeal
in the C.A.); and when said motion was denied without prejudice
to passing on the question raised therein when the case would
be tried on the merits (p. 17, ROA in the C.A.), respondents filed
separate answers, reiterating the grounds of their motion to
dismiss (pp. 18-23, ROA in the C.A.).
During the trial, when petitioner started presenting evidence of
the sale of the land in question to her by respondent Poncio,
part of which evidence was the agreement written in the
Batanes dialect aforementioned, respondent Infantes objected
to the presentation by petitioner of parole evidence to prove the
alleged sale between her and respondent Poncio. In its order of
April 26, 1966, the trial court sustained the objection and
dismissed the complaint on the ground that the memorandum
presented by petitioner to prove said sale does not satisfy the
requirements of the law (pp. 31-35, ROA in the C.A.).
From the above order of dismissal, petitioner appealed to the
Supreme Court (G.R. No. L-11231) which ruled in a decision
dated May 12, 1958, that the Statute of Frauds, being applicable
only to executory contracts, does not apply to the alleged sale
between petitioner and respondent Poncio, which petitioner
claimed to have been partially performed, so that petitioner is
entitled to establish by parole evidence "the truth of this
allegation, as well as the contract itself." The order appealed
from was thus reversed, and the case remanded to the court a
quo for further proceedings (pp. 26-49, ROA in the C.A.).
After trial in the court a quo; a decision was, rendered on
December 5, 1962, declaring the second sale by respondent
Jose Poncio to his co-respondents Ramon Infante and Emma
Infante of the land in question null and void and ordering
respondent Poncio to execute the proper deed of conveyance of
said land in favor of petitioner after compliance by the latter of
her covenants under her agreement with respondent Poncio
(pp. 5056, ROA in the C.A.).
On January 23, 1963, respondent Infantes, through another
counsel, filed a motion for re-trial to adduce evidence for the
proper implementation of the court's decision in case it would be
affirmed on appeal (pp. 56-60, ROA in the C.A.), which motion
was opposed by petitioner for being premature (pp. 61-64, ROA
in the C.A.). Before their motion for re-trial could be resolved,
respondent Infantes, this time through their former counsel, filed
another motion for new trial, claiming that the decision of the
trial court is contrary to the evidence and the law (pp. 64-78,
ROA in the C.A.), which motion was also opposed by petitioner
(pp. 78-89, ROA in the C.A.).
The trial court granted a new trial (pp. 89-90, ROA in the C.A.),
at which re-hearing only the respondents introduced additional
evidence consisting principally of the cost of improvements they
introduced on the land in question (p. 9, ROA in the C.A.).
After the re-hearing, the trial court rendered a decision,
reversing its decision of December 5, 1962 on the ground that
the claim of the respondents was superior to the claim of
petitioner, and dismissing the complaint (pp. 91-95, ROA in the
C.A.), From this decision, petitioner Rosario Carbonell appealed
to the respondent Court of Appeals (p. 96, ROA in the C.A.).
On November 2, 1967, the Court of Appeals (Fifth Division
composed of Justices Magno Gatmaitan, Salvador V. Esguerra
and Angle H. Mojica, speaking through Justice Magno
Gatmaitan), rendered judgment reversing the decision of the
trial court, declaring petitioner therein, to have a superior right to
the land in question, and condemning the defendant Infantes to
reconvey to petitioner after her reimbursement to them of the
sum of P3,000.00 plus legal interest, the land in question and all
its improvements (Appendix "A" of Petition).
Respondent Infantes sought reconsideration of said decision
and acting on the motion for reconsideration, the Appellate
Court, three Justices (Villamor, Esguerra and Nolasco) of
Special Division of Five, granted said motion, annulled and set
aside its decision of November 2, 1967, and entered another
judgment affirming in toto the decision of the court a quo, with
Justices Gatmaitan and Rodriguez dissenting (Appendix "B" of
Petition).
Petitioner Rosario Carbonell moved to reconsider the Resolution
of the Special Division of Five, which motion was denied by
Minute Resolution of December 6, 1968 (but with Justices
Rodriguez and Gatmaitan voting for reconsideration) [Appendix
"C" of Petition].
Hence, this appeal by certiorari.
Article 1544, New Civil Code, which is decisive of this case,
recites:
If the same thing should have been sold to
different vendees, the ownership shall be
transferred to the person who may have first
taken possession thereof in good faith, if it
should movable property.
Should it be immovable property, the
ownership shall belong to the person
acquiring it who in good faith first recorded
it in the Registry of Property.
Should there be no inscription, the
ownership shall pertain to the person who in
good faith was first in the possession; and,
in the absence thereof, to the person who
presents the oldest title, provided there is
good faith (emphasis supplied).
It is essential that the buyer of realty must act in good faith in
registering his deed of sale to merit the protection of the second
paragraph of said Article 1544.
Unlike the first and third paragraphs of said Article 1544, which
accord preference to the one who first takes possession in good
faith of personal or real property, the second paragraph directs
that ownership of immovable property should be recognized in
favor of one "who in good faith first recorded" his right. Under
the first and third paragraph, good faith must characterize the
act of anterior registration (DBP vs. Mangawang, et al., 11
SCRA 405; Soriano, et al. vs. Magale, et al., 8 SCRA 489).
If there is no inscription, what is decisive is prior possession in
good faith. If there is inscription, as in the case at bar, prior
registration in good faith is a pre-condition to superior title.
When Carbonell bought the lot from Poncio on January 27,
1955, she was the only buyer thereof and the title of Poncio was
still in his name solely encumbered by bank mortgage duly
annotated thereon. Carbonell was not aware — and she could
not have been aware — of any sale of Infante as there was no
such sale to Infante then. Hence, Carbonell's prior purchase of
the land was made in good faith. Her good faith subsisted and
continued to exist when she recorded her adverse claim four (4)
days prior to the registration of Infantes's deed of sale.
Carbonell's good faith did not cease after Poncio told her on
January 31, 1955 of his second sale of the same lot to Infante.
Because of that information, Carbonell wanted an audience with
Infante, which desire underscores Carbonell's good faith. With
an aristocratic disdain unworthy of the good breeding of a good
Christian and good neighbor, Infante snubbed Carbonell like a
leper and refused to see her. So Carbonell did the next best
thing to protect her right — she registered her adversed claim
on February 8, 1955. Under the circumstances, this recording of
her adverse claim should be deemed to have been done in good
faith and should emphasize Infante's bad faith when she
registered her deed of sale four (4) days later on February 12,
1955.
Bad faith arising from previous knowledge by Infante of the prior
sale to Carbonell is shown by the following facts, the vital
significance and evidenciary effect of which the respondent
Court of Appeals either overlooked of failed to appreciate:
(1) Mrs. Infante refused to see Carbonell, who wanted to see
Infante after she was informed by Poncio that he sold the lot to
Infante but several days before Infante registered her deed of
sale. This indicates that Infante knew — from Poncio and from
the bank — of the prior sale of the lot by Poncio to Carbonell.
Ordinarily, one will not refuse to see a neighbor. Infante lives
just behind the house of Carbonell. Her refusal to talk to
Carbonell could only mean that she did not want to listen to
Carbonell's story that she (Carbonell) had previously bought the
lot from Poncio.
(2) Carbonell was already in possession of the mortgage
passbook [not Poncio's saving deposit passbook — Exhibit "1"
— Infantes] and Poncio's copy of the mortgage contract, when
Poncio sold the lot Carbonell who, after paying the arrearages of
Poncio, assumed the balance of his mortgaged indebtedness to
the bank, which in the normal course of business must have
necessarily informed Infante about the said assumption by
Carbonell of the mortgage indebtedness of Poncio. Before or
upon paying in full the mortgage indebtedness of Poncio to the
Bank. Infante naturally must have demanded from Poncio the
delivery to her of his mortgage passbook as well as Poncio's
mortgage contract so that the fact of full payment of his bank
mortgage will be entered therein; and Poncio, as well as the
bank, must have inevitably informed her that said mortgage
passbook could not be given to her because it was already
delivered to Carbonell.
If Poncio was still in possession of the mortgage passbook and
his copy of the mortgage contract at the time he executed a
deed of sale in favor of the Infantes and when the Infantes
redeemed his mortgage indebtedness from the bank, Poncio
would have surrendered his mortgage passbook and his copy of
the mortgage contract to the Infantes, who could have
presented the same as exhibits during the trial, in much the
same way that the Infantes were able to present as evidence
Exhibit "1" — Infantes, Poncio's savings deposit passbook, of
which Poncio necessarily remained in possession as the said
deposit passbook was never involved in the contract of sale with
assumption of mortgage. Said savings deposit passbook merely
proves that Poncio had to withdraw P47.26, which amount was
tided to the sum of P200.00 paid by Carbonell for Poncio's
amortization arrearages in favor of the bank on January 27,
1955; because Carbonell on that day brought with her only
P200.00, as Poncio told her that was the amount of his
arrearages to the bank. But the next day Carbonell refunded to
Poncio the sum of P47.26.
(3) The fact that Poncio was no longer in possession of his
mortgage passbook and that the said mortgage passbook was
already in possession of Carbonell, should have compelled
Infante to inquire from Poncio why he was no longer in
possession of the mortgage passbook and from Carbonell why
she was in possession of the same (Paglago, et. al vs. Jara et al
22 SCRA 1247, 1252-1253). The only plausible and logical
reason why Infante did not bother anymore to make such injury ,
w because in the ordinary course of business the bank must
have told her that Poncio already sold the lot to Carbonell who
thereby assumed the mortgage indebtedness of Poncio and to
whom Poncio delivered his mortgage passbook. Hoping to give
a semblance of truth to her pretended good faith, Infante
snubbed Carbonell's request to talk to her about the prior sale to
her b Poncio of the lot. As aforestated, this is not the attitude
expected of a good neighbor imbued with Christian charity and
good will as well as a clear conscience.
(4) Carbonell registered on February 8, 1955 her adverse claim,
which was accordingly annotated on Poncio's title, four [4] days
before Infante registered on February 12, 1955 her deed of sale
executed on February 2, 1955. Here she was again on notice of
the prior sale to Carbonell. Such registration of adverse claim is
valid and effective (Jovellanos vs. Dimalanta, L-11736-37, Jan.
30, 1959, 105 Phil. 1250-51).
(5) In his answer to the complaint filed by Poncio, as defendant
in the Court of First Instance, he alleged that both Mrs. Infante
and Mrs. Carbonell offered to buy the lot at P15.00 per square
meter, which offers he rejected as he believed that his lot is
worth at least P20.00 per square meter. It is therefore logical to
presume that Infante was told by Poncio and consequently knew
of the offer of Carbonell which fact likewise should have put her
on her guard and should have compelled her to inquire from
Poncio whether or not he had already sold the property to
Carbonell.
As recounted by Chief Justice Roberto Concepcion, then
Associate Justice, in the preceding case of Rosario Carbonell
vs. Jose Poncio, Ramon Infante and Emma Infante (1-11231,
May 12, 1958), Poncio alleged in his answer:
... that he had consistently turned down
several offers, made by plaintiff, to buy the
land in question, at P15 a square meter, for
he believes that it is worth not less than P20
a square meter; that Mrs. Infante, likewise,
tried to buy the land at P15 a square meter;
that, on or about January 27, 1955, Poncio
was advised by plaintiff that should she
decide to buy the property at P20 a square
meter, she would allow him to remain in the
property for one year; that plaintiff then
induced Poncio to sign a document, copy of
which if probably the one appended to the
second amended complaint; that Poncio
signed it 'relying upon the statement of the
plaintiff that the document was a permit for
him to remain in the premises in the event
defendant decided to sell the property to the
plaintiff at P20.00 a square meter'; that on
January 30, 1955, Mrs. Infante improved her
offer and agreed to sell the land and its
improvement to her for P3,535.00; that
Poncio has not lost 'his mind,' to sell his
property, worth at least P4,000, for the paltry
sum P1,177.48, the amount of his obligation
to the Republic Saving s Bank; and that
plaintiff's action is barred by the Statute of
Frauds. ... (pp. 38-40, ROA, emphasis
supplied).
II
EXISTENCE OF THE PRIOR SALE TO CARBONELL
DULY ESTABLISHED
(1) In his order dated April 26, 1956 dismissing the complaint on
the ground that the private document Exhibit "A" executed by
Poncio and Carbonell and witnessed by Constancio Meonada
captioned "Contract for One-half Lot which I Bought from Jose
Poncio," was not such a memorandum in writing within the
purview of the Statute of Frauds, the trial judge himself
recognized the fact of the prior sale to Carbonell when he stated
that "the memorandum in question merely states that Poncio is
allowed to stay in the property which he had sold to the
plaintiff. There is no mention of the reconsideration, a
description of the property and such other essential elements of
the contract of sale. There is nothing in the memorandum which
would tend to show even in the slightest manner that it was
intended to be an evidence of contract sale. On the
contrary, from the terms of the memorandum, it tends to show
that the sale of the property in favor of the plaintiff is already an
accomplished act. By the very contents of the memorandum
itself, it cannot therefore, be considered to be the memorandum
which would show that a sale has been made by Poncio in favor
of the plaintiff" (p. 33, ROA, emphasis supplied). As found by the
trial court, to repeat the said memorandum states "that Poncio is
allowed to stay in the property which he had sold to the plaintiff
..., it tends to show that the sale of the property in favor of the
plaintiff is already an accomplished act..."
(2) When the said order was appealed to the Supreme Court by Then, also, defendants say in their brief:
Carbonell in the previous case of Rosario Carbonell vs. Jose
Poncio, Ramon Infante and Emma Infante The only allegation in
(L-11231, supra), Chief Justice Roberto Concepcion, then plaintiff's complaint that
Associate Justice, speaking for a unanimous Court, reversed bears any relation to her
the aforesaid order of the trial court dismissing the complaint, claim that there has
holding that because the complaint alleges and the plaintiff been partial
claims that the contract of sale was partly performed, the same performance of the
is removed from the application of the Statute of Frauds and supposed contract of
Carbonell should be allowed to establish by parol evidence the sale, is the notation of
truth of her allegation of partial performance of the contract of the sum of P247.26 in
sale, and further stated: the bank book of
defendant Jose Poncio.
Apart from the foregoing, there are in the The noting or jotting
case at bar several circumstances indicating down of the sum of
that plaintiff's claim might not be entirely P247.26 in the bank
devoid of factual basis. Thus, for book of Jose Poncio
instance, Poncio admitted in his answer that does not prove the fact
plaintiff had offered several times to that the said amount
purchase his land. was the purchase price
of the property in
Again, there is Exhibit A, a document signed question. For all we
by the defendant. It is in the Batanes dialect, knew, the sum of
which, according to plaintiff's uncontradicted P247.26 which plaintiff
evidence, is the one spoken by Poncio, he claims to have paid to
being a native of said region. Exhibit A the Republic Savings
states that Poncio would stay in the land Bank for the account of
sold by him to plaintiff for one year, from the defendant, assuming
January 27, 1955, free of charge, and that, if that the money paid to
he cannot find a place where to transfer his the Republic Savings
house thereon, he may remain Bank came from the
upon. Incidentally, the allegation in Poncio's plaintiff, was the result of
answer to the effect that he signed Exhibit A some usurious loan or
under the belief that it "was a permit for him accomodation, rather
to remain in the premises in the" that "he than earnest money or
decided to sell the property" to the plaintiff at part payment of the
P20 a sq. m." is, on its face, somewhat land. Neither is it
difficult to believe. Indeed, if he had not competent or
decided as yet to sell the land to plaintiff, satisfactory evidence to
who had never increased her offer of P15 a prove the conveyance of
square meter, there was no reason for the land in question the
Poncio to get said permit from her. Upon the fact that the bank book
other hand, if plaintiff intended to mislead account of Jose Poncio
Poncio, she would have caused Exhibit A to happens to be in the
be drafted, probably, in English , instead of possession of the
taking the trouble of seeing to it that it was plaintiff. (Defendants-
written precisely in his native dialect, the Appellees' brief, pp. 25-
Batanes. Moreover, Poncio's signature on 26).
Exhibit A suggests that he is neither illiterate
nor so ignorant as to sign document without How shall We know why Poncio's bank
reading its contents, apart from the fact that deposit book is in plaintiffs possession, or
Meonada had read Exhibit A to him and whether there is any relation between the
given him a copy thereof, before he signed P247.26 entry therein and the partial
thereon, according to Meonada's payment of P247.26 allegedly made by
uncontradicted testimony. plaintiff to Poncio on account of the price of
his land, if we do not allow the plaintiff to
 explain it on the witness stand? Without
expressing any opinion on the merits of
plaintiff's claim, it is clear, therefore, that she
is entitled , legally as well as from the
viewpoint of equity, to an opportunity to
introduce parol evidence in support of the
allegations of her second amended
complaint. (pp. 46-49, ROA, emphasis
supplied).
(3) In his first decision of December 5, 1962 declaring null and
void the sale in favor of the Infantes and ordering Poncio to
execute a deed of conveyance in favor of Carbonell, the trial
judge found:
... A careful consideration of the contents of
Exh. 'A' show to the satisfaction of the court
that the sale of the parcel of land in question
by the defendant Poncio in favor of the
plaintiff was covered therein and that the
said Exh. "a' was also executed to allow the
defendant to continue staying in the
premises for the stated period. It will be
noted that Exh. 'A' refers to a lot 'sold by him
to me' and having been written originally in a
dialect well understood by the defendant
Poncio, he signed the said Exh. 'A' with a full
knowledge and consciousness of the terms
and consequences thereof. This therefore,
corroborates the testimony of the plaintiff
Carbonell that the sale of the land was made
by Poncio. It is further pointed out that there
was a partial performance of the verbal sale
executed by Poncio in favor of the plaintiff,
when the latter paid P247.26 to the Republic
Savings Bank on account of Poncio's
mortgage indebtedness. Finally, the
possession by the plaintiff of the defendant
Poncio's passbook of the Republic Savings
Bank also adds credibility to her
testimony. The defendant contends on the
other hand that the testimony of the plaintiff,
as well as her witnesses, regarding the sale
of the land made by Poncio in favor of the
plaintiff is inadmissible under the provision
of the Statute of Fraud based on the
argument that the note Exh. "A" is not the
note or memorandum referred to in the to in
the Statute of Fraud. The defendants argue
that Exh. "A" fails to comply with the
requirements of the Statute of Fraud to
qualify it as the note or memorandum
referred to therein and open the way for the
presentation of parole evidence to prove the
fact contained in the note or
memorandum. The defendant argues that
there is even no description of the lot
referred to in the note, especially when the
note refers to only one half lot. With respect
to the latter argument of the Exhibit 'A', the
court has arrived at the conclusion that there
is a sufficient description of the lot referred
to in Exh. 'A' as none other than the parcel
of land occupied by the defendant Poncio
and where he has his improvements
erected. The Identity of the parcel of land
involved herein is sufficiently established by
the contents of the note Exh. "A". For a
while, this court had that similar impression
but after a more and thorough consideration
of the context in Exh. 'A' and for the reasons
stated above, the Court has arrived at the
conclusion stated earlier (pp. 52-54, ROA,
emphasis supplied).
(4) After re-trial on motion of the Infantes, the trial Judge
rendered on January 20, 1965 another decision dismissing the
complaint, although he found
1. That on January 27, 1955, the plaintiff
purchased from the defendant Poncio a
parcel of land with an area of 195 square
meters, more or less, covered by TCT No.
5040 of the Province of Rizal, located at San
Juan del Monte, Rizal, for the price of P6.50
per square meter;
2. That the purchase made by the plaintiff
was not reduced to writing except for a short
note or memorandum Exh. A, which also
recited that the defendant Poncio would be
allowed to continue his stay in the premises,
among other things, ... (pp. 91-92, ROA,
emphasis supplied).
From such factual findings, the trial Judge confirms the due
execution of Exhibit "A", only that his legal conclusion is that it is
not sufficient to transfer ownership (pp. 93-94, ROA).
(5) In the first decision of November 2, 1967 of the Fifth Division
of the Court of Appeals composed of Justices Esguerra (now
Associate Justice of the Supreme Court), Gatmaitan and Mojica,
penned by Justice Gatmaitan, the Court of Appeals found that:
... the testimony of Rosario Carbonell not
having at all been attempted to be disproved
by defendants, particularly Jose Poncio, and
corroborated as it is by the private document
in Batanes dialect, Exhibit A, the testimony
being to the effect that between herself and
Jose there had been celebrated a sale of
the property excluding the house for the
price of P9.50 per square meter, so much so
that on faith of that, Rosario had advanced
the sum of P247.26 and binding herself to
pay unto Jose the balance of the purchase
price after deducting the indebtedness to the
Bank and since the wording of Exhibit A, the
private document goes so far as to describe
their transaction as one of sale, already
consummated between them, note the part
tense used in the phrase, "the lot sold by
him to me" and going so far even as to state
that from that day onwards, vendor would
continue to live therein, for one year, 'during
which time he will not pay anything' this can
only mean that between Rosario and Jose,
there had been a true contract of sale,
consummated by delivery constitutum
possession, Art. 1500, New Civil
Code;vendor's possession having become
converted from then on, as a mere tenant of
vendee, with the special privilege of not
paying rental for one year, — it is true that
the sale by Jose Poncio to Rosario
Carbonell corroborated documentarily only
by Exhibit A could not have been registered
at all, but it was a valid contract
nonetheless, since under our law, a contract
sale is consensual, perfected by mere
consent, Couto v. Cortes, 8 Phil 459, so
much so that under the New Civil Code,
while a sale of an immovable is ordered to
be reduced to a public document, Art. 1358,
that mandate does not render an oral sale of
realty invalid, but merely incapable of proof,
where still executory and action is brought
and resisted for its performance, 1403, par.
2, 3; but where already wholly or partly
executed or where even if not yet, it is
evidenced by a memorandum, in any case
where evidence to further demonstrate is
presented and admitted as the case was
here, then the oral sale becomes perfectly
good, and becomes a good cause of action
not only to reduce it to the form of a public
document, but even to enforce the contract
in its entirety, Art. 1357; and thus it is that
what we now have is a case wherein on the
one hand Rosario Carbonell has proved that
she had an anterior sale, celebrated in her
favor on 27 January, 1955, Exhibit
A, annotated as an adverse claim on 8
February, 1955, and on other, a sale is due
form in favor of Emma L. Infante on 2
February, 1955, Exhibit 3-Infante, and
registered in due form with title unto her
issued on 12 February, 1955; the vital
question must now come on which of these
two sales should prevail; ... (pp. 74-76, rec.,
emphasis supplied).
(6) In the resolution dated October 30, 1968 penned by then
Court of Appeals Justice Esguerra (now a member of this
Court), concurred in by Justices Villamor and Nolasco,
constituting the majority of a Special Division of Five, the Court
of Appeals, upon motion of the Infantes, while reversing the
decision of November 2, 1967 and affirming the decision of the
trial court of January 20, 1965 dismissing plaintiff's
complaint, admitted the existence and genuineness of Exhibit
"A", the private memorandum dated January 27, 1955, although
it did not consider the same as satisfying "the essential
elements of a contract of sale," because it "neither specifically
describes the property and its boundaries, nor mention its
certificate of title number, nor states the price certain to be paid,
or contrary to the express mandate of Articles 1458 and 1475 of
the Civil Code.
(7) In his dissent concurred in by Justice Rodriguez, Justice
Gatmaitan maintains his decision of November 2, 1967 as well
as his findings of facts therein, and reiterated that the private
memorandum Exhibit "A", is a perfected sale, as a sale is
consensual and consummated by mere consent, and is binding
on and effective between the parties. This statement of the
principle is correct [pp. 89-92, rec.].
III
ADEQUATE CONSIDERATION OR PRICE FOR THE SALE
IN FAVOR OF CARBONELL
It should be emphasized that the mortgage on the lot was about
to be foreclosed by the bank for failure on the part of Poncio to
pay the amortizations thereon. To forestall the foreclosure and
at the same time to realize some money from his mortgaged lot,
Poncio agreed to sell the same to Carbonell at P9.50 per square
meter, on condition that Carbonell [1] should pay (a) the amount
of P400.00 to Poncio and 9b) the arrears in the amount of
P247.26 to the bank; and [2] should assume his mortgage
indebtedness. The bank president agreed to the said sale with
assumption of mortgage in favor of Carbonell an Carbonell
accordingly paid the arrears of P247.26. On January 27, 1955,
she paid the amount of P200.00 to the bank because that was
the amount that Poncio told her as his arrearages and Poncio
advanced the sum of P47.26, which amount was refunded to
him by Carbonell the following day. This conveyance was
confirmed that same day, January 27, 1955, by the private
document, Exhibit "A", which was prepared in the Batanes
dialect by the witness Constancio Meonada, who is also from
Batanes like Poncio and Carbonell.
The sale did not include Poncio's house on the lot. And Poncio
was given the right to continue staying on the land without
paying any rental for one year, after which he should pay rent if
he could not still find a place to transfer his house. All these
terms are part of the consideration of the sale to Carbonell.
It is evident therefore that there was ample consideration, and
not merely the sum of P200.00, for the sale of Poncio to
Carbonell of the lot in question.
But Poncio, induced by the higher price offered to him by
Infante, reneged on his commitment to Carbonell and told
Carbonell, who confronted him about it, that he would not
withdraw from his deal with Infante even if he is sent to jail The
victim, therefore, "of injustice and outrage is the widow
Carbonell and not the Infantes, who without moral compunction
exploited the greed and treacherous nature of Poncio, who, for
love of money and without remorse of conscience, dishonored
his own plighted word to Carbonell, his own cousin.
Inevitably evident therefore from the foregoing discussion, is the
bad faith of Emma Infante from the time she enticed Poncio to
dishonor his contract with Carbonell, and instead to sell the lot
to her (Infante) by offering Poncio a much higher price than the
price for which he sold the same to Carbonell. Being guilty of
bad faith, both in taking physical possession of the lot and in
recording their deed of sale, the Infantes cannot recover the
value of the improvements they introduced in the lot. And after
the filing by Carbonell of the complaint in June, 1955, the
Infantes had less justification to erect a building thereon since
their title to said lot is seriously disputed by Carbonell on the
basis of a prior sale to her.
With respect to the claim of Poncio that he signed the document
Exhibit "A" under the belief that it was a permit for him to remain
in the premises in ease he decides to sell the property to
Carbonell at P20.00 per square meter, the observation of the
Supreme Court through Mr. Chief Justice Concepcion in G.R.
No. L-11231, supra, bears repeating:
... Incidentally, the allegation in Poncio's
answer to the effect that he signed Exhibit A
under the belief that it 'was a permit for him
to remain in the premises in the event that
'he decided to sell the property' to the
plaintiff at P20.00 a sq. m is, on its face,
somewhat difficult to believe. Indeed, if he
had not decided as yet to sell that land to
plaintiff, who had never increased her offer
of P15 a square meter, there as no reason
for Poncio to get said permit from her. Upon
the they if plaintiff intended to mislead
Poncio, she would have Exhibit A to be
drafted, probably, in English, instead of
taking the trouble of seeing to it that it was
written precisely in his native dialect, the
Batanes. Moreover, Poncio's signature on
Exhibit A suggests that he is neither illiterate
nor so ignorant as to sign a document
without reading its contents, apart from the
fact that Meonada had read Exhibit A to him-
and given him a copy thereof, before he
signed thereon, according to Meonada's
uncontradicted testimony. (pp. 46-47, ROA).
As stressed by Justice Gatmaitan in his first decision of
November 2, 1965, which he reiterated in his dissent from the
resolution of the majority of the Special Division. of Five on
October 30, 1968, Exhibit A, the private document in the
Batanes dialect, is a valid contract of sale between the parties,
since sale is a consensual contract and is perfected by mere
consent (Couto vs. Cortes, 8 Phil. 459). Even an oral contract of
realty is all between the parties and accords to the vendee the
right to compel the vendor to execute the proper public
document As a matter of fact, Exhibit A, while merely a private
document, can be fully or partially performed, to it from the
operation of the statute of frauds. Being a all consensual
contract, Exhibit A effectively transferred the possession of the
lot to the vendee Carbonell by constitutum possessorium (Article
1500, New Civil Code); because thereunder the vendor Poncio
continued to retain physical possession of the lot as tenant of
the vendee and no longer as knew thereof. More than just the
signing of Exhibit A by Poncio and Carbonell with Constancio
Meonada as witness to fact the contract of sale, the transition
was further confirmed when Poncio agreed to the actual
payment by at Carbonell of his mortgage arrearages to the bank
on January 27, 1955 and by his consequent delivery of his own
mortgage passbook to Carbonell. If he remained owner and
mortgagor, Poncio would not have surrendered his mortgage
passbook to' Carbonell.
IV
IDENTIFICATION AND DESCRIPTION OF THE DISPUTED
LOT IN THE MEMORANDUM EXHIBIT "A"
The claim that the memorandum Exhibit "A" does not sufficiently
describe the disputed lot as the subject matter of the sale, was
correctly disposed of in the first decision of the trial court of
December 5, 1962, thus: "The defendant argues that there is
even no description of the lot referred to in the note (or
memorandum), especially when the note refers to only one-half
lot. With respect to the latter argument of the defendant, plaintiff
points out that one- half lot was mentioned in Exhibit 'A' because
the original description carried in the title states that it was
formerly part of a bigger lot and only segregated later. The
explanation is tenable, in (sic) considering the time value of the
contents of Exh. 'A', the court has arrived at the conclusion that
there is sufficient description of the lot referred to in Exh. As
none other than the parcel of lot occupied by the defendant
Poncio and where he has his improvements erected. The
Identity of the parcel of land involved herein is sufficiently
established by the contents of the note Exh. 'A'. For a while, this
court had that similar impression but after a more and through
consideration of the context in Exh. 'A' and for the reasons
stated above, the court has arrived to (sic) the conclusion stated
earlier" (pp. 53-54, ROA).
Moreover, it is not shown that Poncio owns another parcel with
the same area, adjacent to the lot of his cousin Carbonell and
likewise mortgaged by him to the Republic Savings Bank. The
transaction therefore between Poncio and Carbonell can only
refer and does refer to the lot involved herein. If Poncio had
another lot to remove his house, Exhibit A would not have
stipulated to allow him to stay in the sold lot without paying any
rent for one year and thereafter to pay rental in case he cannot
find another place to transfer his house.
While petitioner Carbonell has the superior title to the lot, she
must however refund to respondents Infantes the amount of
P1,500.00, which the Infantes paid to the Republic Savings
Bank to redeem the mortgage.
It appearing that the Infantes are possessors in bad faith, their
rights to the improvements they introduced op the disputed lot
are governed by Articles 546 and 547 of the New Civil Code.
Their expenses consisting of P1,500.00 for draining the
property, filling it with 500 cubic meters of garden soil, building a
wall around it and installing a gate and P11,929.00 for erecting a
b ' bungalow thereon, are useful expenditures, for they add to
the value of the property (Aringo vs. Arenas, 14 Phil. 263;
Alburo vs. Villanueva, 7 Phil. 277; Valencia vs. Ayala de Roxas,
13 Phil. 45).
Under the second paragraph of Article 546, the possessor in
good faith can retain the useful improvements unless the person
who defeated him in his possession refunds him the amount of
such useful expenses or pay him the increased value the land
may have acquired by reason thereof. Under Article 547, the
possessor in good faith has also the right to remove the useful
improvements if such removal can be done without damage to
the land, unless the person with the superior right elects to pay
for the useful improvements or reimburse the expenses therefor
under paragraph 2 of Article 546. These provisions seem to
imply that the possessor in bad faith has neither the right of
retention of useful improvements nor the right to a refund for
useful expenses.
But, if the lawful possessor can retain the improvements
introduced by the possessor in bad faith for pure luxury or mere
pleasure only by paying the value thereof at the time he enters
into possession (Article 549 NCC), as a matter of equity, the
Infantes, although possessors in bad faith, should be allowed to
remove the aforesaid improvements, unless petitioner Carbonell
chooses to pay for their value at the time the Infantes introduced
said useful improvements in 1955 and 1959. The Infantes
cannot claim reimbursement for the current value of the said
useful improvements; because they have been enjoying such
improvements for about two decades without paying any rent on
the land and during which period herein petitioner Carbonell was
deprived of its possession and use.
WHEREFORE, THE DECISION OF THE SPECIAL DIVISION
OF FIVE OF THE COURT OF APPEALS OF OCTOBER 30,
1968 IS HEREBY REVERSED; PETITIONER ROSARIO
CARBONELL IS HEREBY DECLARED TO HAVE THE
SUPERIOR RIGHT TO THE LAND IN QUESTION AND IS
HEREBY DIRECTED TO REIMBURSE TO PRIVATE
RESPONDENTS INFANTES THE SUM OF ONE THOUSAND
FIVE HUNDRED PESOS (P1,500.00) WITHIN THREE (3)
MONTHS FROM THE FINALITY OF THIS DECISION; AND
THE REGISTER OF DEEDS OF RIZAL IS HEREBY DIRECTED
TO CANCEL TRANSFER CERTIFICATE OF TITLE NO. 37842
ISSUED IN FAVOR OF PRIVATE RESPONDENTS INFANTES
COVERING THE DISPUTED LOT, WHICH CANCELLED
TRANSFER CERTIFICATE OF TITLE NO. 5040 IN THE NAME
OF JOSE PONCIO, AND TO ISSUE A NEW TRANSFER
CERTIFICATE OF TITLE IN FAVOR OF PETITIONER
ROSARIO CARBONELL UPON PRESENTATION OF PROOF
OF PAYMENT BY HER TO THE INFANTES OF THE
AFORESAID AMOUNT OF ONE THOUSAND FIVE HUNDRED
PESOS (P1,500.00).
PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR
AFOREMENTIONED USEFUL IMPROVEMENTS FROM THE
LOT WITHIN THREE (3) MONTHS FROM THE FINALITY OF
THIS DECISION, UNLESS THE PETITIONER ROSARIO
CARBONELL ELECTS TO ACQUIRE THE SAME AND PAYS
THE INFANTES THE AMOUNT OF THIRTEEN THOUSAND
FOUR HUNDRED TWENTY-NINE PESOS (P13,429.00)
WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS
DECISION. SHOULD PETITIONER CARBONELL FAIL TO PAY
THE SAID AMOUNT WITHIN THE AFORESTATED PERIOD
OF THREE (3) MONTHS FROM THE FINALITY OF THIS
DECISION, THE PERIOD OF THREE (3) MONTHS WITHIN
WHICH THE RESPONDENTS INFANTES MAY REMOVE
THEIR AFOREMENTIONED USEFUL IMPROVEMENTS
SHALL COMMENCE FROM THE EXPIRATION OF THE
THREE (3) MONTHS GIVEN PETITIONER CARBONELL TO
PAY FOR THE SAID USEFUL IMPROVEMENTS.
WITH COSTS AGAINST PRIVATE RESPONDENTS.
G.R. No. 194846 June 19, 2013
*HOSPICIO D. ROSAROSO, ANTONIO D. ROSAROSO,
MANUEL D. ROSAROSO, ALGERICA D. ROSAROSO, and
CLEOFE R. LABINDAO, Petitioners,
vs.
LUCILA LABORTE SORIA, SPOUSES HAM SOLUTAN
and **LAILA SOLUTAN, and MERIDIAN REALTY
CORPORATION, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court assailing the December 4, 2009 Decision1 of the
Court of Appeals (CA). in CA G.R. CV No. 00351, which
reversed and set aside the July 30, 2004 Decision2 of the
Regional Trial Court, Branch 8, 7th Judicial Region, Cebu City
(RTC), in Civil Case No. CEB-16957, an action for declaration of
nullity of documents.
The Facts
Spouses Luis Rosaroso (Luis) and Honorata Duazo (Honorata)
acquired several real properties in Daan Bantayan, Cebu City,
including the subject properties. The couple had nine (9)
children namely: Hospicio, Arturo, Florita, Lucila, Eduardo,
Manuel, Cleofe, Antonio, and Angelica. On April 25, 1952,
Honorata died. Later on, Luis married Lourdes Pastor Rosaroso
(Lourdes).
On January 16, 1995, a complaint for Declaration of Nullity of
Documents with Damages was filed by Luis, as one of the
plaintiffs, against his daughter, Lucila R. Soria (Lucila); Lucila’s
daughter, Laila S. Solutan (Laila); and Meridian Realty
Corporation (Meridian). Due to Luis’ untimely death, however,
an amended complaint was filed on January 6, 1996, with the
spouse of Laila, Ham Solutan (Ham); and Luis’ second wife,
Lourdes, included as defendants.3
In the Amended Complaint, it was alleged by petitioners
Hospicio D. Rosaroso, Antonio D. Rosaroso (Antonio), Angelica
D. Rosaroso (Angelica), and Cleofe R. Labindao (petitioners)
that on November 4, 1991, Luis, with the full knowledge and
consent of his second wife, Lourdes, executed the Deed of
Absolute Sale4 (First Sale) covering the properties with Transfer
Certificate of Title (TCT) No. 31852 (Lot No. 8); TCT. No. 11155
(Lot 19); TCT No. 10885 (Lot No. 22); TCT No. 10886 (Lot No.
23); and Lot Nos. 5665 and 7967, all located at Daanbantayan,
Cebu, in their favor.5
They also alleged that, despite the fact that the said properties
had already been sold to them, respondent Laila, in conspiracy
with her mother, Lucila, obtained the Special Power of Attorney
(SPA),6 dated April 3, 1993, from Luis (First SPA); that Luis was
then sick, infirm, blind, and of unsound mind; that Lucila and
Laila accomplished this by affixing Luis’ thumb mark on the SPA
which purportedly authorized Laila to sell and convey, among
others, Lot Nos. 8, 22 and 23, which had already been sold to
them; and that on the strength of another SPA7 by Luis, dated
July 21, 1993 (Second SPA), respondents Laila and Ham
mortgaged Lot No. 19 to Vital Lending Investors, Inc. for and in
consideration of the amount of ₱150,000.00 with the
concurrence of Lourdes.8
Petitioners further averred that a second sale took place on
August 23, 1994, when the respondents made Luis sign the
Deed of Absolute Sale9 conveying to Meridian three (3) parcels
of residential land for ₱960,500.00 (Second Sale); that Meridian
was in bad faith when it did not make any inquiry as to who were
the occupants and owners of said lots; and that if Meridian had
only investigated, it would have been informed as to the true
status of the subject properties and would have desisted in
pursuing their acquisition.
Petitioners, thus, prayed that they be awarded moral damages,
exemplary damages, attorney’s fees, actual damages, and
litigation expenses and that the two SPAs and the deed of sale
in favor of Meridian be declared null and void ab initio.10
On their part, respondents Lucila and Laila contested the First
Sale in favor of petitioners. They submitted that even assuming
that it was valid, petitioners were estopped from questioning the
Second Sale in favor of Meridian because they failed not only in
effecting the necessary transfer of the title, but also in
annotating their interests on the titles of the questioned
properties. With respect to the assailed SPAs and the deed of
absolute sale executed by Luis, they claimed that the
documents were valid because he was conscious and of sound
mind and body when he executed them. In fact, it was Luis
together with his wife who received the check payment issued
by Meridian where a big part of it was used to foot his hospital
and medical expenses.11
Respondent Meridian, in its Answer with Compulsory
Counterclaim, averred that Luis was fully aware of the
conveyances he made. In fact, Sophia Sanchez (Sanchez),
Vice-President of the corporation, personally witnessed Luis
affix his thumb mark on the deed of sale in its favor. As to
petitioners’ contention that Meridian acted in bad faith when it
did not endeavor to make some inquiries as to the status of the
properties in question, it countered that before purchasing the
properties, it checked the titles of the said lots with the Register
of Deeds of Cebu and discovered therein that the First Sale
purportedly executed in favor of the plaintiffs was not registered
with the said Register of Deeds. Finally, it argued that the suit
against it was filed in bad faith.12
On her part, Lourdes posited that her signature as well as that of
Luis appearing on the deed of sale in favor of petitioners, was
obtained through fraud, deceit and trickery. She explained that
they signed the prepared deed out of pity because petitioners
told them that it was necessary for a loan application. In fact,
there was no consideration involved in the First Sale. With
respect to the Second Sale, she never encouraged the same
and neither did she participate in it. It was purely her husband’s
own volition that the Second Sale materialized. She, however,
affirmed that she received Meridian’s payment on behalf of her
husband who was then bedridden.13
RTC Ruling
After the case was submitted for decision, the RTC ruled in favor
of petitioners. It held that when Luis executed the second deed
of sale in favor of Meridian, he was no longer the owner of Lot
Nos. 19, 22 and 23 as he had already sold them to his children
by his first marriage. In fact, the subject properties had already
been delivered to the vendees who had been living there since
birth and so had been in actual possession of the said
properties. The trial court stated that although the deed of sale
was not registered, this fact was not prejudicial to their interest.
It was of the view that the actual registration of the deed of sale
was not necessary to render a contract valid and effective
because where the vendor delivered the possession of the
parcel of land to the vendee and no superior rights of third
persons had intervened, the efficacy of said deed was not
destroyed. In other words, Luis lost his right to dispose of the
said properties to Meridian from the time he executed the first
deed of sale in favor of petitioners. The same held true with his
alleged sale of Lot 8 to Lucila Soria.14 Specifically, the
dispositive portion of the RTC decision reads:
IN VIEW OF THE FOREGOING, the Court finds that a
preponderance of evidence exists in favor of the plaintiffs and
against the defendants. Judgment is hereby rendered:
a. Declaring that the Special Power of Attorney,
Exhibit "K," for the plaintiffs and Exhibit "3" for the
defendants null and void including all transactions
subsequent thereto and all proceedings arising
therefrom;
b. Declaring the Deed of Sale marked as Exhibit "E"
valid and binding;
c. Declaring the Deed of Absolute Sale of Three (3)
Parcels of Residential Land marked as Exhibit "F" null
and void from the beginning;
d. Declaring the Deed of Sale, Exhibit "16" (Solutan)
or Exhibit "FF," null and void from the beginning;
e. Declaring the vendees named in the Deed of Sale
marked as Exhibit "E" to be the lawful, exclusive and
absolute owners and possessors of Lots Nos. 8, 19,
22, and 23;
f. Ordering the defendants to pay jointly and severally
each plaintiff ₱50,000.00 as moral damages; and
g. Ordering the defendants to pay plaintiffs
₱50,000.00 as attorney’s fees; and ₱20,000.00 as
litigation expenses.
The crossclaim made by defendant Meridian Realty Corporation
against defendants Soria and Solutan is ordered dismissed for
lack of sufficient evidentiary basis.
SO ORDERED."15
Ruling of the Court of Appeals
On appeal, the CA reversed and set aside the RTC decision.
The CA ruled that the first deed of sale in favor of petitioners
was void because they failed to prove that they indeed tendered
a consideration for the four (4) parcels of land. It relied on the
testimony of Lourdes that petitioners did not pay her husband.
The price or consideration for the sale was simulated to make it
appear that payment had been tendered when in fact no
payment was made at all.16
With respect to the validity of the Second Sale, the CA stated
that it was valid because the documents were notarized and, as
such, they enjoyed the presumption of regularity. Although
petitioners alleged that Luis was manipulated into signing the
SPAs, the CA opined that evidence was wanting in this regard.
Dr. Arlene Letigio Pesquira, the attending physician of Luis,
testified that while the latter was physically infirmed, he was of
sound mind when he executed the first SPA.17
With regard to petitioners’ assertion that the First SPA was
revoked by Luis when he executed the affidavit, dated
November 24, 1994, the CA ruled that the Second Sale
remained valid. The Second Sale was transacted on August 23,
1994, before the First SPA was revoked. In other words, when
the Second Sale was consummated, the First SPA was still valid
and subsisting. Thus, "Meridian had all the reasons to rely on
the said SPA during the time of its validity until the time of its
actual filing with the Register of Deeds considering that
constructive notice of the revocation of the SPA only came into
effect upon the filing of the Adverse Claim and the
aforementioned Letters addressed to the Register of Deeds on
17 December 1994 and 25 November 1994, respectively,
informing the Register of Deeds of the revocation of the first
SPA."18 Moreover, the CA observed that the affidavit revoking
the first SPA was also revoked by Luis on December 12, 1994.19
Furthermore, although Luis revoked the First SPA, he did not
revoke the Second SPA which authorized respondent Laila to
sell, convey and mortgage, among others, the property covered
by TCT T-11155 (Lot No. 19). The CA opined that had it been
the intention of Luis to discredit the
Second Sale, he should have revoked not only the First SPA but
also the Second SPA. The latter being valid, all transactions
emanating from it, particularly the mortgage of Lot 19, its
subsequent redemption and its second sale, were valid.20 Thus,
the CA disposed in this wise:
WHEREFORE, the appeal is hereby GRANTED. The Decision
dated 30 July 2004 is hereby REVERSED AND SET ASIDE,
and in its stead a new decision is hereby rendered:
1. DECLARING the Special Power of Attorney, dated
21 July 1993, as valid;
2. DECLARING the Special Power of Attorney, dated
03 April 1993, as valid up to the time of its revocation
on 24 November 1994;
3. DECLARING the Deed of Absolute sale, dated 04
November 1991, as ineffective and without any force
and effect;
4. DECLARING the Deed of Absolute Sale of Three
(3) Parcels of Residential Land, dated 23 August
1994, valid and binding from the very beginning;
5. DECLARING the Deed of Absolute Sale, dated 27
September 1994, also valid and binding from the very
beginning;
6. ORDERING the substituted plaintiffs to pay jointly
and severally the defendant-appellant Meridian Realty
Corporation the sum of Php100,000.00 as moral
damages, Php100,000.00 as attorney’s fee and
Php100,000.00 as litigation expenses; and
7. ORDERING the substituted plaintiffs to pay jointly
and severally the defendant-appellants Leila Solutan
et al., the sum of Php50,000.00 as moral damages.
SO ORDERED.21
Petitioners filed a motion for reconsideration, but it was denied
in the CA Resolution,22 dated November 18, 2010.
Consequently, they filed the present petition with the following
ASSIGNMENT OF ERRORS
I.
THE HONORABLE COURT OF APPEALS (19TH DIVISION)
GRAVELY ERRED WHEN IT DECLARED AS VOID THE FIRST
SALE EXECUTED BY THE LATE LUIS ROSAROSO IN FAVOR
OF HIS CHILDREN OF HIS FIRST MARRIAGE.
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN NOT SUSTAINING AND AFFIRMING THE RULING OF THE
TRIAL COURT DECLARING THE MERIDIAN REALTY
CORPORATION A BUYER IN BAD FAITH, DESPITE THE
TRIAL COURT’S FINDINGS THAT THE DEED OF SALE (First
Sale), IS GENUINE AND HAD FULLY COMPLIED WITH ALL
THE LEGAL FORMALITIES.
III.
THE HONORABLE COURT OF APPEALS FURTHER ERRED
IN NOT HOLDING THE SALE (DATED 27 SEPTEMBER 1994),
NULL AND VOID FROM THE VERY BEGINNING SINCE LUIS
ROSAROSO ON NOVEMBER 4, 1991 WAS NO LONGER THE
OWNER OF LOTS 8, 19, 22 AND 23 AS HE HAD EARLIER
DISPOSED SAID LOTS IN FAVOR OF THE CHILDREN OF
HIS (LUIS ROSAROSO) FIRST MARRIAGE.23
Petitioners argue that the second deed of sale was null and void
because Luis could not have validly transferred the ownership of
the subject properties to Meridian, he being no longer the owner
after selling them to his children. No less than Atty. William
Boco, the lawyer who notarized the first deed of sale, appeared
and testified in court that the said deed was the one he
notarized and that Luis and his second wife, Lourdes, signed the
same before him. He also identified the signatures of the
subscribing witnesses.24 Thus, they invoke the finding of the
RTC which wrote:
In the case of Heirs of Joaquin Teves, Ricardo Teves versus
Court of Appeals, et al., G.R. No. 109963, October 13, 1999, the
Supreme Court held that a public document executed [with] all
the legal formalities is entitled to a presumption of truth as to the
recitals contained therein. In order to overthrow a certificate of a
notary public to the effect that a grantor executed a certain
document and acknowledged the fact of its execution before
him, mere preponderance of evidence will not suffice. Rather,
the evidence must (be) so clear, strong and convincing as to
exclude all reasonable dispute as to the falsity of the certificate.
When the evidence is conflicting, the certificate will be upheld x
xx.
A notarial document is by law entitled to full faith and credit upon
its face. (Ramirez vs. Ner, 21 SCRA 207). As such it … must be
sustained in full force and effect so long as he who impugns it
shall not have presented strong, complete and conclusive proof
of its falsity or nullity on account of some flaw or defect provided
against by law (Robinson vs. Villafuerte, 18 Phil. 171, 189-
190).25
Furthermore, petitioners aver that it was erroneous for the CA to
say that the records of the case were bereft of evidence that
they paid the price of the lots sold to them. In fact, a perusal of
the records would reveal that during the cross-examination of
Antonio Rosaroso, when asked if there was a monetary
consideration, he testified that they indeed paid their father and
their payment helped him sustain his daily needs.26
Petitioners also assert that Meridian was a buyer in bad faith
because when its representative visited the site, she did not
make the necessary inquiries. The fact that there were already
houses on the said lots should have put Meridian on its guard
and, for said reason, should have made inquiries as to who
owned those houses and what their rights were over the same.27
Meridian’s assertion that the Second Sale was registered in the
Register of Deeds was a falsity. The subject titles, namely: TCT
No. 11155 for Lot 19, TCT No. 10885 for Lot 22, and TCT No.
10886 for Lot 23 were free from any annotation of the alleged
sale.28
After an assiduous assessment of the records, the Court finds
for the petitioners.
The First Deed Of Sale Was Valid
The fact that the first deed of sale was executed, conveying the
subject properties in favor of petitioners, was never contested by
the respondents. What they vehemently insist, though, is that
the said sale was simulated because the purported sale was
made without a valid consideration.
Under Section 3, Rule 131 of the Rules of Court, the following
are disputable presumptions: (1) private transactions have been
fair and regular; (2) the ordinary course of business has been
followed; and (3) there was sufficient consideration for a
contract.29 These presumptions operate against an adversary
who has not introduced proof to rebut them. They create the
necessity of presenting evidence to rebut the prima facie case
they created, and which, if no proof to the contrary is presented
and offered, will prevail. The burden of proof remains where it is
but, by the presumption, the one who has that burden is relieved
for the time being from introducing evidence in support of the
averment, because the presumption stands in the place of
evidence unless rebutted.30
In this case, the respondents failed to trounce the said
presumption. Aside from their bare allegation that the sale was
made without a consideration, they failed to supply clear and
convincing evidence to back up this claim. It is elementary in
procedural law that bare allegations, unsubstantiated by
evidence, are not equivalent to proof under the Rules of Court.31
The CA decision ran counter to this established rule regarding
disputable presumption. It relied heavily on the account of
Lourdes who testified that the children of Luis approached him
and convinced him to sign the deed of sale, explaining that it
was necessary for a loan application, but they did not pay the
purchase price for the subject properties.32 This testimony,
however, is self-serving and would not amount to a clear and
convincing evidence required by law to dispute the said
presumption. As such, the presumption that there was sufficient
consideration will not be disturbed.
Granting that there was no delivery of the consideration, the
seller would have no right to sell again what he no longer
owned. His remedy would be to rescind the sale for failure on
the part of the buyer to perform his part of their obligation
pursuant to Article 1191 of the New Civil Code. In the case of
Clara M. Balatbat v. Court Of Appeals and Spouses Jose
Repuyan and Aurora Repuyan,33 it was written:
The failure of the buyer to make good the price does not, in law,
cause the ownership to revest to the seller unless the bilateral
contract of sale is first rescinded or resolved pursuant to Article
1191 of the New Civil Code. Non-payment only creates a right to
demand the fulfillment of the obligation or to rescind the
contract. [Emphases supplied]
Meridian is Not a
Buyer in Good Faith
Respondents Meridian and Lucila argue that, granting that the
First Sale was valid, the properties belong to them as they
acquired these in good faith and had them first recorded in the
Registry of Property, as they were unaware of the First Sale.34
Again, the Court is not persuaded.
The fact that Meridian had them first registered will not help its
cause. In case of double sale, Article 1544 of the Civil Code
provides:
ART. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who
may have first possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership shall belong to
the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in possession; and, in the
absence thereof; to the person who presents the oldest title,
provided there is good faith.
Otherwise stated, ownership of an immovable property which is
the subject of a double sale shall be transferred: (1) to the
person acquiring it who in good faith first recorded it in the
Registry of Property; (2) in default thereof, to the person who in
good faith was first in possession; and (3) in default thereof, to
the person who presents the oldest title, provided there is good
faith. The requirement of the law then is two-fold: acquisition in
good faith and registration in good faith. Good faith must concur
with the registration. If it would be shown that a buyer was in
bad faith, the alleged registration they have made amounted to
no registration at all.
The principle of primus tempore, potior jure (first in time,
stronger in right) gains greater significance in case of a double
sale of immovable property. When the thing sold twice is an
immovable, the one who acquires it and first records it in the
Registry of Property, both made in good faith, shall be deemed
the owner. Verily, the act of registration must be coupled with
good faith— that is, the registrant must have no knowledge of
the defect or lack of title of his vendor or must not have been
aware of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the
defects in the title of his vendor.)35 [Emphases and underlining
supplied]
When a piece of land is in the actual possession of persons
other than the seller, the buyer must be wary and should
investigate the rights of those in possession. Without making
such inquiry, one cannot claim that he is a buyer in good faith.
When a man proposes to buy or deal with realty, his duty is to
read the public manuscript, that is, to look and see who is there
upon it and what his rights are. A want of caution and diligence,
which an honest man of ordinary prudence is accustomed to
exercise in making purchases, is in contemplation of law, a want
of good faith. The buyer who has failed to know or discover that
the land sold to him is in adverse possession of another is a
buyer in bad faith.36 In the case of Spouses Sarmiento v. Court
of Appeals,37 it was written:
Verily, every person dealing with registered land may safely rely
on the correctness of the certificate of title issued therefor and
the law will in no way oblige him to go behind the certificate to
determine the condition of the property. Thus, the general rule is
that a purchaser may be considered a purchaser in good faith
when he has examined the latest certificate of title. An exception
to this rule is when there exist important facts that would create
suspicion in an otherwise reasonable man to go beyond the
present title and to investigate those that preceded it. Thus, it
has been said that a person who deliberately ignores a
significant fact which would create suspicion in an otherwise
reasonable man is not an innocent purchaser for value. A
purchaser cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he acted in
good faith under the belief that there was no defect in the title of
the vendor. As we have held:
The failure of appellees to take the ordinary precautions which a
prudent man would have taken under the circumstances,
specially in buying a piece of land in the actual, visible and
public possession of another person, other than the vendor,
constitutes gross negligence amounting to bad faith.
In this connection, it has been held that where, as in this case,
the land sold is in the possession of a person other than the
vendor, the purchaser is required to go beyond the certificate of
title to make inquiries concerning the rights of the actual
possessor. Failure to do so would make him a purchaser in bad
faith. (Citations omitted).
One who purchases real property which is in the actual
possession of another should, at least make some inquiry
concerning the right of those in possession. The actual
possession by other than the vendor should, at least put the
purchaser upon inquiry. He can scarely, in the absence of such
inquiry, be regarded as a bona fide purchaser as against such
possessors. (Emphases supplied)
Prescinding from the foregoing, the fact that private respondent
RRC did not investigate the Sarmiento spouses' claim over the
subject land despite its knowledge that Pedro Ogsiner, as their
overseer, was in actual possession thereof means that it was
not an innocent purchaser for value upon said land. Article 524
of the Civil Code directs that possession may be exercised in
one's name or in that of another. In herein case, Pedro Ogsiner
had informed RRC that he was occupying the subject land on
behalf of the Sarmiento spouses. Being a corporation engaged
in the business of buying and selling real estate, it was gross
negligence on its part to merely rely on Mr. Puzon's assurance
that the occupants of the property were mere squatters
considering the invaluable information it acquired from Pedro
Ogsiner and considering further that it had the means and the
opportunity to investigate for itself the accuracy of such
information. [Emphases supplied]
In another case, it was held that if a vendee in a double sale
registers the sale after he has acquired knowledge of a previous
sale, the registration constitutes a registration in bad faith and
does not confer upon him any right. If the registration is done in
bad faith, it is as if there is no registration at all, and the buyer
who has first taken possession of the property in good faith shall
be preferred.38
In the case at bench, the fact that the subject properties were
already in the possession of persons other than Luis was never
disputed. Sanchez, representative and witness for Meridian,
even testified as follows:
x x x; that she together with the two agents, defendant Laila
Solutan and Corazon Lua, the president of Meridian Realty
Corporation, went immediately to site of the lots; that the agents
brought with them the three titles of the lots and Laila Solutan
brought with her a special power of attorney executed by Luis B.
Rosaroso in her favor but she went instead directly to Luis
Rosaroso to be sure; that the lots were pointed to them and she
saw that there were houses on it but she did not have any
interest of the houses because her interest was on the lots; that
Luis Rosaroso said that the houses belonged to him; that he
owns the property and that he will sell the same because he is
very sickly and he wanted to buy medicines; that she requested
someone to check the records of the lots in the Register of
Deeds; that one of the titles was mortgaged and she told them
to redeem the mortgage because the corporation will buy the
property; that the registered owner of the lots was Luis
Rosaroso; that in more or less three months, the encumbrance
was cancelled and she told the prospective sellers to prepare
the deed of sale; that there were no encumbrances or liens in
the title; that when the deed of absolute sale was prepared it
was signed by the vendor Luis Rosaroso in their house in Opra
x x x.39 (Underscoring supplied)
From the above testimony, it is clear that Meridian, through its
agent, knew that the subject properties were in possession of
persons other than the seller. Instead of investigating the rights
and interests of the persons occupying the said lots, however, it
chose to just believe that Luis still owned them. Simply, Meridian
Realty failed to exercise the due diligence required by law of
purchasers in acquiring a piece of land in the possession of
person or persons other than the seller.
In this regard, great weight is accorded to the findings of fact of
the RTC. Basic is the rule that the trial court is in a better
position to examine real evidence as well as to observe the
demeanor of witnesses who testify in the case.40
WHEREFORE, the petition is GRANTED. The December 4,
2009 Decision and the November 18, 201 0 Resolution of the
Court of Appeals, in CA-G.R. CV No. 00351, are REVERSED
and SET ASIDE. The July 30, 2004 Decision of the Regional
Trial Court, Branch 8, 7th Judicial Region, Cebu City, in Civil
Case No. CEB-16957, is hereby REINSTATED.
SO ORDERED.
G.R. No. 200173 April 15, 2013
SPS. ESMERALDO D. VALLIDO and ARSENIA M. V ALLIDO,
rep. by ATTY. SERGIO C. SUMAYOD, Petitioners,
vs.
SPS. ELMER PONO and JULIET PONO, and PURIFICACION
CERNA-PONG and SPS. MARIANITO PONO and
ESPERANZA MERO-PONO, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari assailing the December
8, 2011 Decision of the Court of Appeals (CA) which reversed
and set aside the July 20, 2004 Decision of the Regional Trial
Court, Branch 12, Ormoc City (RTC). a case involving a double
sale of a parcel of land.
It appears that Martino Dandan (Martino) was the registered
owner of a parcel of land in Kananga, Leyte, with an area of
28,214 square meters, granted under Homestead Patent No. V-
21513 on November 11, 1953 and covered by Original
Certificate of Title (OCT) No. P-429.
On January 4, 1960, Martino, who was at that time living in
Kananga, Leyte, sold a portion of the subject property
equivalent to 18,214 square meters to respondent Purificacion
Cerna (Purificacion). Upon execution of the Deed of Absolute
Sale, Martino gave Purificacion the owner’s copy of OCT No. P-
429. The transfer, however, was not recorded in the Registry of
Deeds.
On May 4, 1973, Purificacion sold her18,214 square meter
portion of the subject property to respondent Marianito Pono
(Marianito) and also delivered OCT No. P-429 to him. Marianito
registered the portion he bought for taxation purposes, paid its
taxes, took possession, and allowed his son respondent Elmer
Pono (Elmer) and daughter-in-law, Juliet Pono (Juliet), to
construct a house thereon. Marianito kept OCT No. P-429. The
transfer, however, was also not recorded in the Registry of
Deeds.
Meanwhile, Martino left Kananga, Leyte, and went to San Rafael
III, Noveleta, Cavite, and re-settled there. On June 14, 1990, he
sold the whole subject property to his grandson, petitioner
Esmeraldo Vallido (Esmeraldo), also a resident of Noveleta,
Cavite. Considering that Martino had delivered OCT No. P-429
to Purificacion in 1960, he no longer had any certificate of title to
hand over to Esmeraldo.
On May 7, 1997, Martino filed a petition seeking for the issuance
of a new owner’s duplicate copy of OCT No. P-429, which he
claimed was lost. He stated that he could not recall having
delivered the said owner’s duplicate copy to anybody to secure
payment or performance of any legal obligation. On June 8,
1998, the petition was granted by the RTC, Branch 12 of Ormoc
City. On September 17, 1999, Esmeraldo registered the deed of
sale in the Registry of Deeds and Transfer Certificate of Title
(TCT) No. TP-13294 was thereafter issued in the name of the
petitioners.
Subsequently, the petitioners filed before the RTC a complaint
for quieting of title, recovery of possession of real property and
damages against the respondents. In their Answer, respondents
Elmer and Juliet averred that their occupation of the property
was upon permission of Marianito. They included a historical
chronology of the transactions from that between Martino and
Purificacion to that between Purificacion and Marianito.
On July 20, 2004, the RTC promulgated a decision1 favoring the
petitioners. The RTC held that there was a double sale under
Article 1544 of the Civil Code. The respondents were the first
buyers while the petitioners were the second buyers. The RTC
deemed the petitioners as buyers in good faith because during
the sale on June 4, 1990, OCT No. P-429 was clean and free
from all liens. The petitioners were also deemed registrants in
good faith because at the time of the registration of the deed of
sale, both OCT No. P-429 and TCT No. TP-13294 did not bear
any annotation or mark of any lien or encumbrance. The RTC
concluded that because the petitioners registered the sale in the
Register of Deeds, they had a better right over the respondents.
Aggrieved, the respondents filed their Notice of Appeal on
August 27, 2004.
In the assailed Decision,2 dated December 8, 2011, the CA
ruled in favor of the respondents. The CA agreed that there was
a double sale. It, however, held that the petitioners were neither
buyers nor registrants in good faith. The respondents
indisputably were occupying the subject land. It wrote that
where the land sold was in the possession of a person other
than the vendor, the purchaser must go beyond the certificate of
title and make inquiries concerning the rights of the actual
possessors. It further stated that mere registration of the sale
was not enough as good faith must concur with the registration.
Thus, it ruled that the petitioners failed to discharge the burden
of proving that they were buyers and registrants in good faith.
Accordingly, the CA concluded that because the sale to
Purificacion took place in 1960, thirty (30) years prior to
Esmeraldo’s acquisition in 1990, the respondents had a better
right to the property.
Hence, this petition.
The petitioners argue that the CA erred in ruling in favor of the
respondents. Primarily, they contend that the Appellant’s Brief
was filed beyond the 30-day extension period granted by the CA
and that the findings of fact of the RTC were no longer subject
to review and should not have been disturbed on appeal.
They invoke that they are buyers and registrants in good faith.
They claim that the title of the land was clean and free from any
and all liens and encumbrances from the time of the sale up to
the time of its registration. They also aver that they had no
knowledge of the sale between Martino and Purificacion on July
4, 1960 as they have been residents of Noveleta, Cavite, which
is very far from Brgy. Masarayao, Kananga, Leyte. When
Esmeraldo confronted his grandfather, Martino, about the July 4,
1960 sale to Purificacion, he took as gospel truth the vehement
denial of his grandfather on the existence of the sale. The latter
explained that the transaction was only a mortgage. These facts
show that indeed they were buyers and registrants in good faith.
Thus, their right of ownership is preferred against the
unregistered claim of the respondents.
The petition is without merit.
On the procedural aspect, it was the ruling of the CA that the
respondents were deemed to have filed their Appellant’s Brief
within the reglementary period.3 The Court accepts that as it
was merely a technical issue.
The core issue in this case is whether the petitioners are buyers
and registrants in good faith.
It is undisputed that there is a double sale and that the
respondents are the first buyers while the petitioners are the
second buyers. The burden of proving good faith lies with the
second buyer (petitioners herein) which is not discharged by
simply invoking the ordinary presumption of good faith.4
After an assiduous assessment of the evidentiary records, this
Court holds that the petitioners are NOT buyers in good faith as
they failed to discharge their burden of proof.
Notably, it is admitted that Martino is the grandfather of
Esmeraldo. As an heir, petitioner Esmeraldo cannot be
considered as a third party to the prior transaction between
Martino and Purificacion. In Pilapil v. Court of Appeals,5it was
written:
The purpose of the registration is to give notice to third persons.
And, privies are not third persons. The vendor's heirs are his
privies. Against them, failure to register will not vitiate or annul
the vendee's right of ownership conferred by such unregistered
deed of sale.
The non-registration of the deed of sale between Martino and
Purificacion is immaterial as it is binding on the petitioners who
are privies.6 Based on the privity between petitioner Esmeraldo
and Martino, the petitioner as a second buyer is charged with
constructive knowledge of prior dispositions or encumbrances
affecting the subject property. The second buyer who has actual
or constructive knowledge of the prior sale cannot be a
registrant in good faith.7
Moreover, although it is a recognized principle that a person
dealing on a registered land need not go beyond its certificate of
title, it is also a firmly settled rule that where there are
circumstances which would put a party on guard and prompt
him to investigate or inspect the property being sold to him, such
as the presence of occupants/tenants thereon, it is expected
from the purchaser of a valued piece of land to inquire first into
the status or nature of possession of the occupants. As in the
common practice in the real estate industry, an ocular inspection
of the premises involved is a safeguard that a cautious and
prudent purchaser usually takes. Should he find out that the
land he intends to buy is occupied by anybody else other than
the seller who, as in this case, is not in actual possession, it
would then be incumbent upon the purchaser to verify the extent
of the occupant’s possessory rights.
As the petitioners cannot be considered buyers in good faith,
they cannot lean on the indefeasibility of their TCT in view of the
doctrine that the defense of indefeasibility of a torrens title does
not extend to transferees who take the certificate of title in bad
faith.13
The Court cannot ascribe good faith to those who have not
shown any diligence in protecting their rights.14
Lastly, it is uncontroverted that the respondents were occupying
the land since January 4, 1960 based on the deed of sale
between Martino and Puriticacion. They have also made
improvements on the land by erecting a house of mixed
permanent materials thereon, which was also admitted by the
petitioners.15 The respondents, without a doubt, are possessors
in good faith. Ownership should therefore vest in the
respondents because they were first in possession of the
property in good faith.16
WHEREFORE, the petition is DENIED.

The failure of a prospective buyer to take such precautionary

steps would mean negligence on his part and would preclude
him from claiming or invoking the rights of a "purchaser in good
faith."8 It has been held that "the registration of a later sale must
be done in good faith to entitle the registrant to priority in
ownership over the vendee in an earlier sale."9

There are several indicia that should have placed the petitioners
on guard and prompted them to investigate or inspect the
property being sold to them. First, Martino, as seller, did not
have possession of the subject property. Second, during the
sale on July 4, 1990, Martino did not have the owner’s duplicate
copy of the title. Third, there were existing permanent
improvements on the land. Fourth, the respondents were in
actual possession of the land. These circumstances are too
glaring to be overlooked and should have prompted the
petitioners, as prospective buyers, to investigate or inspect the
land. Where the vendor is not in possession of the property, the
prospective vendees are obligated to investigate the rights of
one in possession.10

When confronted by Esmeraldo on the alleged previous sale,

Martino declared that there was no sale but only a
mortgage.The petitioners took the declaration of Martino as
gospel truth or ex cathedra.11 The petitioners are not convincing.
Glaringly, Martino gave conflicting statements. He stated in his
Petition for Issuance of New Owner's Duplicate Copy of
OTC12 that he could not recall having delivered the owner's
duplicate copy to anybody to secure payment or performance of
any obligation. Yet, when confronted by Esmeraldo, Martino
stated that he mortgaged the land with Purificacion. The claims
of Martino, as relayed by the petitioners, cannot be relied upon.
 G.R. No. 195975, September 05, 2016
TAINA MANIGQUE-STONE, Petitioner, v. CATTLEYA LAND,
INC., AND SPOUSES TROADIO B. TECSON AND ASUNCION
ORTALIZ-TECSON, Respondents.
DECISION
DEL CASTILLO, J.:
The sale of Philippine land to an alien or foreigner, even if titled
in the name of his Filipino spouse, violates the Constitution and
is thus, void.
Assailed in this Petition for Review on Certiorari1 are the August
16, 2010 Decision2 of the Court of Appeals (CA) which
dismissed the appeal by Taina Manigque-Stone (Taina) in CA-
G.R. CV No. 02352, and its February 22, 2011
Resolution,3 which denied Taina's motion for
reconsideration4 thereon.
Factual Antecedents
Sometime in July 1992, Cattleya Land, Inc. (Cattleya) sent its
legal counsel, Atty. Federico C. Cabilao, Jr. (Atty. Cabilao, Jr.),
to Tagbilaran City to investigate at the Office of the Register of
Deeds in that city the status of the properties of spouses Col.
Troadio B. Tecson (Col. Tecson) and Asuncion Tecson
(collectively, Tecson spouses), which Cattleya wanted to
purchase. One of these properties, an 8,805-square meter
parcel of land located at Doljo, Panglao, Bohol, is registered in
the name of the Tecson spouses, and covered by Transfer
Certificate of Title (TCT) No. 17655 (henceforth, the subject
property). Atty. Cabilao, Jr. found that no encumbrances or liens
on the subject property had been annotated on the TCT thereof,
except for an attachment issued in connection with Civil Case
No. 3399 entitled "Tantrade Corporation vs. Bohol Resort Hotel,
Inc., et al."5
On November 6, 1992, Cattleya entered into a Contract of
Conditional Sale with the Tecson spouses covering nine parcels
of land, including the subject property. In this transaction the
Tecson spouses were represented by Atty. Salvador S. Pizarras
(Atty. Pizarras). The Contract of Conditional Sale was entered in
the Primary Book of the Office of the Register of Deeds of Bohol
that same day, per Entry No. 83422. On August 30, 1993, the
parties executed a Deed of Absolute Sale covering the subject
property. This Deed of Absolute Sale was also entered in the
Primary Book on October 4, 1993, per Entry No. 87549.
However, neither the Contract of Conditional Sale nor the Deed
of Absolute Sale could be annotated on the certificate of title
covering the subject property because the then Register of
Deeds of Bohol, Atty. Narciso S. De la Serna (Atty. De la Serna)
refused to annotate both deeds. According to Atty. De la Serna
it was improper to do so because of the writ of attachment that
was annotated on the certificate of title of the subject property,
in connection with the said Civil Case No. 3399.6
On December 1, 1993, Atty. Cabilao, Jr. and Atty. Pizarras, in
representation of their respective clients, again requested Atty.
De la Serna to annotate the Deed of Absolute Sale and all other
pertinent documents on the original certificate of title covering
the subject property. But Atty. De la Serna refused anew � this
time saying that he would accede to the request only if he was
presented with a court order to that effect. Atty. De la Serna still
refused the request to annotate, even after Atty. Cabilao, Jr. had
told him that all that he (Atty. Cabilao, Jr.) was asking was for
the Deed of Absolute Sale to be annotated on the original
certificate of title, and not for Atty. De la Serna to issue a new
transfer of title to the subject property.7
The writ of attachment on the certificate of title to the subject
property was, however, lifted, after the parties in Civil Case No.
3399 reached an amicable settlement or compromise
agreement. Even then, however, Cattleya did not still succeed in
having the aforementioned Deed of Absolute Sale registered,
and in having title to the subject property transferred to its name,
because it could not surrender the owner's copy of TCT No.
17655, which was in possession of the Tecson spouses.
According to Cattleya, the Tecson spouses could not deliver
TCT No. 17655 to it, because according to the Tecson spouses
this certificate of title had been destroyed in a fire which broke
out in Sierra Bullones, Bohol.8
This claim by the Tecson spouses turned out to be false,
however, because Atty. Cabilao, Jr. came to know, while
following up the registration of the August 30, 1993 Deed of
Absolute Sale at the Office of the Register of Deeds of Bohol,
that the owner's copy of TCT No. 17655 had in fact been
presented by Taina at the Office of the Register of Deeds of
Bohol, along with the Deed of Sale that was executed by the
Tecson spouses, in favor of Taina covering the subject
property.9
It appears that when Taina's then common-law husband,
Michael (Mike) Stone, visited Bohol sometime in December
1985, he fell in love with the place and decided to buy a portion
of the beach lot in Doljo, Panglao, Bohol. They met with Col.
Tecson, and the latter agreed to sell them a portion of the beach
lot for US$8,805.00. Mike and Taina made an initial
downpayment of US$1,750.00 (or equivalent P35,000.00 at that
time) for a portion of a beach lot, but did not ask for a receipt for
this initial downpayment. On June 1, 1987, a Deed of Absolute
Sale covering the subject portion was executed by Col. Tecson
in Taina's favor. Subsequent payments were made by Mike
totalling P40,000.00, as of August 29, 1986, although another
payment of P5,000.00 was made sometime in August 1987. The
last payment in the amount of P32,000.00, was made in
September 1987.10 In 1990, Troadio Tecson, Jr., the son of Col.
Tecson and Taina's brother-in-law, delivered to Taina the
owner's copy of TCT No. 17655.11
In the meantime, in October 1986, Taina and Mike got married.
On April 25, 1994, Taina filed a Notice of Adverse Claim
covering the subject portion, after she learned that Col. Tecson
and his lawyer had filed a petition for the issuance of a second
owner's copy over TCT No. 17655.12
On February 8, 1995, Taina sought to have her Deed of
Absolute Sale registered with the Office of the Register of
Deeds of Bohol, and on that occasion presented the owner's
copy of TCT No. 17655. Taina also caused a Memorandum of
Encumbrance to be annotated on this certificate of title. The
result was that on February 10, 1995, a new certificate of title,
TCT No. 21771, was issued in the name of Taina, in lieu of TCT
No. 17655, in the name of the Tecson spouses.13 The subject
property is described in TCT No. 21771 as follows:
A parcel of Land (Lot 5 of the consolidation-subdivision plan
Pcs-07-000907, being a portion of lots I-A and I-B, Psd-07-02-
12550, LRC. Rec. No. ___), situated in the Barrio of Doljo,
Municipality of Panglao, Province of Bohol, Island of Bohol.
Bounded on the North, along lines 15-16-1 by Bohol Strait; on
the East and Southeast, along line 1-2 by Lot 4 of the
consolidation-subdividion plan; along line 3-4 by Primitivo Hora;
and along line 4-5 by Lot 6 of the consolidation-subdivision plan;
on the South and Southwest, along line 5-6-7-8 by Andres
Guimalan; along line 8-9 by [Bienvenido] Biosino; along lines 9-
10-11-12-13-14 by Angel Hora; and on the West, along lines 14-
15 by Lot 7 of the consolidation-subdivision plan. Beginning at a
point marked "1" on plan, being S. 83 deg. 08'E., 1045.79 m.
from triangulation point TIP, USCGS, 1908, Doljo, Panglao,
Bohol; containing an area of EIGHT THOUSAND EIGHT
HUNDRED AND FIVE (8,805) SQUARE METERS, more or
less.14
Whereupon, Cattleya instituted against Taina a civil action for
quieting of title and/or recovery of ownership and cancellation of
title with damages.15 Docketed as Civil Case No. 5782 of the
Regional Trial Court (RTC) of Bohol at Tagbilaran City, Cattleya
therein initially impleaded Atty. De la Serna as party defendant;
but as the latter had already retired as Register of Deeds of
Bohol, both parties agreed to drop his name from the case.16
Taina likewise filed a motion for leave to admit a third-party
complaint against the Tecson spouses; this motion was granted
by the RTC.17
After due proceedings, the RTC of Bohol gave judgment18 for
Cattleya, thus:
WHEREFORE, in view of all the foregoing, judgment is hereby
rendered in favor of the plaintiff and against the defendant in the
main case as follows:
1. Quieting the title or ownership of the plaintiff in Lot 5 by
declaring the sale in its favor as valid and enforceable by virtue
of a prior registration of the sale in accordance with the
provisions of Presidential Decree No. 1529 otherwise known as
the Property Registration Decree;
2. Ordering the cancellation of Transfer Certificate of Title No.
21771 in the name of defendant TAINA MANIGQUE-STONE
and the issuance of a new title in favor of the plaintiff after
payment of the required fees; and
3. Ordering the defendant to desist from claiming ownership and
possession thereof. Without pronouncement as to costs.
As to defendant's third[-]party complaint against spouses x x x
Tecson[,] x x x judgment is hereby rendered as follows:
1. Ordering the return of the total amount of Seventy-seven
Thousand (P77,000.00) Pesos to the third[-]party plaintiff with
legal rate of interest from the time of the filing of the third[-]party
complaint on June 28, 2004 until the time the same shall have
been fully satisfied; and
2. Ordering the payment of P50,000.00 by way of moral and
exemplary damages and x x x of attorney's fees in the amount
of P30,000.00 and to pay the costs.
SO ORDERED.19
In finding for Cattleya, the RTC held that the sale entered by the
Tecson spouses with Cattleya and with Taina involving one and
the same property was a double sale, and that Cattleya had a
superior right to the lot covered thereby, because Cattleya was
the first to register the sale in its favor in good faith; that
although at the time of the sale the TCT covering the subject
property could not yet be issued, and the deed of sale could not
be annotated thereon due to a pending case between the
vendors-spouses (Tecson spouses) and Tantrade, Inc., the
evidence convincingly showed nonetheless that it was Cattleya
that was the first to register the sale in its favor with the Office of
the Provincial Registry of Deeds of Bohol on October 4, [1993]
as shown in Entry No. 87549.20 Furthermore, the RTC found
that Cattleya had no notice, nor was it aware, of Taina's claim to
the subject property, and that the only impediment it (Cattleya)
was aware of was the pending case (Civil Case No. 3399)
between Tantrade Corporation and Bohol Resort Hotel, Inc.21
On the other hand, the RTC found Taina's position untenable
because: First, the June 1, 1987 sale between Col. Tecson and
Mike, Taina's then common-law husband, was a patent nullity,
an absolutely null and void sale, because under the Philippine
Constitution a foreigner or alien cannot acquire real property in
the Philippines. Second, at the time of the sale, Taina was only
Mike's dummy, and their subsequent marriage did not validate
or legitimize the constitutionally proscribed sale earlier made in
Mike's favor. And third, no less than Taina herself admitted that
at the time she caused the sale to be registered and title thereto
issued to her, she knew or was otherwise aware that the very
same lot had already been sold to Cattleya, or at least claimed
by the latter � and this is a state of affairs constitutive of bad
faith on her part.22
The RTC likewise held that neither parties in the main case was
entitled to damages, because they failed to substantiate their
respective claims thereto.23
As regards Taina's third-party complaint against the Tecson
spouses, the RTC ordered the return or restitution to her of the
sum of P77,000.00, plus legal interest. Likewise awarded by the
RTC in Taina's favor were moral and exemplary damages in the
amount of P50,000.00 and attorney's fees in the amount of
P30,000.00 plus costs.24
Dissatisfied with this judgment, Taina appealed to the CA.
Ruling of the Court of Appeals
On August 16, 2010, the CA handed down the assailed
Decision,25cralawred which contained the following decretal
portion:
WHEREFORE, the challenged Decision of the Regional Trial
Court dated [August 10, 2007] is hereby AFFIRMED with
MODIFICATIONS; to wit:
1. Quieting the title of ownership of the plaintiff-appellee,
CATTLEYA LAND, INC. in the above-described property by
declaring the sale in its favor as valid and enforceable;
2. Ordering the cancellation of Transfer Certificate of Title No.
21771 in the name of defendant-appellant TAINA MANIGQUE-
STONE;
3. Ordering the registration of the Deed of Absolute Sale
involving the subject property executed in favor of CATTLEYA
LAND, INC. and the issuance x x x of a new title in favor of the
plaintiff-appellee CATTLEYA LAND, INC. ate payment of the
required fees; and
4. Ordering the defendant-appellant, TAINA MANIGQUE-
STONE to desist from claiming ownership and possession
thereof. Without pronouncement as to cost.
As to the third-party defendants-appellees, the spouses Troadio
B. Tecson and Asuncion Ortaliz Tecson, judgment is hereby
rendered as follows:
1. Ordering third-party defendants-appellees, spouses
TROADIO B. TECSON and ASUNCION ORTALIZ TECSON,
[to] return x x x the total amount of Seventy-seven Thousand
(P77,000.00) Pesos to the defendant-appellant, TAINA
MANIGQUE-STONE, with legal rate of interest from the time of
filing of the third[-]party complaint on June 28, 2004 until the
time the same shall have been fully satisfied; and
2. Ordering third-party defendants-appellees, spouses
TROADIO B. TECSON and ASUNCION ORTALIZ TECSON [to
pay] P50,000.00 to the defendant-appellant, TAINA
MANIGQUE-STONE by way of moral and exemplary damages
and [to pay] attorney's fees in the amount of P30,000.00 x x x.
No pronouncement as to cost.
SO ORDERED.26
In support of its Decision, the CA ratiocinated �
Article 1498 of the Civil Code provides that, as a rule, the
execution of a notarized deed of sale is equivalent to the
delivery of a thing sold. In this case, the notarization of the deed
of sale of TAINA is defective. TAINA testified that the deed of
sale was executed and signed by Col. Troadio Tecson in Bohol
but was notarized in Manila without the vendors appearing
personally before the notary public.
Additionally, Article 1477 of the Civil Code provides that the
ownership of the thing sold is transferred upon the actual or
constructive delivery thereof; however, the delivery of the
owner's copy of TCT 17655 to TAINA is dubious. It was not the
owner, Col. Troadio Tecson, himself who delivered the same but
his son who also happens to be TAINA's brother-in-law. Hence,
the foregoing circumstances negate the fact that there was
indeed an absolute delivery or transfer of ownership.
Anent the issue on validity of the sale to Taina Manigque-Stone,
the fundamental law is perspicuous in its prohibition against
aliens from holding title or acquiring private lands, except only
by way of legal succession or if the acquisition was made by a
former natural-born citizen.
A scrutiny of the records would show that the trial court aptly
held that the defendant-appellant was only a dummy for Mike
Stone who is a foreigner. Even if the Deed of Absolute Sale is in
the name of Taina Manigque-Stone that does not change the
fact that the real buyer was Mike Stone, a foreigner. The
appellant herself had admitted in court that the buyer was Mike
Stone and at the time of the negotiation she was not yet legally
married to Mike Stone. They cannot do indirectly what is
prohibited directly by the law.
To further militate against her stand, the appellant herself
testified during the cross examination:
Now, the Deed of Sale states that the buyer is Taina
Q:
Manigque-Stone?
A: Yes.
� �
Q: And not Mike Stone who according to you was the one who
paid the entire consideration and was the one who
negotiated with Colonel Tecson. Will you kindly tell the
Court how come it was your name who placed [sic] in the
Deed of Sale?
Because an American, foreign national cannot buy land
A:
here.
� �
Yes because an American national, foreigner cannot own
Q:
land here.
A: Yes.
� �
And so the Deed of Sale was placed in your name,
Q:
correct?
A: Yes.
The above testimony is a clear admission against interest. An
admission against interest is the best evidence which affords the
greatest certainty of the facts in dispute. The rationale for the
rule is based on the presumption that no man would declare
anything against himself unless such declaration is true.
Accordingly, it is rational to presume that the testimony
corresponds with the truth, and she bears the burden if it does
not.
Moreover, TAINA asserts in the brief that 'ownership of the lot
covered by TCT 21771 is held by her, a Filipino. As long as the
lot is registered in the name of a Filipino, the trial court is barred
from inquiring [into] its legality.' Such assertion is bereft of merit.
The Honorable Supreme Court, in identifying the true ownership
of a property registered in the name of a Filipina who was
married to a foreign national, pronounced in Borromeo vs.
Descallar that:
'It is settled that registration is not a mode of acquiring
ownership. It is only a means of confirming the fact of its
existence with notice to the world at large. Certificates of title are
not a source of right. The mere possession of a title does not
make one the true owner of the property. Thus, the mere fact
that respondent has the titles of the disputed properties in her
name does not necessarily, conclusively and absolutely make
her the owner [thereof]. The rule on indefeasibility of title
likewise does not apply to respondent. A certificate of title
implies that the title is quiet, and that it is perfect, absolute and
indefeasible. However, there are well-defined exceptions to this
rule, as when the transferee is not a holder in good faith and did
not acquire the subject properties for a valuable consideration.
This is the situation in the instant case. Respondent did not
contribute a single centavo in the acquisition of the properties.
She had no income of her own at that time, nor did she have
any savings. x x x'27
Taina moved for reconsideration28 of the CA's Decision, but the
CA thumbed down this motion in its February 22, 2011
Resolution.29 Hence, the present Petition.
Issues
Before this Court, petitioner puts forward the following questions
of law for resolution:
1. Whether the assailed Decision is legally correct in holding
that petitioner is a mere dummy of Mike.
2. Whether the assailed Decision is legally correct in considering
that the verbal contract of sale between spouses Tecson and
Mike transferred ownership to a foreigner, which falls within the
constitutional ban on sales of land to foreigners.
3. Whether the assailed Decision is legally correct in not
considering that, assuming that the sale of land to Mike violated
the Constitution, the same has been cured by the subsequent
marriage of petitioner to Mike and by the registration of the land
in the name of petitioner, a Filipino citizen.
4. Whether the assailed Decision is legally correct in not
applying the rules on double sale, which clearly favor petitioner
Taina.30
In amplification thereof, petitioner advances these arguments:
I
The trial court and the Court of Appeals departed from the clear
provisions of the law and established jurisprudence when it
failed to consider that the Filipino wife of Mike Stone, petitioner
Taina Manigque-Stone[,] has the legal capacity and the conjugal
partnership interests to enter into a contract of deed of absolute
sale with respondent Sps. Troadio B. Tecson and Asuncion
Ortaliz Tecson.
II
The trial court and the Court of Appeals departed from the
provisions of the law and established jurisprudence when it
failed to consider that the verbal contract of sale of land to Mike
Stone was unenforceable and did not transfer ownership to him,
to fall within the constitutional ban on foreigners owning lands in
the Philippines.
III
The trial court and the Court of Appeals departed from
established jurisprudence, when it failed to consider that,
assuming arguendo that the sale of land to Mike Stone violated
the Constitutional ban on foreign ownership of lands, the same
has been cured by the subsequent marriage of petitioner and
Mike Stone, and [the subsequent issuance of title] in the name
of petitioner.
IV
The Court of Appeals gravely erred and departed from
established rules of evidence when it ruled that the delivery of
the owner's copy of TCT 17655 to petitioner Taina is dubious.
V
The trial court and the Court of Appeals gravely erred when it
departed from provisions of the law and established
jurisprudence when it did not apply the rules on double sale
which clearly favor petitioner Taina.31
The fundamental issue for resolution in the case at bench is
whether the sale of land by the Tecson spouses to Michael
Stone a.k.a. Mike, a foreigner or alien, although ostensibly made
in Taina's name, was valid, despite the constitutional prohibition
against the sale of lands in the Philippines to foreigners or
aliens. A collateral or secondary issue is whether Article 1544 of
the Civil Code, the article which governs double sales, controls
this case.
Petitioner's Arguments
In praying that the CA Decision be overturned Taina posits that
while Mike's legal capacity (to own or acquire real property in
the Philippines) was not entirely unassailable, there was
nevertheless no actual violation of the constitutional prohibition
against the acquisition or purchase by aliens or foreigners of
lands in the Philippines, because in this case no real transfer of
ownership had been effected in favor of Mike, from Col.
Tecson;32 that all payments made by Mike to Col. Tecson must
be presumed to have come from the community property he had
with Taina, because Mike had been her (Taina's) common-law-
husband from 1982 up to the day they were married, in 1986;
hence, in this context, she (Taina) was not exactly Mike's
dummy at all, but his active partner;33 that it is of no
consequence that she (Taina) had knowledge that Cattleya had
likewise purchased or acquired the subject lot because the deed
of sale in favor of Cattleya was executed subsequent to the
deed of sale that she and Mike had entered into with the Tecson
spouses, thus, she was the first to acquire ownership of the
subject lot in good faith;34 that assuming for argument's sake
that neither she nor Cattleya was a purchaser in good faith, still
she was the first one to acquire constructive possession of the
subject lot pursuant to Article 1544 3rd paragraph of the Civil
Code, and for this reason she had acquired lawful title thereto.35
Respondent Cattleya Land's arguments
Cattleya counters that there could not have been a double sale
in the instant case because the earlier sale between Col.
Tecson and Mike was absolutely null and void, as this was a
flagrant violation of the constitutional provision barring or
prohibiting aliens or foreigners from acquiring or purchasing land
in the Philippines; hence, there was only one valid sale in this
case, and that was the sale between Col. Tecson and
Cattleya.36
Court's Resolution with respect to Respondents-Spouses
Tecson
This Court's Resolution dated June 20, 2012 noted, amongst
others, the Manifestation filed by Cattleya, which inter
alia stated: (1) that Col. Tecson died on December 7, 2004; (2)
that Taina instituted a third-party complaint against the Tecson
spouses; (3) that in this third-party complaint the Tecson
spouses were declared in default by the trial court; (4) that this
default order was not appealed by the Tecson spouses; (5) that
the present appeal by Taina from the CA Decision will in no way
affect or prejudice the Tecson spouses, given the fact that these
spouses did not appeal from the default order, and (6) that the
instant Petition be submitted for resolution without the Comment
of the Tecson spouses.37 In the Resolution of February 26,
2014, this Court noted that since Asuncion Tecson had failed to
submit to this Court the name of the legal representative of her
deceased husband Col. Tecson within the period which expired
on October 3, 2013, this Court was dispensing with the
Comment of the Tecson spouses in the instant Petition.38
Our Ruling
This Petition is bereft of merit.
Section 7, Article XII of the 1987 Constitution states that:
Save in cases of hereditary succession, no private lands shall
be transferred or conveyed except to individuals, corporations,
or associations qualified to acquire or hold lands of the public
domain.
Given the plain and explicit language of this constitutional
mandate, it has been held that "[a]liens, whether individuals or
corporations, are disqualified from acquiring lands of the public
domain. Hence, they are also disqualified from acquiring
private lands. The primary purpose of the constitutional
provision is the conservation of the national patrimony."39
In the case at bench, Taina herself admitted that it was really
Mike who paid with his own funds the subject lot; hence, Mike
was its real purchaser or buyer. More than that, it bears
stressing that if the deed of sale at all proclaimed that she
(Taina) was the purchaser or buyer of the subject property and
this subject property was placed under her name, it was simply
because she and Mike wanted to skirt or circumvent the
constitutional prohibition barring or outlawing foreigners or
aliens from acquiring or purchasing lands in the Philippines.
Indeed, both the CA and the RTC exposed and laid bare Taina's
posturing and pretense for what these really are: that in the
transaction in question, she was a mere dummy, a spurious
stand-in, for her erstwhile common-law husband, who was not a
Filipino then, and never attempted to become a naturalized
Filipino citizen thereafter. The CA put things in correct
perspective, thus �
A scrutiny of the records would show that the trial court aptly
held that the defendant-appellant was only a dummy for Mike
Stone who is a foreigner. Even if the Deed of Absolute Sale is in
the name of Taina Manigque-Stone that does not change the
fact that the real buyer was Mike Stone, a foreigner. The
appellant herself had admitted in court that the buyer was Mike
Stone and at the time of the negotiation she was not yet legally
married to Mike Stone. They cannot do indirectly what is
prohibited directly by the law.40 (Emphasis supplied)
Citing the RTC's proceedings of December 7, 2004, the CA
adverted to the following testimony by the petitioner during her
cross-examination thus �
(Atty. Monteclar)
Now, the Deed of Sale states that the buyer is Taina
Q:
Manigque-Stone?
A: Yes.
� �
Q: And not Mike Stone who according to you was the one who
paid the entire consideration and was the one who
negotiated with Colonel Tecson. Will you kindly tell the
Court how come it was your name who placed [sic] in the
Deed of Sale?
Because an American, foreign national cannot buy land
A:
here.
� �
Yes because an American national, foreigner cannot own
Q:
land here.
A: Yes.
� �
And so the Deed of Sale was placed in your name,
Q:
correct?
A: Yes.41 (Emphasis supplied)
It is axiomatic, of course, that this Court is not a trier of facts.
Subject to well-known exceptions, none of which obtains in the
instant case, this Court is bound by the factual findings of the
CA, especially where such factual findings, as in this case,
accorded in the main with the RTC's own findings.42
Given the fact that the sale by the Tecson spouses to Taina as
Mike's dummy was totally abhorrent and repugnant to the
Philippine Constitution, and is thus, void ab initio, it stands to
reason that there can be no double sale to speak of here. In the
case of Fudot v. Cattleya Land, Inc.,43 which fortuitously also
involved the Tecson spouses and Cattleya, we held thus �
The petition is bereft of merit.
Petitioner's arguments, which rest on the assumption that there
was a double sale, must fail.
In the first place, there is no double sale to speak of. Art. 1544
of the Civil Code, which provides the rule on double sale,
applies only to a situation where the same property
is validly sold to different vendees. In this case, there is only
one sale to advert to, that between the spouses Tecson and
respondent.
In Remalante v. Tibe, this Court ruled that the Civil Law
provision on double sale is not applicable where there is only
one valid sale, the previous sale having been found to
be fraudulent. Likewise, in Espiritu and Apostol v. Valerio,
where the same parcel of land was purportedly sold to two
different parties, the Court held that despite the fact that one
deed of sale was registered ahead of the other, Art. 1544 of the
Civil Code will not apply where said deed is found to be
a forgery, the result of this being that the right of the other
vendee should prevail.
The trial court declared that the sale between the spouses
Tecson and petitioner is invalid, as it bears the forged signature
of Asuncion. x x x44 (Citations omitted; Emphasis supplied)
In view of the fact that the sale in the case at bench is worse off
(because it is constitutionally infirm) than the sale in
the Fudot case, which merely involves a violation of the
pertinent provisions of the Civil Code, this Court must affirm, as
it hereby affirms the CA's ruling that, "there is only one sale to
reckon with, that is, the sale to Cattleya.45
Again, our holding in Muller v. Muller,46 which is almost on all
fours with the case at bench, can only strengthen and reinforce
our present stance. In Muller, it appears that German national
Helmut Muller (Helmut), alien or foreigner husband of the
Filipina Elena Buenaventura Muller (Elena), bought with his
capital funds a parcel of land in Antipolo City and also paid for
the construction of a house thereon. This Antipolo property was
registered under the name of Elena under TCT No. 219438.
Subsequently, Helmut instituted a petition for separation of
properties with the RTC of Quezon City. After due proceedings,
the RTC of Quezon City rendered judgment terminating the
regime of absolute community of property between Helmut and
Elena. The RTC also decreed the separation of properties
between the spouses. With respect to the Antipolo property, the
RTC held that although it was acquired with the use of Helmut's
capital funds, nevertheless the latter could not recover his
investment because the property was purchased in violation of
Section 7, Article XII of the Constitution. Dissatisfied with the
RTC's judgment, Helmut appealed to the CA which upheld his
appeal. The CA ruled that: (1) Helmut merely prayed for
reimbursement of the purchase price of the Antipolo property,
and not that he be declared the owner thereof; (2) Elena's
ownership over this property was considered as ownership-in-
trust for Helmut; (3) there is nothing in the Constitution which
prohibits Helmut from acquiring ownership of the house.
However, on a Petition for Review on Certiorari, this Court
reversed the CA and reinstated the RTC's ruling. In sustaining
the RTC, this Court once again stressed the absolute character
of the constitutional prohibition against ownership of lands in this
country by foreigners or aliens:
The Court of Appeals erred in holding that an implied trust was
created and resulted by operation of law in view of petitioner's
marriage to respondent. Save for the exception provided in
cases of hereditary succession, respondent's disqualification
from owning lands in the Philippines is absolute. Not even an
ownership in trust is allowed. Besides, where the purchase is
made in violation of an existing statute and in evasion of its
express provision, no trust can result in favor of the party who is
guilty of the fraud. To hold otherwise would allow
circumvention of the constitutional prohibition.47 (Citation
omitted; Emphasis supplied)
The same absolute constitutional proscription was reiterated
anew in the comparatively recent case of Matthews v.
Taylor,48 erroneously invoked by Taina. Taina claims that this
case supports her position in the case at bench allegedly
because, like her case, the alien or foreigner husband in
the Matthews case (Benjamin A. Taylor, a British subject)
likewise provided the funds for the purchase of real property by
his Filipino wife (Joselyn C. Taylor) and this Court allegedly
sustained said wife's ownership over the property.49 That Taina's
claim is a clear misapprehension of the thrust and purport of the
ruling enunciated in the Matthews case is put to rest by what
this Court said there �
In light of the foregoing jurisprudence, we find and so hold that
Benjamin has no right to nullify the Agreement of Lease
between Joselyn and petitioner. Benjamin, being an alien, is
absolutely prohibited from acquiring private and public
lands in the Philippines. Considering that Joselyn appeared to
be the designated 'vendee' in the Deed of Sale of said property,
she acquired sole ownership there[of]. This is true even if we
sustain Benjamin's claim that he provided the funds for
such acquisition. By entering into such contract knowing
that it was illegal, no implied trust was created in his favor;
no reimbursement for his expenses can be allowed; and no
declaration can be made that the subject property was part
of the conjugal/community property of the spouses. In any
event, he had and has no capacity or personality to question the
subsequent lease of the Boracay property by his wife on the
theory that in so doing, he was merely exercising the
prerogative of a husband in respect [to] conjugal property. To
sustain such a theory would countenance indirect
controversion of the constitutional prohibition. If the
property were to be declared conjugal, this would accord
the alien husband a substantial interest and right over the
land, as he would then have a decisive vote as to its
transfer or disposition. This is a right that the Constitution
does not permit him to have.(Citation omitted; emphasis and
underscoring supplied)50
The other points raised by petitioner in the present Petition for
Review are collateral or side issues and need not detain this
Court any further. Suffice it to say that the chief or main
constitutional issue that has been addressed and resolved in the
present Petition has effectively subsumed or relegated to
inconsequence the other collateral or side issues raised herein.
WHEREFORE, the Petition is DENIED. The Decision of the
Court of Appeals dated August 16, 2010 and its Resolution
dated February 22, 2011 in CA-G.R. CV No. 02352 being in
conformity with the law and with this Court's jurisprudential
teachings, are hereby AFFIRMED in toto.
SO ORDERED.
 November 16, 2016
G.R. No. 201883
SPOUSES DESIDERIO and TERESA DOMINGO, Petitioners
vs.
SPOUSES EMMANUEL and TITA MANZANO, FRANKLIN
ESTABILLO, and CARMELITA AQUINO, Respondents
This Petition for Review on Certiorari1
seeks to set aside: a) the
January 4, 2012 Decision2 of the Court of Appeals (CA) in CA-
G.R. CV No. 93662 which reversed the May 22, 2009
Decision3 of the Regional Trial Court (RTC) of Caloocan City,
Branch 128 in Civil Case No. C-20102; and b) the CA's May 18,
2012 Resolution4 denying herein petitioners' Motion for
Reconsideration.
Factual Antecedents
Respondents Emmanuel and Tita Manzano (the Manzanos)
were the registered owners of a 35,281-square meter parcel of
land with improvements in Bagong Barrio, Caloocan City
(subject property), covered by Transfer Certificate of Title (TCT)
No. 160752.
On June 1, 2001, the Manzanos, through their duly appointed
attorney-in-fact and herein co-respondent Franklin Estabillo
(Estabillo), executed a notarized agreement5 with petitioners
Desiderio and Teresa Domingo which provided, among others,
that –
Ako, si Desiderio Domingo na nakatira sa 188 Gen. Mascardo
St. Bagong Barrio Kalookan City. Na bibilhin ko ang lupa at
bahay ni Tita Manzano sa 168 Gen. Mascardo St. Bagong
Barrio Kalookan City. Na ang may Special Power of Attorney si
Franklin Estabillo sa halagang (₱900,000.00) nine hundred
thousand pesos. Sa aming napagkasunduan ako ay magbibigay
ng halagang (₱l00,000.00) one hundred thousand pesos para
sa Reservision [sic] Fee.
Ayon sa aming napagkasunduan ililipat lamang ang Titulo ng
lupa na may no. 160752 at bahay pag nabayaran ko ng lahat
ang (₱900,000.00) Nine Hundred Thousand Pesos hanggang
Marso ng 2001. Kami ay maghahati sa Gain Tax at
documentary stamps na babayaran sa B.I.R. ayon sa aming
napagkasunduan.
Kalakip nito ang xerox title ng titulo ng lupa at bahay.6
Petitioners paid the ₱100,000.00 reservation fee upon the
execution of the agreement. Thereafter, they also made
payments on several occasions, amounting to ₱160,000.00.
However, they failed to tender full payment of the balance when
the March 2001 deadline came. Even then, Estabillo advised
petitioners to continue their payments; thus, they made
additional payments totaling ₱85,000.00. All in all, as of
November 2001, petitioners had made payment in the amount
of ₱345,000.00.
All this time, the Manzanos remained in possession of the
subject property.
In December 2001, petitioners offered to pay the remaining
₱555,000.00 balance, but Estabillo refused to accept payment;
instead, he advised petitioners to await respondent Tita
Manzano' s (Tita) arrival from abroad.
When Tita arrived, petitioners tendered payment of the balance,
but the former refused to accept it. Instead, she told them that
the property was no longer for sale and she was forfeiting their
payments. For this reason, petitioners caused the annotation of
an affidavit of adverse claim7 upon TCT No. 160752.
Soon thereafter, petitioners discovered that respondent
Carmelita Aquino (Aquino) bought the subject property on May
7, 2002, and a new title – TCT No. C-359293 – had been issued
in her name. Their adverse claim was nevertheless carried over
to Aquino's new title.
Ruling of the Regional Trial Court
On May 23, 2002, petitioners filed a Complaint for specific
performance and damages with injunctive relief against
respondents. The case was docketed as Civil Case No. C-
20102 and assigned to Branch 128 of the RTC of Caloocan City.
Petitioners sought to compel the Manzanos to accept payment
of the remaining balance, execute a deed of sale over the
subject property in their favor, and restrain the sale in favor of
Aquino.
Petitioners later filed an Amended Complaint,8 praying further
that Aquino's new title - TCT No. C-359293 - be cancelled and
annulled, and that instead, the Manzanos' TCT No. 160752 be
reinstated, or alternatively, that a new title be issued in their
name upon continuation of the sale in their favor and payment of
the outstanding balance.
In their respective Answers,9 Aquino and Estabillo alleged
essentially that there was no sale between petitioners and the
Manzanos, but a mere offer to buy from petitioners, which was
refused due to late payment; that the case was premature for
failure to resort to conciliation; and that Aquino's new title was
indefeasible and may not be collaterally attacked. The
Manzanos, who appear to be living in the United States of
America, did not file a responsive pleading, for which reason
they were declared in default.
After the issues were joined, trial proceeded.
On May 22, 2009, the RTC issued a Decision declaring that, as
against Aquino, petitioners have a prior right over the subject
property. It held that the agreement between petitioners and the
Manzanos was a contract of sale. Applying Article 1544 of the
Civil Code,10 the RTC held that Aquino was a buyer in bad faith,
as she knew of petitioners’ prior purchase and registered
adverse claim – and such knowledge was equivalent to
registration, and thus, the registration of her sale was done in
bad faith. Thus, the trial court decreed:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of plaintiffs and against defendants as; follows:
1. The defendant Spouses Emmanuel and Tita Manzano are
hereby ordered to execute a Deed of Absolute [sic] over a
house and lot covered by Transfer Certificate of Title No.
160752 of the Registry of Deeds of Kalookan City upon the
tender of payment by the plaintiffs in the amount of
Php555,000.00.
2. The Registry of Deeds is hereby ordered to cancel Transfer
Certificate of Title No. C-35[9]293 issued in favor defendant [sic]
Carmelita Aquino and Transfer Certificate of Title No. 160752 is
ordered reinstated.
3. The defendant Carmelita Aquino is hereby ordered to
surrender possession of the property to the plaintiffs upon the
execution of the necessary deed of absolute sale.
4. The defendants Spouses Manzano and defendant Franklin
Estabillo are hereby ordered to pay, jointly and severally, the
plaintiffs the sum of Php30,000.00 as reasonable attorney's
fees.
5. The defendants Spouses Manzano and defendant Estabillo
are likewise ordered to pay, jointly and severally, the costs of
this suit.
SO ORDERED.11
Ruling of the Court of Appeals
Aquino filed an appeal before the CA, docketed as CA-G.R. CV
No. 93662. The appellate court initially referred the case for
mediation, but the parties failed to settle amicably.
On January 4, 2012, the CA rendered the assailed Decision
containing the following pronouncement:
We find for appellant.12
The crux of the instant petition is whether the agreement
between the spouses Manzano and appellees13 is a contract of
sale, as the RTC ruled, or a contract to sell, as appellant
proposed. If it is a contract of sale, then Article 1544 of the Civil
Code applies, and the RTC’s Decision stands on firm ground.
However, if the contract is merely a contract to sell, the propriety
of applying Art. 1544 falters, and appellant’s principal thrust in
her Brief deserves discussion. Thus, the resolution of this issue
is decisive.
xxxx
We have applied the distinctions above and t1xamined the
contract between the parties. In this regard, We differ from the
RTC and find that the Manzanos and appellees entered into a
mere contract to sell.
We quote the following provision from the contract, which is
particularly revealing of the contract's true nature:
'Ayon sa aming napagkasunduan, ililipat lamang ang Titulo ng
lupa na may no. 160752 at bahay pag nabayaran ko ng lahat ng
(₱900,000.00) Nine Hundred thousand pesos hanggang Marso
ng 2001.'
[Translated as: According to our agreement, the title of the land
with no. 160752 and the house shall only be transferred when I
have completely paid the ₱900, 000. 00 by March 2001.]
The above passage clearly indicates that first, the ownership is
reserved to the vendors, and second, that the title of the subject
property passes to the buyers only upon full payment of
Php900,000.00 [in] March 2001. Additionally, appellees have
never even granted possession of the subject property, and that
no deed of sale, absolute or conditional, has been executed in
their favor. All have been held as indications that the contracting
parties have entered into a contract to sell.
Thus, with our determination of that character of the parties'
agreement as a contract to sell, We now proceed to illuminate
whether Art. 1544 indeed applies to the situation at bar.
Applicability of Art. 1544 to Contracts to Sell
Relevant cases affirm an indubitable rule: Article 1544 only
applies to instances of double sales, and not where one contract
is some other transaction, such as a contract to sell, even if the
latter concurs with a contract of sale over the same realty.
In Cheng v. Genato, et al.,14 the Court succinctly clarified and
explained the reason behind such inapplicability, to wit:
'However, a meticulous reading of the aforequoted provision
(Art. l 544, Civil Code) shows that said law is not apropos to the
instant case. This provision connotes that the following
circumstances must concur:
(a) The two (or more) sales transactions in the 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 very same seller.’
These situations obviously are lacking in a contract to sell for
neither a transfer of ownership nor a sales transaction has been
consummated. The contract to be binding upon the obligee or
the vendor depends upon the fulfillment or non-fulfillment of an
event.'
Later jurisprudence would then echo the above doctrine.
Especially persuasive is the ruling in Spouses Nabus and Tolero
v. Spouses Pacson,15 as its facts closely resemble those at bar.
Distilled, those facts show that the Nabuses (the sellers) entered
into a contract with the Pacsons (the prospective buyers) over a
parcel of land. But the Pacsons failed to pay on time; this
notwithstanding, the Nabuses still accepted their late payments.
The Nabuses, however, failed to appear on the designated date
for the delivery of the final payment to them.
Later, the Pacsons heard that the land had been sold to Betty
Tolero, a third party, later adjudged found to be buyer in bad
faith. Tolero obtained a new title over the property pursuant to
the sale to her.
Thus, the Pacsons filed for the annulment of the deeds of sale,
the cancellation of the titles issued in favor of the buyer Betty
Tolero, and for damages. The RTC and the CA ruled for the
Pacsons, and against Betty Tolero.
The Supreme Court, however, disagreed, and upheld the rights
from the latter contract of sale. The Court ruled:
'Sale, by its very nature, is a consensual contract because it is
perfected by mere consent. The essential elements of a contract
of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered
as a Contract of Sale because the first essential element is
lacking. In a contract to sell, the prospective seller explicitly
reserves the transfer of title to the prospective buyer, meaning,
the prospective seller does not as yet agree or consent to
transfer ownership of the property subject of the contract to sell
until the happening of an event, which for present purposes we
shall take as the full payment of the purchase price. What the
seller agrees or obliges himself to do is to fulfill his promise to
sell the subject property when the entire amount of the purchase
price is delivered to him. In other words, the full payment of the
purchase price partakes of a suspensive condition, the non-
fulfillment of which prevents the obligation to sell from arising
and, thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.'
The Court found that the Pacsons could have consigned the
amount to be paid to the Pacsons [sic], which would have
produced the effect of payment and fulfilled the suspensive
condition in a contract to sell, hence obligating the prospective
seller to transfer the title to the prospective buyers. The
Pacsons, however, failed to do so. In this case, appellees
unfortunately committed the same error.
In any case, the foregoing principles result in the rule that in
contracts to sell, specific performance is therefore an improper
remedy to compel the seller to execute the deed of sale before
full payment of the purchase price. Thus, in the Nabus case, the
Court held:
'Evidently, before the remedy of specific perfom1ance may be
availed of, there must be a breach of the contract.
Under a contract to sell, the title of the thing to be sold is
retained by the seller until the purchaser makes full payment of
the agreed purchase price. Such payment is a positive
suspensive condition, the non-fulfillment of which is not a breach
of contract but merely an event that prevents the seller from
conveying title to the purchaser. The non-payment of the
purchase price renders the contract to sell ineffective and
without force and effect. Thus, a cause of action, for specific
performance does not arise.'
As regards a subsequent 'buyer in bad faith' affecting prior
contracts to sell, the peculiarities of a contract to sell,
emphasized above, culminate in the unique doctrine that in case
a third person purchases a property subject of a prior contract to
sell, such buyer is protected from the taint of bad faith under
Article 1544. Here the ruling in Spouses Cruz and Cruz v.
Spouses Fernando and Fernando,16 citing Coronel v. Court of
Appeals17 enlightens, to wit:
'In a contract to sell, there being no previous sale of the
property, a third person buying such property despite the
fulfillment of the suspensive condition such as the full payment
of the purchase price, for instance, cannot be deemed a buyer
in bad faith and the prospective buyer cannot seek the relief of
reconveyance of the property. There is no double sale in such
case. Title to the property will transfer to the buyer after
registration because there is no defect in the owner-seller's
title per se, but the latter, of course, may be sued for damages
by the intending buyer.'
Considering these well-settled precedents, We rule that: first,
the contract between the parties was a contract to sell; second,
that since there are no double sales over the same realty, Art.
1544 of the Civil Code is therefore inapplicable to the instant
case; third, that because the contract between the Manzanos
and the appellees was a contract to sell, and appellees have not
paid the full purchase price by full payment or consignment,
specific performance does not lie for a reconveyance of the
property; and fourth, that by virtue of the inapplicability of Art.
1544 and the nature of a contract to sell, appellant cannot be
deemed in bad faith.
We find that such ruling soundly disposes of the other issues
raised by appellant in her favor, thereby needing no further
discussion.
In rendering Our pronouncement, We clarify that We are not
unmindful of Filinvest Development Corporation v. Golden
Haven Memorial Park18 which appellees invoked in their Brief. In
the Filinvestcase, where rights from a contract to sell clashed
with those from a contract of sale over the same realty, indeed
the Court applied the principle of a "bad faith buyer" in a manner
closely resembling an application of Art. 1544. However, the
facts of that case present a crucial difference. In Filinvest, no
titles were yet issued in the subsequent buyer’s name; the
subsequent buyer merely sought to annotate his sales. As such,
the holding in Spouses Cruz v. Fernando, i.e., that title to the
property will transfer upon registration without the third person
purchaser being held in bad faith, has not yet, so to speak,
locked in place against the intending buyer in the earlier contract
to sell. Thus, before registration of the sale, the vendee may still
be held in bad faith and the sale to him annulled; but after
registration, title will issue and the slighted intending buyer can
only recover damages from the seller, because, as the Spouses
Cruz v. Fernando case emphasized, the owner-seller’s title
suffers no defect per se.
This is not, however, to say that appellees are deprived of
remedies. As found in the Nabus case, appellees are entitled to
the reimbursement of the sums they have paid, if only to prevent
the defendants' unjust enrichment. Appellees are also entitled to
nominal damages against the defendants Manzanos and
Estabillo. x x x
xxxx
In the matter of reimbursements, it bears stating that we are
also aware that the appellees paid less than two years'
installments on their contract. It is thus relevant to discuss R.A.
6552, or the 'Realty Installment Buyer Act' which has been held
applicable to contracts to sell realty on installments.
Significantly, in Rillo v. Court of Appeals,19 the Court did not
grant reimbursements under the law to the prospective buyer
because the buyer paid less than two year's installments.
However, we find that this holding is inapplicable. In Rillo, the
prospective buyer claimed reimbursement under Sec. 4 of RA
6552. However, a reading of the law clarifies that Sec. 420 must
be read in connection with Sec. 3, which 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 Numbered 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:x x x’
Clearly, the above provision and Sec. 4 apply only when the
buyer defaults in payment. In case the defaulting buyer paid less
than two years' installments, RA. 6552 grants him no right to
recover his installments. But appellees were not in default The
acceptance by Estabillo of their late installments waived the
original period for payment, following Angeles v. Calasanz.21 We
find that Estabillo's acceptance also bound his principals, the
Manzanos, who accepted the late payments, amounting to a
tacit ratification of the agent's acts, and obligated the Manza.nos
to comply with its consequences. Therefore, the period to pay
the balance has not yet lapsed and appellees were not in
default.
Finally, we affirm the RTC's grant of attorney's fees and costs,
as defendants' unilateral cancellation of the contract and
subsequent sale to appellant, without reimbursing appellees of
their payments, constrained appellees to institute the present
action to protect their interests.
WHEREFORE, the Petition is GRANTED. The Decision of the
Regional Trial Court in Civil Case No. C-20102 dated 22 May
2009 is REVERSED and SET ASIDE. Judgment is hereby
rendered upholding the validity of the sale of the subject
property made by defendants Emmanuel Manzano and Tita
Manzano in favor of appellant Carmelita Aquino, as well as the
validity of Transfer Certificate of Title No. 359293 issued in the
name of Carmelita Aquino. Defendants Emmanuel Manzano
and Tita Manzano and defendant Franklin Estabillo are ordered
to reimburse appellees Spouses Desiderio and Teresa Domingo
the sum of Three Hundred and Forty Five Thousand Pesos
(₱345,000.00) corresponding to the installment payments they
have paid on the subject property, with annual interest of twelve
percent (12%) until fully paid. Defendants Emmanuel Manzano,
Tita Manzano, and Franklin Estabillo are likewise ordered jointly
and severally to pay spouses Desiderio and Teresa Domingo
nominal damages in the amount of Ten Thousand Pesos
(₱l0,000.00) and reasonable attorney's fees amounting to Thirty
Thousand Pesos (₱30,000.00) each with annual interest of
twelve percent (12%) until fully paid. Costs against defendants
Emmanuel Manzano, Tita Manzano, and Franklin Estabillo.
SO ORDERED.22
Petitioners filed a Motion for Reconsideration, which the CA
denied in its subsequent May 18, 2012 Resolution. Hence, the
present Petition.
Issues
In a March 24, 2014 Resolution,23 this Court resolved to give
due course to the Petition, which contains the following
assignment of errors:
1. THE COURT OF APPEALS ERRED IN NOT
DISREGARDING THE ISSUE RAISED BY RESPONDENT
AQUINO FOR THE FIRST TIME ON APPEAL THAT ARTICLE
1544 OF THE CIVIL CODE IS NOT APPLICABLE TO THIS
CASE.
2. THE COURT OF APPEALS ERRED IN HOLDING THAT
ARTICLE 1544 IS NOT APPLICABLE TO THIS CASE.1âwphi1
3. THE COURT OF APPEALS ERRED IN NOT AFFIRMING
THE DECISION OF THE REGIONAL TRIAL COURT OF
CALOOCAN CITY.24
Petitioners' Arguments
In their Petition and Reply,25 petitioners contend that
respondents Aquino and Estabillo are not entitled to the defense
that Article 1544 is not applicable in this case, since they did not
include the same in their answers below; that the CA erred in
not applying said Article 1544, in light of previous Supreme
Court rulings (Abarquez v. Court of Appeals26 and Filinvest
Development Corporation v. Golden Haven Memorial Park
Inc.27) to the effect that Article 1544 applies even when one of
the double sale transactions involved is a mere contract to sell;
that Aquino was a purchaser in bad faith as she clearly knew of
the prior sale in their favor through the adverse claim annotated
on TCT No. 160752; and that their annotation of an adverse
claim on TCT No. 160752 is equivalent to registration of
ownership.28
Respondent Aquino's Arguments
Pleading affirmance, Aquino argues in her Comment (With
Manifestation)29 that as correctly ruled by the CA, Article 1544
does not apply, and she is not barred from arguing so to refute
petitioners' insistence that the said provision applies; that it was
the RTC that introduced the applicability of Article 1544 to the
case through its May 22, 2009 Decision - thus, the necessity of
arguing against it arose only on appeal; and that the agreement
between the Manzanos and petitioners being a contract to sell,
Article 1544 cannot apply since as between them, no sale or
transfer of ownership occurred, and when petitioners failed to
pay the purchase price in full, no breach of contract necessarily
occurred, but the agreement between them simply became
ineffective and without force and effect. Finally, Aquino contends
that the cited cases of Abarquez v. Court of
Appeals and Filinvest Development Corporation v. Golden
Haven Memorial Park, Inc. are not applicable in this case, as
misrepresented by petitioners: Abarquez does not involve a
contract to sell, while the Court clearly did not apply Article 1544
in Filinvest.
Our Ruling
The Court denies the Petition.
On petitioners' contention that respondent Aquino may not raise
the issue pertaining to Article 1544 for the first time on appeal,
this Court holds that – as correctly noted by Aquino - since the
relevance of Article 1544 was tackled only in the RTC's
Decision, then it is understandable why she should refute its
applicability only on appeal.
Petitioners' main contention is that while their agreement with
the Manzanos was admittedly a mere contract to sell where title
is retained by the latter until full payment of the price, they
nonetheless have a superior right over the subject property, as
against Aquino, by virtue of the applicability of Article 1544 and
the fact that Aquino was a buyer in bad faith.
This Court, however, agrees with the CA' s pronouncement that
Article 1544 cannot apply to the present case.1âwphi1 The
appellate court' s disquisition is succinct; nothing more can be
added to what it has said. Just the same, the treatment and
disposition of cases of this nature is quite settled.
This ponente has had the occasion to rulethat in a contract to
sell, payment of the price is a positive suspensive condition,
failure of which is not a breach of contract warranting rescission
but rather just an event that prevents the prospective buyer from
compelling the prospective seller to convey title. In other words,
the non-fulfillment of the condition of full payment renders the
contract to sell ineffective and without force and effect.30
x x x A contract to sell is one where the prospective seller
reserves the transfer of title to the prospective buyer until the
happening of an event, such as full payment of the purchase
price. What the seller obliges himself to do is to sell the subject
property only when the entire amount of the purchase price has
already been delivered to him. 'In other words, the full payment
of the purchase price partakes of a suspensive condition, the
non-fulfillment of which prevents the obligation to sell from
arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer'. x x x31
And it is precisely for the above reason that Article 1544 of the
Civil Code cannot apply. Since failure to pay the price in full in a
contract to sell renders the same ineffective and without force
and effect, then there is no sale to speak of. Even petitioners'
posture that their annotation of an adverse claim on TCT No.
160752 is equivalent to registration or claim of ownership
necessarily fails, on account of the fact that there was never a
sale in their favor - and without a sale in their favor, they could
not register or claim ownership of the subject property. Thus, as
between the parties to the instant case, there could be no
double sale which would justify the application of Article 1544.
Petitioners failed to pay the purchase price in full, while Aquino
did, and thereafter she was able to register her purchase and
obtain a new certificate of title in her name. As far as this Court
is concerned, there is only one sale - and that is, the one in
Aquino's favor. "Since there is only one valid sale, the rule on
double sales under Article 1544 of the Civil Code does not
apply."32
With regard to the cases cited by petitioners, Abarquez v. Court
of Appeals and Filinvest Development Corporation v. Golden
Haven Memorial Park, Inc., suffice it to state that they do not
apply, In Abarquez, while the agreement entered into was a
contract to sell, the land subject of the sale was nonetheless
delivered to the buyer, who took possession thereof and even
constructed a house thereon. In the present case, the subject
property was never surrendered to petitioners and they were
never in possession thereof. There is a difference in the factual
milieu. On the other hand, the Filinvest case is not one involving
Article 1544; and while the Court therein held that a notice of
adverse claim is a "warning to third parties dealing with the
property that someone claims an interest in it or asserts a better
right than the registered owner,"33 this is not true as regards
petitioners, As already stated, petitioners' failure to pay the price
in full rendered their contract to sell ineffective and without force
and effect, thus nullifying any claim or better right they may have
had.
WHEREFORE, the Petition is DENIED. The January 4, 2012
Decision and May 18, 2012 Resolution of the Court of Appeals
in CA-G.R. CV No. 93662 are AFFIRMED with
MODIFICATION, in that the monetary awards shall earn interest
at the rate of 12% per annum up to June 30, 2013; thereafter,
the rate of interest shall be 6% per annum until judgment is fully
satisfied.34
SO ORDERED.
G.R. No. 200009, January 23, 2017
SPRING HOMES SUBDIVISION CO., INC., SPOUSES PEDRO
L. LUMBRES AND REBECCA T. ROARING, Petitioners,
v. SPOUSES PEDRO TABLADA, JR. AND ZENAIDA
TABLADA, Respondent.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule
45 of the Rules of Court seeking to reverse and set aside the
Decision1 dated May 31, 2011 and Resolution2 dated January 4,
2012 of the Court of Appeals (CA) in CA-G.R. CV No. 94352
which reversed and set aside the Decision3 dated September 1,
2009, of the Regional Trial Court (RTC), Branch 92, Calamba
City.
The factual antecedents are as follows.
On October 12, 1992, petitioners, Spouses Pedro L. Lumbres
and Rebecca T. Roaring, (Spouses Lumbres) entered into a
Joint Venture Agreement with Spring Homes Subdivision Co.,
Inc., through its chairman, the late Mr. Rolando B. Pasic, for the
development of several parcels of land consisting of an area of
28,378 square meters. For reasons of convenience and in order
to facilitate the acquisition of permits and licenses in connection
with the project, the Spouses Lumbres transferred the titles to
the parcels of land in the name of Spring Homes.4
On January 9, 1995, Spring Homes entered into a Contract to
Sell with respondents, Spouses Pedro Tablada, Jr. and Zenaida
Tablada, (Spouses Tablada) for the sale of a parcel of land
located at Lot No. 8, Block 3, Spring Homes Subdivision,
Barangay Bucal, Calamba, Laguna, covered by Transfer
Certificate of Title (TCT) No. T-284037. On March 20, 1995, the
Spouses Lumbres filed with the RTC of Calamba City a
complaint for Collection of Sum of Money, Specific Performance
and Damages with prayer for the issuance of a Writ of
Preliminary Attachment against Spring Homes for its alleged
failure to comply with the terms of the Joint Venture
Agreement.5 Unaware of the pending action, the Spouses
Tablada began constructing their house on the subject lot and
thereafter occupied the same. They were then issued a
Certificate of Occupancy by the Office Building Official.
Thereafter, on January 16, 1996, Spring Homes executed a
Deed of Absolute Sale in favor of the Spouses Tablada, who
paid Spring Homes a total of P179,500.00, more than the
P157,500.00 purchase price as indicated in the Deed of
Absolute Sale.6 The title over the subject property, however,
remained with Spring Homes for its failure to cause the
cancellation of the TCT and the issuance of a new one in favor
of the Spouses Tablada, who only received a photocopy of said
title.

Subsequently, the Spouses Tablada discovered that the subject
property was mortgaged as a security for a loan in the amount
of over P4,000,000.00 with Premiere Development Bank as
mortgagee and Spring Homes as mortgagor. In fact, since the
loan remained unpaid, extrajudicial proceedings were
instituted.7Meanwhile, without waiting for trial on the� specific
performance and sum of money complaint, the Spouses
Lumbres and Spring Homes entered into a Compromise
Agreement, approved by the Calamba RTC on October 28,
1999, wherein Spring Homes conveyed the subject property, as
well as several others, to the Spouses Lumbres.8 By virtue of
said agreement, the Spouses Lumbres were authorized to
collect Spring Homes' account receivables arising from the
conditional sales of several properties, as well as to cancel said
sales, in the event of default in the payment by the subdivision
lot buyers. In its capacity as mortgagee, Premiere Development
Bank was included as a party in the Compromise Agreement.9
In the exercise of the power granted to them, the Spouses
Lumbres started collecting deficiency payments from the
subdivision lot buyers. Specifically, they sent demand letters to
the Spouses Tablada for the payment of an alleged outstanding
balance of the purchase price of the subject property in the
amount of P230,000.00. When no payment was received, the
Spouses Lumbres caused the cancellation of the Contract to
Sell previously executed by Spring Homes in favor of the
Spouses Tablada. On December 22, 2000, the Spouses
Lumbres and Spring Homes executed a Deed of Absolute Sale
over the subject property, and as a result, a new title, TCT No.
T-473055, was issued in the name of the Spouses Lumbres.10
On June 20, 2001, the Spouses Tablada filed a complaint for
Nullification of Title, Reconveyance and Damages against
Spring Homes and the Spouses Lumbres praying for the
nullification of the second Deed of Absolute Sale executed in
favor of the Spouses Lumbres, as well as the title issued as a
consequence thereof, the declaration of the validity of the first
Deed of Absolute Sale executed in their favor, and the issuance
of a new title in their name.11 The Sheriffs Return dated August
1, 2001 indicated that while the original copy of the complaint
and the summons were duly served upon the Spouses
Lumbres, summons was not properly served upon Spring
Homes because it was reportedly no longer existing as a
corporate entity.12
On August 14, 2001, the Spouses Lumbres filed a Motion to
Dismiss the case against them raising as grounds the non-
compliance with a condition precedent and lack of jurisdiction of
the RTC over the subject matter. They alleged that the Spouses
Tablada failed to avail of conciliatory proceedings, and that the
RTC has no jurisdiction since the parties, as well as property in
question, are all located at Calamba City, and that the action
instituted by the Spouses Tablada praying for the nullification of
the Compromise Agreement actually corresponds to a
nullification of a judgement issued by a co-equal trial court. The
Spouses Tablada opposed by alleging that Spring Homes holds
office at Paraiiaque City, falling under the exception from the
requirement of barangay conciliatory proceedings and that the
action they filed was for nullification of title issued to the
Spouses Lumbres as a result of a double sale, which is rightly
under the jurisdiction of the trial court. They also emphasized
that as non-parties to the Compromise Agreement, the same is
not binding upon them. The Motion to Dismiss was eventually
denied by the trial court on October 2, 2001.13
Interestingly, on even date, the Spouses Lumbres filed an
ejectment suit of their own before the Municipal Trial Court in
Cities (MTCC) of Calamba City demanding that the Spouses
Tablada vacate the subject property and pay rentals due
thereon. The MTCC, however, dismissed the suit ruling that the
Spouses Lumbres registered their title over the subject property
in bad faith. Such ruling was reversed by the RTC which found
that there was no valid deed of absolute sale between the
Spouses Tablada and Spring Homes. Nevertheless, the CA, on
appeal, agreed with the MTCC and reinstated the decision
thereof. This was affirmed by the Court in Spouses
Lumbres v. Spouses Tablada 14 on February 23, 2007.
Meanwhile, on the nullification and reconveyance of title suit
filed by the Spouses Tablada, the RTC noted that Spring Homes
has not yet been summoned. This caused the Spouses Tablada
to move for the discharge of Spring Homes as a party on the
ground that the corporation had already ceased to exist. The
Spouses Lumbres, however, opposed said motion claiming that
Spring Homes is an indispensable party.15The RTC ordered the
motion to be held in abeyance until the submission of proof on
Spring Homes' corporate status. In the meantime, trial ensued.
Eventually, it was shown that Spring Homes' certificate of
registration was revoked on September 29, 2003.16
On September 1, 2009, the RTC rendered its Decision
dismissing the Spouses Tablada's action for lack of jurisdiction
over the person of Spring Homes, an indispensable
party.17 According to the trial court, their failure to cause the
service of summons upon Spring Homes was fatal for Spring
Homes was an indispensable party without whom no complete
determination of the case may be reached.18 In support thereof,
the RTC cited the pronouncement in Uy v. CA, et. al.19 that the
absence of an indispensable party renders all subsequent
actuations of the court null and void for want of authority to act
not only as to the absent parties but even as to those
present.20 In the instant case, the Spouses Tablada prayed that
the Deed of Absolute Sale executed by Spring Homes in favor
of the Spouses Lumbres be declared null and void and that
Spring Homes be ordered to deliver the owner's duplicate
certificate of title covering the subject lot. Thus, without
jurisdiction over Spring Homes, the case could not properly
proceed.21 The RTC added that the Spouses Tablada's
subsequent filing of the motion to discharge does serve as an
excuse for at that time, the certificate of registration of Spring
Homes had not yet been cancelled or revoked by the Securities
and Exchange Commission (SEC). In fact, the assumption that it
was already dissolved when the suit was filed does not cure the
defect, because the dissolution of a corporation does not render
it beyond the reach of courts considering the fact that it
continues as a body corporate for the winding up of its affairs.22
In its Decision dated May 31, 2011, however, the CA reversed
and set aside the RTC Decision finding that Spring Homes is not
an indispensable party. It held that Spring Homes may be the
vendor of the subject property but the title over the same had
already been issued in the name of the Spouses Lumbres. So
any action for nullification of the said title causes prejudice and
involves only said spouses, the registered owners thereof. Thus,
the trial court may very well grant the relief prayed for by the
Spouses Lumbres.23In support thereof, the appellate court cited
the ruling in Seno, et. al. v. Mangubat, et. al.24 wherein it was
held that in the annulment of sale, where the action was
dismissed against defendants who, before the filing of said
action, had sold their interests in the subject land to their co-
defendant, the said dismissal against the former, who are only
necessary parties, will not bar the action from proceeding
against the latter as the remaining defendant, having been
vested with absolute title over the subject property.25 Thus, the
CA maintained that the RTC's reliance on Uy v. CA is misplaced
for in said case, it was imperative that an assignee of interests
in certain contracts be impleaded, and not the assignor, as the
RTC interpreted the ruling to mean. Thus, the doctrine
in Uy actually bolsters the finding that it is the Spouses
Lumbres, as assignee of the subject property, and not Spring
Homes, as assignor, who are the indispensable parties.26
Moreover, considering that the RTC had already concluded its
trial on the case and the presentation of evidence by both
parties, the CA deemed it proper to proceed to rule on the
merits of the case. At the outset, the appellate court noted that
the ruling of the Court in Spouses Lumbres v. Spouses
Tablada back in 2007 cannot automatically be applied herein for
said ruling involves an ejectment case that is effective only with
respect to the issue of possession and cannot be binding as to
the title of the subject property.
This notwithstanding, the CA ruled that based on the records,
the first sale between Spring Homes and the Spouses Tablada
must still be upheld as valid, contrary to the contention of the
Spouses Lumbres that the same was not validly consummated
due to the Spouses Tablada's failure to pay the full purchase
price of P409,500.00. According to the appellate court, the first
Deed of Absolute Sale clearly indicated that the consideration
for the subject property was P157,500.00.27 The Spouses
Lumbres' argument that such Deed of Absolute Sale was
executed only for the purpose of securing a loan from PAG-IBIG
in favor of the Spouses Tablada was unsubstantiated. In fact,
even the second Deed of Absolute Sale executed by Spring
Homes in favor of the Spouses Lumbres, as well as several
receipts presented, indicated the same amount of P157,500.00
as purchase price. As for the amount of P409,500.00 indicated
in the Contract to Sell executed between Spring Homes and the
Spouses Tablada, the CA adopted the findings of the Court
inSpouses Lumbres v. Spouses Tablada in 2007 and held that
the amount of P409,500.00 is actually composed not only of the
subject parcel of land but also the house to be constructed
thereon. But since it was proven that it was through the Spouses
Tablada's own hard-earned money that the house was
constructed, there existed no balance of the purchase price in
the amount of P230,000.00 as the Spouses Lumbres
vehemently insist, viz.:
Further, the spouses Lumbres alleged that what was legal and
binding between Spring Homes and plaintiffs-appellants
[spouses Tablada] was the Contract to Sell which, in
part, reads:chanRoblesvirtualLawlibrary
3. That the SELLER, for and in consideration of the payments
and other terms and conditions hereinafter to be designated,
has offered to sell and the BUYER has agreed to buy certain
parcel of land more particularly described as
follows:chanRoblesvirtualLawlibrary
Total
Blk. No. P- Lot Area Sq. Price Per sq.
Selling
111 No. Meter Meter
Price
3 8 105 P1,500 �
42 6,000 �
P409,500
Similar to the ruling of the Supreme Court in Spouses Lumbres
v. Spouses Tablada, despite there being no question that the
total land area of the subject property was One Hundred Five
(105) square meters, there appears in the said contract to sell a
numerical value of Forty Two (42) square meters computed at
the rate of Six Thousand Pesos (6,000.00) per square
meter. We agree with the findings of the Supreme Court in
this regard that the Forty Two (42) square meters referred
only to the land area of the house to be constructed in the
subject property. Since the spouses Lumbres failed to
disprove the plaintiffs-appellants [spouses Tablada] claim
that it was through their own hard earned money that
enabled them to fund the construction and completion of
their house and not Spring Homes, there existed no balance
of the purchase price to begin with. It is important to note
that what the plaintiffs-appellants [spouses Tablada]
bought from Spring Homes was a vacant lot. Nowhere in
the Deed of Absolute Sale executed between plaintiffs-
appellants [spouses Tablada] and Spring Homes was it
indicated that the improvements found thereon form part of
the subject property, lest, that any improvements existed
thereto. It was only through the plaintiffs-appellants
(spouses Tablada] own efforts that a house was
constructed on the subject property.28
The appellate court further stressed that at the time when the
Spouses Tablada entered into a contract of sale with Spring
Homes, the title over the subject property was already
registered in the name of Spring Homes. Thus, the Deed of
Absolute Sale between Spring Homes and the Spouses Tablada
was valid and with sufficient consideration for every person
dealing with a registered land may safely rely on the correctness
of the certificate of title issued therefor and the law will, in no
way, oblige him to go beyond the certificate to determine the
condition of the property.29
In the end, the CA upheld the ruling of the Court in Spouses
Lumbres v. Spouses Tablada that notwithstanding the fact that
the Spouses Lumbres, as the second buyer, registered their
Deed of Absolute Sale, in contrast to the Spouses Tablada who
were not able to register their Deed of Absolute Sale precisely
because of Spring Home's failure to deliver the owner's copy of
the TCT, the Spouses Tablada's right could not be deemed
defeated as the Spouses Lumbres were in bad faith for even
before their registration of their title, they were already informed
that the subject property was already previously sold to the
Spouses Tablada, who had already constructed their house
thereon.30 Thus, the CA disposed the case as
follows:chanRoblesvirtualLawlibrary
WHEREFORE, in view of the foregoing premises, the instant
appeal is hereby GRANTED. The assailed Decision dated
September 1, 2009 in Civil Case No. 3117-2001-C is hereby
ANNULLED AND SET ASIDE. Accordingly, the Register of
Deeds of Calamba, Laguna, is hereby directed to cancel
Transfer Certificate of Title No. T-473055 registered in the name
of the defendants-appellees spouses Pedro L. Lurnbres and
Rebecca T. Roaring Lurnbres and, in lieu thereof, issue a new
one in the name of plaintiffs-appellants.
SO ORDERED. 31
When their Motion for Reconsideration was denied by the CA in
its Resolution dated January 4, 2012, the Spouses Lumbres
filed the instant petition invoking the following
arguments:chanRoblesvirtualLawlibrary
I.
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE
APPEAL FOR LACK OF JURISDICTION OF THE TRIAL
COURT OVER THE PERSON OF SPRING HOMES AS AN
INDISPENSABLE PARTY.
II.
THE COURT OF APPEALS ERRED IN ORDERING THAT
RESPONDENTS, NOT PETITIONERS, WERE PURCHASERS
OF THE PROPERTY IN GOOD FAITH, WHICH IS NOT IN
ACCORD WITH ESTABLISHED FACTS, LAW, AND
JURISPRUDENCE.
In the instant petition, the Spouses Lumbres insist that the
Spouses Tablada have not yet paid the balance of the purchase
price of the subject property in the amount of P230,000.00
despite repeated demands.32 They also insist that since Spring
Homes, an indispensable party, was not duly summoned, the
CA should have affirmed the RTC's dismissal of the instant
complaint filed by the Spouses Tablada for lack of
jurisdiction.33 Citing the RTC's Decision, the Spouses Lumbres
reiterated that even assuming that Spring Homes had been
dissolved at the time of the filing of the complaint, the same
does not excuse the failure to implead it for it still continues as a
body corporate for three (3) years after revocation of its
certificate of incorporation.34
Moreover, the Spouses Lumbres faulted the CA in upholding the
findings of the Court in �the 2007 case entitled Spouses
Lumbres v. Spouses Tablada for the issue therein only involves
physical possession and not ownership. Contrary to the findings
of the CA, the Spouses Lumbres claim that the Spouses
Tablada were not purchasers in good faith for their failure to
react to their repeated demands for the payment of the
P230,000.00.35 In fact, the Spouses Tablada even admitted that
they would pay the P230,000.00 upon the release of the PAG-
IBIG loan.36 Thus, the purported Deed of Absolute Sale between
Spring Homes and the Spouses Tablada is void for having no
valuable consideration, especially since it was issued merely for
purposes of the loan application from PAG-IBIG. On the other
hand, the Spouses Lumbres claim that they were in good faith
since the First Deed of Absolute Sale between Spring Homes
and the Spouses Tablada was not annotated at the back of the
subject property's title.37
The petition is bereft of merit.
At the outset, it must be noted that Spring Homes is not an
indispensable party. Section 7,38 Rule 3 of the Revised Rules of
Court defines indispensable parties as parties-in-interest without
whom there can be no final determination of an action and who,
for this reason, must be joined either as plaintiffs or as
defendants.39 Time and again, the Court has held that a party is
indispensable, not only if he has an interest in the subject matter
of the controversy, but also if his interest is such that a final
decree cannot be made without affecting this interest or without
placing the controversy in a situation where the final
determination may be wholly inconsistent with equity and good
conscience.40 He is a person whose absence disallows the court
from making an effective, complete, or equitable determination
of the controversy between or among the contending
parties.41 Conversely, a party is not indispensable to the suit if
his interest in the controversy or subject matter is distinct and
divisible from the interest of the other parties and will not
necessarily be prejudiced by a judgment which does complete
justice to the parties in court.42 If his presence would merely
permit complete relief between him and those already parties to
the action or will simply avoid multiple litigation, he is not
indispensable.
In dismissing the complaint for lack of jurisdiction, the trial court
relied on Uy v. CA, et. al.43 and held that since Spring Homes,
an indispensable party, was not summoned, it had no authority
to proceed. But as aptly observed by the CA, the doctrine
in Uy hardly serves as basis for the trial court's conclusions and
actually even bolsters the finding that it is the Spouses Lumbres,
as assignee of the subject property, and not Spring Homes, as
assignor, who are the indispensable parties. In said case, the
Public Estates Authority (PEA), tasked to complete engineering
works on the Heritage Memorial Park project, assigned all of its
interests therein to Heritage Park Management
Corporation (HPMC). When a complaint was filed against the
PEA in connection with the project, the Court affirmed the
dismissal thereof holding that HPMC, as assignee of PEA's
interest, should have been impleaded, being the indispensable
party therein. The pertinent portion of the Decision
states:chanRoblesvirtualLawlibrary
Based on the Constmction Agreement, PEA entered into it in its
capacity as Project Manager, pursuant to the PFTA. According
to the provisions of the PFTA, upon the formation of the
HPMC, the PEA would turn over to the HPMC all the
contracts relating to the Heritage Park. At the time of the
filing of the CIAC Case on May 31, 2001, PEA ceased to be
the Project Manager of the Heritage Park Project, pursuant
to Section 11 of the PFTA. Through a Deed of Assignment,
PEA assigned its interests in all the existing contracts it
entered into as the Project Manager for Heritage Park to
HPMC. As early as March 17, 2000, PEA officially turned over to
HPMC all the documents and equipment in its possession
related to the Heritage Park Project. Petitioner was duly
informed of these incidents through a letter dated March 13,
2000. Apparently, as of the date of the filing of the CIAC
Case, PEA is no longer a party-in-interest. Instead, it is now
CIAC Case, PEA is no longer a party-in-interest. Instead, it
is now private respondent HPMC, as the assignee, who
stands to be benefited or injured by the judgment in the
suit. In its absence, there cannot be a resolution of the
dispute of the parties before the court which is effective,
complete or equitable. We thus reiterate that HPMC is an
indispensable party.44
Moreover, as held by the CA, the pronouncement in Seno, et. al.
v. Mangubat, et. al.45 is instructive. In said case, the petitioner
therein entered into an agreement with certain respondents over
a parcel of land, which agreement petitioner believed to be
merely an equitable mortgage but respondents insisted to be a
sale. The agreement, however, was embodied in a document
entitled "Deed of Absolute Sale." Consequently, respondents
were able to obtain title over the property in their names. When
two of the three respondents sold their shares to the third
respondent, the third respondent registered the subject property
solely in his name. Thereafter, the third respondent further sold
said property to another set of persons. Confronted with the
issue of whether the two respondents who sold their shares to
the third respondent should be impleaded as indispensable
parties in an action filed by petitioner to reform the agreement
and to annul the subsequent sale, the Court ruled in the
negative, viz.:
The first issue We need to resolve is whether or not
defendants Andres Evangelista and Bienvenido Mangubat
are indispensable parties. Plaintiffs contend that said
defendants being more dummies of defendant Marcos
Mangubat and therefore not real parties in interest, there is no
room for the application of Sec. 7, Rule 3 of the Revised Rules
of Court.
xxxx
In the present case, there are no rights of defendants
Andres Evangelista and Bienvenido Mangubat to be
safeguarded if the sale should be held to be in fact an
absolute sale nor if the sale is held to be an equitable
mortgage. Defendant Marcos Mangubat became the
absolute owner of the subject property by virtue of the sale
to him of the shares of the aforementioned defendants in
the property. Said defendants no longer have any interest in
the subject property. However, being parties to the instrument
sought to be reformed, their presence is necessary in order to
settle all the possible issues of tile controversy. Whether the
disputed sale be declared an absolute sale or an equitable
mortgage, the rights of all the defendants will have been amply
protected. Defendants-spouses Luzame in any event may
enforce their rights against defendant Marcos Mangubat.46
Similarly, by virtue of the second Deed of Absolute Sale
between Spring Homes and the Spouses Lumbres, the Spouses
Lumbres became the absolute and registered owner of the
subject property herein. As such, they possess that certain
interest in the property without which, the courts cannot proceed
for settled is the doctrine that registered owners of parcels of
land whose title is sought to be nullified should be impleaded as
an indispensable party.47 Spring Homes, however, which has
already sold its interests in the subject land, is no longer
regarded as an indispensable party, but is, at best, considered
to be a necessary party whose presence is necessary to
adjudicate the whole controversy, but whose interests are so far
separable that a final decree can be made in- its absence
without affecting it.48 This is because when Spring Homes sold
the property in question to the Spouses Lumbres, it practically
transferred all its interests therein to the said Spouses. In fact, a
new title was already issued in the names of the Spouses
Total
Lumbres. As such, Spring Homes no longer stands to be directly Blk. No. P- Lot Area Sq. Price Per sq.
Selling
benefited or injured by the judgment in the instant suit 111 No. Meter Meter
Price
regardless of whether the new title registered in the names of
the Spouses Lumbres is cancelled in favor of the Spouses 3 8 105 P1,500 �
Tablada or not. Thus, contrary to the ruling of the RTC, the
failure to summon Spring Homes does not deprive it of 42 6,000 �
jurisdiction over the instant case for Spring Homes is not an
indispensable party. P409,500

On the merits of the case, the Court likewise affirms the findings
of the CA. The issue here involves what appears to be a double
The two deeds of absolute sale as well as the respondents'
sale. First, the Spouses Tablada entered into a Contract to Sell
Tax Declaration No. 019-1342 uniformly show that the land
with Spring Homes in 1995 which was followed by a Deed of
area of the property covered by TCT No. T-284037 is 105
Absolute Sale in 1996. Second, in 2000, the Spouses Lumbres
square meters.The parties never contested its actual land area.
and Spring Homes executed a Deed of Absolute Sale over the
same property. The Spouses Lumbres persistently insist that the
However, while there is only one parcel of land being sold,
first Deed of Sale executed by the Spouses Tablada is void for
which is Lot 8, Blk. 3, paragraph "1" above of the Contract
having no valuable consideration. They argue that out of the
to Sell speaks of two (2) land areas, namely, "105" and "42,"
P409,500.00 purchase price under the Contract to Sell, the
and two (2) prices per square meter, to wit: "P1,500" and
Spouses Tablada merely paid P179,500.00, failing to pay the
"P6,000."As correctly observed by the
rest in the amount of P230,000.00 despite demands.
CA:chanRoblesvirtualLawlibrary
There is no merit in the contention.
It does not require much imagination to understand why figures
"3," "8," "105" and "P1,500" appear in the paragraph "1" of the
As the CA held, it is clear from the first Deed of Absolute Sale
Contract to Sell. Certainly "3" stands for "Blk. No.," "8" stands for
that the consideration for the subject property is P157,500.00. In
"Lot No.," "105" stands for the land area and "P1,500" stands for
fact, the same amount was indicated as the purchase price in
the second Deed of Absolute Sale between Spring Homes and the price per square meter. However, this Court is perplexed as
regards figures "42" and "6,000" as they are not accompanied
the Spouses Lumbres. As for the varying amounts contained in
by any "Blk. No." and/or "Lot No." In other words, while there is
the Contract to Sell, the Court notes that the same has already
only one parcel of land being sold, paragraph "1" of the Contract
been duly addressed by the Court in the 2007 Spouses
to Sell contains two land areas and two prices per square meter.
Lumbres v. Spouses Tablada49 case, the pertinent portions of
There is no reason for the inclusion of land area in the
which states:chanRoblesvirtualLawlibrary
computation when it was established beyond cavil that the total
area being sold is only 105 square meters. Likewise, there is no
In claiming their right of possession over the subject lot,
explanation why there is another rate for the additional 42
petitioners made much of the judicially approved Compromise
square meters, which was pegged at P6,000 per square meter,
Agreement in Civil Case No. 2194-95-C, wherein Spring Homes'
while that of 105 square meters was only P1,500.00.
rights and interests over the said lot under its Contract to Sell
with the respondents were effectively assigned to
them. Petitioners argue that out of the whole P409,500.00
The CA could only think of one possible explanation: the
purchase price under the respondents Contract to Sell with
Contract to Sell refers only to a single lot with a total land
Spring Homes, the respondents were able to pay only
area of 105 square meters. The 42 square meters mentioned
P179,500.00, leaving a balance of P230,000.00.
in the same contract and therein computed at the rate of
116,000 per square meter refer to the cost of the house
Upon scrutiny, however, the CA astutely observed that despite
which would be constructed by the respondents on the
there being no question that the total land area of the subject lot
subject lot through a Pag-Ibig loan. The land area of the
is 105 square meters, the Contract to Sell executed and entered
house to be constructed was pegged at 42 square meters
into by Spring Homes and the respondent spouses
because of the following restrictions in the Contract to
states:chanRoblesvirtualLawlibrary
Sell:chanRoblesvirtualLawlibrary
3. That the SELLER, for and in consideration of the payments
9. The lot(s) subject matter of this contract are subject to the
and other terms and conditions hereinafter to be designated,
following restrictions:chanRoblesvirtualLawlibrary
has offered to sell and the BUYER has agreed to buy certain
parcel of land more particularly described as
a) Any building which may be constructed at anytime in said
follows:chanRoblesvirtualLawlibrary
lot(s) must be strong x x x. Said building must not be
constructed at a distance of less than (2) meters from any
boundaries of the lot(s).
b) The total area to be voted to buildings or structures shall not
exceed eighty percent (80%) of the total area of the lot(s).50
Thus, while the Spouses Lumbres would like Us to believe that
based on the Contract to Sell, the total selling price of the
subject property is P409,500.00, the contract itself, as well as
the surrounding circumstances following its execution, negate
their argument. As appropriately found by the Court, said
amount actually pertains to the sum of: (1) the cost of the land
area of the lot at 105 square meters priced at P1,500 per square
meter; and (2) the cost of the house to be constructed on the
land at 42 square meters priced at P6,000 per square meter.
But it would be a grave injustice to hold the Spouses Tablada
liable for more than the cost of the land area when it was duly
proven that they used their own funds in the construction of the
house. As shown by the records, the Spouses Tablada was
forced to use their own money since their PAG-IBIG loan
application did not materialize, not through their own fault, but
because Spring Homes failed, despite repeated demands, to
deliver to them the owner's duplicate copy of the subject
property's title required by the loan application. In reality,
therefore, what Spring Homes really sold to the Spouses
Tablada was only the lot in the amount of P157,500.00, since
the house was constructed thereon using the Spouses
Tablada's own money. In fact, nowhere in the Contract to Sell
was it stated that the subject property includes any improvement
thereon or that the same even exists. Moreover, as previously
mentioned, in both the first and second Deeds of Absolute Sale,
it was indicated that the amount of the property subject of the
sale is only P157,500.00. Accordingly, the Court held further
in Spouses Lumbres v. Spouses Tablada:
Looking at the above-quoted portion of the Contract to Sell,
the CA found merit in the respondents' contention that the
total selling price of P409,500 includes not only the price of
the lot but also the cost of the house that would be
constructed thereon. We are incline to agree. The CA went on
to say:chanRoblesvirtualLawlibrary
It could be argued that the contract to sell never mentions
the construction of any house or building on the subject
property. Had it been the intention of the parties that the
total selling price would include the amount of the house
that would be taken from a loan to be obtained from Pag
Ibig, they could have specified so. However, one should not
lose sight of the fact that the contract to sell is an
accomplished form. [Respondents,] trusting Spring Homes,
could not be expected to demand that another contract duly
reflective of their agreements be utilized instead of the
accomplished form. The terms and conditions of the contract
may not contemplate the inclusion of the cost of the house in the
total selling price, but the entries typewritten thereon sufficiently
reveal the intentions of the parties.
The position of the [respondents] finds support in the
documents and subsequent actuations of Bertha Pasic, the
representative of Spring Homes. [Respondents] undeniably
proved that they spent their own hard earned money to
construct a house thereon after their Pag-Ibig loan did not
materialize. It is highly unjust for the [respondents] to pay
for the amount of the house when the loan did not
materialize due to the failure of Spring Homes to deliver the
owner's duplicate copy of TCT No. T 284037.
xxxx
If the total selling price was indeed P409,500.00, as
[petitioners] would like to poster, said amount should have
appeared as the consideration in the deed of absolute sale
dated January 15, 1996. However, only P157,500.00 was
stated. The amount stated in the Deed of Absolute Sale dated
January 15, 1996 was not only a portion of the selling price,
because the Deed of Sale dated December 22, 2000 also
reflected P157,500.00 as consideration. It is not shown that
[petitioners] likewise applied for a loan with Pag-Ibig. The
reasonable inference is that the consistent amount stated in
the two Deeds of Absolute Sale was the true selling price as
it perfectly jibed with the computation in the Contract to
Sell.
We find the CA's reasoning to be sound. At any rate, the
execution of the January 16, 1996 Deed of Absolute Sale in
favor of the respondents effectively rendered the previous
Contract to Sell ineffective and canceled. Furthermore, we find
no merit in petitioners' contention that the first sale to the
respondents was void for want of consideration. As the CA
pointed out in its assailed decision:chanRoblesvirtualLawlibrary
Other than the [petitioners'] self-serving assertion that the
Deeds of Absolute Sale was executed solely for the
purpose of obtaining a Pag-Ibig loan, no other concrete
evidence was tendered to justify the execution of the deed
of absolute sale. They failed to overcome the clear and
convincing evidence of the [respondents] that as early as July 5,
1995 the latter had already paid the total amount of
P179,500.00, much bigger than the actual purchase price for the
subject land.51
There is, therefore, no factual or legal basis for the Spouses
Lumbres to claim that since the Spouses Tablada still had an
outstanding balance of P230,000.00 from the total purchase
price, the sale between Spring Homes and the Spouses
Tablada was void, and consequently, they were authorized to
unilaterally cancel such sale, and thereafter execute another
one transferring the subject property in their names. As correctly
held by the Court in Spouses Lumbres v. Spouses
Tablada,52 the first Deed of Sale executed in favor of the
Spouses Tablada is valid and with sufficient consideration.
Thus, in view of this validity of the sale subject of the first Deed
of Absolute Sale between Spring Homes and the Spouses
Tablada, the Court shall now determine who, as between the
two spouses herein, properly acquired ownership over the
subject property. In this regard, Article 1544 of the Civil Code
reads:chanRoblesvirtualLawlibrary
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. (Emphasis supplied)
The principle of primus tempore, potior jure (first in time,
stronger in right) gains greater significance in case of a double
sale of immovable property.53 Thus, the Court has consistently
ruled that ownership of an immovable property which is the
subject of a double sale shall be transferred: (1) to the person
acquiring it who in good faith first recorded it in the Registry of
Property; (2) in default thereof, to the person who in good faith
was first in possession; and (3) in default thereof, to the person
who presents the oldest title, provided there is good faith.54 The
requirement of the law then is two-fold: acquisition in good faith
and registration in good faith. Good faith must concur with the
registration that is, the registrant must have no knowledge of the
defect or lack of title of his vendor or must not have been aware
of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the
defects in the title of his vendor. If it is shown that a buyer was in
bad faith, the alleged registration they have made amounted to
no registration at all.55
Here, the first buyers of the subject property, the Spouses
Tablada, were able to take said property into possession but
failed to register the same because of Spring Homes' unjustified
failure to deliver the owner's copy of the title whereas the
second buyers, the Spouses Lumbres, were able to register the
property in their names. But while said the Spouses Lumbres
successfully caused the transfer of the title in their names, the
same was done in bad faith. As correctly observed by the Court
in Spouses Lumbres v. Spouses Tablada,56 the Spouses
Lumbres cannot claim good faith since at the time of the
execution of their Compromise Agreement with Spring Homes,
they were indisputably and reasonably informed that the subject
lot was previously sold to the Spouses Tablada. They were also
already aware that the Spouses Tablada had constructed a
house thereon and were in physical possession thereof. They
cannot, therefore, be permitted to freely claim good faith on their
part for the simple reason that the First Deed of Absolute Sale
between Spring Homes and the Spouses Tablada was not
annotated at the back of the subject property's title. It is beyond
the Court's imagination how spouses Lumbres can feign
ignorance to the first sale when the records clearly reveal that
they even made numerous demands on the Spouses Tablada to
pay, albeit erroneously, an alleged balance of the purchase
price.
Indeed, knowledge gained by the first buyer of the second sale
cannot defeat the first buyer's rights except only as provided by
law, as in cases where the second buyer first registers in good
faith the second sale ahead of the first.57 Such knowledge of the
first buyer does bar her from availing of her rights under the law,
among them, first her purchase as against the second buyer.
But conversely, 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.58
Accordingly, in order for the Spouses Lumbres to obtain priority
over the Spouses Tablada, the law requires a continuing good
faith and innocence or lack of knowledge of the first sale that
would enable their contract to ripen into full ownership through
prior registration.59 But from the very beginning, the Spouses
Lumbres had already known of the fact that the subject property
had previously been sold to the Spouses Tablada, by virtue of a
valid Deed of Absolute Sale. In fact, the Spouses Tablada were
already in possession of said property and had even
constructed a house thereon. Clearly then, the Spouses
Lumbres were in bad faith the moment they entered into the
second Deed of Absolute Sale and thereafter registered the
subject property in their names. For this reason, the Court
cannot, therefore, consider them as the true and valid owners of
the disputed property and permit them to retain title thereto.
WHEREFORE, premises considered, the instant petition
is DENIED. The assailed Decision dated May 31, 2011 and
Resolution dated January 4, 2012 of the Court of Appeals in CA-
G.R. CV No. 94352 are hereby AFFIRMED.
SO ORDERED.
G.R. No. L-18536 March 31, 1965
JOSE B. AZNAR, plaintiff-appellant,
vs.
RAFAEL YAPDIANGCO, defendant-appellee;
TEODORO SANTOS, intervenor-appellee.
Florentino M. Guanlao for plaintiff-appellant.
Rafael Yapdiangco in his own behalf as defendant-appellee.
Lorenzo Sumulong, R. B. Hilao and B. S. Felipe for intervenor-
appellee.
REGALA, J.:
This is an appeal, on purely legal questions, from a decision of
the Court of First Instance of Quezon City, Branch IV, declaring
the intervenor-appellee, Teodoro Santos, entitled to the
possession of the car in dispute.
The records before this Court disclose that sometime in May,
1959, Teodoro Santos advertised in two metropolitan papers the
sale of his FORD FAIRLANE 500. In the afternoon of May 28,
1959, a certain L. De Dios, claiming to be a nephew of Vicente
Marella, went to the Santos residence to answer the ad.
However, Teodoro Santos was out during this call and only the
latter's son, Irineo Santos, received and talked with De Dios.
The latter told the young Santos that he had come in behalf of
his uncle, Vicente Marella, who was interested to buy the
advertised car.
On being informed of the above, Teodoro Santos instructed his
son to see the said Vicente Marella the following day at his
given address: 1642 Crisostomo Street, Sampaloc, Manila. And
so, in the morning of May 29, 1959, Irineo Santos went to the
above address. At this meeting, Marella agreed to buy the car
for P14,700.00 on the understanding that the price would be
paid only after the car had been registered in his name.
Irineo Santos then fetched his father who, together with L. De
Dios, went to the office of a certain Atty. Jose Padolina where
the deed of the sale for the car was executed in Marella's favor.
The parties to the contract thereafter proceeded to the Motor
Vehicles Office in Quezon City where the registration of the car
in Marella's name was effected. Up to this stage of the
transaction, the purchased price had not been paid.
From the Motor Vehicles Office, Teodoro Santos returned to his
house. He gave the registration papers and a copy of the deed
of sale to his son, Irineo, and instructed him not to part with
them until Marella shall have given the full payment for the car.
Irineo Santos and L. De Dios then proceeded to 1642
Crisostomo Street, Sampaloc, Manila where the former
demanded the payment from Vicente Marella. Marella said that
the amount he had on hand then was short by some P2,000.00
and begged off to be allowed to secure the shortage from a
sister supposedly living somewhere on Azcarraga Street, also in
Manila. Thereafter, he ordered L. De Dios to go to the said sister
and suggested that Irineo Santos go with him. At the same time,
he requested the registration papers and the deed of sale from
Irineo Santos on the pretext that he would like to show them to
his lawyer. Trusting the good faith of Marella, Irineo handed over
the same to the latter and thereupon, in the company of L. De
Dios and another unidentified person, proceeded to the alleged
house of Marella's sister.
At a place on Azcarraga, Irineo Santos and L. De Dios alighted
from the car and entered a house while their unidentified
companion remained in the car. Once inside, L. De Dios asked
Irineo Santos to wait at the sala while he went inside a room.
That was the last that Irineo saw of him. For, after a
considerable length of time waiting in vain for De Dios to return,
Irineo went down to discover that neither the car nor their
unidentified companion was there anymore. Going back to the
house, he inquired from a woman he saw for L. De Dios and he
was told that no such name lived or was even known therein.
Whereupon, Irineo Santos rushed to 1642 Crisostomo to see
Marella. He found the house closed and Marella gone. Finally,
he reported the matter to his father who promptly advised the
police authorities.
That very same day, or on the afternoon of May 29, 1959
Vicente Marella was able to sell the car in question to the
plaintiff-appellant herein, Jose B. Aznar, for P15,000.00. Insofar
as the above incidents are concerned, we are bound by the
factual finding of the trial court that Jose B. Aznar acquired the
said car from Vicente Marella in good faith, for a valuable
consideration and without notice of the defect appertaining to
the vendor's title.
While the car in question was thus in the possession of Jose B.
Aznar and while he was attending to its registration in his name,
agents of the Philippine Constabulary seized and confiscated
the same in consequence of the report to them by Teodoro
Santos that the said car was unlawfully taken from him.
In due time, Jose B. Aznar filed a complaint for replevin against
Captain Rafael Yapdiangco, the head of the Philippine
Constabulary unit which seized the car in question Claiming
ownership of the vehicle, he prayed for its delivery to him. In the
course of the litigation, however, Teodoro Santos moved and
was allowed to intervene by the lower court.
At the end of the trial, the lower court rendered a decision
awarding the disputed motor vehicle to the intervenor-appellee,
Teodoro Santos. In brief, it ruled that Teodoro Santos had been
unlawfully deprived of his personal property by Vicente Marella,
from whom the plaintiff-appellant traced his right. Consequently,
although the plaintiff-appellant acquired the car in good faith and
for a valuable consideration from Vicente Marella, the said
decision concluded, still the intervenor-appellee was entitled to
its recovery on the mandate of Article 559 of the New Civil Code
which provides:
ART. 559. The possession of movable property
acquired in good faith is equivalent to title.
Nevertheless, one who lost any movable or has been
unlawfully deprived thereof, may recover it from the
person in possession of the same.
If the possessor of a movable lost or of which the
owner has been unlawfully deprived, has acquired it in
good faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor.
From this decision, Jose B. Aznar appeals.
The issue at bar is one and simple, to wit: Between Teodoro
Santos and the plaintiff-appellant, Jose B. Aznar, who has a
better right to the possession of the disputed automobile?
We find for the intervenor-appellee, Teodoro Santos.
The plaintiff-appellant accepts that the car in question originally
belonged to and was owned by the intervenor-appellee,
Teodoro Santos, and that the latter was unlawfully deprived of
the same by Vicente Marella. However, the appellant contends
that upon the facts of this case, the applicable provision of the
Civil Code is Article 1506 and not Article 559 as was held by the
decision under review. Article 1506 provides:
ART. 1506. Where the seller of goods has a voidable
title thereto, but his, title has not been voided at the
time of the sale, the buyer acquires a good title to the
goods, provided he buys them in good faith, for value,
and without notice of the seller's defect of title.
The contention is clearly unmeritorious. Under the aforequoted
provision, it is essential that the seller should have a voidable
title at least. It is very clearly inapplicable where, as in this case,
the seller had no title at all.
Vicente Marella did not have any title to the property under
litigation because the same was never delivered to him. He
sought ownership or acquisition of it by virtue of the contract.
Vicente Marella could have acquired ownership or title to the
subject matter thereof only by the delivery or tradition of the car
to him.
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)
In the case on hand, the car in question was never delivered to
the vendee by the vendor as to complete or consummate the
transfer of ownership by virtue of the contract. It should be
recalled that while there was indeed a contract of sale between
Vicente Marella and Teodoro Santos, the former, as vendee,
took possession of the subject matter thereof by stealing the
same while it was in the custody of the latter's son.
There is no adequate evidence on record as to whether Irineo
Santos voluntarily delivered the key to the car to the unidentified
person who went with him and L. De Dios to the place on
Azcarraga where a sister of Marella allegedly lived. But even if
Irineo Santos did, it was not the delivery contemplated by Article
712 of the Civil Code. For then, it would be indisputable that he
turned it over to the unidentified companion only so that he may
drive Irineo Santos and De Dios to the said place on Azcarraga
and not to vest the title to the said vehicle to him as agent of
Vicente Marella. Article 712 above contemplates that the act be
coupled with the intent of delivering the thing. (10 Manresa 132)
The lower court was correct in applying Article 559 of the Civil
Code to the case at bar, for under it, the rule is to the effect that
if the owner has lost a thing, or if he has been unlawfully
deprived of it, he has a right to recover it, not only from the
finder, thief or robber, but also from third persons who may have
acquired it in good faith from such finder, thief or robber. The
said article establishes two exceptions to the general rule of
irrevindicability, to wit, when the owner (1) has lost the thing, or
(2) has been unlawfully deprived thereof. In these cases, the
possessor cannot retain the thing as against the owner, who
may recover it without paying any indemnity, except when the
possessor acquired it in a public sale. (Del Rosario v. Lucena, 8
Phil. 535; Varela v. Finnick, 9 Phil. 482; Varela v. Matute, 9 Phil.
479; Arenas v. Raymundo, 19 Phil. 46. Tolentino, id., Vol. II, p.
261.)
In the case of Cruz v. Pahati, et al., 52 O.G. 3053 this Court has
already ruled
that —
Under Article 559 of the new Civil Code, a person
illegally deprived of any movable may recover it from
the person in possession of the same and the only
defense the latter may have is if he has acquired it in
good faith at a public sale, in which case, the owner
cannot obtain its return without reimbursing the price
paid therefor. In the present case, plaintiff has been
illegally deprived of his car through the ingenious
scheme of defendant B to enable the latter to dispose
of it as if he were the owner thereof. Plaintiff,
therefore, can still recover possession of the car even
if it is in the possession of a third party who had
acquired it in good faith from defendant B. The maxim
that "no man can transfer to another a better title than
he had himself" obtains in the civil as well as in the
common law. (U.S. v. Sotelo, 28 Phil. 147)
Finally, the plaintiff-appellant here contends that inasmuch as it
was the intervenor-appellee who had caused the fraud to be
perpetrated by his misplaced confidence on Vicente Marella, he,
the intervenor-appellee, should be made to suffer the
consequences arising therefrom, following the equitable
principle to that effect. Suffice it to say in this regard that the
right of the owner to recover personal property acquired in good
faith by another, is based on his being dispossessed without his
consent. The common law principle that where one of two
innocent persons must suffer by a fraud perpetrated by another,
the law imposes the loss upon the party who, by his misplaced
confidence, has enabled the fraud to be committed, cannot be
applied in a case which is covered by an express provision of
the new Civil Code, specifically Article 559. Between a common
law principle and a statutory provision, the latter must prevail in
this jurisdiction. (Cruz v. Pahati, supra)
UPON ALL THE FOREGOING, the instant appeal is hereby
dismissed and the decision of the lower court affirmed in full.
Costs against the appellant.
G.R. No. 80298 April 26, 1990
EDCA PUBLISHING & DISTRIBUTING CORP., petitioner,
vs.
THE SPOUSES LEONOR and GERARDO SANTOS, doing
business under the name and style of "SANTOS
BOOKSTORE," and THE COURT OF APPEALS, respondents.
Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B.
Samson for petitioner.
Cendana Santos, Delmundo & Cendana for private
respondents.
CRUZ, J.:
The case before us calls for the interpretation of Article 559 of
the Civil Code and raises the particular question of when a
person may be deemed to have been "unlawfully deprived" of
movable property in the hands of another. The article runs in full
as follows:
Art. 559. The possession of movable property
acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has
been unlawfully deprived thereof, may recover it from
the person in possession of the same.
If the possessor of a movable lost or of which the
owner has been unlawfully deprived has acquired it in
good faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor.
The movable property in this case consists of books, which were
bought from the petitioner by an impostor who sold it to the
private respondents. Ownership of the books was recognized in
the private respondents by the Municipal Trial Court, 1 which
was sustained by the Regional Trial Court, 2 which was in turn
sustained by the Court of Appeals. 3 The petitioner asks us to
declare that all these courts have erred and should be reversed.
This case arose when on October 5, 1981, a person identifying
himself as Professor Jose Cruz placed an order by telephone
with the petitioner company for 406 books, payable on
delivery. 4 EDCA prepared the corresponding invoice and
delivered the books as ordered, for which Cruz issued a
personal check covering the purchase price of P8,995.65. 5 On
October 7, 1981, Cruz sold 120 of the books to private
respondent Leonor Santos who, after verifying the seller's
ownership from the invoice he showed her, paid him
P1,700.00. 6
Meanwhile, EDCA having become suspicious over a second
order placed by Cruz even before clearing of his first check,
made inquiries with the De la Salle College where he had
claimed to be a dean and was informed that there was no such
person in its employ. Further verification revealed that Cruz had
no more account or deposit with the Philippine Amanah Bank,
against which he had drawn the payment check. 7 EDCA then
went to the police, which set a trap and arrested Cruz on
October 7, 1981. Investigation disclosed his real name as
Tomas de la Peña and his sale of 120 of the books he had
ordered from EDCA to the private respondents. 8
On the night of the same date, EDCA sought the assistance of
the police in Precinct 5 at the UN Avenue, which forced their
way into the store of the private respondents and threatened
Leonor Santos with prosecution for buying stolen property. They
seized the 120 books without warrant, loading them in a van
belonging to EDCA, and thereafter turned them over to the
petitioner. 9
Protesting this high-handed action, the private respondents
sued for recovery of the books after demand for their return was
rejected by EDCA. A writ of preliminary attachment was issued
and the petitioner, after initial refusal, finally surrendered the
books to the private respondents. 10 As previously stated, the
petitioner was successively rebuffed in the three courts below
and now hopes to secure relief from us.
To begin with, the Court expresses its disapproval of the
arbitrary action of the petitioner in taking the law into its own
hands and forcibly recovering the disputed books from the
private respondents. The circumstance that it did so with the
assistance of the police, which should have been the first to
uphold legal and peaceful processes, has compounded the
wrong even more deplorably. Questions like the one at bar are
decided not by policemen but by judges and with the use not of
brute force but of lawful writs.
Now to the merits
It is the contention of the petitioner that the private respondents
have not established their ownership of the disputed books
because they have not even produced a receipt to prove they
had bought the stock. This is unacceptable. Precisely, the first
sentence of Article 559 provides that "the possession of
movable property acquired in good faith is equivalent to a title,"
thus dispensing with further proof.
The argument that the private respondents did not acquire the
books in good faith has been dismissed by the lower courts, and
we agree. Leonor Santos first ascertained the ownership of the
books from the EDCA invoice showing that they had been sold
to Cruz, who said he was selling them for a discount because he
was in financial need. Private respondents are in the business of
buying and selling books and often deal with hard-up sellers
who urgently have to part with their books at reduced prices. To
Leonor Santos, Cruz must have been only one of the many such
sellers she was accustomed to dealing with. It is hardly bad faith
for any one in the business of buying and selling books to buy
them at a discount and resell them for a profit.
But the real issue here is whether the petitioner has been
unlawfully deprived of the books because the check issued by
the impostor in payment therefor was dishonored.
In its extended memorandum, EDCA cites numerous cases
holding that the owner who has been unlawfully deprived of
personal property is entitled to its recovery except only where
the property was purchased at a public sale, in which event its
return is subject to reimbursement of the purchase price. The
petitioner is begging the question. It is putting the cart before the
horse. Unlike in the cases invoked, it has yet to be established
in the case at bar that EDCA has been unlawfully deprived of
the books.
The petitioner argues that it was, because the impostor acquired
no title to the books that he could have validly transferred to the
private respondents. Its reason is that as the payment check
bounced for lack of funds, there was a failure of consideration
that nullified the contract of sale between it and Cruz.
The contract of sale is consensual and is perfected once
agreement is reached between the parties on the subject matter
and the consideration. According to the Civil Code:
Art. 1475. The contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of the
law governing the form of contracts.
xxx xxx xxx
Art. 1477. The ownership of the thing sold shall be
transferred to the vendee upon the actual or
constructive delivery thereof.
Art. 1478. The parties may stipulate that ownership in
the thing shall not pass to the purchaser until he has
fully paid the price.
It is clear from the above provisions, particularly the last one
quoted, that ownership in the thing sold shall not pass to the
buyer until full payment of the purchase only if there is a
stipulation to that effect. Otherwise, the rule is that such
ownership shall pass from the vendor to the vendee upon the
actual or constructive delivery of the thing sold even if the
purchase price has not yet been paid.
Non-payment only creates a right to demand payment or to
rescind the contract, or to criminal prosecution in the case of
bouncing checks. But absent the stipulation above noted,
delivery of the thing sold will effectively transfer ownership to the
buyer who can in turn transfer it to another.
In Asiatic Commercial Corporation v. Ang,11 the plaintiff sold
some cosmetics to Francisco Ang, who in turn sold them to Tan
Sit Bin. Asiatic not having been paid by Ang, it sued for the
recovery of the articles from Tan, who claimed he had validly
bought them from Ang, paying for the same in cash. Finding that
there was no conspiracy between Tan and Ang to deceive
Asiatic the Court of Appeals declared:
Yet the defendant invoked Article 464 12 of the Civil
Code providing, among other things that "one who has
been unlawfully deprived of personal property may
recover it from any person possessing it." We do not
believe that the plaintiff has been unlawfully deprived
of the cartons of Gloco Tonic within the scope of this
legal provision. It has voluntarily parted with them
pursuant to a contract of purchase and sale. The
circumstance that the price was not subsequently paid
did not render illegal a transaction which was valid
and legal at the beginning.
In Tagatac v. Jimenez,13 the plaintiff sold her car to Feist, who
sold it to Sanchez, who sold it to Jimenez. When the payment
check issued to Tagatac by Feist was dishonored, the plaintiff
sued to recover the vehicle from Jimenez on the ground that she
had been unlawfully deprived of it by reason of Feist's
deception. In ruling for Jimenez, the Court of Appeals held:
The point of inquiry is whether plaintiff-appellant
Trinidad C. Tagatac has been unlawfully deprived of
her car. At first blush, it would seem that she was
unlawfully deprived thereof, considering that she was
induced to part with it by reason of the chicanery
practiced on her by Warner L. Feist. Certainly,
swindling, like robbery, is an illegal method of
deprivation of property. In a manner of speaking,
plaintiff-appellant was "illegally deprived" of her car,
for the way by which Warner L. Feist induced her to
part with it is illegal and is punished by law. But does
this "unlawful deprivation" come within the scope of
Article 559 of the New Civil Code?
xxx xxx xxx
. . . The fraud and deceit practiced by Warner L. Feist
earmarks this sale as a voidable contract (Article 1390
N.C.C.). Being a voidable contract, it is susceptible of
either ratification or annulment. If the contract is
ratified, the action to annul it is extinguished (Article
1392, N.C.C.) and the contract is cleansed from all its
defects (Article 1396, N.C.C.); if the contract is
annulled, the contracting parties are restored to their
respective situations before the contract and mutual
restitution follows as a consequence (Article 1398,
N.C.C.).
However, as long as no action is taken by the party
entitled, either that of annulment or of ratification, the
contract of sale remains valid and binding. When
plaintiff-appellant Trinidad C. Tagatac delivered the
car to Feist by virtue of said voidable contract of sale,
the title to the car passed to Feist. Of course, the title
that Feist acquired was defective and voidable.
Nevertheless, at the time he sold the car to Felix
Sanchez, his title thereto had not been avoided and
he therefore conferred a good title on the latter,
provided he bought the car in good faith, for value and
without notice of the defect in Feist's title (Article 1506,
N.C.C.). There being no proof on record that Felix
Sanchez acted in bad faith, it is safe to assume that
he acted in good faith.
The above rulings are sound doctrine and reflect our own
interpretation of Article 559 as applied to the case before us.
Actual delivery of the books having been made, Cruz acquired
ownership over the books which he could then validly transfer to
the private respondents. The fact that he had not yet paid for
them to EDCA was a matter between him and EDCA and did not
impair the title acquired by the private respondents to the books.
One may well imagine the adverse consequences if the phrase
"unlawfully deprived" were to be interpreted in the manner
suggested by the petitioner. A person relying on the seller's title
who buys a movable property from him would have to surrender
it to another person claiming to be the original owner who had
not yet been paid the purchase price therefor. The buyer in the
second sale would be left holding the bag, so to speak, and
would be compelled to return the thing bought by him in good
faith without even the right to reimbursement of the amount he
had paid for it.
It bears repeating that in the case before us, Leonor Santos took
care to ascertain first that the books belonged to Cruz before
she agreed to purchase them. The EDCA invoice Cruz showed
her assured her that the books had been paid for on delivery. By
contrast, EDCA was less than cautious — in fact, too trusting in
dealing with the impostor. Although it had never transacted with
him before, it readily delivered the books he had ordered (by
telephone) and as readily accepted his personal check in
payment. It did not verify his identity although it was easy
enough to do this. It did not wait to clear the check of this
unknown drawer. Worse, it indicated in the sales invoice issued
to him, by the printed terms thereon, that the books had been
paid for on delivery, thereby vesting ownership in the buyer.

Surely, the private respondent did not have to go beyond that

invoice to satisfy herself that the books being offered for sale by
Cruz belonged to him; yet she did. Although the title of Cruz was
presumed under Article 559 by his mere possession of the
books, these being movable property, Leonor Santos
nevertheless demanded more proof before deciding to buy
them.

It would certainly be unfair now to make the private respondents

bear the prejudice sustained by EDCA as a result of its own
negligence.1âwphi1 We cannot see the justice in transferring
EDCA's loss to the Santoses who had acted in good faith, and
with proper care, when they bought the books from Cruz.

While we sympathize with the petitioner for its plight, it is clear

that its remedy is not against the private respondents but
against Tomas de la Peña, who has apparently caused all this
trouble. The private respondents have themselves been unduly
inconvenienced, and for merely transacting a customary deal
not really unusual in their kind of business. It is they and not
EDCA who have a right to complain.

WHEREFORE, the challenged decision is AFFIRMED and the

petition is DENIED, with costs against the petitioner.