Republic of the Philippines This contract of sale can be analyzed into three relative to the payment of freight can
to the payment of freight can be taken to
SUPREME COURT component parts.
Manila
1. SUBJECT MATTER AND CONSIDERATION.
EN BANC
Facts. — The contract provided for "80 drums Caustic
G.R. No. 13203 September 18, 1918 Soda 76 per cent "Carabao" brand al precio de
Dollar Gold Nine and 75/100 1-lbs."
BEHN, MEYER & CO. (LTD.), plaintiff-appellant,
vs. Resorting to the circumstances surrounding the
TEODORO R. YANCO, defendant-appellee. agreement are we are permitted to do, in pursuance of
this provision, the merchandise was shipped from New
Crossfield & O'Brien for appellant. York on the steamship Chinese Prince. The steamship
Charles C. Cohn for appellee. was detained by the British authorities at Penang, and
part of the cargo, including seventy-one drums of
caustic soda, was removed. Defendant refused to
MALCOLM, J.: accept delivery of the remaining nine drums of soda on
the ground that the goods were in bad order.
The first inquiry to be determined is what was the Defendant also refused the optional offer of the
contract between the parties. plaintiff, of waiting for the remainder of the shipment
until its arrival, or of accepting the substitution of
The memorandum agreement executed by the duly seventy-one drums of caustic soda of similar grade
authorized representatives of the parties to this action from plaintiff's stock. The plaintiff thereupon sold, for
reads: the account of the defendant, eighty drums of caustic
soda from which there was realized the sum of
P6,352.89. Deducting this sum from the selling price of
Contract No. 37. P10,063.86, we have the amount claimed as damages
for alleged breach of the contract.
MANILA, 7 de marzo, de 1916.
Law. — It is sufficient to note that the specific
merchandise was never tendered. The soda which the
plaintiff offered to defendant was not of the "Carabao"
Confirmanos haber vendido a Bazar Siglo XX, brand, and the offer of drums of soda of another kind
80 drums Caustic Soda 76 per cent was not made within the time that a March shipment,
"Carabao" brand al precio de Dollar Gold Nine according to another provision the contract, would
and 75/100 per 100-lbs., c.i.f. Manila, normally have been available.
pagadero against delivery of documents.
Embarque March, 1916.
2. PLACE OF DELIVERY.
Comprador Bazar Siglo XX Facts. — The contract provided for "c.i.f.
de Teodoro R. Yangco Manila, pagadero against delivery of documents."
J. Siquia
Law. — Determination of the place of delivery always
Vendores
resolves itself into a question of act. If the contract be
BEHN, MEYER & CO. (Ltd.)
silent as to the person or mode by which the goods are
O. LOMBECK.
to be sent, delivery by the vendor to a common carrier,
in the usual and ordinary course of business, transfers
the property to the vendee. A specification in a contact
indicate the intention of the parties in regard to the
place of delivery. If the buyer is to pay the freight, it is
reasonable to suppose that he does so because the
goods become his at the point of shipment. On the
other hand, if the seller is to pay the freight, the
inference is equally so strong that the duty of the seller
is to have the goods transported to their ultimate
destination and that title to property does not pass until
the goods have reached their destination.
(See Williston on Sales, PP. 406-408.)
The letters "c.i.f." found in British contracts stand for
cost, insurance, and freight. They signify that the price
fixed covers not only the cost of the goods, but the
expense of freight and insurance to be paid by the
seller. (Ireland vs. Livingston, L. R., 5 H. L., 395.) Our
instant contract, in addition to the letters "c.i.f.," has the
word following, "Manila." Under such a contract, an
Australian case is authority for the proposition that no
inference is permissible that a seller was bound to
deliver at the point of destination. (Bowden vs. Little, 4
Comm. [Australia], 1364.)
In mercantile contracts of American origin the letters
"F.O.B." standing for the words "Free on Board," are
frequently used. The meaning is that the seller shall
bear all expenses until the goods are delivered where
they are to be "F.O.B." According as to whether the
goods are to be delivered "F.O.B." at the point of
shipment or at the point of destination determines the
time when property passes.
Both the terms "c.i.f." and "F.O.B." merely make rules
of presumption which yield to proof of contrary
intention. As Benjamin, in his work on Sales, well says:
"The question, at last, is one of intent, to be ascertained
by a consideration of all the circumstances." For
instance, in a case of Philippine origin, appealed to the
United States Supreme Court, it was held that the sale
was complete on shipment, though the contract was for
goods, "F.O.B. Manila," the place of destination the
other terms of the contract showing the intention to
transfer the property. (United States vs. R. P. Andrews
& Co. [1907], 207 U.S., 229.)
With all due deference to the decision of the High Court
of Australia, we believe that the word Manila in
conjunction with the letters "c.i.f." must mean that the
Sales 1 of 70
contract price, covering costs, insurance, and freight,
signifies that delivery was to made at Manila. If the
plaintiff company has seriously thought that the place
of delivery was New York and Not Manila, it would not
have gone to the trouble of making fruitless attempts to
substitute goods for the merchandise named in the
contract, but would have permitted the entire loss of the
shipment to fall upon the defendant. Under plaintiffs
hypothesis, the defendant would have been the
absolute owner of the specific soda confiscated at
Penang and would have been indebted for the contract
price of the same.
This view is corroborated by the facts. The goods were
not shipped nor consigned from New York to plaintiff.
The bill of lading was for goods received from Neuss
Hesslein & Co. the documents evidencing said
shipment and symbolizing the property were sent by
Neuss Hesslein & Co. to the Bank of the Philippine
Islands with a draft upon Behn, Meyer & Co. and with
instructions to deliver the same, and thus transfer the
property to Behn, Meyer & Co. when and if Behn,
Meyer & Co. should pay the draft.
The place of delivery was Manila and plaintiff has not
legally excused default in delivery of the specified
merchandise at that place.
3. TIME OF DELIVERY.
the price of $9.75 per one hundred pounds, cost,
insurance, and freight included, to be shipped during
March, 1916, to be delivered to Manila and paid for on
delivery of the documents.
PERFORMANCE.
In resume, we find that the plaintiff has not proved the
performance on its part of the conditions precedent in
the contract. The warranty — the material promise —
of the seller to the buyer has not been complied with.
The buyer may therefore rescind the contract of sale
because of a breach in substantial particulars going to
the essence of the contract. As contemplated by article
1451 of the Civil Code, the vendee can demand
fulfillment of the contract, and this being shown to be
impossible, is relieved of his obligation. There thus
being sufficient ground for rescission, the defendant is
not liable.
The judgment of the trial court ordering that the plaintiff
take nothing by its action, without special finding as to
costs, is affirmed, with the costs of this instance.
Against the appellant. So ordered.
Arellano, C.J., Torres, Johnson, Street and Avanceña,
JJ., concur.

Facts. — The contract provided for: "Embarque: March

1916," the merchandise was in fact shipped from New
York on the Steamship Chinese Prince on April 12,
1916.

Law. — The previous discussion makes a resolution of

this point unprofitable, although the decision of the
United States Supreme Court in Norrington vs. Wright
(([1885], 115 U.S., 188) can be read with profit.
Appellant's second and third assignments of error
could, if necessary, be admitted, and still could not
recover.

THE CONTRACT.

To answer the inquiry with which we begun this

decision, the contract between the parties was for 80
drums of caustic soda, 76 per cent "Carabao" brand, at
Sales 2 of 70
 EN BANC has the option of delivering 5 per cent more or less of 110 per cent of CIF contract value. Seller to allow
the contracted quantity, such surplus or deficiency to buyer from the CIF price an amount equivalent to the
[G.R. No. L-8717. November 20, 1956.]
be settled as follows:chanroblesvirtuallawlibrary On current rate of insurance prevailing on the date
GENERAL FOODS CORPORATION, Plaintiff- the basis of the delivered weight up to 3 per cent at of shipment, in lieu of sellers covering usual marine
Appellant, vs. NATIONAL COCONUT the contract price and any excess or deficiency insurance themselves.
CORPORATION, Defendant-Appellee. beyond this 3 per cent at the market price of the day
of arrival at port of discharge, this market price to be CLAUSE
fixed by the Executive Committee of the National PARAMOUNT:chanroblesvirtuallawlibrary This
Institute of Oilseeds Products. Each shipment to contract is subject to published rules of the National
DECISION Institute of Oilseeds Products adopted and now in
be treated as a separate contract.
REYES, J. B. L., J.: force, which are hereby made a part hereof. Any
PACKING:chanroblesvirtuallawlibrary In bulk. dispute arising under this contract shall be settled by
Appellant General Foods Corporation is a foreign SHIPMENT:chanroblesvirtuallawlibrary November, a Board of Arbitrators selected by the Chairman of
corporation organized under the laws of the State of 1947, earlier if possible, from Philippine Islands. the Foreign Commerce Association of the San
Delaware, U. S. A., and licensed to do business in the Francisco Chamber of Commerce and to be judged
Philippines; chan PRICE:chanroblesvirtuallawlibrary One hundred and according to the rules of the National Institute of
roblesvirtualawlibrarywhile Appellee National Coconut sixty-four dollars ($164) per ton of 2,000 pounds, CIF Oilseeds Products and the findings of said Board will
Corporation (otherwise called NACOCO), was, on the New York. be final and binding upon all the signatories hereto,
date of the transaction in question, a corporation PAYMENT:chanroblesvirtuallawlibrary Buyers to providing such rules are not in conflict with existing
created by Commonwealth Act No. 518, but later open immediately by cable in favor of Sellers Government regulations.
abolished and place in liquidation by Executive Order Irrevocable Letter of Credit through the Philippine
No. 3727 dated November 24, 1950. The above shipment to be made under Franklin
National Bank for 95 per cent of invoice value based Baker’s license No. 26429. This contract covers the
On September 23, 1947, Appellee sold on shipping weight in exchange for the following sale made by the Nacoco thru the Mercantile, Inc.
to Appellant 1,500 (later reduced to 1,000) long tons of documents:chanroblesvirtuallawlibrary dated September 9, 1947 in the Philippines.” (Exhibit
copra, at $164 (later reduced to $163) per ton of 2,000 1. Provisional Invoice. “A”).
pounds, under the following terms and
conditions:chanroblesvirtuallawlibrary 2. Full set of negotiable ocean bills of lading, freight From November 14 to December 3,
charges fully prepaid and showing the material on 1947, Appellee shipped 1054.6278 short tons of copra
“CONTRACT NO. RH-3551 board. to Appellant on board the S. S. “Mindoro”. The
weighing of the cargo was done by the Luzon
FRANKLIN BAKER DIVISION OF GENERAL FOODS 3. Weight Certificate confirming quantity shown on Brokerage Co., in its capacity as agent of the General
CORPORATION invoice and bill of lading. Superintendence Co., Ltd., of Geneva, Switzerland, by
15th & Bloomfield Streets 4. Consular invoice or certificate of origin in duplicate. taking the individual weight of each bag of copra and
summing up the total gross weight of the shipment,
Hoboken, New Jersey 5. Loading survey report and weight certificate of then weighing a certain number of empty bags to
WE CONFIRM HAVING PURCHASED FOR YOU Superintendence Corporation. determine the average tare of the empty bags, which
TODAY from Messrs. National Coconut Corporation, was subtracted from the gross weight of the shipment
6. Consular form No. 197 (Pure Food & Drug
Manila, Philippine Islands, through Mercantile, Inc., to determine the net weight of the cargo. On the
Certificate).
Manila, P. I. strength of the net weigh thus
Balance due to be paid promptly upon ascertainment found, Appellee prepared and remitted
COMMODITY:chanroblesvirtuallawlibrary COPRA — and based upon outturn weights and quality at port of to Appellant the corresponding bills of lading and other
Fair Merchantable Quality, Basis discharge. documents, and withdrew from the latter’s letter of
6% F. F. A. credit 95 per cent of the invoice value of the shipment,
WEIGHTS:chanroblesvirtuallawlibrary Net landed or a total of $136,686.95.
QUALITY:chanroblesvirtuallawlibrary As per rule 100 weights.
of National Institute of Upon arrival in New York, the net cargo was reweighed
SAMPLING:chanroblesvirtuallawlibrary As per Rule by Appellant and was found to weigh only 898.792
Oilseeds Products. 101 of National Institute of Oilseeds Products. short tons. Deducting from the value of the shortage
INSURANCE:chanroblesvirtuallawlibrary Buyer to the sum of $8,092.02 received by Appellant from the
QUANTITY:chanroblesvirtuallawlibrary Fifteen
provide valid insurance for Marine and War risks for insurer for 58.25 long tons lost or destroyed even
Hundred (1500) tons of 2,240 pounds each. Seller
before the copra was loaded on board the
Sales 3 of 70
vessel, Appellant demanded from Appellee the refund
of the amount of $24,154.59. Sometime after the
receipt of Appellant’s demand, the Appellee, through
its officers-in-charge Jose Nieva, Sr., acknowledged in
a letter liability for the deficiency in the outturn weights
of the copra and promised payment thereof as soon as
funds were available (Exhibit “B”). Then Appellee was,
as already stated, abolished and went into
liquidation. Appellant submitted its claim to the Board
of Liquidators, which refused to pay the same; chan
roblesvirtualawlibrarywherefore, it filed the present
action in the Court of First Instance of Manila to recover
from Defendant-Appellee the amount of $24,154.49
and the 17 per cent exchange tax thereon which, under
the provisions of Republic Act 529, had to be paid in
order to remit said amount to the United States, plus
attorney’s fees and costs. The Court a quo found for
the Defendant and dismissed the complaint; chan
roblesvirtualawlibraryhence, this appeal by Plaintiff.
Plaintiff-Appellant’s theory is that although the sale
between the parties quoted a CIF New York price, the
agreement contemplated the payment of the price
according to the weight and quality of the cargo upon
arrival in New York, the port of destination, and that
therefore, the risk of the shipment was upon the
seller. Defendant-Appellee, on the other hand, insists
that the contract in question was an ordinary C. I. F.
agreement wherein delivery to the carrier is delivery to
the buyer, and that the shipment having been delivered
to the buyer and the latter having paid its price, the sale
was consummated.
There is no question that under an ordinary C.I.F.
agreement, delivery to the buyer is complete upon
delivery of the goods to the carrier and tender of the
shipping and other documents required by the contract
and the insurance policy taken in the buyer’s behalf
(77 C.J. S. 983; chan roblesvirtualawlibrary46 Am. Jur.
313; chan roblesvirtualawlibraryII Williston on Sales,
103 — 107). There is equally no question that the
parties may, by express stipulation or impliedly (by
making the buyer’s obligation depend on arrival and
inspection of the goods), modify a CIF contract and
throw the risk upon the seller until arrival in the port of
destination (77 CJS 983- 984; chan
roblesvirtualawlibraryWilliston, supra, 116; chan
roblesvirtualawlibraryalso Willits vs. Abekobei, 189
NYS 525; chan roblesvirtualawlibraryNational
Wholesale Grocery Co. vs. Mann. 146 NE 791,
Klipstein vs. Dilsizian, 273 F 473).
In the transaction now in question, despite the quoted
price of CIF New York, and the right of the seller to
withdraw 95 per cent of the invoice price from the
buyer’s letter of credit upon tender of the shipping and
other documents required by the contract, the express
agreement that the “Net Landed Weights” were to
govern, and the provision that the balance of the price
was to be ascertained on the basis of outturn weights
and quality of the cargo at the port of discharge,
indicate an intention that the precise amount to be paid
by the buyer depended upon the ascertainment of the
exact net weight of the cargo at the port of destination.
That is furthermore shown by the provision that the
seller could deliver 5 per cent more or less than the
contracted quantity, such surplus or deficiency to be
paid “on the basis of the delivered weight”.
In our opinion, the governing rule may be found in the
decision of the Supreme Court of New York in the case
of Warner, Barnes & Co. vs. Warner Sugar R. Co., 192
NYS 151, cited in Appellee’s brief (pp. 16-19.) In said
case, the parties had expressly agreed that the
payment of the price was to be according to “landed
weights”, and that delivery of the goods shipped from
the Philippine Islands to New York was to be in New
York ex vessel at wharf; chan roblesvirtualawlibrarybut
it was also agreed that the seller had the right, upon
presentation of full shipping documents, including full
insurance, to draw upon the Defendants for 90 per cent
of the invoice price, evidencing an intent to give the
buyers dominion over the goods and to place the risk
of loss upon them. The reasonable construction given
by the Court to this contract was
that:chanroblesvirtuallawlibrary
“though the seller was required to deliver the goods at
a customary wharf in New York, and the price could not
be finally determined until the goods were landed, yet
the property in the goods and the risk of loss was
intended to pass when the full shipping documents
were presented, including an insurance policy. If the
goods were totally lost, then by the express terms of
the contract the buyers were to pay the full amount of
invoice and if the goods were partially lost, then it is
fairly inferable that, while payment was to be made
according to landed weights, the seller should not be
deprived of the right to show that these landed weights
were diminished by loss or damage due to the risk of
the voyage. Any other construction of the contract
would require the seller to provide insurance for the
buyer for a loss which falls not on the buyer, but on the
seller.” (Emphasis supplied.)
The same could be said in the instant case. While the
risk of loss was apparently placed on
the Appellant after delivery of the cargo to the carrier,
it was nevertheless agreed that the payment of the
price was to be according to the “net landed weight”.
The net landed or outturn weight of the cargo, upon
arrival in New York, was 898.692 short tons. Although
the evidence shows that the estimated weight of the
shipment when it left Manila was 1,054.6278 tons,
the Appellee had the burden of proof to show that the
shortage in weight upon arrival in New York was due
to risks of the voyage and not the natural drying up of
the copra while in transit, or to reasonable allowances
for errors in the weighing of the gross cargo and the
empty bags in Manila. In the absence of such proof on
the part of the shipper-Appellee, we are constrained to
hold that the net landed weight of the shipment in New
York should control, as stipulated in the agreement,
and that therefore, the Appellee should be held liable
for the amount of $24,154.59 which it had overdrawn
from Appellant’s letter of credit.
Appellee contends that as it was only the “balance due
to be paid” that was to be ascertained and based “upon
outturn weights and quality at port of discharge”, as
provided in the contract, there was no more balance
due to be ascertained at the port of discharge because
it had already received full payment of the copra it sent
to the Appellant when it withdrew $136,686.95 from the
latter’s letter of credit. The argument is untenable. The
provision regarding the ascertainment of the balance
due based upon outturn weight and quality of the
shipment at the port of discharge, should not be
construed separately from the stipulation that the “net
landed weight” was to control. The manifest intention
of the parties was for the total price to be finally
ascertained only upon determining the net weight and
quality of the goods upon arrival in New York, most
likely because the cargo in question, being copra, by
nature dries up and diminishes in weight during the
voyage; chan roblesvirtualawlibrarythat no bulk
weigher was available in Manila so that the best that
could be done was to get the gross weight of the
shipment and deduct the average tare of the empty
bags; chan roblesvirtualawlibraryand that the buyer in
New York had no agent in Manila to represent it and
protect its interest during the weighing of the cargo.
The intention of the parties to be bound by the outturn
Sales 4 of 70
or net landed weight in New York is clearly shown in
the letter of Appellee’s then officer-in-charge Jose
Nieva, Sr., acknowledging liability for the deficiency in
the outturn weight of the copra (Exhibit “B”). Although
this letter may not be considered an admission of
liability on the part of Appellee in the absence of a
showing that Nieva was authorized to admit liability for
the corporation, it is nevertheless competent evidence
of the intention of the parties, particularly the
NACOCO, to be bound by the net landed weight or
outturn weight of the copra at the port of discharge.
With respect to Appellant’s claim for damages
equivalent to the 17 per cent excise tax which it has to
pay in order to remit the sum of $24,154.59 to the
United States, such excise tax is no longer imposed in
view of the trade (Laurel-Langley) agreement, so that
it need not be taken into account.
Wherefore, the judgment appealed from is reversed
and the Appellee National Coconut Corporation is
ordered to pay the Appellant General Foods
Corporation the equivalent in Philippine currency of the
amount of $24,154.59, with legal interest from the time
of the filing of the complaint. No pronouncement as to
costs. SO ORDERED.
Parás, C.J., Bengzon, Padilla, Montemayor,
Bautista Angelo, Labrador, Concepcion, Endencia
and Felix, JJ., concur.

Sales 5 of 70
 Republic of the Philippines
SUPREME COURT
SECOND DIVISION
G.R. No. 122463 December 19, 2005
RUDOLF LIETZ, INC., Petitioner,
vs.
THE COURT OF APPEALS, AGAPITO BURIOL,
TIZIANA TURATELLO & PAOLA
SANI, Respondents.
DECISION
Tinga, J.:
This is a petition for review on certiorari under Rule 45
of the Revised Rules of Court, praying for the
annulment of the Decision1 dated April 17, 1995 and
the Resolution2 dated October 25, 1995 of the Court of
Appeals in CA-G.R. CV No. 38854. The Court of
Appeals affirmed the Decision3 in Civil Case No. 2164
of the Regional Trial Court (RTC), Branch 48, of
Palawan and Puerto Princesa City with the
modification that herein respondents Tiziana Turatello
and Paola Sani are entitled to damages, attorney’s
fees, and litigation expenses.
The dispositive portion of the RTC Decision reads:
WHEREFORE, in view of the foregoing and as prayed
for by the defendants, the instant complaint is hereby
DISMISSED. Defendant’s counterclaim is likewise
DISMISSED. Plaintiff, however, is ordered to pay
defendant Turatello and Sani’s counsel the sum of
₱3,010.38 from August 9, 1990 until fully paid
representing the expenses incurred by said counsel
when the trial was cancelled due to the non-
appearance of plaintiff’s witnesses. With costs against
the plaintiff.
SO ORDERED.4
As culled from the records, the following antecedents
appear:
Respondent Agapito Buriol previously owned a parcel
of unregistered land situated at Capsalay Island, Port
Barton, San Vicente, Palawan. On August 15, 1986,
respondent Buriol entered into a lease agreement with
Flavia Turatello and respondents Turatello and Sani,
all Italian citizens, involving one (1) hectare of
respondent Buriol’s property. The lease agreement
was for a period of 25 years, renewable for another 25
years. The lessees took possession of the land after
paying respondent Buriol a down payment of
₱10,000.00.5 The lease agreement, however, was
reduced into writing only in January 1987.
On November 17, 1986, respondent Buriol sold to
petitioner Rudolf Lietz, Inc. the same parcel of land for
the amount of ₱30,000.00. The Deed of Absolute
Sale embodying the agreement described the land as
follows:
A parcel of land, consisting of FIVE (5) hectares, more
or less, a portion of that parcel of land declared in the
name of Agapito Buriol, under Tax Declaration No.
0021, revised in the year 1985, together with all
improvements thereon, situated at the Island of
Capsalay, Barangay Port Barton, municipality of San
Vicente, province of Palawan which segregated from
the whole parcel described in said tax declaration, has
the following superficial boundaries: NORTH, Sec. 01-
017; and remaining property of the vendor; EAST, by
Seashore; SOUTH, 01-020; and WEST, by 01-018
(now Elizabeth Lietz).6
Petitioner later discovered that respondent Buriol
owned only four (4) hectares, and with one more
hectare covered by lease, only three (3) hectares were
actually delivered to petitioner. Thus, petitioner
instituted on April 3, 1989 a complaint for Annulment of
Lease with Recovery of Possession with Injunction and
Damages against respondents and Flavia Turatello
before the RTC. The complaint alleged that with
evident bad faith and malice, respondent Buriol sold to
petitioner five (5) hectares of land when respondent
Buriol knew for a fact that he owned only four (4)
hectares and managed to lease one more hectare to
Flavia Turatello and respondents Tiziana Turatello and
Paola Sani. The complaint sought the issuance of a
restraining order and a writ of preliminary injunction to
prevent Flavia Turatello and respondents Turatello and
Sani from introducing improvements on the property,
the annulment of the lease agreement between
respondents, and the restoration of the amount paid by
petitioner in excess of the value of the property sold to
him. Except for Flavia Turatello, respondents filed
separate answers raising similar defenses of lack of
cause of action and lack of jurisdiction over the action
for recovery of possession. Respondents Turatello and
Sani also prayed for the award of damages and
attorney’s fees.7
After trial on the merits, the trial court rendered
judgment on May 27, 1992, dismissing both petitioner’s
complaint and respondents’ counterclaim for damages.
Petitioner and respondents Turatello and Sani
separately appealed the RTC Decision to the Court of
Appeals, which affirmed the dismissal of petitioner’s
complaint and awarded respondents Turatello and
Sani damages and attorney’s fees. The dispositive
portion of the Court of Appeals Decision reads:
WHEREFORE, the decision appealed from is hereby
AFFIRMED, with the following modification:
Plaintiff-appellant Rudolf Lietz, Inc. is hereby (1)
ordered to pay defendants-appellants Turatello and
Sani, the sum of ₱100,000.00 as moral damages; (2)
₱100,000.00 as exemplary damages; (3) ₱135,728.73
as attorney’s fees; and (4) ₱10,000.00 as litigation
expenses.
SO ORDERED.8
Petitioner brought to this Court the instant petition after
the denial of its motion for reconsideration of the Court
of Appeal Decision. The instant petition imputes the
following errors to the Court of Appeals.
I. IN DEFENDING AGAPITO BURIOL’S GOOD FAITH
AND IN STATING THAT ASSUMING THAT HE
(BURIOL) WAS IN BAD FAITH PETITIONER WAS
SOLELY RESPONSIBLE FOR ITS INEXCUSABLE
CREDULOUSNESS.
II. IN ASSERTING THAT ARTICLES 1542 AND 1539
OF THE NEW CIVIL CODE ARE, RESPECTIVELY,
APPLICABLE AND INAPPLICABLE IN THE CASE AT
BAR.
Sales 6 of 70
III. IN NOT GRANTING PETITIONER’S CLAIM FOR
ACTUAL AND EXEMPLARY DAMAGES.
IV. IN GRANTING RESPONDENTS TIZIANA
TURATELLO AND PAOLA SANI EXHORBITANT [sic]
AMOUNTS AS DAMAGES WHICH ARE EVEN
BEREFT OF EVIDENTIARY BASIS.9
Essentially, only two main issues confront this Court,
namely: (i) whether or not petitioner is entitled to the
delivery of the entire five hectares or its equivalent, and
(ii) whether or not damages may be awarded to either
party.
Petitioner contends that it is entitled to the
corresponding reduction of the purchase price because
the agreement was for the sale of five (5) hectares
although respondent Buriol owned only four (4)
hectares. As in its appeal to the Court of Appeals,
petitioner anchors its argument on the second
paragraph of Article 1539 of the Civil Code, which
provides:
Art. 1539. The obligation to deliver the thing sold
includes that of placing in the control of the vendee all
that is mentioned in the contract, in conformity with the
following rules:
If the sale of real estate should be made with a
statement of its area, at the rate of a certain price for a
unit of measure or number, the vendor shall be obliged
to deliver to the vendee, if the latter should demand it,
all that may have been stated in the contract; but,
should this be not possible, the vendee may choose
between a proportional reduction of the price and the
rescission of the contract, provided that, in the latter
case, the lack in the area be not less than one-tenth of
that stated.
....
The Court of Appeals Decision, however, declared as
inapplicable the abovequoted provision and instead
ruled that petitioner is no longer entitled to a reduction
in price based on the provisions of Article 1542 of the
Civil Code, which read:
Art. 1542. In the sale of real estate, made for a lump
sum and not at the rate of a certain sum for a unit of
measure or number, there shall be no increase or
decrease of the price, although there be a greater or
lesser area or number than that stated in the contract.
The same rule shall be applied when two or more
immovables are sold for a single price; but if, besides
mentioning the boundaries, which is indispensable in
every conveyance of real estate, its area or number
should be designated in the contract, the vendor shall
be bound to deliver all that is included within said
boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to
do so, he shall suffer a reduction in the price, in
proportion to what is lacking in the area or number,
unless the contract is rescinded because the vendee
does not accede to the failure to deliver what has been
stipulated.
Article 1539 governs a sale of immovable by the unit,
that is, at a stated rate per unit area. In a unit price
contract, the statement of area of immovable is not
conclusive and the price may be reduced or increased
depending on the area actually delivered. If the vendor
delivers less than the area agreed upon, the vendee
may oblige the vendor to deliver all that may be stated
in the contract or demand for the proportionate
reduction of the purchase price if delivery is not
possible. If the vendor delivers more than the area
stated in the contract, the vendee has the option to
accept only the amount agreed upon or to accept the
whole area, provided he pays for the additional area at
the contract rate.10
In some instances, a sale of an immovable may be
made for a lump sum and not at a rate per unit. The
parties agree on a stated purchase price for an
immovable the area of which may be declared based
on an estimate or where both the area and boundaries
are stated.
In the case where the area of the immovable is stated
in the contract based on an estimate, the actual area
delivered may not measure up exactly with the area
stated in the contract. According to Article 154211 of the
Civil Code, in the sale of real estate, made for a lump
sum and not at the rate of a certain sum for a unit of
measure or number, there shall be no increase or
decrease of the price although there be a greater or
lesser area or number than that stated in the contract.
However, the discrepancy must not be substantial. A
vendee of land, when sold in gross or with the
description "more or less" with reference to its area,
does not thereby ipso facto take all risk of quantity in
the land. The use of "more or less" or similar words in
designating quantity covers only a reasonable excess
or deficiency.12
Where both the area and the boundaries of the
immovable are declared, the area covered within the
boundaries of the immovable prevails over the stated
area. In cases of conflict between areas and
boundaries, it is the latter which should prevail. What
really defines a piece of ground is not the area,
calculated with more or less certainty, mentioned in its
description, but the boundaries therein laid down, as
enclosing the land and indicating its limits. In a contract
of sale of land in a mass, it is well established that the
specific boundaries stated in the contract must control
over any statement with respect to the area contained
within its boundaries. It is not of vital consequence that
a deed or contract of sale of land should disclose the
area with mathematical accuracy. It is sufficient if its
extent is objectively indicated with sufficient precision
to enable one to identify it. An error as to the superficial
area is immaterial.13 Thus, the obligation of the vendor
is to deliver everything within the boundaries,
inasmuch as it is the entirety thereof that distinguishes
the determinate object.14
As correctly noted by the trial court and the Court of
Appeals, the sale between petitioner and respondent
Buriol involving the latter’s property is one made for a
lump sum. The Deed of Absolute Sale shows that the
parties agreed on the purchase price on a
predetermined area of five hectares within the
specified boundaries and not based on a particular rate
per area. In accordance with Article 1542, there shall
be no reduction in the purchase price even if the area
delivered to petitioner is less than that stated in the
contract. In the instant case, the area within the
boundaries as stated in the contract shall control over
the area agreed upon in the contract.
The Court rejects petitioner’s contention that the
property’s boundaries as stated in the Deed of
Absolute Sale are superficial and unintelligible and,
Sales 7 of 70
therefore, cannot prevail over the area stated in the SO ORDERED.
contract. First, as pointed out by the Court of Appeals,
at an ocular inspection prior to the perfection of the
contract of sale, respondent Buriol pointed to petitioner
the boundaries of the property. Hence, petitioner
gained a fair estimate of the area of the property sold
to him. Second, petitioner cannot now assail the
contents of the Deed of Absolute Sale, particularly the
description of the boundaries of the property, because
petitioner’s subscription to the Deed of Absolute
Sale indicates his assent to the correct description of
the boundaries of the property.

Petitioner also asserts that respondent Buriol is guilty

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

The Court of Appeals reversed the trial court’s

dismissal of respondents Turatello and Sani’s
counterclaim for moral and exemplary damages,
attorney’s fees and litigation expenses. In awarding
moral damages in the amount of ₱100,000 in favor of
Turatello and Sani, the Court of Appeals justified the
award to alleviate the suffering caused by petitioner’s
unfounded civil action. The filing alone of a civil action
should not be a ground for an award of moral damages
in the same way that a clearly unfounded civil action is
not among the grounds for moral damages.15

Exemplary or corrective damages are imposed, by way

of example or correction for the public good, in addition
to the moral, temperate, liquidated or compensatory
damages.16 With the deletion of the award for moral
damages, there is no basis for the award of exemplary
damages.

WHEREFORE, the instant petition for review on

certiorari is GRANTED in PART. The Court of
Appeals Decision in CA-G.R. CV No. 38854 is
AFFIRMED with the MODIFICATION that the award of
moral and exemplary damages is DELETED.
Sales 8 of 70
 THIRD DIVISION
G.R. No. 128573 January 13, 2003
NAAWAN COMMUNITY RURAL BANK
INC., petitioner,
vs.
THE COURT OF APPEALS and SPOUSES
ALFREDO AND ANNABELLE LUMO, respondents.
CORONA, J.:
Under the established principles of land registration, a
person dealing with registered land may generally rely
on the correctness of a certificate of title and the law
will in no way oblige him to go beyond it to determine
the legal status of the property.
Before us is a Petition for Review on Certiorari
challenging the February 7, 1997 Decision1 of the
Court of Appeals in CA-G.R. CV No. 55149, which in
turn affirmed the decision2 of the Regional Trial Court
of Misamis Oriental, Branch 18 as follows:
"WHEREFORE, the plaintiffs-spouses are
adjudged the absolute owners and
possessors of the properties in question (Lot
18583, under TCT No. T-50134, and all
improvements thereon) and quieting title
thereto as against any and all adverse claims
of the defendant. Further, the sheriff's
certificate of sale, Exhibit 4; 4-A; Sheriff's
deed of final conveyance, Exhibit 5, 5-A; Tax
Declarations No. 71211, Exhibit 7, and any
and all instrument, record, claim,
encumbrance or proceeding in favor of the
defendant, as against the plaintiffs, and their
predecessor-in-interest, which may be extant
in the office of the Register of Deeds of
Province of Misamis Oriental, and of Cagayan
de Oro City, and in the City Assessor's Office
of Cagayan de Oro City, are declared as
invalid and ineffective as against the plaintiffs'
title.
"The counterclaim is dismissed for lack of
merit.
"SO ORDERED."3
The facts of the case, as culled from the records, are
as follows:
On April 30, 1988, a certain Guillermo Comayas
offered to sell to private respondent-spouses Alfredo
and Annabelle Lumo, a house and lot measuring 340
square meters located at Pinikitan, Camaman-an,
Cagayan de Oro City.
Wanting to buy said house and lot, private respondents
made inquiries at the Office of the Register of Deeds of
Cagayan de Oro City where the property is located and
the Bureau of Lands on the legal status of the vendor's
title. They found out that the property was mortgaged
for P8,000 to a certain Mrs. Galupo and that the
owner's copy of the Certificate of Title to said property
was in her possession.
Private respondents directed Guillermo Comayas to
redeem the property from Galupo at their expense,
giving the amount of P10,000 to Comayas for that
purpose.
On May 30, 1988, a release of the adverse claim of
Galupo was annotated on TCT No. T-41499 which
covered the subject property.
In the meantime, on May 17, 1988, even before the
release of Galupo's adverse claim, private respondents
and Guillermo Comayas, executed a deed of absolute
sale. The subject property was allegedly sold for
P125,000 but the deed of sale reflected the amount of
only P30,000 which was the amount private
respondents were ready to pay at the time of the
execution of said deed, the balance payable by
installment.
On June 9, 1988, the deed of absolute sale was
registered and inscribed on TCT No. T-41499 and, on
even date, TCT No. T-50134 was issued in favor of
private respondents.
After obtaining their TCT, private respondents
requested the issuance of a new tax declaration
certificate in their names. However, they were
surprised to learn from the City Assessor's Office that
the property was also declared for tax purposes in the
name of petitioner Naawan Community Rural Bank Inc.
Records in the City Assessor's Office revealed that, for
the lot covered by TCT No. T-50134, Alfredo Lumo's
T/D # 83324 bore the note: "This lot is also declared in
the name of Naawan Community Rural Bank Inc. under
T/D # 71210".
Apparently, on February 7, 1983, Guillermo Comayas
obtained a P15,000 loan from petitioner Bank using the
subject property as security. At the time said contract
of mortgage was entered into, the subject property was
then an unregistered parcel of residential land, tax-
declared in the name of a certain Sergio A. Balibay
while the residential one-storey house was tax-
declared in the name of Comayas.
Balibay executed a special power of attorney
authorizing Comayas to borrow money and use the
subject lot as security. But the Deed of Real Estate
Mortgage and the Special Power of Attorney were
recorded in the registration book of the Province of
Misamis Oriental, not in the registration book of
Cagayan de Oro City. It appears that, when the
registration was made, there was only one Register of
Deeds for the entire province of Misamis Oriental,
including Cagayan de Oro City. It was only in 1985
when the Office of the Register of Deeds for Cagayan
de Oro City was established separately from the Office
of the Register of Deeds for the Province of Misamis
Oriental.
For failure of Comayas to pay, the real estate mortgage
was foreclosed and the subject property sold at a
public auction to the mortgagee Naawan Community
Rural Bank as the highest bidder in the amount of
P16,031.35. Thereafter, the sheriff's certificate of sale
was issued and registered under Act 3344 in the
Register of Deeds of the Province of Misamis Oriental.
On April 17, 1984, the subject property was registered
in original proceedings under the Land Registration
Act. Title was entered in the registration book of the
Register of Deeds of Cagayan de Oro City as Original
Certificate of Title No. 0-820, pursuant to Decree No.
N-189413.
Sales 9 of 70
On July 23, 1984, Transfer Certificate of Title No. T-
41499 in the name of Guillermo P. Comayas was
entered in the Register of Deeds of Cagayan de Oro
City.
Meanwhile, on September 5, 1986, the period for
redemption of the foreclosed subject property lapsed
and the MTCC Deputy Sheriff of Cagayan de Oro City
issued and delivered to petitioner bank the sheriff's
deed of final conveyance. This time, the deed was
registered under Act 3344 and recorded in the
registration book of the Register of Deeds of Cagayan
de Oro City.
By virtue of said deed, petitioner Bank obtained a tax
declaration for the subject house and lot.
Thereafter, petitioner Bank instituted an action for
ejectment against Comayas before the MTCC which
decided in its favor. On appeal, the Regional Trial Court
affirmed the decision of the MTCC in a decision dated
April 13, 1988.
On January 27, 1989, the Regional Trial Court issued
an order for the issuance of a writ of execution of its
judgment. The MTCC, being the court of origin,
promptly issued said writ.
However, when the writ was served, the property was
no longer occupied by Comayas but herein private
respondents, the spouses Lumo who had, as earlier
mentioned, bought it from Comayas on May 17, 1988.
Alarmed by the prospect of being ejected from their
home, private respondents filed an action for quieting
of title which was docketed as Civil Case No. 89-138.
After trial, the Regional Trial Court rendered a decision
declaring private respondents as purchasers for value
and in good faith, and consequently declaring them as
the absolute owners and possessors of the subject
house and lot. Petitioner appealed to the Court of
Appeals which in turn affirmed the trial court's decision.
Hence, this petition.
Petitioner raises the following issues:
I. WHETHER OR NOT THE SHERIFF'S
DEED OF FINAL CONVEYANCE WAS DULY
EXECUTED AND REGISTERED IN THE
REGISTER OF DEEDS OF CAGAYAN DE
ORO CITY ON DECEMBER 2, 1986;
II. WHETHER OR NOT REGISTRATION OF
SHERIFF'S DEED OF FINAL CONVEYANCE
IN THE PROPER REGISTRY OF DEEDS
COULD BE EFFECTIVE AS AGAINST
SPOUSES LUMO.
Both parties cite Article 1544 of the Civil Code which
governs the double sale of immovable property.
Article 1544 provides:
". . . . 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."
Petitioner bank contends that the earlier registration of
the sheriff's deed of final conveyance in the day book
under Act 3344 should prevail over the later
registration of private respondents' deed of absolute
sale under Act 496,4 as amended by the Property
Registration Decree, PD 1529.
This contention has no leg to stand on. It has been held
that, where a person claims to have superior
proprietary rights over another on the ground that he
derived his title from a sheriff's sale registered in the
Registry of Property, Article 1473 (now Article 1544) of
the Civil Code will apply only if said execution sale of
real estate is registered under Act 496.5
Unfortunately, the subject property was still untitled
when it was already acquired by petitioner bank by
virtue of a final deed of conveyance. On the other hand,
when private respondents purchased the same
property, it was covered by the Torrens System.
Petitioner also relies on the case of Bautista vs.
Fule6 where the Court ruled that the registration of an
instrument involving unregistered land in the Registry
of Deeds creates constructive notice and binds third
person who may subsequently deal with the same
property.
However, a close scrutiny of the records reveals that,
at the time of the execution and delivery of the sheriff's
deed of final conveyance on September 5, 1986, the
disputed property was already covered by the Land
Registration Act and Original Certificate of Title No. 0-
820 pursuant to Decree No. N189413 was likewise
already entered in the registration book of the Register
of Deeds of Cagayan De Oro City as of April 17, 1984.
Thus, from April 17, 1984, the subject property was
already under the operation of the Torrens System.
Under the said system, registration is the operative act
that gives validity to the transfer or creates a lien upon
the land.
Moreover, the issuance of a certificate of title had the
effect of relieving the land of all claims except those
noted thereon. Accordingly, private respondents, in
dealing with the subject registered land, were not
required by law to go beyond the register to determine
the legal condition of the property. They were only
charged with notice of such burdens on the property as
were noted on the register or the certificate of title. To
have required them to do more would have been to
defeat the primary object of the Torrens System which
is to make the Torrens Title indefeasible and valid
against the whole world.
Private respondents posit that, even assuming that the
sheriff's deed of final conveyance in favor of petitioner
bank was duly recorded in the day book of the Register
of Deeds under Act 3344, ownership of the subject real
property would still be theirs as purchasers in good
faith because they registered the sale first under the
Property Registration Decree.
The rights created by the above-stated statute of
course do not and cannot accrue under an inscription
in bad faith. Mere registration of title in case of double
sale is not enough; good faith must concur with the
registration.7
Petitioner contends that the due and proper registration
of the sheriff's deed of final conveyance on December
2, 1986 amounted to constructive notice to private
Sales 10 of 70
respondents. Thus, when private respondents bought
the subject property on May 17, 1988, they were
deemed to have purchased the said property with the
knowledge that it was already registered in the name
of petitioner bank.
Thus, the only issue left to be resolved is whether or
not private respondents could be considered as buyers
in good faith.
The "priority in time" principle being invoked by
petitioner bank is misplaced because its registration
referred to land not within the Torrens System but
under Act 3344. On the other hand, when private
respondents bought the subject property, the same
was already registered under the Torrens System. It is
a well-known rule in this jurisdiction that persons
dealing with registered land have the legal right to rely
on the face of the Torrens Certificate of Title and to
dispense with the need to inquire further, except when
the party concerned has actual knowledge of facts and
circumstances that would impel a reasonably cautious
man to make such inquiry.8
Considering therefore that private respondents
exercised the diligence required by law in ascertaining
the legal status of the Torrens title of Guillermo
Comayas over the subject property and found no flaws
therein, they should be considered as innocent
purchasers for value and in good faith.
Accordingly, the appealed judgment of the appellate
court upholding private respondents Alfredo and
Annabelle Lumo as the true and rightful owners of the
disputed property is affirmed.
WHEREFORE, petition is hereby DENIED.
SO ORDERED.
Puno, Panganiban, Sandoval-Gutierrez, and Carpio-
Morales JJ ., concur

Did private respondents exercise the required diligence

in ascertaining the legal condition of the title to the
subject property so as to be considered as innocent
purchasers for value and in good faith?

We answer in the affirmative.

Before private respondents bought the subject property

from Guillermo Comayas, inquiries were made with the
Registry of Deeds and the Bureau of Lands regarding
the status of the vendor's title. No liens or
encumbrances were found to have been annotated on
the certificate of title. Neither were private respondents
aware of any adverse claim or lien on the property
other than the adverse claim of a certain Geneva
Galupo to whom Guillermo Comayas had mortgaged
the subject property. But, as already mentioned, the
claim of Galupo was eventually settled and the adverse
claim previously annotated on the title cancelled. Thus,
having made the necessary inquiries, private
respondents did not have to go beyond the certificate
of title. Otherwise, the efficacy and conclusiveness of
the Torrens Certificate of Title would be rendered futile
and nugatory.

Sales 11 of 70
 FIRST DIVISION
G.R. No. 167412 February 22, 2006
JUANITA NAVAL, Petitioner,
vs.
COURT OF APPEALS, JUANITO CAMALLA, JAIME
NACION, CONRADO BALILA, ESTER MOYA and
PORFIRIA AGUIRRE, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review assails the Decision1 of the
Court of Appeals dated December 14, 2004, in CA-
G.R. SP No. 86736, which reversed the Decision2 of
the Regional Trial Court (RTC) of Naga City, Branch
26, in Civil Case No. 2004-0054 affirming the
Decision3 of the Municipal Circuit Trial Court (MCTC)
of Magarao-Canaman, Camarines Sur, as well as the
Resolution4 dated February 17, 2005 denying
petitioner’s motion for reconsideration.
The facts of the case are as follows:
On December 2, 1969, Ildefonso A. Naval sold a parcel
of land located in Sto. Tomas, Magarao, Camarines
Sur, consisting of 858 sq. m. to Gregorio B. Galarosa.
The sale was recorded in the Registry of Property of
the Registry of Deeds of Camarines Sur on December
3, 1969 pursuant to Act No. 3344, the law governing
registrations of all instruments on unregistered lands. 5
Subsequently, Gregorio sold portions of the land to
respondents Conrado Rodrigo Balilla6 on November 4,
1976, Jaime Nacion7 on January 10, 1977 and
spouses Ireneo and Ester Moya8 in July 1977, and
Juanito Camalla9 on September 4, 1987. All buyers
occupied the portion they bought, built improvements
thereon, and paid the taxes due thereto.10
The controversy arose when petitioner Juanita Naval,
the great granddaughter of Ildefonso, was issued on
April 1, 1975 by the Register of Deeds of Camarines
Sur an Original Certificate of Title (OCT) No. RP-5386
(29791), covering 733 sq. m. of the subject land.11 She
claimed that she bought the subject land from Ildefonso
in 1972.12
On November 10, 1977, petitioner filed a complaint for
recovery of possession against Bartolome Aguirre,
Conrado Balila,13 Ireneo Moya, Jaime Nacion and
Domingo Nacion, which was docketed as Civil Case
No. 306.14 However, the case was dismissed15 without
prejudice16 for failure to prosecute the action for an
unreasonable length of time.
Almost 20 years later, or on April 21, 1997, petitioner
re-filed the complaint for recovery of possession with
damages before the MCTC of Magarao-Canaman,
Camarines Sur, against Juanita17 Camalla, Diosdado
Balila, Conrado Balila, Forferia18 Aguirre, Jaime
Nacion and Ester Moya. The case was docketed as
Civil Case No. 994.
After trial, the MCTC rendered its decision, the
dispositive portion reads as follows:
WHEREFORE, for all the foregoing consideration,
decision is hereby rendered in favor of the plaintiff and
against defendants:
1) Declaring the plaintiff to be the legal owner
of the land as described in paragraph 2 of the
complaint;
2) Ordering defendants Juanito Camalla,
Diosdado Balila, Conrado Balila, Porferia
Aguirre and Jaime Nacion to vacate the
property in question and to deliver its
possession to the plaintiff;
3) Ordering Ester Moya to vacate the fifty (50)
square meters occupied by her and to
relinquish its possession to the plaintiff;
4) Dismissing the respective claims for
damages of the parties.
Pronouncing no costs.
SO ORDERED.19
Aggrieved, respondents appealed the decision to the
RTC of Naga City, which affirmed in toto the assailed
decision.20
Respondents thereafter elevated the case to the Court
of Appeals via Rule 42 of the Rules of Court. Finding
the prior registration of the deed of sale between
Ildefonso and Gregorio with the Register of Deeds as
a constructive notice to subsequent buyers, the
appellate court reversed the decision of the RTC. Thus,
WHEREFORE, premises considered, the present
petition is hereby GRANTED. The appealed decision
of the court a quo is hereby REVERSED and SET
ASIDE and a new judgment is hereby entered
dismissing respondent's complaint for recovery of
possession with damages. Petitioners' counterclaim for
damages is likewise dismissed for lack of legal and
factual bases.
No pronouncement as to costs.
SO ORDERED.21
Hence, this petition assigning the following errors:
I
THE COURT OF APPEALS ERRED IN
DECLARING THAT GREGORIO
GALAROSA HAS RIGHTFULLY ACQUIRED
OWNERSHIP OVER THE LOT COVERED
BY OCT RP #5386 (29791) AND
DECLARING HIM TO HAVE POSSESSED
THE LOT BEFORE THE ALLEGED SALES
TO RESPONDENTS.
II
THE COURT OF APPEALS ERRED IN
HOLDING THAT THE PAYMENT OF TAXES
BY RESPONDENTS WERE (sic) EVIDENCE
OF LAWFUL POSSESSION AND
OWNERSHIP.
III
Sales 12 of 70
 THE COURT OF APPEALS ERRED IN
DECLARING THAT THE LOTS CLAIMED BY
THE RESPONDENTS HAVE BEEN
POSSESSED BY THEM IN GOOD FAITH
DESPITE THEIR KNOWLEDGE OF THE
EXISTENCE OF OCT RP #5386(29791).22
Petitioner claims that she has superior rights over the
subject land because the sale between Ildefonso and
Gregorio and the subsequent registration thereof with
the Register of Deeds had no legal effect since the
subject land was declared in the name of Agrifina Avila
while the tax declaration cancelled by Gregorio’s was
that of Gregorio Boñaga. Petitioner thus assails the
right claimed by Gregorio over the subject land from
which the respondents derived their respective
claims.23
On the other hand, respondents contend that the
registered sale by Ildefonso to Gregorio in 1969 of the
subject land, from whom they derive their claims, vests
them with better right than the petitioner; that
registration under Act No. 3344 served as constructive
notice to the whole world, including the petitioner, who
claimed to have purchased the subject land from
Ildefonso in 1972, but failed to present evidence to
prove such acquisition.24
We deny the petition.
Prefatorily, a perusal of the records reveals that during
the trial, petitioner vigorously asserted that the subject
land was the exclusive property of Ildefonso who sold
it to her in 1972.25 However, in this appeal, petitioner
assails the ownership not only of Gregorio but also of
Ildefonso by alleging that at the time the latter sold the
land to Gregorio, the same was declared in the name
of Agrifina Avila. When a party adopts a certain theory
in the court below, he is not allowed to change his
theory on appeal, for to allow him to do so would not
only be unfair to the other party, but it would also be
offensive to the basic rules of fair play, justice and due
process.26
In this appeal, the issue for resolution is who has the
superior right to a parcel of land sold to different buyers
at different times by its former owner.
It is not disputed that the subject land belonged to
Ildefonso and that it was not registered under the
Torrens System27 when it was sold to Gregorio in 1969
and to the petitioner in 1972. Further, the deed of sale
between Ildefonso and Gregorio was registered with
the Register of Deeds of Camarines Sur pursuant to
Act No. 3344, as shown by Inscription No. 54609 dated
December 3, 1969, Page 119, Volume 186, File No.
55409 at the back thereof.
In holding that respondents have a better right to
possess the subject land in view of the bona
fide registration of the sale with the Register of Deeds
of Camarines Sur by Ildefonso and Gregorio, the Court
of Appeals applied Article 1544 of the Civil Code, which
provides:
ART. 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to
the person who may have first taken possession
thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good
faith.
While we agree with the appellate court that
respondents have superior right over the petitioner on
the subject property, we find Article 1544 inapplicable
to the case at bar since the subject land was
unregistered at the time of the first sale. The
registration contemplated under this provision has
been held to refer to registration under the Torrens
System, which considers the act of registration as the
operative act that binds the land.28 Thus, in Carumba
v. Court of Appeals,29 we held that Article 1544 of the
Civil Code has no application to land not registered
under Torrens System.
The law applicable therefore is Act No. 3344, which
provides for the registration of all instruments on land
neither covered by the Spanish Mortgage Law nor the
Torrens System. Under this law, registration by the first
buyer is constructive notice to the second buyer that
can defeat his right as such buyer in good faith.
Applying the law, we held in Bautista v. Fule30 that the
registration of an instrument involving unregistered
land in the Registry of Deeds creates constructive
notice and binds third person who may subsequently
deal with the same property. We also held in Bayoca v.
Nogales31 that:
Verily, there is absence of prior registration in good
faith by petitioners of the second sale in their favor. As
stated in the Santiago case, registration by the first
buyer under Act No. 3344 can have the effect of
constructive notice to the second buyer that can defeat
his right as such buyer. On account of the undisputed
fact of registration under Act No. 3344 by [the first
buyers], necessarily, there is absent good faith in the
registration of the sale by the [second buyers] for which
they had been issued certificates of title in their names.
It follows that their title to the land cannot be upheld. x
x x.
Even if petitioner argues that she purchased and
registered the subject land in good faith and without
knowledge of any adverse claim thereto, respondents
still have superior right over the disputed property. We
held in Rayos v. Reyes32 that:
"[T]he issue of good faith or bad faith of the buyer is
relevant only where the subject of the sale is registered
land and the purchaser is buying the same from the
registered owner whose title to the land is clean x x x
in such case the purchaser who relies on the clean title
of the registered owner is protected if he is a purchaser
in good faith for value." Since the properties in question
are unregistered lands, petitioners as subsequent
buyers thereof did so at their peril. Their claim of having
bought the land in good faith, i.e., without notice that
some other person has a right to or interest in the
property, would not protect them if it turns out, as it
actually did in this case, that their seller did not own the
property at the time of the sale.
It is an established principle that no one can give what
one does not have, nemo dat quod non habet.
Accordingly, one can sell only what one owns or is
Sales 13 of 70
authorized to sell, and the buyer can acquire no more
than what the seller can transfer legally.33 In the case
at bar, since Ildefonso no longer owned the subject
land at the time of the sale to the petitioner, he had
nothing to sell and the latter did not acquire any right to
it.
Even if we apply Article 1544, the facts would
nonetheless show that respondents and their
predecessors-in-interest registered first the source of
their ownership and possession, i.e., the 1969 deed of
sale, and possessed the subject land at the earliest
time. Applying the doctrine of "priority in time, priority in
rights" or "prius tempore, potior jure," respondents are
entitled to the ownership and possession of the subject
land.34
True, a certificate of title, once registered, should not
thereafter be impugned, altered, changed, modified,
enlarged or diminished except in a direct proceeding
permitted by law.35 Moreover, Section 32 of
Presidential Decree No. 1529 provides that "[u]pon the
expiration of said period of one year, the decree of
registration and the certificate of title shall become
incontrovertible."
However, it does not deprive an aggrieved party of a
remedy in law. What cannot be collaterally attacked is
the certificate of title and not the title or ownership
which is represented by such certificate. Ownership is
different from a certificate of title.36 The fact that
petitioner was able to secure a title in her name did not
operate to vest ownership upon her of the subject land.
Registration of a piece of land under the Torrens
System does not create or vest title, because it is not a
mode of acquiring ownership. A certificate of title is
merely an evidence of ownership or title over the
particular property described therein.37 It cannot be
used to protect a usurper from the true owner; nor can
it be used as a shield for the commission of fraud;
neither does it permit one to enrich himself at the
expense of others.38 Its issuance in favor of a particular
person does not foreclose the possibility that the real
property may be co-owned with persons not named in
the certificate, or that it may be held in trust for another
person by the registered owner.39
As correctly held by the Court of Appeals,
notwithstanding the indefeasibility of the Torrens title,
the registered owner may still be compelled to
reconvey the registered property to its true owners.
The rationale for the rule is that reconveyance does not
set aside or re-subject to review the findings of fact of
the Bureau of Lands. In an action for reconveyance,
the decree of registration is respected as
incontrovertible. What is sought instead is the transfer
of the property or its title which has been wrongfully or
erroneously registered in another person’s name, to its
rightful or legal owner, or to the one with a better right.40
Finally, the Court of Appeals correctly held that an
action for reconveyance does not prescribe when the
plaintiff is in possession of the land to be reconveyed,
as in this case. Thus, in Leyson v. Bontuyan:41
x x x [T]his Court declared that an action for
reconveyance based on fraud is imprescriptible where
the plaintiff is in possession of the property subject of
the acts. In Vda. de Cabrera v. Court of Appeals, the
Court held:
... [A]n action for reconveyance of a parcel of land
based on implied or constructive trust prescribes in ten
years, the point of reference being the date of
registration of the deed or the date of the issuance of
the certificate of title over the property, but this rule
applies only when the plaintiff or the person enforcing
the trust is not in possession of the property, since if a
person claiming to be the owner thereof is in actual
possession of the property, as the defendants are in
the instant case, the right to seek reconveyance, which
in effect seeks to quiet title to the property, does not
prescribe. The reason for this is that one who is in
actual possession of a piece of land claiming to be the
owner thereof may wait until his possession is
disturbed or his title is attacked before taking steps to
vindicate his right, the reason for the rule being, that
his undisturbed possession gives him a continuing right
to seek the aid of a court of equity to ascertain and
determine the nature of the adverse claim of a third
party and its effect on his own title, which right can be
claimed only by one who is in possession.
Similarly, in the case of David v. Malay, the same
pronouncement was reiterated by the Court:
... There is settled jurisprudence that one who is in
actual possession of a piece of land claiming to be
owner thereof may wait until his possession is
disturbed or his title is attacked before taking steps to
vindicate his right, the reason for the rule being, that
his undisturbed possession gives him a continuing right
to seek the aid of the court of equity to ascertain and
determine the nature of the adverse claim of a third
party and its effect on his own title, which right can be
claimed only by one who is in possession. No better
situation can be conceived at the moment for Us to
apply this rule on equity than that of herein petitioners
whose ... possession of the litigated property for no less
than 30 years and was suddenly confronted with a
claim that the land she had been occupying and
cultivating all these years, was titled in the name of a
third person. We hold that in such a situation the right
to quiet title to the property, to seek its reconveyance
and annul any certificate of title covering it, accrued
only from the time the one in possession was made
aware of a claim adverse to his own, and it is only then
that the statutory period of prescription commences to
run against such possessor.
The paramount reason for this exception is based on
the theory that registration proceedings could not be
used as a shield for fraud. Moreover, to hold otherwise
would be to put premium on land-grabbing and
transgressing the broader principle in human relations
that no person shall unjustly enrich himself at the
expense of another.
WHEREFORE, in view of the foregoing, the petition
is DENIED. The Decision of the Court of Appeals dated
December 14, 2004, in CA-G.R. SP No. 86736,
dismissing petitioner’s complaint for recovery of
possession and respondents’ counterclaim for
damages for lack of legal and factual bases, and the
Resolution dated February 17, 2005 denying the
motion for reconsideration, are AFFIRMED.
SO ORDERED.
Sales 14 of 70
 THIRD DIVISION
G.R. No. 121165 September 26, 2006
HON. DOMINADOR F. CARILO, Presiding Judge,
R.T.C. XI-19 Digos, Davao del Sur, BONIFACIO J.
GUYOT, Clerk of Court and Provincial Sheriff of
Davao del Sur, ALFREDO C. SENOY, Deputy Prov.
Sheriff assigned to R.T.C. XI-19 Digos, Davao del
Sur, MARCOS D. RISONAR, JR., ., Registrar of
Deeds of Davao del Sur, and MARIA
GONZALES, petitioners,
vs.
HON. COURT OF APPEALS, MARIA PAZ DABON
and ROSALINDA DABON, respondents.
RESOLUTION
QUISUMBING, J.:
For review on certiorari is the Decision1 dated February
22, 1995 of the Court of Appeals in CA-G.R. SP No.
23687, which annulled and set aside the judgment and
orders of the Regional Trial Court (RTC) of Digos,
Davao del Sur, Branch 19, in Civil Case No.
2647, Maria Gonzales v. Priscilla Manio and Jose
Manio.
The facts as culled from the records are as follows:
On April 2, 1990, petitioner Maria Gonzales filed a
complaint against the spouses Priscilla and Jose
Manio with the RTC of Digos, Davao del Sur, Branch
19. Gonzales sought the execution of the deed of sale
in her favor for the property she bought from Priscilla
Manio. She also asked for damages and attorney's
fees.
Gonzales alleged that on April 26, 1988, she
paid P10,000 to Priscilla as downpayment on
the P400,000 purchase price of the lot with
improvements, since Priscilla had a special power of
attorney from her son, Aristotle, the owner of the land.
They also agreed that the balance would be paid within
three months after the execution of the deed of sale.
Yet, after the lapse of the period and despite repeated
demands, Priscilla did not execute the deed of sale.
Thus, Gonzales filed an action for specific performance
against the spouses Priscilla and Jose Manio.
For failure to file an Answer, the Manios were declared
in default and Gonzales was allowed to present
evidence ex parte.
After trial, the court rendered judgment in favor of
Gonzales, which we quote verbatim:
WHEREFORE, premises considered, it is
hereby ordered that judgment is rendered in
favor of plaintiff and against defendants,
ordering defendants:
1) To execute the final deed of sale
and transfer of the property
mentioned in paragraph 4 above to
plaintiff, or should the defendant
refuse to execute the deed of sale,
the Clerk of Court be directed to
execute the same upon plaintiff's
depositing of the sum
of P390,000.00 with the Clerk of
Court as complete and valid
payment thereof to defendant
Priscilla Manio;
2) To pay plaintiff the sum
of P100,000.00 for moral damages
and P50,000.00 for exemplary
damages;
3) To pay plaintiff the sum
of P50,000.00 for attorney's fees
plus P700.00 per appearances of
plaintiff's counsel before this
Honorable Court as appearance
fees;
4) To pay plaintiff the sum
of P5,000.00 as litigation expenses.
SO ORDERED.2
Gonzales deposited with the Clerk of Court
the P390,000 balance of the price and filed a motion
for execution.3 She later withdrew the motion because
the trial court's decision was not properly served on the
defendants. After numerous delays, the sheriff finally
personally served a copy of the decision on Priscilla on
August 4, 1990, at the ungodly hour of 12:00 midnight
at Sitio Wilderness, Barangay Mount Carmel,
Bayugan, Agusan del Sur.4
Since there was no appeal, the trial court's decision
became final and executory. But the writ of execution
was not served upon the defendants, since according
to the Sheriff's Return, the defendants could not be
located. The sheriff, likewise, informed the trial court
that the money judgment could be readily satisfied by
the petitioner's cash deposit should the trial court grant
the motion to release the cash deposit filed by
Gonzales.5
Subsequently, Gonzales filed a motion asking that the
Clerk of Court be directed to be the one to execute a
deed of conveyance. Gonzales also filed a motion to
withdraw the cash deposit for the balance of the price
to offset the award of damages. The trial court granted
both motions but later modified the amount
to P207,800.
On October 29, 1990, Gonzales filed a petition for the
nullification of the Owner's Duplicate Certificate of Title
No. 16658 and asked that a new certificate be issued
in her name to give effect to the deed of conveyance
since Priscilla refused to relinquish the owner's
duplicate copy.
Consequently, the trial court declared the owner's
duplicate copy of TCT No. 16658 void, and directed the
City Civil Registrar to issue a new certificate of title in
favor of Gonzales. The orders were reiterated in
subsequent orders and TCT No. T-23690 was issued
under the name of Gonzales.
On December 14, 1990, herein respondents Maria Paz
Dabon and Rosalina Dabon, claiming to have bought
the aforementioned lot from Aristotle Manio filed before
the Court of Appeals a petition for annulment of
judgment and orders of the RTC in Civil Case No.
2647. The case was docketed as CA G.R. SP No.
23687, entitled "Maria Paz Dabon and Rosalina Dabon
v. Hon. Dominador F. Carillo, Presiding Judge, RTC
Sales 15 of 70
Branch 19, Digos, Davao del Sur; Bonifacio J. Guyot,
Clerk of Court and Provincial Sheriff of Davao del Sur;
Alfredo C. Senoy, Deputy Prov. Sheriff assigned to
RTC Br. 19, Digos, Davao del Sur; Marcos D. Risonar,
Jr., Registrar of Deeds of Davao del Sur; and Maria
Gonzales." The Dabons alleged therein that the
judgment of the trial court was void ab initio because of
lack of jurisdiction over their persons, as the real
parties in interest, and that they were fraudulently
deprived of their right to due process. They also prayed
for a Temporary Restraining Order and for Preliminary
Prohibitory Injunction against Gonzales. They gave the
trial court a notice of their action for the annulment of
the judgment and subsequent orders in Civil Case No.
2647.6
Meanwhile, Gonzales filed before the trial court a
motion for the issuance of a writ of possession. The
Dabons filed an opposition on the following grounds:
(1) The writ of possession cannot be enforced because
the defendants named in the writ, the Manios, were no
longer in possession of the property; (2) They had
bought the lot with the improvements therein and had
taken possession, although they had not yet registered
their ownership with the Register of Deeds; and (3) The
court did not acquire jurisdiction over them as the real
parties in interest.
On December 17, 1990, the Court of Appeals, without
giving due course to the petition, issued a resolution
restraining the trial court from implementing its
Decision dated June 19, 19907 and its subsequent
orders thereto in Civil Case No. 2647 until further notice
from the Court of Appeals. It also required Gonzales to
file her Comment.8
The Court of Appeals in a resolution denied the
application for preliminary injunction and appointed a
commissioner to receive evidence of the parties.9
Following the Commissioner's report, the Court of
Appeals found that (1) the contract of sale between
Gonzales and Priscilla was unenforceable because the
sale was evidenced by a handwritten note which was
vague as to the amount and which was not notarized;
(2) the trial court did not acquire jurisdiction over the
indispensable parties; and (3) the proceedings were
attended with fraud. The Court of Appeals nullified the
judgment of the RTC in Civil Case No. 2647 and
cancelled TCT No. T-23690. The dispositive portion of
said judgment reads as follows:
WHEREFORE, premises considered, the
questioned decision, dated June 19, 1990
(and all orders arising therefrom), of the
Regional Trial Court (Branch 19) in Digos,
Davao del Sur is hereby ANNULLED and SET
ASIDE—and the Transfer Certificate of Title
No. T-23690 which was issued thereafter
declared null and void and ordered canceled.
Costs against the private respondent.
SO ORDERED.10
On July 17, 1995, Gonzales' Motion for
Reconsideration was denied. Hence, the instant
petition, assigning the following errors:
I COROLLARILY, THE HONORABLE COURT
The Honorable Court of Appeals erred in not
holding that the purchase of the disputed
property by petitioner Maria Gonzales from
Aristotle Manio thru the latter's mother and
attorney-in-fact was a valid contract as
between the contracting parties.
II
THE HONORABLE COURT OF APPEALS
ERRED IN NOT HOLDING THAT
PETITIONER MARIA GONZALES WAS IN
GOOD FAITH IN BUYING THE DISPUTED
PROPERTY FROM ARISTOTLE MANIO
THRU THE LATTER'S MOTHER AND
ATTORNEY-IN-FACT.
III
THE HONORABLE COURT OF APPEALS
ERRED IN NOT APPLYING IN THE
INSTANT CASE THE DOCTRINE IN
DOUBLE SALE UNDER ARTICLE 1544 OF
THE CIVIL CODE OF THE PHILIPPINES.
IV
THE HONORABLE COURT OF APPEALS
GRAVELY FAILED TO APPRECIATE THE
FACT THAT PRIVATE RESPONDENTS'
[PETITIONERS BELOW] CLAIM IS HIGHLY
INCREDIBLE, IMPROBABLE, AND
FRAUDULENT.
V
THE HONORABLE COURT OF APPEALS
ERRED IN NOT HOLDING THAT PRIVATE
RESPONDENTS MARIA PAZ DABON AND
ROSALINA DABON HAVE NO RIGHT TO
BRING THE INSTANT SUIT.
VI
OF APPEALS ERRED IN NOT SUSTAINING
PETITIONER MARIA GONZALES' [PRIVATE
RESPONDENT BELOW] CLAIM FOR
DAMAGES AGAINST THE PRIVATE
RESPONDENTS [PETITIONERS BELOW].11
Simply, the threshold issues in this petition are: (1)
whether the Court of Appeals erred in declaring the
sale of the land to Gonzales by Priscilla invalid; (2)
whether there was basis to annul the judgment of the
RTC; and (3) whether the Dabons could file the action
for annulment of judgment.
We shall discuss the issues jointly.
Prefatorily, we note that named as petitioners are
Presiding Judge Dominador Carillo; Bonifacio Guyot,
Alfredo Senoy, Clerk of Court and Deputy Sheriff of the
same court, respectively; Marcos D. Risonar, Registrar
of Deeds of Davao del Sur; and Maria Gonzales. In our
view, petitioner Gonzales apparently had impleaded
Judge Carillo, Guyot, Senoy and Risonar in this petition
by merely reversing the designation of said public
officers among the respondents below in the Court of
Appeals, as now among the petitioners herein. Since
they are not interested parties and would not benefit
from any of the affirmative reliefs sought, only Maria
Sales 16 of 70
Gonzales remains as the genuine party-petitioner in
the instant case.
We now come to the main issues: (1) Was there
sufficient basis to annul the judgment in Civil Case No.
2647? (2) Are the Dabons proper parties to file the
petition for annulment of judgment?
Petitioner Gonzales contends that the respondents do
not have standing before the Court of Appeals to file a
petition for annulment of the judgment in Civil Case No.
2647 because respondents were not parties therein.
Petitioner maintains that respondents have no right
that could be adversely affected by the judgment
because they are not the owners of the property.
Petitioner claims that the Court of Appeals should have
applied the doctrine of double sale to settle the issue
of ownership and declare her the true owner of the
property. Petitioner concludes that respondents – not
being the owners and are not real parties in interest in
the complaint for specific performance – have no right
to bring the action for annulment of the judgment.
According to petitioner Gonzales, she did not implead
Aristotle as defendant in Civil Case No. 2647 since a
decision against Priscilla, Aristotle's attorney-in-fact,
would bind Aristotle also.
Respondents (Maria Paz and Rosalina Dabon) now
insist that they are parties in interest as buyers, owners
and possessors of the contested land and that they had
been fraudulently deprived of their day in court during
the proceedings in the trial court in Civil Case No. 2647.
They have no remedy in law other than to file a case
for the annulment of judgment of the trial court in said
case.
Petitioner Gonzales should be reminded of Section 3
of Rule 3 of the Rules on Civil Procedure which
explicitly states that an action should be brought
against the real party in interest,12 and in case the
action is brought against the agent, the action must be
brought against an agent acting in his own name and
for the benefit of an undisclosed principal without
joining the principal, except when the contract involves
things belonging to the principal.13 The real party in
interest is the party who would be benefited or injured
by the judgment or is the party entitled to the avails of
the suit. We have held that in such a situation, an
attorney-in-fact is not a real party in interest and that
there is no law permitting an action to be brought by
and against an attorney-in-fact.14
Worth stressing, the action filed by Gonzales before
the RTC is for specific performance to compel Priscilla
to execute a deed of sale, involving real property
which, however, does not belong to Priscilla but to
Aristotle Manio, the son of Priscilla. The complaint only
named as defendant Priscilla, joined by her spouse, yet
Priscilla had no interest on the lot and can have no
interest whatever in any judgment rendered. She was
not acting in her own name, nor was she acting for the
benefit of an undisclosed principal. The joinder of all
indispensable parties is a condition sine qua non of the
exercise of judicial powers, and the absence of
indispensable party renders all subsequent actions 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.15 Accordingly, the failure to implead Aristotle
Manio as defendant renders all proceedings in the Civil
Case No. 2647, including the order granting the
cancellation of TCT No. 16658 and issuance of a new
title, null and void.
It is settled that a person need not be a party to the
judgment sought to be annulled.16 What is essential is
that he can prove his allegation that the judgment was
obtained by fraud or collusion and he would be
adversely affected thereby,17 because if fully
substantiated by preponderance of evidence, those
allegations could be the basis for annulment of the
assailed judgment.
In the present case, even if respondents were not
parties to the specific performance case, any finding
that there was extrinsic fraud in the institution of the
complaint, i.e. exclusion of the real party in interest,
and collusion between petitioner and Sheriff Senoy,
would adversely affect the respondents' ownership and
thus, could be their basis for annulment of the
judgment.
Pertinently, Section 2 of Rule 47 of the Rules on Civil
Procedure explicitly provides the two grounds for
annulment of judgment, namely: extrinsic fraud and
lack of jurisdiction.18
There is extrinsic fraud when a party has been
prevented by fraud or deception from presenting his
case. Fraud is extrinsic where it prevents a party from
having a trial or from presenting his entire case to the
court, or where it operates upon matters pertaining not
to the judgment itself but to the manner in which it is
procured. The overriding consideration when extrinsic
fraud is alleged is that the fraudulent scheme of the
prevailing litigant prevented a party from having his day
in court.19 It must be distinguished from intrinsic fraud
which refers to acts of a party at a trial which prevented
a fair and just determination of the case, and which
could have been litigated and determined at the trial or
adjudication of the case.20
In its Decision dated February 22, 1995, the Court of
Appeals found that indices of fraud attended the case
before the trial court: First, the plaintiff deliberately
excluded the Dabons as party to the case despite
knowledge that the Dabons had alleged that they had
bought the land from Aristotle. Second, the Sheriff's
Return was suspiciously served on a Saturday, at
midnight, on August 4, 1990. Third, the trial court
ordered the plaintiff to deposit the full payment of
property, but subsequently ordered its
withdrawal. Lastly, there was no notice given to the
person named in the certificate of title which Gonzales
wanted to be annulled.
Of the indices of fraud cited by the Court of Appeals,
the failure to comply with the notification requirement
in the petition for the cancellation of title amounts to
extrinsic fraud. Under the Property Registration
Decree, all parties in interest shall be given
notice.21 There is nothing in the records that show
Gonzales notified the actual occupants or lessees of
the property. Further, the records show that Gonzales
had known of the sale of the land by Aristotle to the
Dabons and despite her knowledge, the former did not
include the Dabons in her petition for the annulment of
title. Deliberately failing to notify a party entitled to
notice also constitutes extrinsic fraud.22 This fact is
sufficient ground to annul the order allowing the
cancellation of title in the name of Gonzales.
Likewise, under Rule 47, a judgment is void for lack of
jurisdiction over the persons of the real parties in
interest, i.e., Aristotle Manio and the Dabons.
Sales 17 of 70
Lastly, petitioner insists that the contract of sale
between her and Priscilla was valid and enforceable
because under the provision on double sale, 23 she
owned the land because she bought the lot on April 26,
1988, while the same was allegedly sold to the Dabons
on October 19, 1989. In our view, the doctrine on
double sale holds no relevance in this case. The
pertinent article 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 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 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 is two-fold: acquisition
in good faith and registration in good faith.24
At this juncture, we must emphasize that the action for
annulment of judgment under Rule 47 of the Rules of
Court does not involve the merits of the final order of
the trial court.25 The issue of whether before us is a
case of double sale is outside the scope of the present
petition for review. The appellate court only allowed the
reception of extraneous evidence to determine
extrinsic fraud. To determine which sale was valid,
review of evidence is necessary. This we cannot do in
this petition. An action for annulment of judgment is
independent of the case where the judgment sought to
be annulled is rendered26 and is not an appeal of the
judgment therein.27
The extraneous evidence presented to the appellate
court cannot be used to supplant the evidence in the
records of the specific performance case because the
extraneous evidence was not part of the records on the
merits of the case. Again, the extraneous evidence was
only allowed merely to prove the allegations of extrinsic
fraud. Accordingly, we hold that the issue of ownership
of the subject real property cannot be addressed in this
petition for review.
Annulment of judgment is not a relief to be granted
indiscriminately by the courts. It is a recourse equitable
in character and allowed only in exceptional cases as
where there is no available or other adequate
remedy.28 This case falls under said exception. In this
case, where it was found that the trial court did not have
jurisdiction over the real parties in interest, and that
notices were deliberately not given, amount to extrinsic
fraud. The Court of Appeals did not err in granting the
annulment of the judgment in Civil Case No. 2647 and
the orders subsequent thereto, for lack of jurisdiction
and extrinsic fraud.
WHEREFORE, the petition is DENIED for lack of merit.
The assailed Decision dated February 22, 1995 of the
Court of Appeals in CA-G.R. SP No. 23687,
is AFFIRMED. Costs against petitioner Maria
Gonzales.
SO ORDERED.
Carpio, Carpio-Morales, Tinga, Velasco, Jr.,
J.J., concur.
Sales 18 of 70
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
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:
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 Beginning today January 27, 1955,
meters, more or less, covered by TCT No. 5040 and Jose Poncio can start living on the
subject to mortgage in favor of the Republic Savings lot sold by him to me, Rosario
Bank for the sum of P1,500.00. Petitioner Rosario Carbonell, until after one year during
Carbonell, a cousin and adjacent neighbor of which time he will not pa anything.
respondent Poncio, and also from the Batanes Islands, Then if after said one can he could
lived in the adjoining lot at 177 V. Agan Street. not find an place where to move his
house, he could still continue
Both petitioners Rosario Carbonell and respondent occupying the site but he should pay
Emma Infante offered to buy the said lot from Poncio a rent that man, be agreed.
(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 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
Sales 19 of 70

(Pp. 6-7 rec. on appeal).
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 amount of some P400.00, the
balance she still had to pay in addition to her assuming
the mortgaged obligation to Republic Savings Bank.
Upon arriving at respondent Jose Poncio's house,
however, the latter told petitioner that he could not
proceed any more with the sale, because he had
already given the lot to respondent Emma Infants; and
that he could not withdraw from his deal with
respondent Mrs. Infante, even if he were to go to jail.
Petitioner then sought to contact respondent Mrs.
Infante but the latter refused to see her.
On February 5, 1955, petitioner saw Emma Infante
erecting a all around the lot with a gate.
Petitioner then consulted Atty. Jose Garcia, g who pendency. Respondent Mrs. Infante spent for the
advised her to present an adverse claim overdthe land house the total amount of P11,929.00.
in question with the Office of the Register of Deeds
) of
Rizal. Atty. Garcia actually sent a letter of inquiry
C to the On June 1, 1955, petitioner Rosario Carbonell, thru
Register of Deeds and demand letters toO private counsel, filed a second amended complaint against
respondents Jose Poncio and Emma Infante. N private respondents, praying that she be declared the
S lawful owner of the questioned parcel of land; that the
In his answer to the complaint Poncio admittedT"that on subsequent sale to respondents Ramon R. Infante and
January 30, 1955, Mrs. Infante improved her A offer and Emma L. Infante be declared null and void, and that
he agreed to sell the land and its improvements N to her respondent Jose Poncio be ordered to execute the
for P3,535.00" (pp. 38-40, ROA). C corresponding deed of conveyance of said land in her
I favor and for damages and attorney's fees (pp. 1-7,
O rec. on appeal in the C.A.).
In a private memorandum agreement datedMJanuary
31, 1955, respondent Poncio indeed bound himself E to
sell to his corespondent Emma Infante, the property
O for Respondents first moved to dismiss the complaint on
the sum of P2,357.52, with respondent Emma N Infante the ground, among others, that petitioner's claim is
still assuming the existing mortgage debt inAfavor of unenforceable under the Statute of Frauds, the alleged
Republic Savings Bank in the amount of P1,177.48. D sale in her favor not being evidenced by a written
Emma Infante lives just behind the houses of A Poncio document (pp. 7-13, rec. on appeal in the C.A.); and
and Rosario Carbonell. W when said motion was denied without prejudice to
i passing on the question raised therein when the case
On February 2, 1955, respondent Joset Poncio would be tried on the merits (p. 17, ROA in the C.A.),
n
executed the formal deed of sale in favor of respondent respondents filed separate answers, reiterating the
Mrs. Infante in the total sum of P3,554.00 and e on the grounds of their motion to dismiss (pp. 18-23, ROA in
same date, the latter paid Republic Savings Bank s the the C.A.).
mortgage indebtedness of P1,500.00. The mortgage s
on the lot was eventually discharged. During the trial, when petitioner started presenting
evidence of the sale of the land in question to her by
Informed that the sale in favor of respondent Emma respondent Poncio, part of which evidence was the
Infante had not yet been registered, Atty. Garcia agreement written in the Batanes dialect
aforementioned, respondent Infantes objected to the
prepared an adverse claim for petitioner, who signed
and swore to an registered the same on February 8, presentation by petitioner of parole evidence to prove
the alleged sale between her and respondent Poncio.
1955.
In its order of April 26, 1966, the trial court sustained
the objection and dismissed the complaint on the
The deed of sale in favor of respondent Mrs. Infante ground that the memorandum presented by petitioner
was registered only on February 12, 1955. As a to prove said sale does not satisfy the requirements of
consequence thereof, a Transfer Certificate of Title the law (pp. 31-35, ROA in the C.A.).
was issued to her but with the annotation of the
adverse claim of petitioner Rosario Carbonell.
From the above order of dismissal, petitioner appealed
to the Supreme Court (G.R. No. L-11231) which ruled
Respondent Emma Infante took immediate possession in a decision dated May 12, 1958, that the Statute of
of the lot involved, covered the same with 500 cubic Frauds, being applicable only to executory contracts,
meters of garden soil and built therein a wall and gate, does not apply to the alleged sale between petitioner
spending the sum of P1,500.00. She further contracted and respondent Poncio, which petitioner claimed to
the services of an architect to build a house; but the have been partially performed, so that petitioner is
construction of the same started only in 1959 — years entitled to establish by parole evidence "the truth of this
after the litigation actually began and during its allegation, as well as the contract itself." The order
appealed from was thus reversed, and the case
Sales 20 of 70
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
Sales 21 of 70
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
Sales 22 of 70
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 Carbonell in the previous case of Rosario
Carbonell vs. Jose Poncio, Ramon Infante and Emma
Infante
(L-11231, supra), Chief Justice Roberto Concepcion,
then Associate Justice, speaking for a unanimous
Court, reversed the aforesaid order of the trial court
dismissing the complaint, holding that because the
complaint alleges and the plaintiff claims that the
contract of sale was partly performed, the same is
removed from the application of the Statute of Frauds
and Carbonell should be allowed to establish by parol
evidence the truth of her allegation of partial
performance of the contract of sale, and further stated:
Apart from the foregoing, there
are in the case at bar several
circumstances indicating that
plaintiff's claim might not be entirely
devoid of factual basis. Thus, for
instance, Poncio admitted in his
answer that plaintiff had offered
several times to purchase his land.
Again, there is Exhibit A, a document
signed by the defendant. It is in the
Batanes dialect, which, according to
plaintiff's uncontradicted evidence,
is the one spoken by Poncio, he
being a native of said region. Exhibit
A states that Poncio would stay in
the land sold by him to plaintiff for
one year, from January 27, 1955,
free of charge, and that, if he cannot
find a place where to transfer his
house thereon, he may remain
upon. 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" that "he decided
to sell the property" to the plaintiff at
P20 a sq. m." is, on its face,
somewhat difficult to believe.
Indeed, if he had not decided as yet
to sell the land to plaintiff, who had
never increased her offer of P15 a
square meter, there was no reason
for Poncio to get said permit from
her. Upon the other hand, if plaintiff
intended to mislead Poncio, she
would have caused 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 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.
Then, also, defendants say in their
brief:
The only allegation in plaintiff's
complaint that bears any
relation to her claim that there
has been partial performance
of the supposed contract of
sale, is the notation of the sum
of P247.26 in the bank book of
defendant Jose Poncio. The
noting or jotting down of the
sum of P247.26 in the bank
book of Jose Poncio does not
prove the fact that the said
amount was the purchase
price of the property in
question. For all we knew, the
sum of P247.26 which plaintiff
claims to have paid to the
Republic Savings Bank for the
account of the defendant,
assuming that the money paid
to the Republic Savings Bank
came from the plaintiff, was the
result of some usurious loan or
accomodation, rather than
earnest money or part
payment of the land. Neither is
it competent or satisfactory
evidence to prove the
conveyance of the land in
question the fact that the bank
book account of Jose Poncio
happens to be in the
possession of the plaintiff.
(Defendants-Appellees' brief,
pp. 25-26).
How shall We know why Poncio's
bank deposit book is in plaintiffs
possession, or whether there is any
relation between the P247.26 entry
therein and the partial payment of
P247.26 allegedly made by 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
Sales 23 of 70
 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
Sales 24 of 70
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
Sales 25 of 70
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
Sales 26 of 70
possessor in bad faith has neither the right of retention CARBONELL ELECTS TO ACQUIRE THE SAME
of useful improvements nor the right to a refund for AND PAYS THE INFANTES THE AMOUNT OF
useful expenses. THIRTEEN THOUSAND FOUR HUNDRED TWENTY-
NINE PESOS (P13,429.00) WITHIN THREE (3)
But, if the lawful possessor can retain the MONTHS FROM THE FINALITY OF THIS DECISION.
improvements introduced by the possessor in bad faith SHOULD PETITIONER CARBONELL FAIL TO PAY
for pure luxury or mere pleasure only by paying the THE SAID AMOUNT WITHIN THE AFORESTATED
value thereof at the time he enters into possession PERIOD OF THREE (3) MONTHS FROM THE
(Article 549 NCC), as a matter of equity, the Infantes, FINALITY OF THIS DECISION, THE PERIOD OF
although possessors in bad faith, should be allowed to THREE (3) MONTHS WITHIN WHICH THE
remove the aforesaid improvements, unless petitioner RESPONDENTS INFANTES MAY REMOVE THEIR
Carbonell chooses to pay for their value at the time the AFOREMENTIONED USEFUL IMPROVEMENTS
Infantes introduced said useful improvements in 1955 SHALL COMMENCE FROM THE EXPIRATION OF
and 1959. The Infantes cannot claim reimbursement THE THREE (3) MONTHS GIVEN PETITIONER
for the current value of the said useful improvements; CARBONELL TO PAY FOR THE SAID USEFUL
because they have been enjoying such improvements IMPROVEMENTS.
for about two decades without paying any rent on the
land and during which period herein petitioner WITH COSTS AGAINST PRIVATE RESPONDENTS.
Carbonell was deprived of its possession and use.
Castro, C.J, Aquino and Martin, JJ., concur.
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
Sales 27 of 70
 SECOND DIVISION
G.R. No. 124242 January 21, 2005
SAN LORENZO DEVELOPMENT
CORPORATION, petitioner,
vs.
COURT OF APPEALS, PABLO S. BABASANTA,
SPS. MIGUEL LU and PACITA ZAVALLA
LU, respondents.
DECISION
TINGA, J.:
From a coaptation of the records of this case, it
appears that respondents Miguel Lu and Pacita
Zavalla, (hereinafter, the Spouses Lu) owned two (2)
parcels of land situated in Sta. Rosa, Laguna covered
by TCT No. T-39022 and TCT No. T-39023 both
measuring 15,808 square meters or a total of 3.1616
hectares.
On 20 August 1986, the Spouses Lu purportedly sold
the two parcels of land to respondent Pablo
Babasanta, (hereinafter, Babasanta) for the price of
fifteen pesos (₱15.00) per square meter. Babasanta
made a downpayment of fifty thousand pesos
(₱50,000.00) as evidenced by a memorandum receipt
issued by Pacita Lu of the same date. Several other
payments totaling two hundred thousand pesos
(₱200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to
Pacita Lu to demand the execution of a final deed of
sale in his favor so that he could effect full payment of
the purchase price. In the same letter, Babasanta
notified the spouses about having received information
that the spouses sold the same property to another
without his knowledge and consent. He demanded that
the second sale be cancelled and that a final deed of
sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta
wherein she acknowledged having agreed to sell the
property to him at fifteen pesos (₱15.00) per square
meter. She, however, reminded Babasanta that when
the balance of the purchase price became due, he
requested for a reduction of the price and when she
refused, Babasanta backed out of the sale. Pacita
added that she returned the sum of fifty thousand
pesos (₱50,000.00) to Babasanta through Eugenio
Oya.
On 2 June 1989, respondent Babasanta, as plaintiff,
filed before the Regional Trial Court (RTC), Branch 31,
of San Pedro, Laguna, a Complaint for Specific
Performance and Damages1 against his co-
respondents herein, the Spouses Lu. Babasanta
alleged that the lands covered by TCT No. T- 39022
and T-39023 had been sold to him by the spouses at
fifteen pesos (₱15.00) per square meter. Despite his
repeated demands for the execution of a final deed of
sale in his favor, respondents allegedly refused.
In their Answer,2 the Spouses Lu alleged that Pacita Lu
obtained loans from Babasanta and when the total
advances of Pacita reached fifty thousand pesos
(₱50,000.00), the latter and Babasanta, without the
knowledge and consent of Miguel Lu, had verbally
agreed to transform the transaction into a contract to
sell the two parcels of land to Babasanta with the fifty
thousand pesos (₱50,000.00) to be considered as the
downpayment for the property and the balance to be
paid on or before 31 December 1987. Respondents Lu
added that as of November 1987, total payments made
by Babasanta amounted to only two hundred thousand
pesos (₱200,000.00) and the latter allegedly failed to
pay the balance of two hundred sixty thousand pesos
(₱260,000.00) despite repeated demands. Babasanta
had purportedly asked Pacita for a reduction of the
price from fifteen pesos (₱15.00) to twelve pesos
(₱12.00) per square meter and when the Spouses Lu
refused to grant Babasanta’s request, the latter
rescinded the contract to sell and declared that the
original loan transaction just be carried out in that the
spouses would be indebted to him in the amount of two
hundred thousand pesos (₱200,000.00). Accordingly,
on 6 July 1989, they purchased Interbank Manager’s
Check No. 05020269 in the amount of two hundred
thousand pesos (₱200,000.00) in the name of
Babasanta to show that she was able and willing to pay
the balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17
January 19903 wherein he prayed for the issuance of a
writ of preliminary injunction with temporary restraining
order and the inclusion of the Register of Deeds of
Calamba, Laguna as party defendant. He contended
that the issuance of a preliminary injunction was
necessary to restrain the transfer or conveyance by the
Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition4 to the amended
complaint contending that it raised new matters which
seriously affect their substantive rights under the
original complaint. However, the trial court in its Order
dated 17 January 19905 admitted the amended
complaint.
On 19 January 1990, herein petitioner San Lorenzo
Development Corporation (SLDC) filed a Motion for
Intervention6 before the trial court. SLDC alleged that it
had legal interest in the subject matter under litigation
because on 3 May 1989, the two parcels of land
involved, namely Lot 1764-A and 1764-B, had been
sold to it in a Deed of Absolute Sale with Mortgage. 7 It
alleged that it was a buyer in good faith and for value
and therefore it had a better right over the property in
litigation.
In his Opposition to SLDC’s motion for
intervention,8 respondent Babasanta demurred and
argued that the latter had no legal interest in the case
because the two parcels of land involved herein had
already been conveyed to him by the Spouses Lu and
hence, the vendors were without legal capacity to
transfer or dispose of the two parcels of land to the
intervenor.
Meanwhile, the trial court in its Order dated 21 March
1990 allowed SLDC to intervene. SLDC filed
its Complaint-in-Intervention on 19 April
1990.9 Respondent Babasanta’s motion for the
issuance of a preliminary injunction was likewise
granted by the trial court in its Order dated 11 January
199110 conditioned upon his filing of a bond in the
amount of fifty thousand pesos (₱50,000.00).
SLDC in its Complaint-in-Intervention alleged that on
11 February 1989, the Spouses Lu executed in its favor
an Option to Buy the lots subject of the complaint.
Accordingly, it paid an option money in the amount of
three hundred sixteen thousand one hundred sixty
Sales 28 of 70
pesos (₱316,160.00) out of the total consideration for
the purchase of the two lots of one million two hundred
sixty-four thousand six hundred forty pesos
(₱1,264,640.00). After the Spouses Lu received a total
amount of six hundred thirty-two thousand three
hundred twenty pesos (₱632,320.00) they executed on
3 May 1989 a Deed of Absolute Sale with Mortgage in
its favor. SLDC added that the certificates of title over
the property were delivered to it by the spouses clean
and free from any adverse claims and/or notice of lis
pendens. SLDC further alleged that it only learned of
the filing of the complaint sometime in the early part of
January 1990 which prompted it to file the motion to
intervene without delay. Claiming that it was a buyer in
good faith, SLDC argued that it had no obligation to
look beyond the titles submitted to it by the Spouses Lu
particularly because Babasanta’s claims were not
annotated on the certificates of title at the time the
lands were sold to it.
After a protracted trial, the RTC rendered
its Decision on 30 July 1993 upholding the sale of the
property to SLDC. It ordered the Spouses Lu to pay
Babasanta the sum of two hundred thousand pesos
(₱200,000.00) with legal interest plus the further sum
of fifty thousand pesos (₱50,000.00) as and for
attorney’s fees. On the complaint-in-intervention, the
trial court ordered the Register of Deeds of Laguna,
Calamba Branch to cancel the notice of lis
pendens annotated on the original of the TCT No. T-
39022 (T-7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court
ruled that since both Babasanta and SLDC did not
register the respective sales in their favor, ownership
of the property should pertain to the buyer who first
acquired possession of the property. The trial court
equated the execution of a public instrument in favor of
SLDC as sufficient delivery of the property to the latter.
It concluded that symbolic possession could be
considered to have been first transferred to SLDC and
consequently ownership of the property pertained to
SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial court’s
decision to the Court of Appeals alleging in the main
that the trial court erred in concluding that SLDC is a
purchaser in good faith and in upholding the validity of
the sale made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the
Court of Appeals. They contended that the trial court
erred in failing to consider that the contract to sell
between them and Babasanta had been novated when
the latter abandoned the verbal contract of sale and
declared that the original loan transaction just be
carried out. The Spouses Lu argued that since the
properties involved were conjugal, the trial court should
have declared the verbal contract to sell between
Pacita Lu and Pablo Babasanta null and void ab
initio for lack of knowledge and consent of Miguel Lu.
They further averred that the trial court erred in not
dismissing the complaint filed by Babasanta; in
awarding damages in his favor and in refusing to grant
the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered
its Decision11 which set aside the judgment of the trial
court. It declared that the sale between Babasanta and
the Spouses Lu was valid and subsisting and ordered
the spouses to execute the necessary deed of
conveyance in favor of Babasanta, and the latter to pay
the balance of the purchase price in the amount of two
hundred sixty thousand pesos (₱260,000.00). The
appellate court ruled that the Absolute Deed of Sale
with Mortgage in favor of SLDC was null and void on
the ground that SLDC was a purchaser in bad faith.
The Spouses Lu were further ordered to return all
payments made by SLDC with legal interest and to pay
attorney’s fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for
reconsideration with the appellate court.12 However, in
a Manifestation dated 20 December 1995,13 the
Spouses Lu informed the appellate court that they are
no longer contesting the decision dated 4 October
1995.
In its Resolution dated 11 March 1996,14 the appellate
court considered as withdrawn the motion for
reconsideration filed by the Spouses Lu in view of their
manifestation of 20 December 1995. The appellate
court denied SLDC’s motion for reconsideration on the
ground that no new or substantial arguments were
raised therein which would warrant modification or
reversal of the court’s decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed
by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING
THAT SAN LORENZO WAS NOT A BUYER IN GOOD
FAITH BECAUSE WHEN THE SELLER PACITA
ZAVALLA LU OBTAINED FROM IT THE CASH
ADVANCE OF ₱200,000.00, SAN LORENZO WAS
PUT ON INQUIRY OF A PRIOR TRANSACTION ON
THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO
APPRECIATE THE ESTABLISHED FACT THAT THE
ALLEGED FIRST BUYER, RESPONDENT
BABASANTA, WAS NOT IN POSSESSION OF THE
DISPUTED PROPERTY WHEN SAN LORENZO
BOUGHT AND TOOK POSSESSION OF THE
PROPERTY AND NO ADVERSE CLAIM, LIEN,
ENCUMBRANCE OR LIS PENDENS WAS
ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO
APPRECIATE THE FACT THAT RESPONDENT
BABASANTA HAS SUBMITTED NO EVIDENCE
SHOWING THAT SAN LORENZO WAS AWARE OF
HIS RIGHTS OR INTERESTS IN THE DISPUTED
PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING
THAT NOTWITHSTANDING ITS FULL
CONCURRENCE ON THE FINDINGS OF FACT OF
THE TRIAL COURT, IT REVERSED AND SET ASIDE
THE DECISION OF THE TRIAL COURT UPHOLDING
THE TITLE OF SAN LORENZO AS A BUYER AND
FIRST POSSESSOR IN GOOD FAITH. 15
SLDC contended that the appellate court erred in
concluding that it had prior notice of Babasanta’s claim
over the property merely on the basis of its having
advanced the amount of two hundred thousand pesos
(₱200,000.00) to Pacita Lu upon the latter’s
representation that she needed the money to pay her
obligation to Babasanta. It argued that it had no reason
to suspect that Pacita was not telling the truth that the
money would be used to pay her indebtedness to
Babasanta. At any rate, SLDC averred that the amount
of two hundred thousand pesos (₱200,000.00) which it
advanced to Pacita Lu would be deducted from the
Sales 29 of 70
balance of the purchase price still due from it and
should not be construed as notice of the prior sale of
the land to Babasanta. It added that at no instance did
Pacita Lu inform it that the lands had been previously
sold to Babasanta.
Moreover, SLDC stressed that after the execution of
the sale in its favor it immediately took possession of
the property and asserted its rights as new owner as
opposed to Babasanta who has never exercised acts
of ownership. Since the titles bore no adverse claim,
encumbrance, or lien at the time it was sold to it, SLDC
argued that it had every reason to rely on the
correctness of the certificate of title and it was not
obliged to go beyond the certificate to determine the
condition of the property. Invoking the presumption of
good faith, it added that the burden rests on Babasanta
to prove that it was aware of the prior sale to him but
the latter failed to do so. SLDC pointed out that the
notice of lis pendens was annotated only on 2 June
1989 long after the sale of the property to it was
consummated on 3 May 1989.1awphi1.nét
Meanwhile, in an Urgent Ex-Parte Manifestation dated
27 August 1999, the Spouses Lu informed the Court
that due to financial constraints they have no more
interest to pursue their rights in the instant case and
submit themselves to the decision of the Court of
Appeals.16
On the other hand, respondent Babasanta argued that
SLDC could not have acquired ownership of the
property because it failed to comply with the
requirement of registration of the sale in good faith. He
emphasized that at the time SLDC registered the sale
in its favor on 30 June 1990, there was already a notice
of lis pendens annotated on the titles of the property
made as early as 2 June 1989. Hence, petitioner’s
registration of the sale did not confer upon it any right.
Babasanta further asserted that petitioner’s bad faith in
the acquisition of the property is evident from the fact
that it failed to make necessary inquiry regarding the
purpose of the issuance of the two hundred thousand
pesos (₱200,000.00) manager’s check in his favor.
The core issue presented for resolution in the instant
petition is who between SLDC and Babasanta has a
better right over the two parcels of land subject of the
instant case in view of the successive transactions
executed by the Spouses Lu.
To prove the perfection of the contract of sale in his
favor, Babasanta presented a document signed by
Pacita Lu acknowledging receipt of the sum of fifty
thousand pesos (₱50,000.00) as partial payment for
3.6 hectares of farm lot situated at Barangay Pulong,
Sta. Cruz, Sta. Rosa, Laguna.17 While the receipt
signed by Pacita did not mention the price for which the
property was being sold, this deficiency was supplied
by Pacita Lu’s letter dated 29 May 198918 wherein she
admitted that she agreed to sell the 3.6 hectares of land
to Babasanta for fifteen pesos (₱15.00) per square
meter.
An analysis of the facts obtaining in this case, as well
as the evidence presented by the parties, irresistibly
leads to the conclusion that the agreement between
Babasanta and the Spouses Lu is a contract to sell and
not a contract of sale.
Contracts, in general, are perfected by mere
consent,19 which is manifested by the meeting of the
offer and the acceptance upon the thing which are to
constitute the contract. The offer must be certain and
the acceptance absolute.20 Moreover, contracts shall
be obligatory in whatever form they may have been
entered into, provided all the essential requisites for
their validity are present.21
The receipt signed by Pacita Lu merely states that she
accepted the sum of fifty thousand pesos (₱50,000.00)
from Babasanta as partial payment of 3.6 hectares of
farm lot situated in Sta. Rosa, Laguna. While there is
no stipulation that the seller reserves the ownership of
the property until full payment of the price which is a
distinguishing feature of a contract to sell, the
subsequent acts of the parties convince us that the
Spouses Lu never intended to transfer ownership to
Babasanta except upon full payment of the purchase
price.
Babasanta’s letter dated 22 May 1989 was quite telling.
He stated therein that despite his repeated requests for
the execution of the final deed of sale in his favor so
that he could effect full payment of the price, Pacita Lu
allegedly refused to do so. In effect, Babasanta himself
recognized that ownership of the property would not be
transferred to him until such time as he shall have
effected full payment of the price. Moreover, had the
sellers intended to transfer title, they could have easily
executed the document of sale in its required form
simultaneously with their acceptance of the partial
payment, but they did not. Doubtlessly, the receipt
signed by Pacita Lu should legally be considered as a
perfected contract to sell.
The distinction between a contract to sell and a
contract of sale is quite germane. In a contract of sale,
title passes to the vendee upon the delivery of the thing
sold; whereas in a contract to sell, by agreement the
ownership is reserved in the vendor and is not to pass
until the full payment of the price.22 In a contract of
sale, the vendor has lost and cannot recover ownership
until and unless the contract is resolved or rescinded;
whereas in a contract to sell, title is retained by the
vendor until the full payment of the price, such payment
being a positive suspensive condition and failure of
which is not a breach but an event that prevents the
obligation of the vendor to convey title from becoming
effective.23
The perfected contract to sell imposed upon
Babasanta the obligation to pay the balance of the
purchase price. There being an obligation to pay the
price, Babasanta should have made the proper tender
of payment and consignation of the price in court as
required by law. Mere sending of a letter by the vendee
expressing the intention to pay without the
accompanying payment is not considered a valid
tender of payment.24 Consignation of the amounts due
in court is essential in order to extinguish Babasanta’s
obligation to pay the balance of the purchase price.
Glaringly absent from the records is any indication that
Babasanta even attempted to make the proper
consignation of the amounts due, thus, the obligation
on the part of the sellers to convey title never acquired
obligatory force.
On the assumption that the transaction between the
parties is a contract of sale and not a contract to sell,
Babasanta’s claim of ownership should nevertheless
fail.
Sale, being a consensual contract, is perfected by
mere consent25 and from that moment, the parties may
Sales 30 of 70
reciprocally demand performance.26 The essential
elements of a contract of sale, to wit: (1) consent or
meeting of the minds, that is, to transfer ownership in
exchange for the price; (2) object certain which is the
subject matter of the contract; (3) cause of the
obligation which is established.27
The perfection of a contract of sale should not,
however, be confused with its consummation. In
relation to the acquisition and transfer of ownership, it
should be noted that sale is not a mode, but merely a
title. A mode is the legal means by which dominion or
ownership is created, transferred or destroyed, but title
is only the legal basis by which to affect dominion or
ownership.28 Under Article 712 of the Civil Code,
"ownership and other real rights over property are
acquired and transmitted by law, by donation, by
testate and intestate succession, and in consequence
of certain contracts, by tradition." Contracts only
constitute titles or rights to the transfer or acquisition of
ownership, while delivery or tradition is the mode of
accomplishing the same.29 Therefore, sale by itself
does not transfer or affect ownership; the most that
sale does is to create the obligation to transfer
ownership. It is tradition or delivery, as a consequence
of sale, that actually transfers ownership.
Explicitly, the law provides that the ownership of the
thing sold is acquired by the vendee from the moment
it is delivered to him in any of the ways specified in
Article 1497 to 1501.30 The word "delivered" should not
be taken restrictively to mean transfer of actual
physical possession of the property. The law
recognizes two principal modes of delivery, to wit: (1)
actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the
control and possession of the vendee.31 Legal or
constructive delivery, on the other hand, may be had
through any of the following ways: the execution of a
public instrument evidencing the sale;32 symbolical
tradition such as the delivery of the keys of the place
where the movable sold is being kept;33 traditio longa
manu or by mere consent or agreement if the movable
sold cannot yet be transferred to the possession of the
buyer at the time of the sale;34 traditio brevi manu if the
buyer already had possession of the object even
before the sale;35 and traditio constitutum
possessorium, where the seller remains in possession
of the property in a different capacity.36
Following the above disquisition, respondent
Babasanta did not acquire ownership by the mere
execution of the receipt by Pacita Lu acknowledging
receipt of partial payment for the property. For one, the
agreement between Babasanta and the Spouses Lu,
though valid, was not embodied in a public instrument.
Hence, no constructive delivery of the lands could have
been effected. For another, Babasanta had not taken
possession of the property at any time after the
perfection of the sale in his favor or exercised acts of
dominion over it despite his assertions that he was the
rightful owner of the lands. Simply stated, there was no
delivery to Babasanta, whether actual or constructive,
which is essential to transfer ownership of the property.
Thus, even on the assumption that the perfected
contract between the parties was a sale, ownership
could not have passed to Babasanta in the absence of
delivery, since in a contract of sale ownership is
transferred to the vendee only upon the delivery of the
thing sold.37
However, it must be stressed that the juridical
relationship between the parties in a double sale is
primarily governed by Article 1544 which lays down the
rules of preference between the two purchasers of the
same property. It provides:
Art. 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to
the person who may have first taken possession
thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good
faith.
The principle of primus tempore, potior jure (first in
time, stronger in right) gains greater significance in
case of double sale of immovable property. When the
thing sold twice is an immovable, the one who acquires
it and first records it in the Registry of Property, both
made in good faith, shall be deemed the
owner.38 Verily, the act of registration must be coupled
with good faith— that is, the registrant must have no
knowledge of the defect or lack of title of his vendor or
must not have been aware of facts which should have
put him upon such inquiry and investigation as might
be necessary to acquaint him with the defects in the
title of his vendor.39
Admittedly, SLDC registered the sale with the Registry
of Deeds after it had acquired knowledge of
Babasanta’s claim. Babasanta, however, strongly
argues that the registration of the sale by SLDC was
not sufficient to confer upon the latter any title to the
property since the registration was attended by bad
faith. Specifically, he points out that at the time SLDC
registered the sale on 30 June 1990, there was already
a notice of lis pendens on the file with the Register of
Deeds, the same having been filed one year before on
2 June 1989.
Did the registration of the sale after the annotation of
the notice of lis pendens obliterate the effects of
delivery and possession in good faith which admittedly
had occurred prior to SLDC’s knowledge of the
transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989,
the Spouses Lu executed the Option to Buy in favor of
SLDC upon receiving ₱316,160.00 as option money
from SLDC. After SLDC had paid more than one half
of the agreed purchase price of ₱1,264,640.00, the
Spouses Lu subsequently executed on 3 May 1989
a Deed of Absolute Sale in favor or SLDC. At the time
both deeds were executed, SLDC had no knowledge
of the prior transaction of the Spouses Lu with
Babasanta. Simply stated, from the time of execution
of the first deed up to the moment of transfer and
delivery of possession of the lands to SLDC, it had
acted in good faith and the subsequent annotation of lis
pendens has no effect at all on the consummated sale
between SLDC and the Spouses Lu.
Sales 31 of 70
A purchaser in good faith is one who buys property of
another without notice that some other person has a
right to, or interest in, such property and pays a full and
fair price for the same at the time of such purchase,
or before he has notice of the claim or interest of some
other person in the property.40 Following the foregoing
definition, we rule that SLDC qualifies as a buyer in
good faith since there is no evidence extant in the
records that it had knowledge of the prior transaction in
favor of Babasanta. At the time of the sale of the
property to SLDC, the vendors were still the registered
owners of the property and were in fact in possession
of the lands.l^vvphi1.net Time and again, this Court
has ruled that a person dealing with the owner of
registered land is not bound to go beyond the
certificate of title as he is charged with notice of
burdens on the property which are noted on the face of
the register or on the certificate of title.41 In assailing
knowledge of the transaction between him and the
Spouses Lu, Babasanta apparently relies on the
principle of constructive notice incorporated in Section
52 of the Property Registration Decree (P.D. No. 1529)
which reads, thus:
Sec. 52. Constructive notice upon registration. – Every
conveyance, mortgage, lease, lien, attachment, order,
judgment, instrument or entry affecting registered land
shall, if registered, filed, or entered in the office of the
Register of Deeds for the province or city where the
land to which it relates lies, be constructive notice to all
persons from the time of such registering, filing, or
entering.
However, the constructive notice operates as such¾by
the express wording of Section 52¾from the time of the
registration of the notice of lis pendens which in this
case was effected only on 2 June 1989, at which time
the sale in favor of SLDC had long been consummated
insofar as the obligation of the Spouses Lu to transfer
ownership over the property to SLDC is concerned.
More fundamentally, given the superiority of the right of
SLDC to the claim of Babasanta the annotation of the
notice of lis pendens cannot help Babasanta’s position
a bit and it is irrelevant to the good or bad faith
characterization of SLDC as a purchaser. A notice of lis
pendens, as the Court held in Nataño v.
Esteban,42 serves as a warning to a prospective
purchaser or incumbrancer that the particular property
is in litigation; and that he should keep his hands off the
same, unless he intends to gamble on the results of the
litigation." Precisely, in this case SLDC has intervened
in the pending litigation to protect its rights. Obviously,
SLDC’s faith in the merit of its cause has been
vindicated with the Court’s present decision which is
the ultimate denouement on the controversy.
The Court of Appeals has made capital43 of SLDC’s
averment in its Complaint-in-Intervention44 that at the
instance of Pacita Lu it issued a check for ₱200,000.00
payable to Babasanta and the confirmatory testimony
of Pacita Lu herself on cross-examination.45 However,
there is nothing in the said pleading and the testimony
which explicitly relates the amount to the transaction
between the Spouses Lu and Babasanta for what they
attest to is that the amount was supposed to pay off the
advances made by Babasanta to Pacita Lu. In any
event, the incident took place after the Spouses Lu had
already executed the Deed of Absolute Sale with
Mortgage in favor of SLDC and therefore, as previously
explained, it has no effect on the legal position of
SLDC.
Assuming ex gratia argumenti that SLDC’s registration
of the sale had been tainted by the prior notice of lis
pendens and assuming further for the same nonce that
this is a case of double sale, still Babasanta’s claim
could not prevail over that of SLDC’s. In Abarquez v.
Court of Appeals,46 this Court had the occasion to rule
that if a vendee in a double sale registers the sale after
he has acquired knowledge of a previous sale, the
registration constitutes a registration in bad faith and
does not confer upon him any right. If the registration
is done in bad faith, it is as if there is no registration at
all, and the buyer who has taken possession first of the
property in good faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was
notarized and registered only after the second vendee,
Abarquez, registered their deed of sale with the
Registry of Deeds, but the Israels were first in
possession. This Court awarded the property to the
Israels because registration of the property by
Abarquez lacked the element of good faith. While the
facts in the instant case substantially differ from that
in Abarquez, we would not hesitate to rule in favor of
SLDC on the basis of its prior possession of the
property in good faith. Be it noted that delivery of the
property to SLDC was immediately effected after the
execution of the deed in its favor, at which time SLDC
had no knowledge at all of the prior transaction by the
Spouses Lu in favor of Babasanta.1a\^/phi1.net
The law speaks not only of one criterion. The first
criterion is priority of entry in the registry of property;
there being no priority of such entry, the second is
priority of possession; and, in the absence of the two
priorities, the third priority is of the date of title, with
good faith as the common critical element. Since SLDC
acquired possession of the property in good faith in
contrast to Babasanta, who neither registered nor
possessed the property at any time, SLDC’s right is
definitely superior to that of Babasanta’s.
At any rate, the above discussion on the rules on
double sale would be purely academic for as earlier
stated in this decision, the contract between Babasanta
and the Spouses Lu is not a contract of sale but merely
a contract to sell. In Dichoso v. Roxas,47 we had the
occasion to rule that Article 1544 does not apply to a
case where there was a sale to one party of the land
itself while the other contract was a mere promise to
sell the land or at most an actual assignment of the
right to repurchase the same land. Accordingly, there
was no double sale of the same land in that case.
WHEREFORE, the instant petition is hereby
GRANTED. The decision of the Court of Appeals
appealed from is REVERSED and SET ASIDE and the
decision of the Regional Trial Court, Branch 31, of San
Pedro, Laguna is REINSTATED. No costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and
Chico-Nazario, JJ., concur.
Sales 32 of 70
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-16420 October 12, 1921
AGRIPINO MENDOZA, petitioner-appellee,
vs.
PRIMITIVO KALAW, objector-appellant.
Guillermo M. Katigbak for appellant.
Felipe A. Jose for appellee.
JOHNSON, J.:
From the record it appears that on the 26th day of
November, 1919, the petitioner presented a petition in
the Court of First instance of the City of Manila for the
registration, under the Torrens system, of a piece or
parcel of land, particularly described in paragraph A of
the petition. The said lot is alleged to have an area of
371.6 square meters. The petitioner alleged that he
was the owner in fee simple of said parcel of land for
the reason that he had purchased the same of
Federico Cañet on the 8th day of November, 1919.
Accompanying the petition, there was united a plan
(marked Exhibit A) containing a technical description of
the metes and bounds of said parcel of land.
To the registration of said parcel of land the oppositor,
Primitivo Kalaw, presented his opposition, alleging that
he was the owner of the same and that he had acquired
it from the said Federico Cañet.
Upon the issue thus presented by the petitioner and
opposition, the Honorable James A. Ostrand, on the
23d day of January, 1920, in a carefully prepared
opinion, reached the conclusion that the petitioner was
the owner in fee simple of said parcel of land, and
ordered it registered in his name in accordance with the
provisions of the Land registration Act. From that
decree the oppositor appealed to this court.
From an examination of the record the following facts
seem to be proved by a large preponderance of the
evidence:
(1) That on the 24th day of September, 1919,
the said Federico Cañet sold, under
a conditional sale, the parcel of land in
question to the appellant (Exhibit 1);
(2) That on the 8th day of November, 1919,
the said Federico Cañet made an absolute
sale of said parcel of land to the petitioner
Agripino Mendoza (Exhibit B);
(3) That on the 12th day of November, 1919,
Agripino Mendoza entered upon, and took
actual possession of, said parcel of land,
enclosed it with a fence, and began to clean
the same;
(4) That after the petitioner had fenced and
cleaned said lot, as above indicated, a
representative of the oppositor claimed and
attempted to obtain possession of said lot, but
the petitioner, who was then in possession,
refused to deliver the possession, upon the
ground that the was the owner;
(5) That on the 17th day of November (18th
day of November), 1919, the oppositor
attempted to have his title registered in the
registry of deeds of the City of Manila, but
such registration was denied by the register of
deeds for the reason that there existed some
defect in the description of the property, and
for the reason that the title of the vendor had
not therefore been registered. The register of
deeds, however, did make an "anotacion
preventiva."
It will be noted from the foregoing that Federico Cañet
made two sales of the same property — one of the
oppositor and the other to the petitioner. The first was
but a conditional sale while the latter was an absolute
sale. It will also be noted that while the absolute sale to
the petitioner was subsequent to the conditional sale to
the oppositor, the former obtained the actual
possession of the property first. It will further be noted
from a reading of Exhibits 1 and B that the petitioner
actually paid to his vendor the purchase price of the
property in question, while the payment by the
oppositor depended upon the performance of certain
conditions mentioned in the contract of
sale. 1awph!l.net
While was have stated that there were two sales of the
parcel of land in question, that is hardly the fact,
because a conditional sale, before the performance of
the condition, can hardly be said to be a sale of
property, especially where the condition has not been
performed or complied with. That being true, article
1473 of the Civil Code can hardly be said to be
applicable.
Neither can the "anotacion preventiva" obtained by the
oppositor be said to have created any advance in his
favor, for the reason that a preventative precautionary
notice on the records of the registry of deeds only
protects the rights of the person securing it for a period
of thirty days. (Par. 2, art. 17, Mortgage Law.) A
preventative precautionary notice only protects the
interests and rights of the person who secures it
against those who acquire an interest in the property
subsequent thereto, and then, only for a period of thirty
days. It cannot affect the rights or interests of persons
who acquired an interest in the property theretofore.
(Veguillas vs. Jaucian, 25 Phil., 315;
Samson vs. Garcia and Ycalina, 34 Phil., 805.) In the
present case the petitioner had acquired an absolute
deed to the land in question, and had actually entered
into the possession of the same, before the
preventative precautionary notice was noted in the
office of the registry of deeds. Therefore, under the
provisions of the Mortgage Law above cited, it could in
no way affect the rights or interests of persons,
acquired theretofore.
For all of the foregoing reasons, we are fully persuaded
that the judgment ordering the registration of the parcel
of land in question in the name of the petitioner should
be and is hereby affirmed, with costs. So ordered.
Araullo, Street, Avanceña and Villamor, JJ., concur.
Sales 33 of 70
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 120191 October 10, 1997
LORETO ADALIN, CARLOS CALINGASAN,
DEMETRIO ADAYA and MAGNO
ADALIN, petitioners,
vs.
THE HON. COURT OF APPEALS, FAUSTINO L. YU,
ANTONIO T. LIM, ELENA K. PALANCA, JOSE
PALANCA, EDUARDA K. VARGAS, JOSE VARGAS,
MERCEDES K. CABALLERO, EBERHARDO
CABALLERO, ISABEL K. VILLAMOR, FEDERICO
VILLAMOR, JOSE KADO, URSULA KADO, MARIA
K. CALONZO, BAYANI L. CALONZO, TEOFILA
KADO, NESTOR KADO and LILIA
KADO, respondents.
HERMOSISIMA, JR., J.:
Before us is a petition for review seeking the reversal
of the Decision1 of the Court of Appeals2 and in lieu
thereof, the reinstatement of the Decision3 of the
Regional Trial Court4 in an action for specific
performance filed by private respondents Faustino L.
Yu and Antonio T. Lim against the Kado siblings,
namely, private respondents Elena K. Palanca,
Eduarda K. Vargas, Mercedes K. Caballero, Isabel K.
Villamor, Jose Kado, Maria K. Calonzo, Teofila Kado
and Nestor Kado, and their respective spouses.
In essence, the petition poses a challenge against the
respondent appellate court's legal conclusion that the
transaction entered into by private respondents Yu and
Lim with private respondents Kado siblings, is one of
an absolute sale and not merely a conditional sale as
denominated in the document signed by said parties.
As such, there is no dispute as to the following facts:
. . . [F]rom the welter of evidence and the
record, it has been established that Elena
Kado Palanca, and her brothers and sisters,
namely, Eduarda K. Vargas, Mercedes K.
Caballero, Isabel K. Villamor, Jose Kado,
Maria K. Calonzo, Teofila Kado and Nestor
Kado, hereinafter referred to, for brevity's
sake, as the Appellees-Vendors, were the
owners of a parcel of land, with an area of
1,343 square meters, with a five-door, one
storey commercial building constructed
thereon, fronting the Imperial Hotel, located
along Magallanes Street, Cotabato City,
described in and covered by Transfer
Certificate of Title No. T-12963 of the Registry
of Deeds of Cotabato City . . . . One of the five
(5) doors was leased to Loreto Adalin,
hereinafter referred to as the Appellee Adalin,
two (2) doors were leased to Carlos
Calingasan and Demetrio Adaya respectively,
and two (2) doors were leased to Magno
Adalin, all of whom are hereinafter referred to,
for brevity's sake, as the Appellees-Vendees.
The Appellees-Vendees and Appellee Adalin
paid a monthly rental of P1,500.00 for each
door. The Appellees-Vendors commissioned
Ester Bautista to look for and negotiate with
prospective buyers for the sale of their
property for the price of P3,000,000.00.
Sometime in August, 1987, Ester Bautista
offered the property, for sale, to the
Appellants and the latter agreed to buy the
property. A conference was held in the office
of the Appellant Faustino Yu, at the Imperial
Hotel, where he was the President-Manager,
with both Appellants, the Appellee Adalin, the
Appellees-Vendors Elena Palanca and
Teofilo Kado, in their behalf and in behalf of
the Appellees-Vendors, in attendance, to
discuss the terms and conditions of the sale.
The Appellants and Appellee Adalin, the
Appellees-Vendors agreed that the
Appellants will each buy two (2) doors while
Appellee Adalin will buy the fifth door which
he was leasing from the Appellees-Vendors,
all for the price of P2,600,000.00. During the
conference, the Appellants inquired from the
Appellee-Vendor Elena Palanca whether the
Appellees-Vendees were interested to buy
the property but the Appellee-Vendor Elena
Palanca replied that the property had been
offered to the Appellees-Vendees for sale but
that the latter were not interested to buy the
same. The conferees then agreed to meet, on
September 2, 1987, in the house of the
Appellee-Vendor Palanca, with Atty. Bayani
Calonzo, her brother-in-law, in attendance, to
finalize the sale. However, unknown to the
Appellants, the Appellee-Vendor Elena
Palanca, in her behalf and in behalf of the
other Appelles-Vendors, sent, on September
2, 1987, separate letters to each of the
Appellees-Vendees informing them that
someone was interested to buy the property
and requested them to vacate the property
within thirty (30) days "unless all of you could
buy the property at the same price" . . . .
During the conference in the house of the
Appellee-Vendor Elena Palanca, on
September 2, 1987, the Appellants, the
Appellee Adalin and the Appellees-Vendors
Elena Palanca and Teofilo Kado in their
behalf and in behalf of the other Appellees-
Vendors, Atty. Bayani Calonzo, the husband
of the Appellee Maria Kado, Atty. Eugenio
Soyao, the counsel of the Appellants and the
Appellee-Vendee Magno Adalin who
attended in his behalf and in behalf of the
Appellees-Vendees, were present. When
asked by the Appellants if the Appellees-
Vendees were interested to buy the property,
the Appellee-Vendee Magno Adalin
forthrightly replied that the Appellees-
Vendees were not interested to buy the
property because they cannot afford the
purchase price thereof. However, he claimed
that the Appellees' Vendees were entitled to
P50,000.00 each as disturbance money, in
consideration for their vacating the property,
to be borne by the Appellees-Vendors. The
Appellants, the Appellee Adalin and the
Appelles-Vendors forthwith agreed that each
Appellant will buy two (2) doors while the fifth
door leased by Appellee Adalin will be
purchased by him, all for the purchase price
of P2,600,000.00 and that the Appellants and
Appellee Adalin will pay, P300,000.00 as
downpayment for the property, the balance to
be payable upon the eviction of the
Appellees-Vendees from the property and the
Sales 34 of 70
execution of a "Deed of Absolute Sale". Atty.
Bayani Calonzo forthwith assured the
Appellants that he could secure the eviction of
the Appellees-Vendees from the property
within a month because the latter were his
close friends and compadres. Atty. Bayani
Calonzo then gave Atty. Eugenio Soyao, the
counsel of the Appellants, the go-signal to
prepare the deed for the signatures of the
parties. On September 8, 1987, the
Appellants and Appellee Adalin, as buyers of
the property, and the Appellees-Vendors, met
in the office of the Appellant Faustino Yu at
the Imperial Hotel and executed the "Deed of
Conditional Sale" prepared by Atty. Eugenio
Soyao
. . . . The Appellants and Appellee Adalin each
contributed P100,000.00 and gave the total
amount of P300,000.00 to the Appellee-
Vendor Elena Palanca as the downpayment
for the property. The Appellees-Vendors
Elena Palanca and Eduarda Vargas signed
an "Acknowledgment Receipt" for the
downpayment . . . in their behalf and in behalf
of the other Appellees-Vendors. In the
meantime, the Appellants deferred
registration of the deed until after the eviction
of the Appellees-Vendees from the property
and the payment of the balance of the
purchase price of the property to the
Appellees-Vendors as agreed upon under the
"Deed of Conditional Sale".
In the interim, on October 14, 1987, the
Appellees-Vendors, through the Appellee-
Vendor Elena Palanca, wrote, conformably
with the terms of the "Deed of Conditional
Sale" . . . a letter complaint against the
Appellees-Vendees with the Barangay
Captain for unlawful detainer . . . . The case
was docketed as Barangay Case No. 7,052-
87 . . . . On October 16, 1987, the Appellee-
Vendee Magno Adalin wrote a letter to the
Appellees-Vendors, through the Appellee-
Vendor Elena Palanca, informing them that
he had decided to purchase the two doors he
was leasing for the purchase price of
P600,000.00 per door and was ready to
tender the amount by the end of the month . .
. . The Appellee-Vendee Demetrio Adaya and
the Appellee-Vendee Carlos Calingasan
likewise wrote separate letters to the
Appellees-Vendors informing the latter of their
decision to purchase the premises occupied
by them respectively for the amount of
P600,000.00 each . . . . Inspite of the prior
sale of the property to the Appellants and
Appellee Adalin, the Appellees-Vendors
decided to back out from said sale to the
Appellants and to sell the property to the
Appellees-Vendees and to return the
downpayments of the Appellants for the
property in the total amount of P200,000.00
with interests thereon. The Appellees-
Vendees procured TCBT Check No. 195031
in the amount of P101,416.66 payable to the
Appellant Faustino Yu and TCBT Check No.
195032 in the amount of P101,416.66
payable to the Appellant Antonio Lim and
transmitted the same to the Appellants with a
covering letter . . . . The Appellants were
flabbergasted. Both the Appellants refused to
receive the said letter and checks and
insisted, instead, that the Appellees-Vendors
comply with the "Deed of Conditional Sale" . .
. . On November 16, 1987, the Appellants,
through their counsel, wrote a letter to the
Appellees-Vendors, copies of which were
furnished the Appellees-Vendees, inquiring if
the appropriate action has been undertaken
towards the eviction of the Appellees-
Vendees
. . . . The Appellees-Vendors ignored the said
letter. Instead, the Appellees-Vendors signed,
in December, 1987, a "Deed of Sale of
Registered Land" under which they sold the
said property to the Appellees-Vendees,
including the Appellee Adalin for the price of
only P1,000,000.00 . . . much lower than the
price of the Appellant under the "Deed of
Conditional Sale"
. . . . Although it appears that the deed was
notarized by Atty. Bayani Calonzo, however,
the deed does not bear any number in the
notarial register of the lawyer. In the same
month, the Appellees-Vendors signed
another "Deed of Sale of Registered Land"
under which they sold to the Appellees-
Vendees including Appellee Adalin the
aforesaid property for the considerably
increased price of P3,000,000.00 . . . . The
deed was notarized by Atty. Bayani Calonzo.
Interestingly, both deeds were not filed with
the Register of Deeds of Cotabato City. Not
content with the two (2) Deeds of Sale of
Registered Land . . . the Appellees-Vendors,
signed a third "Deed of Sale of Registered
Land" which appears dated February 5, 1988
under which they purportedly sold to the
Appellees-Vendees, including Appellee
Adalin, the aforesaid property for the much
reduced price of only P860,000.00 . . . .
However, the aforesaid deed was not
immediately filed with the Register of Deeds
of Cotabato City. On February 26, 1988, the
Appellees-Vendors, through Atty. Bayani
Calonzo, filed a Petition against the
Appellants for the consignation of their
downpayment of P200,000.00, with the
Regional Trial Court of General Santos City
entitled "Maria K. Calonzo, et al. versus
Faustino Yu, Special Civil Case No. 259". . . .
Undaunted, the Appellants filed a complaint
with the Barangay Captain for Breach of
Contract against the Appellees-Vendors
entitled "Faustino Yu, et al. versus Elena K.
Palanca, et al., Barangay Case No. 9,014-
88". The Barangay Captain issued, on April 7,
1988, summons to the Appellees-Vendors for
them to appear for a conference on April 22,
1988 at 9:00 o'clock in the morning . . . .
Invitations were also sent to the Appellees-
Vendees . . . . During the conference attended
by Appellee-Vendees, the Appellants, if only
to accommodate the Appellee-Vendee
Magno Adalin and settle the case amicably,
agreed to buy only one door each so that the
Appellee-Vendee Magno Adalin could
purchase the two doors he was occupying.
However, the Appellee-Vendee Magno Adalin
adamantly refused, claiming that he was
already the owner of the two (2) doors. When
the Appellant Antonio Lim asked the Appellee
Vendee Magno Adalin to show the "Deed of
Sale" for the two doors, the latter insouciantly
walked out. Atty. Bayani Calonzo likewise
stated that there was no need to show the
deed of sale. No settlement was forged and,
Sales 35 of 70
on May 16, 1988, the Barangay Captain
issued the Certification to File Action . . . .
On May 5, 1988, the Appellants filed their
complaint for "Specific Performance" against
the Appellees-Vendors and Appellee Adalin
in the Court a quo.
On June 14, 1988, the Appellants caused the
annotation of a "Notice of Lis Pendens" at the
dorsal portion of Transfer Certificate of Title
No. 12963 under the names of the Appellees-
Vendors . . . . On October 25, 1988, the
Appellees-Vendees filed a "Motion for
Intervention as Plaintiffs-Intervenors"
appending thereto a copy of the "Deed of Sale
of Registered Land" signed by the Appellees-
Vendors . . . . On October 27, 1988, the
Appellees-Vendees filed the "Deed of Sale of
Registered Land" . . . with the Register of
Deeds on the basis of which Transfer
Certificate of Title No. 24791 over the
property was issued under their names . . . .
On the same day, the Appellees-Vendees
filed in the Court a quo a "Motion To Admit
Complaint-In-Intervention . . . . Attached to the
Complaint-In-Intervention was the "Deed of
Sale of Registered Land" signed by the
Appellees-Vendees . . . . The Appellants were
shocked to learn that the Appellees-Vendors
had signed the said deed. As a counter-move,
the Appellants filed a motion for leave to
amend Complaint and, on November 11,
1988, filed their Amended Complaint
impleading the Appellees-Vendees as
additional Defendants. . . .
xxx xxx xxx
The Appellees-Vendors suffered a rebuff
when, on January 10, 1989, the Regional Trial
Court of General Santos City issued an Order
dismissing the Petition of the Appellees-
Vendors for consignation . . . . In the
meantime, on November 30, 1989, Appellee
Adalin died and was substituted, per order of
the Court a quo, on January 5, 1990, by his
heirs, namely, Anita, Anelita, Loreto, Jr.,
Teresita, Wilfredo, Lilibeth, Nelson, Helen and
Jocel, all surnamed Adalin, as Appellees-
Vendees . . . .
After trial, the Court a quo rendered judgment
in favor of the Appellees-Vendees . . . .5
In the opinion of the court a quo, petitioners became
the owners of the parcel of land in question with the
five-door, one storey commercial building standing
thereon, when they purchased the same following the
offer and the 30-day option extended to them by private
respondent Elena Palanca, in behalf of the other Kado
siblings, in her letter to them dated September 2, 1987.
The trial court disregarded the fact that the Kado
siblings had already finished transacting with private
respondents Faustino Yu and Antonio Lim and had in
fact entered into a conditional sale with them
respecting the same property. The trial court brushed
aside this fact as it reasoned that:
. . . In conditional deed of sale, ownership is
only transferred after the purchase price is
fully paid or the fulfillment of the condition and
the execution of a definite or absolute deed of
sale are made. . . .
In this case, it is clear from the provision of the
Deed of Conditional Sale . . . that the balance
of the price of P2,300,000.00 shall be paid
only after all the defendants-vendees shall
have vacated and surrendered the premises
to the defendants-vendors. However, the
tenants did not leave the premises. In fact
they opted to buy the property. Moreover, at
that time, the property was legally leased to
the defendants-vendees. . . .
xxx xxx xxx
Clearly therefore, the condition set forth in the
said Deed of Conditional Sale between the
plaintiffs and the defendants-vendors was not
fulfilled. Since the condition was not fulfilled,
there was no transfer of ownership of the
property from the defendants-vendors to the
plaintiffs. . . .
. . . [In] the letters of Elena Palanca to the
defendants-vendees dated September 2,
1987 . . . [t]hey were given the option or
preferential right to purchase the property.
xxx xxx xxx
When the defendants-vendors accepted
defendants-vendees' option to buy, the
former returned the initial payment of
P200,000.00 to the plaintiffs . . . but they
refused to accept the same. This refusal
however did not diminish the effect of the
acceptance of the option to buy, which in fact
led to the execution of the said Deed of Sale
of Registered Land . . . and the subsequent
issuance of the Transfer Certificate of Title
No. T-24791 of the Registry of Deeds for the
City of Cotabato in the names of the
defendants-vendees . . . . . .
. . . [T]he defendants-vendors acted in bad
faith when, while during the effectivity of the
period of the option to buy [that] they gave to
the defendants-vendees, they executed a
Deed of Conditional Sale . . . in favor of the
plaintiffs. This was only six (6) days from date
of the option. . . .6
The trial court also ruled that the conditional sale of the
subject property to private respondents Faustino Yu
and Antonio Lim and the sale of the same property to
petitioners, did not involve a double sale as to warrant
the application of Article 1544 of the Civil Code. The
court a quo ratiocinated in this manner:
. . . [T]he plaintiffs assert that this case is one
of double sale and should be governed by
Article 1544 of the Civil Code. The first sale,
plaintiffs claim, is that under the Deed of
Conditional Sale . . . in their favor and the
second sale is that ultimately covered by the
Deed of Sale of Registered Land for
P860,000.00 . . . in favor of the defendants-
vendee. As already pointed out by the court,
the execution of the Deed of Conditional Sale
did not transfer ownership of the property to
the plaintiff, hence, there can be no double
Sales 36 of 70
 sale. As held in the case of Mendoza
vs. Kalaw, 42 Phil. 236, Article 1544 does not
apply to situations where one sale was
subject to a condition which was not complied
with. This is because a conditional sale,
before the performance of the condition, can
hardly be said to be a sale of property,
specially where the condition has not been
performed or complied with.7
Pursuant to the above ruminations of the court a quo,
it ordered the following in the dispositive portion of its
decision:
WHEREFORE, the court hereby orders the
dismissal of plaintiffs' complaint against the
defendants-vendees for lack or merit, and
hereby further sustains the validity of Transfer
Certificate of Title No. T-24791 issued in their
names (defendants-vendees) by the Registry
of Deeds for the City of Cotabato.
The defendants-vendors are hereby jointly
and severally ordered to pay moral damages
of P500,000.00 to each of the plaintiffs,
P100,000.00 exemplary damages to each of
the plaintiffs and P50,000.00 as and for
attorney's fees.
Defendants-vendors are hereby further
ordered to return the P200,000.00 initial
payment received by them with legal interest
from date of receipt thereof up to November
3, 1987.
Defendants-vendees' counterclaim is hereby
ordered dismissed.
With cost against the defendants-vendors
SO ORDERED.8
Private respondents Faustino Yu and Antonio Lim
wasted no time in appealing from the above decision
of the court a quo. They were vindicated when the
respondent Court of Appeals rendered its decision in
their favor. The respondent appellate court reversed
the trial court as it ruled, thus:
. . . We find, and so declare. that the "Deed of
Conditional Sale" . . . executed by the
Appellees-Vendors in favor of the Appellants
was an absolute deed of sale and not a
conditional sale.
xxx xxx xxx
In ascertaining the nature of a contract and
the intention of the parties thereto, it
behooves the trier of facts to look into the
context of the contract in its entirety and not
merely specific words or phrases therein,
standing alone, as well as the
contemporaneous and subsequent acts of the
parties. It bears stressing that the title of the
contract is not conclusive of its nature. . . .
Although a contract may be denominated a
"Deed of Conditional Sale", or "Agreement to
Sell", the same may be, in reality a deed of
absolute sale or a contract of sale . . . .
Under Article 1458 of the New Civil Code, a
sale may be absolute or conditional. A
contract may be conditional when the
ownership of the thing sold is retained until
the fulfillment of a positive suspensive
condition, generally the payment of the
purchase price, the breach of which condition
will prevent the onset of the obligation to
deliver title . . . . A sale of immovables is
absolute where the contract does not contain
any provision that title to the property sold is
reserved to the Vendors or that the Vendor is
entitled to unilaterally rescind the same.
xxx xxx xxx
The Court a quo . . . resolutely subscribed to
the view that the . . . deed is conditional, its
efficacy dependent upon a suspensive
condition — that of the payment by the
Appellants of the balance of the purchase
price of the properly, after the Appellees-
Vendees shall have been evicted from the
property or shall have voluntarily vacated the
same and the Deed of Absolute Sale shall
have been executed in favor of the
Appellants; and, since the condition was not
fulfilled, the sale never became effective . . . .
. . . Even a cursory reading of the deed will
readily show absence of any stipulation in
said deed that the title to the property was
reserved to the Appellees-Vendors until the
balance of the purchase price was paid nor
giving them the right to unilaterally rescind the
contract if the Appellants failed to pay the said
amount upon the eviction of the Appellees-
Vendees. Inscrutably the, the deed is a
perfected deed of absolute sale, not a
conditional one. . . .
xxx xxx xxx
There may not have been delivery of the
properly to the Appellants either symbolically
or physically and more, the Appellees-
Vendors may have deferred their obligation of
delivering physical possession of the property
to the Appellees only after the Appellees-
Vendees shall have vacated the property,
however, the right of retention of the
Appellees-Vendors of title to or ownership
over the property cannot thereby be inferred
therefrom. . . . .
In fine, the non-payment of the balance of the
purchase price of the property and the
consequent eviction of the Appellees-
Vendees therefrom were not conditions which
suspended the efficacy of the "Deed of
Conditional Sale". Rather, the same, if due to
the fault of the Appellants, merely accorded
the Appellees-Vendors the option to rescind
the already existing and effective sale.
The Appellants and the Appellees-Vendors,
having entered into, under the "Deed of
Conditional Sale" . . . an absolute sale, the
Appellants thus had every right to demand
that the Appellees-Vendors performed their
prestation under the deed, to wit — the
eviction of the Appellees-Vendees from the
Sales 37 of 70
property — so that the Appellants may then
pay the balance of the purchase price of the
property.
xxx xxx xxx
The Court a quo and the Appellees, however,
posit that the "Deed of Conditional Sale" . . .
had not been consummated and title to and
ownership over the property had not been
transferred to the Appellants because there
had been neither constructive nor actual
delivery of the property to the Appellants . . . .
We do not agree. The evidence in the record
shows that the Appellants and the Appellees-
Vendors met in the house of Appellee Elena
Palanca on September 2, 1987. The
Appellees-Vendees were represented by the
Appellee-Vendee, Retired Col. Magno Adalin.
The latter did not object to the sale of the
property to the Appellants but merely insisted
that each of the Appellees-Vendees be give
in P50,000.00 as disturbance fee by the
Appellees-Vendors to which the latter
acquiesced because Atty. Bayani Calonzo
forthwith gave Atty. Eugenio Soyao, the go-
signal to prepare the "Deed of Conditional
Sale" for the signatures thereof by the parties
on September 8, 1987. The Appellees-
Vendors, on September 2, 1987, wrote letters
to the Appellees-Vendees giving them the
option to match the price offered by the
Appellants. The Appellees-Vendees
maintained a resounding silence to the letter-
offer of the Appellees-Vendors. It was only, on
October 16, 1987, that the Appellees-
Vendees, after the execution by the
Appellants and the Appellees-Vendors of the
"Deed of Conditional Sale", that the
Appellees-Vendees finally decided to
themselves, purchase the property. The
Appellees are estopped from claiming that the
property had not been delivered to the
Appellants. The Appellants cannot use their
gross bad faith as a shield to frustrate the
enforcement, by the Appellants, of the "Deed
of Conditional Sale". . . .
xxx xxx xxx
The Appellees-Vendors cannot invoke the
refusal of the Appellees-Vendees to vacate
the property and the latter's decision to
themselves purchase the property as a valid
justification to renege on and turn their backs
against their obligation to deliver or cause the
eviction of the Appellees-Vendees from and
deliver physical possession or the property to
the Appellants. For, if We gave our
approbation to the stance of the Appellees,
then We would thereby be sanctioning the
performance by the Appellees-Vendors of
their obligations under the deed subject to the
will and caprices of the Appellees-Vendees,
which we cannot do . . . .
It would be the zenith of inequity for the
Appellees-Vendors to invoke the occupation
by the Appellees-Vendees, as of the property,
as a justification to ignore their obligation to
have the Appellees-Vendees evicted from the
property and for them to give P50,000.00
disturbance fee for each of the Appellees-
Vendees and a justification for the latter to
hold on to the possession of the property.
xxx xxx xxx
Assuming, gratia arguendi, for the nonce, that
there had been no consummation of the
"Deed of Conditional Sale" . . . by reason of
the non-delivery to the Appellants of the
property, it does not thereby mean that the
"Deed of Sale of Registered Land" . . .
executed by the Appellees should be given
preference. Apropos to this, We give our
approbation to the plaint of the Appellants that
the Court a quo erred in not applying the
second and third paragraphs of Article 1544 .
....
For, the evidence in the record shows that,
although the Appellees-Vendees managed to
cause the registration of the Deed of Sale of
Registered Land . . . on October 27, 1988 and
procure Transfer Certificate of Title No. 24791
under their names, on said date, and that they
were, as of said date, in physical possession
of the property, however, the evidence in the
record shows that the Appellees-Vendees
were in gross evident bad faith. At the time the
Appellees executed the "Deed of Sale of
Registered Land" in December 1987 . . . they
were aware that the Appellees-Vendors and
the Appellants had executed their "Deed of
Conditional Sale" as early as September 8,
1987. . . . In the light of the foregoing, We
arrive at the ineluctable conclusion that
preference must be accorded the "Deed of
Conditional Sale" executed by the Appellants
and the Appellees-Vendors.9
Accordingly, the respondent Court of Appeals rendered
another judgment in the case and ordered the
following:
1. The "Deed of Conditional Sale", Exhibit
"A" is hereby declared valid;
2. The "Deeds of Sale of Registered
Land", Exhibits "E", "F" and "G" and Transfer
Certificate of Title No. 24791 are hereby
declared null and void;
3. The Appellees-Vendees except the heirs of
Loreto Adalin are hereby ordered to vacate
the property within thirty (30) days from the
finality of this Decision;
4. The Appellees-Vendors are hereby ordered
to execute, in favor of the Appellants, a "Deed
of Absolute Sale" covering four (4) doors of
the property (which includes the area of the
property on which said four doors are
constructed) except the door purchased by
the Appellee-Vendee Loreto Adalin, free of
any liens or encumbrances;
5. The Appellants are hereby ordered to remit
to the Appellees-Vendors the balance of the
purchase price of the four (4) doors in the
amount of P1,880,000.00;
Sales 38 of 70
 6. The Appellees-Vendors are hereby ordered
to refund to the Appellees-Vendees the
amount of P840,000.00 which they paid for
the properly under the "Deed of Conditional
Sale of Registered Land", Exhibit "G", without
interest considering that they also acted in
bad faith;
7. The Appellee-Vendee Magno Adalin is
hereby ordered to pay the amount of
P3,000.00 a month, and each of the
Appellees-Vendees, except the Appellee
Adalin, the amount of P1,500.00 to the
Appellants, from November, 1987, up to the
time the property is vacated and delivered to
the Appellants, as reasonable compensation
for the occupancy of the property, with
interest thereon at the rate of 6% per annum;
8. The Appellees-Vendors are hereby ordered
to pay, jointly and severally, to each of the
Appellants the amount of P100,000.00 by way
of moral damages, P20,000.00 by way of
exemplary damages and P20,000.00 by way
of attorney's fees;
9. The counterclaims of the Appellees are
dismissed.
With costs against the Appellees.
SO ORDERED.10
Unable to agree with the above decision of the
respondent appellate court, petitioners seek reversal
thereof on the basis on the following grounds:
1. The Unconsummated Conditional Contract
of Sale in favor of the herein respondent
VENDEES is Inferior to and Cannot Prevail
Over the Consummated Absolute
Contracts of Sale in favor of the herein
petitioners.
2. The Deeds of Sale in favor of the herein
Petitioners as well as Transfer Certificate of
Title No. 24791 in their names are Perfectly
Valid Documents.
3. The herein Petitioners may not be Legally
and Rightfully Ordered to Vacate the Litigated
Property or Pay Reasonable Compensation
for the Occupancy Thereof .
4. The herein Petitioners may not be Held
Liable to Pay the Costs.11
5. The Court of Appeals erred in holding that
the Deed of Conditional Sale is in reality an
absolute deed of sale.
6. The Court of Appeals erred in relying totally
and exclusively on the evidence presented by
respondents and in disregarding the evidence
for petitioners.
7. The Court of Appeals erred in holding that
herein petitioners are guilty of bad faith and
that Article 1544 of the Civil Code is
applicable.12
The petition lacks merit.
The grounds relied upon by petitioners are essentially
a splitting of the various aspects of the one pivotal
issue that holds the key to the resolution of this
controversy: the true nature of the sale transaction
entered into by the Kado siblings with private
respondents Faustino Yu and Antonio Lim. Our task
put simply, amounts to a declaration of what kind
contract had been entered into by said parties and of
what their respective rights and obligations are
thereunder.
It is not disputed that in August, 1987, Elena K.
Palanca, in behalf of the Kado siblings, commissioned
Ester Bautista to look for buyers for their property
fronting the Imperial Hotel in Cotabato City. Bautista
logically offered said property to the owners of the
Imperial Hotel which may be expected to grab the offer
and take advantage of the proximity of the property to
the hotel site. True enough, private respondent
Faustino Yu, the President-General Manager of
Imperial Hotel, agreed to buy said property.
Thus during that same month of August, 1987, a
conference was held in the office of private respondent
Yu at the Imperial Hotel. Present there were private
respondent Yu, Loreto Adalin who was one of the
tenants of the five-door, one-storey building standing
on the subject property, and Elena Palanca and Teofilo
Kado in their own behalf as sellers and in behalf of the
other tenants of said building. During the conference,
private respondents Yu and Lim categorically asked
Palanca whether the other tenants were interested to
buy the property, but Palanca also categorically
answered that the other tenants were not interested to
buy the same. Consequently, they agreed to meet at
the house of Palanca on September 2, 1987 to finalize
the sale.
On September 2, 1987, Loreto Adalin; Yu and Lim and
their legal counsel; Palanca and Kado and their legal
counsel; and one other tenant, Magno Adalin, met at
Palanca's house. Magno Adalin was there in his own
behalf as tenant of two of the five doors of the one-
storey building standing on the subject property and in
behalf of the tenants of the two other doors, namely.
Carlos Calingasan and Demetrio Adaya. Again, private
respondents Yu and Lim asked Palanca and Magno
Adalin whether the other tenants were interested to buy
the subject property, and Magno Adalin unequivocally
answered that he and the other tenants were not so
interested mainly because they could not afford it.
However, Magno Adalin asserted that he and the other
tenants were each entitled to a disturbance fee of
P50,000.00 as consideration for their vacating the
subject property.
During said meeting, Palanca and Kado, as sellers,
and Loreto Adalin and private respondents Yu and Lim,
as buyers, agreed that the latter will pay P300,000.00
as downpayment for the property and that as soon as
the former secures the eviction of the tenants, they will
be paid the balance of P2,300,000.00.
Pursuant to the above terms and conditions, a Deed of
Conditional Sale was drafted by the counsel of private
respondents Yu and Lim. On September 8, 1987, at the
Imperial Hotel office of private respondent Yu, Palanca
and Eduarda Vargas, representing the sellers, and
Sales 39 of 70
Loreto Adalin and private respondents Yu and Lim
signed the Deed of Conditional Sale. They also agreed
to defer the registration of the deed until after the
sellers have secured the eviction of the tenants from
the subject property.
The tenants, however, refused to vacate the subject
property. Being under obligation to secure the eviction
of the tenants, in accordance with the terms and
conditions of the Deed of Conditional Sale, Elena
Palanca filed with the Barangay Captain a letter
complaint for unlawful detainer against the said
tenants.
Undisputedly, Palanca, in behalf of the Kado siblings
who had already committed to sell the property to
private respondents Yu and Lim and Loreto Adalin,
understood her obligation to eject the tenants on the
subject property. Having gone to the extent of filing an
ejectment case before the Barangay Captain, Palanca
clearly showed an intelligent appreciation of the nature
of the transaction that she had entered into: that she,
in behalf of the Kado siblings, had already sold the
subject property to private respondents Yu and Lim
and Loreto Adalin, and that only the payment of the
balance of the purchase price was subject to the
condition that she would successfully secure the
eviction of their tenants. In the sense that the payment
of the balance of the purchase price was subject to a
condition, the sale transaction was not yet completed,
and both sellers and buyers have their respective
obligations yet to be fulfilled: the former, the ejectment
of their tenants; and the latter, the payment of the
balance of the purchase price. In this sense, the Deed
of Conditional Sale may be an accurate denomination
of the transaction. But the sale was conditional only
inasmuch as there remained yet to be fulfilled, the
obligation of the sellers to eject their tenants and the
obligation of the buyers to pay the balance of the
purchase price. The choice of who to sell the property
to, however, had already been made by the sellers and
is thus no longer subject to any condition nor open to
any change. In that sense, therefore, the sale made by
Palanca to private respondents was definitive and
absolute.
Nothing in the acts of the sellers and buyers before,
during or after the said transaction justifies the radical
change of posture of Palanca who, in order to provide
a legal basis for her later acceptance of the tenants'
offer to buy the same property, in effect claimed that
the sale, being conditional, was dependent on the
sellers not changing their minds about selling the
property to private respondents Yu and Lim. The
tenants, for their part, defended Palanca's subsequent
dealing with them by asserting their option rights under
Palanca's letter of September 2, 1987 and harking on
the non-fulfillment of the condition that their ejectment
be secured first.
Two days after Palanca filed an ejectment case before
the Barangay Captain against the tenants of the
subject property, Magno Adalin, Demetrio Adaya and
Carlos Calingasan wrote letters to Palanca informing
the Kado siblings that they have decided to purchase
the doors that they were leasing for the purchase price
of P600,000.00 per door. Almost instantly, Palanca, in
behalf of the Kado siblings, accepted the offer of the
said tenants and returned the downpayments of private
respondents Yu and Lim. Of course, the latter refused
to accept the reimbursements.
Certainly, we cannot countenance the double dealing
perpetrated by Palanca in behalf of the Kado siblings.
No amount of legal rationalizing can sanction the
arbitrary breach of contract that Palanca committed in
accepting the offer of Magno Adalin, Adaya and
Calingasan to purchase a property already earlier sold
to private respondents Yu and Lim.
Petitioners claim that they were given a 30-day option
to purchase the subject property as contained in the
September 2, 1987 letter of Palanca. In the first place,
such option is not valid for utter lack of
consideration.13 Secondly, private respondents twice
asked Palanca and the tenants concerned as to
whether or not the latter were interested to buy the
subject property, and twice, too, the answer given to
private respondents was that the said tenants were not
interested to buy the subject property because they
could not afford it. Clearly, said tenants and Palanca,
who represented the former in the initial negotiations
with private respondents, are estopped from denying
their earlier statement to the effect that the said tenants
Magno Adalin, Adaya and Calingasan had no intention
of buying the four doors that they were leasing from the
Kado siblings. More significantly, the subsequent sale
of the subject property by Palanca to the said tenants,
smacks of gross bad faith, considering that Palanca
and the said tenants were in full awareness of the
August and September negotiations between Bautista
and Palanca, on the one hand, and Loreto Adalin,
Faustino Yu and Antonio Lim, on the other, for the sale
of the one-storey building. It cannot be denied, thus,
that Palanca and the said tenants entered into the
subsequent or second sale notwithstanding their full
knowledge of the subsistence of the earlier sale over
the same property to private respondents Yu and Lim.
It goes without saying, thus, that though the second
sale to the said tenants was registered, such prior
registration cannot erase the gross bad faith that
characterized such second sale, and consequently,
there is no legal basis to rule that such second sale
prevails over the first sale of the said property to private
respondents Yu and Lim.
We agree, thus, with the ruminations of the respondent
Court of Appeals that:
The Appellees-Vendors cannot invoke the
refusal of the Appellees-Vendees to vacate
the property and the latter's decision to
themselves purchase the property as a valid
justification to renege on and turn their backs
against their obligation to deliver or cause the
eviction of the Appellees-Vendees from the
deliver physical possession or the property to
the Appellants. For, if We gave our
approbation to the stance of the Appellees,
then We would thereby be sanctioning the
performance by the Appellees-Vendors of
their obligations under the deed subject to the
will and caprices of the Appellees-Vendees,
which we cannot do . . . .
It would be the zenith of inequity for the
Appellees-Vendors to invoke the occupation
by the Appellees-Vendees, as of the property,
as a justification to ignore their obligation to
have the Appellees-Vendees evicted from the
property and for them to give P50,000.00
disturbance fee for each of the Appellees-
Vendees and a justification for the latter to
hold on to the possession of the property.
xxx xxx xxx
Sales 40 of 70
 Assuming, gratia arguendi, for the nonce, that
there had been no consummation of the
"Deed of Conditional Sale" . . . by reason of
the non-delivery to the Appellants of the
property, it does not thereby mean that the
"Deed of Sale of Registered Land" . . .
executed by the Appellees should be given
preference. Apropos to this, We give our
approbation to the plaint of the Appellants that
the Court a quo erred in not applying the
second and third paragraphs of Article 1544 .
...

For, the evidence in the record shows that,

although the Appellees-Vendees managed to
cause the registration of the Deed of Sale of
Registered Land . . . on October 27, 1988 and
procure Transfer Certificate of Title No. 24791
under their names, on said date, and that they
were, as of said date, in physical possession
of the property, however, the evidence in the
record shows that the Appellees-Vendees
were in gross evident bad faith. At the time the
Appellees executed the "Deed of Sale of
Registered Land" in December 1987 . . . they
were aware that the Appellees-Vendors and
the Appellants had executed their "Deed of
Conditional Sale" as early as September 8,
1987. . . . In the light of the foregoing, We
arrive at the ineluctable conclusion that
preference must be accorded the "Deed
of Conditional Sale" executed by the
Appellants and the Appellees-Vendors.14

WHEREFORE, the instant petition is HEREBY

DISMISSED.

Costs against petitioners.

SO ORDERED.

Sales 41 of 70
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 129760 December 29, 1998
RICARDO CHENG, petitioner,
vs.
RAMON B. GENATO and ERNESTO R. DA JOSE &
SOCORRO DA JOSE, respondents.
MARTINEZ, J.:
This petition for review on certiorari seeks to annul and
set aside the Decision of the Court of Appeals
(CA) 1 dated July 7, 1997 in CA-G.R. No. CV No.
44706 entitled "Ricardo Cheng, plaintiff-appellee
vs. Ramon B. Genato, defendant-appellant,
Ernesto R. Da Jose & Socorro B. Da Jose,
Intervenors-Appellants" which reversed the ruling
of the Regional Trial Court, Branch 96 of Quezon
City dated January 18, 1994. The dispositive
portion of the CA Decision reads:
WHEREFORE, based on the
foregoing, appealed decision is
hereby REVERSED and SET
ASIDE and judgment is rendered
ordering;
1. The dismissal of the complaint;
2. The cancellation of the
annotations of the defendant-
appellant's Affidavit to Annul
Contract to Sell and plaintiff-
appellee's Notice of Adverse
Claim in the subject TCT's,
namely, TCT No. T-76.196 (M) and
TCT No. T-76.197 (M);
3. Payment by the intervenors-
appellants of the remaining
balance of the purchase price
pursuant to their agreement with
the defendant-appellant to
suspend encashment of the three
post-dated checks issued since
1989.
4. Ordering the execution by the
defendant-appellant Genato of
the Deed of Absolute Sale over
the subject two lots covered by
TCT No. T-76.196 (M) and TCT No.
T-76.197 (M) in favor of
intervenors-appellants Spouses
Da Jose;
5. The return by defendant-
appellant Genato of the
P50,000.00 paid to him by the
plaintiff-appellee Cheng, and
6. Payment by plaintiff-appellee
Cheng of moral damages to
herein intervenors-appellants Da
Jose of P100,000.00, exemplary
damages of P50,000.00,
attorney's fees of P50,000.00, and
costs of suit; and to defendant-
appellant, of P100,000.00 in
exemplary damages, P50,000.00
in attorney's fees. The amounts
payable to the defendant-
appellant may be compensated
by plaintiff appellee with the
amount ordered under the
immediately foregoing paragraph
which defendant-appellant has to
pay the plaintiff-appellee.
SO ORDERED. 2
The antecedents of the case are as follows:
Respondent Ramon B. Genato (Genato) is the
owner of two parcels of land located at Paradise
Farms, San Jose del Monte, Bulacan covered by
TCT No. T-76.196 (M) 3 and TCT No. T-76.197
(M) 4 with an aggregate area of 35,821square
meters, more or less.
On September 6, 1989, respondent Genato entered
into an agreement with respondent-spouses
Ernesto R. Da Jose and Socorro B. Da Jose (Da
Jose spouses) over the above-mentioned two
parcels of land. The agreement culminated in the
execution of a contract to sell for which the
purchase price was P80.00 per square meter. The
contract was in a public instrument and was duly
annotated at the back of the two certificates of title
on the same day. Clauses 1and 3 thereof provide:
1. That the purchase price shall be
EIGHTY (P80.00) PESOS,
Philippine Currency per square
meter, of which the amount of
FIFTY THOUSAND (P50,000.00)
PESOS shall be paid by the
VENDEE to the VENDOR as partial
down payment at the time of
execution of this Contract to Sell.
xxx xxx xxx
3. That the VENDEE, Thirty (30)
DAYS after the execution of this
contract, and only after having
satisfactorily verified and
confirmed the truth and
authenticity of documents, and
that no restrictions, limitations,
and developments imposed on
and/or affecting the property
subject of this contract shall be
detrimental to his interest, the
VENDEE shall pay to the
VENDOR, NINE HUNDRED FIFTY
THOUSAND (P950,00.00) PESOS.
Philippine Currency, representing
the full payment of the agreed
Down Payment, after which
complete possession of the
property shall be given to the
VENDEE to enable him to prepare
the premises and any
development therein.
Sales 42 of 70
On October 4, 1989, the Da Jose spouses, not
having finished verifying the titles mentioned in
clause 3 as aforequoted, asked for and was
granted by respondent Genato an extension of
another 30 days — or until November 5, 1989.
However, according to Genato, the extension was
granted on condition that a new set of documents
is made seven (7) days from October 4, 1989. 6 This
was denied by the Da Jose spouses.
Pending the effectivity of the aforesaid extension
period, and without due notice to the Da Jose
spouses, Genato executed an Affidavit to Annul
the Contract to Sell, 7 on October 13, 1989.
Moreover, no annotation of the said affidavit at the
back of his titles was made right away. The affidavit
contained, inter alia, the following paragraphs;
xxx xxx xxx
That it was agreed between the
parties that the agreed
downpayment of P950,000.00
shall be paid thirty (30) days after
the execution of the Contract, that
is on or before October 6, 1989;
The supposed VENDEES failed to
pay the said full downpayment
even up to this writing, a breach
of contract;
That this affidavit is being
executed to Annul the aforesaid
Contract to Sell for the vendee
having committed a breach of
contract for not having complied
with the obligation as provided in
the Contract to Sell; 8
On October 24, 1989, herein petitioner Ricardo
Cheng (Cheng) went to Genato's residence and
expressed interest in buying the subject
properties. On that occasion, Genato showed to
Ricardo Cheng copies of his transfer certificates of
title and the annotations at the back thereof of his
contract to sell with the Da Jose spouses. Genato
also showed him the aforementioned Affidavit to
Annul the Contract to Sell which has not been
annotated at the back of the titles.
Despite these, Cheng went ahead and issued a
check for P50,000.00 upon the assurance by
Genato that the previous contract with the Da Jose
spouses will be annulled for which Genato issued
a handwritten receipt (Exh. "D"), written in this
wise:
10/24/89
Received from Ricardo Cheng
the Sum of Fifty Thousand Only
(P50.000-)
as partial for T-76196 (M)
T-76197 (M) area 35.821 Sq.m.
Paradise Farm, Gaya-Gaya, San Jose
Del Monte
P70/m2 Bulacan
plus C. G. T. etc.
Check # 470393 (SGD.) Ramon B.
Genato
10/24/89 9
On October 25, 1989, Genato deposited Cheng's
check. On the same day, Cheng called up Genato
reminding him to register the affidavit to annul the
contract to sell. 10
The following day, or on October 26, 1989, acting
on Cheng's request, Genato caused the
registration of the Affidavit to Annul the Contract
to Sell in the Registry of Deeds, Meycauayan,
Bulacan as primary entry No. 262702. 11
While the Da Jose spouses were at the Office of the
Registry of Deeds of Meycauayan, Bulacan on
October 27, 1989, they met Genato by coincidence.
It was only then that the Da Jose spouses
discovered about the affidavit to annul their
contract. The latter were shocked at the disclosure
and protested against the rescission of their
contract. After being reminded that he (Genato)
had given them (Da Jose spouses) an additional
30-day period to finish their verification of his
titles, that the period was still in effect, and that
they were willing and able to pay the balance of the
agreed down payment, later on in the day, Genato
decided to continue the Contract he had with them.
The agreement to continue with their contract was
formalized in a conforme letter dated October 27,
1989.
Thereafter, Ramon Genato advised Ricardo Cheng
of his decision to continue his contract with the Da
Jose spouses and the return of Cheng's P50,000.00
check. Consequently, on October 30, 1989,
Cheng's lawyer sent a letter 12 to Genato
demanding compliance with their agreement to sell
the property to him stating that the contract to sell
between him and Genato was already perfected
and threatening legal action.
On November 2, 1989, Genato sent a letter 13 to
Cheng (Exh. "6") enclosing a BPI Cashier's Check
for P50,000.00 and expressed regret for his
inability to "consummate his transaction" with him.
After having received the letter of Genato on
November 4, 1989, Cheng, however, returned the
said check to the former via RCPI telegram 14 dated
November 6, 1989, reiterating that "our contract to
sell your property had already been perfected."
Meanwhile, also on November 2, 1989, Cheng
executed an affidavit of adverse claim 15 and had it
annotated on the subject TCT's.
On the same day, consistent with the decision of
Genato and the Da Jose spouses to continue with
their Contract to Sell of September 6, 1989, the Da
Jose spouses paid Genato the complete down
payment of P950,000.00 and delivered to him three
(3) postdated checks (all dated May 6, 1990, the
stipulated due date) in the total amount of
Sales 43 of 70
P1,865,680.00 to cover full payment of the balance
of the agreed purchase price. However, due to the
filing of the pendency of this case, the three (3)
postdated checks have not been encashed.
On December 8, 1989, Cheng instituted a
complaint 16 for specific performance to compel
Genato to execute a deed of sale to him of the
subject properties plus damages and prayer for
preliminary attachment. In his complaint, Cheng
averred that the P50,000.00 check he gave was a
partial payment to the total agreed purchase price
of the subject properties and considered as an
earnest money for which Genato acceded. Thus,
their contract was already perfected.
In Answer 17 thereto, Genato alleged that the
agreement was only a simple receipt of an option-
bid deposit, and never stated that it was a partial
payment, nor is it an earnest money and that it was
subject to condition that the prior contract with the
Da Jose spouses be first cancelled.
The Da Jose spouses, in their Answer in
Intervention, 18 asserted that they have a superior
right to the property as first buyers. They alleged
that the unilateral cancellation of the Contract to
Sell was without effect and void. They also cited
Cheng's bad faith as a buyer being duly informed
by Genato of the existing annotated Contract to
Sell on the titles.
After trial on the merits, the lower court ruled that
the receipt issued by Genato to Cheng unerringly
meant a sale and not just a priority or an option to
buy. It cannot be true that the transaction was
subjected to some condition or reservation, like
the priority in favor of the Da Jose spouses as first
buyer because, if it were otherwise, the receipt 2. Ordering defendant to return to
would have provided such material condition or the intervenors the sum of
reservation, especially as it was Genato himself P1,000,000.00, plus interest at the
who had made the receipt in his own hand. It also legal rate from November 2, 1989
opined that there was a valid rescission of the until full payment;
Contract to Sell by virtue of the Affidavit to Annul
the Contract to Sell. Time was of the essence in the 3. Directing defendant to return to
execution of the agreement between Genato and the intervenors the three (3)
Cheng, under this circumstance demand, postdated checks immediately
extrajudicial or judicial, is not necessary. It falls upon finality of this judgment;
under the exception to the rule provided in Article
1169 19 of the Civil Code. The right of Genato to
unilaterally rescind the contract is said to be under 4. Commanding defendant to
execute with and in favor of the
Article 1191 20 of the Civil Code. Additionally, after
reference was made to the substance of the plaintiff Ricardo Cheng, as
vendee, a deed of conveyance
agreement between Genato and the Da Jose
spouses, the lower court also concluded that and sale of the real properties
Cheng should be preferred over the intervenors-Da described and covered in
Jose spouses in the purchase of the subject Transfer Certificates of Title No.
properties. Thus, on January 18, 1994 the trial T-76-196 (M) and T-76.197 (M) of
court rendered its decision the decretal portion of the Registry of Deeds of Bulacan,
which reads: Meycauayan Branch, at the rate of
P70.000/square meter, less the
amount of P50,000.00 alreaddy
WHEREFORE, judgment is hereby rendered: paid to defendant, which is
considered as part of the
1. Declaring the contract to sell dated purchase price, with the plaintiff
September 6, 1989 executed between being liable for payment of the
defendant Ramon Genato, as vendor, and capital gains taxes and other
intervenors Spouses Ernesto and Socorro expenses of the transfer pursuant
Da Jose, as vendees, resolved and to the agreement to sell dated
rescinded in accordance with Art. 1191, Civil October 24, 1989; and
Code, by virtue of defendant's affidavit to
annul contract to sell dated October 13, 1989 5 Ordering defendant to pay the
and as the consequence of intervenors'
plaintiff and the intervenors as
failure to execute within seven (7) days from follows:
October 4, 1989 another contract to sell
pursuant to their mutual agreement with
defendant;
a/ P50,000.00, as nominal damages, to plaintiff;
b/ P50,000.00, as nominal damages, to intervenors;
c/ P20,000.00, as and for attorney's fees, to plaintiff;
d/ P20,000.00, as and for attorney's fees, to intervenors; and
e/ Cost of the suit.
Sales 44 of 70
 xxx xxx xxx
Not satisfied with the aforesaid decision, herein
respondents Ramon Genato and Da Jose spouses
appealed to the court a quo which reversed such
judgment and ruled that the prior contract to sell in
favor of the Da Jose spouses was not validly
rescinded; that the subsequent contract to sell
between Genato and Cheng, embodied in the
handwritten receipt, was without force and effect
due to the failure to rescind the prior contract; and
that Cheng should pay damages to the
respondents herein being found to be in bad faith.
Hence this petition.21
This petition for review, assails the Court of
Appeals' Decision on the following grounds: (1)
that the Da Jose spouses' Contract to Sell has been
validly rescinded or resolved; (2) that Ricardo
Cheng's own contract with Genato was not just a
contract to sell but one of conditional contract of
sale which gave him better rights, thus precluding
the application of the rule on double sales under
Article 1544, Civil Code; and (3) that, in any case, it
was error to hold him liable for damages.
The petition must be denied for failure to show that
the Court of Appeals committed a reversible error
which would warrant a contrary ruling.
No reversible error can be ascribed to the ruling of
the Court of Appeals that there was no valid and
effective rescission or resolution of the Da Jose
spouses Contract to Sell, contrary to petitioner's
contentions and the trial court's erroneous ruling.
In a Contract to Sell, the payment of the purchase
price is a positive suspensive condition, the failure
of which is not a breach, casual or serious, but a
situation that prevents the obligation of the vendor
to convey title from acquiring an obligatory
force.22 It is one where the happening of the event
gives rise to an obligation. Thus, for its non-
fulfillment there will be no contract to speak of, the
obligor having failed to perform the suspensive
condition which enforces a juridical relation. In fact
with this circumstance, there can be no rescission
of an obligation that is still non-existent, the
suspensive condition not having occurred as
yet.23 Emphasis should be made that the breach
contemplated in Article 1191 of the New Civil Code
is the obligor's failure to comply with an obligation
already extant, not a failure of a condition to render
binding that obligation.24
Obviously, the foregoing jurisprudence cannot be
made to apply to the situation in the instant case
because no default can be ascribed to the Da Jose
spouses since the 30-day extension period has not
yet expired. The Da Jose spouses' contention that
no further condition was agreed when they were
granted the 30-days extension period from October
7, 1989 in connection with clause 3 of their contract
to sell dated September 6, 1989 should be upheld
for the following reason, to wit; firstly, If this were
not true, Genato could not have been persuaded to
continue his contract with them and later on agree
to accept the full settlement of the purchase price
knowing fully well that he himself imposed
such sine qua non condition in order for the
extension to be valid; secondly, Genato could have
immediately annotated his affidavit to annul the
contract to sell on his title when it was executed on
October 13, 1989 and not only on October 26, 1989
after Cheng reminded him of the
annotation; thirdly, Genato could have sent at least
a notice of such fact, there being no stipulation
authorizing him for automatic rescission, so as to
finally clear the encumbrance on his titles and
make it available to other would be buyers. It
likewise settles the holding of the trial court that
Genato "needed money urgently."
Even assuming in gratia argumenti that the Da
Jose spouses defaulted, as claimed by Genato, in
their Contract to Sell, the execution by Genato of
the affidavit to annul the contract is not even called
for. For with or without the aforesaid affidavit their
non-payment to complete the full downpayment of
the purchase price ipso facto avoids their contract
to sell, it being subjected to a suspensive
condition. When a contract is subject to a
suspensive condition, its birth or effectivity can
take place only if and when the event which
constitutes the condition happens or is fulfilled.25 If
the suspensive condition does not take place, the
parties would stand as if the conditional obligation
had never
existed. 26
Nevertheless, this being so Genato is not relieved
from the giving of a notice, verbal or written, to the
Da Jose spouses for his decision to rescind their
contract. In many cases,27 even though we upheld
the validity of a stipulation in a contract to sell
authorizing automatic rescission for a violation of
its terms and conditions, at least a written notice
must be sent to the defaulter informing him of the
same. The act of a party in treating a contract as
cancelled should be made known to the
other.28 For such act is always provisional. It is
always subject to scrutiny and review by the courts
in case the alleged defaulter brings the matter to
the proper courts. In University of the Philippines
vs. De Los Angeles,29 this Court stressed and we
quote:
In other words, the party who
deems the contract violated may
consider it resolved or rescinded,
and act accordingly, without
previous court action, but it
proceeds at its own risk. For it is
only the final judgment of the
corresponding court that will
conclusively and finally settle
whether the action taken was or
was not correct in law. But the law
definitely does not require that
the contracting party who
believes itself injured must first
file suit and wait for a judgment
before taking extrajudicial steps
to protect its interest. Otherwise,
the party injured by the other's
breach will have to passively sit
and watch its damages
accumulate during the pendency
of the suit until the final judgment
of rescission is rendered when
the law itself requires that he
should exercise due diligence to
minimize its own damages (Civil
Code, Article 2203).
Sales 45 of 70
This rule validates, both in equity and justice,
contracts such as the one at bat, in order to avoid
and prevent the defaulting party from assuming the
offer as still in effect due to the obligee's tolerance
for such non-fulfillment. Resultantly, litigations of
this sort shall be prevented and the relations
among would-be parties may be preserved. Thus,
Ricardo Cheng's contention that the Contract to
Sell between Genato and the Da Jose spouses was
rescinded or resolved due to Genato's unilateral
rescission finds no support in this case.
Anent the issue on the nature of the agreement
between Cheng and Genato, the records of this
case are replete with admissions30 that Cheng
believed it to be one of a Contract to Sell and not
one of Conditional Contract of Sale which he, in a
transparent turn-around, now pleads in this
Petition. This ambivalent stance of Cheng is even
noted by the appellate court, thus:
At the outset, this Court notes
that plaintiff-appellee was
inconsistent in characterizing the
contract he allegedly entered into.
In his complaint.31 Cheng alleged
that the P50,000.00 down
payment was earnest money. And
next, his testimony32 was offered
to prove that the transaction
between him and Genato on
October 24, 1989 was actually a
perfected contract to sell.33
Settled is the rule that an issue which was not
raised during the trial in the court below cannot be
raised for the first time on appeal.34 Issues of fact
and arguments not adequately brought to the
attention of the trial court need not be and
ordinarily will not be considered by a reviewing
court as they cannot be raised for the first time on
appeal.35 In fact, both courts below correctly held
that the receipt which was the result of their
agreement, is a contract to sell. This was, in fact
Cheng's contention in his pleadings before said
courts. This patent twist only operates against
Cheng's posture which is indicative of the
weakness of his claim.
But even if we are to assume that the receipt, Exh.
"D," is to be treated as a conditional contract of
sale, it did not acquire any obligatory force since it
was subject to suspensive condition that the
earlier contract to sell between Genato and the Da
Jose spouses should first be cancelled or
rescinded — a condition never met, as Genato, to
his credit, upon realizing his error, redeemed
himself by respecting and maintaining his earlier
contract with the Da Jose spouses. In fact, a careful
reading of the receipt, Exh. "D," alone would not
even show that a conditional contract of sale has
been entered by Genato and Cheng. When the
requisites of a valid contract of sale are lacking in
said receipt, therefore the "sale" is neither valid or
enfoceable.36
To support his now new theory that the transaction
was a conditional contract of sale, petitioner
invokes the case of Coronel vs. Court of
Appeals 37 as the law that should govern their
Petition. We do not agree. Apparently, the factual
milieu in Coronel is not on all fours with those in
the case at bar.
In Coronel, this Court found that the petitioners
therein clearly intended to transfer title to the buyer
which petitioner themselves admitted in their
pleading. The agreement of the parties therein was
definitively outlined in the "Receipt of Down
Payment" both as to property, the purchase price,
the delivery of the seller of the property and the
manner of the transfer of title subject to the
specific condition that upon the transfer in their
names of the subject property the Coronels will
execute the deed of absolute sale.
Whereas, in the instant case, even by a careful
perusal of the receipt, Exh. "D," alone such kind of
circumstances cannot be ascertained without
however resorting to the exceptions of the Rule on
Parol Evidence.
To our mind, the trial court and the appellate court
correctly held that the agreement between Genato
and Cheng is a contract to sell, which was, in fact,
petitioner connection in his pleadings before the
said courts. Consequently, both to mind, which
read:
Art. 1544. If the same thing should
have been sold to different
vendees, the ownership shall be
transferred to the person who
may have first taken possession
thereof in good faith, if it should
be movable property.
Should it be immovable property,
the ownership shall belong to the
person acquiring it who in good
faith first recorded it in the
Registry of Property.
Should there be no inscription,
the ownership shall pertain to the
person who in good faith was first
in possession; and in the absence
thereof, to the person who
presents he oldest title, provided
there is good faith.
However, a meticulous reading of the aforequoted
provision 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 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.
Sales 46 of 70
The contract to be binding upon the obligee or the
vendor depends upon the fulfillment or non-
fulfillment of an event.
Notwithstanding this contrary finding with the
appellate court, we are of the view that the
governing principle of Article 1544, Civil Code,
should apply in this situation.
Jurisprudence38 teaches us that the governing
principle is PRIMUS TEMPORE, PORTIOR JURE
(first in time, stronger in right). For not only was the
contract between herein respondents first in time;
it was also registered long before petitioner's
intrusion as a second buyer. This principle only
applies when the special rules provided in the
aforcited article of the Civil Code do not apply or fit
the specific circumstances mandated under said
law or by jurisprudence interpreting the article.
The rule exacted by Article 1544 of the Civil Code
for the second buyer to be able to displace the first
buyer are:
(1) that the second buyer must show that he acted
in good faith (i.e. in ignorance of the first sale and
of the first buyer's rights) from the time of
acquisition until title is transferred to him by
registration or failing registration, by delivery of
possession;39
(2) the second buyer must show continuing good
faith and innocence or lack of knowledge of the
first sale until his contract ripens into full
ownership through prior registration as provided
by law.40
Thus, in the case at bar, the knowledge gained by
the Da Jose spouses, as first buyers, of the new
agreement between Cheng and Genato will not
defeat their rights as first buyers except where
Cheng, as second buyer, registers or annotates his
transaction or agreement on the title of the subject
properties in good faith ahead of the Da Jose
spouses. Moreover, although the Da Jose spouses,
as first buyers, knew of the second transaction it
will not bar them from availing of their rights
granted by law, among them, to register first their
agreement as against the second buyer.
In contrast, knowledge gained by Cheng of the first
transaction between the Da Jose spouses and
Genato defeats his rights even if he is first to
register the second transaction, since such
knowledge taints his prior registration with bad
faith.
"Registration", as defined by Soler and Castillo,
means any entry made in the books of the registry,
including both registration in its ordinary and strict
sense, and cancellation, annotation, and even
marginal notes.41 In its strict acceptation, it is the
entry made in the registry which records solemnly
and permanently the right of ownership and other
real rights.42 We have ruled43 before that when a
Deed of Sale is inscribed in the registry of property
on the original document itself, what was done with
respect to said entries or annotations and marginal
notes amounted to a registration of the sale. In this
light, we see no reason why we should not give
priority in right the annotation made by the Da Jose
spouses with respect to their Contract to Sell dated
September 6, 1989.
Moreover, registration alone in such cases without
good faith is not sufficient. Good faith must concur
with registration for such prior right to be
enforceable. In the instant case, the annotation
made by the Da Jose spouses on the titles of
Genato of their "Contract To Sell" more than
satisfies this requirement. Whereas in the case of
Genato's agreement with Cheng such is
unavailing. For even before the receipt, Exh. "D,"
was issued to Cheng information of such pre-
existing agreement has been brought to his
knowledge which did not deter him from pursuing
his agreement with Genato. We give credence to
the factual finding of the appellate court that
"Cheng himself admitted that it was he who sought
Genato in order to inquire about the property and
offered to buy the same.44 And since Cheng was
fully aware, or could have been if he had chosen to
inquire, of the rights of the Da Jose spouses under
the Contract to Sell duly annotated on the transfer
certificates of titles of Genato, it now becomes
unnecessary to further elaborate in detail the fact
that he is indeed in bad faith in entering into such
agreement. As we have held in Leung Yee vs. F.L.
Strong Machinery Co.:45
One who purchases real estate
with knowledge of a defect . . . of
title in his vendor cannot claim
that he has acquired title thereto
in good faith as against . . . . an
interest therein; and the same rule
must be applied to one who has
knowledge of facts which should
have put him upon such inquiry
and investigation as might be
necessary to acquaint him with
the defects in the title of his
vendor. A purchaser cannot close
his eyes to facts which should put
a reasonable man upon his guard,
and then claim that he acted in
good faith under the belief that
there was no defect in the title of
the vendor. His mere refusal to
believe that such defect exists, or
his willful closing of his eyes to
the possibility of the existence of
a defect in his vendor's title, will
not make him an innocent
purchaser for value, if it
afterwards develops that the title
was in fact defective, and it
appears that he had such notice
of the defect as would have led to
its discovery had he acted with
that measure of precaution which
may reasonably be required of a
prudent man in a like situation.
Good faith, or lack of it, is in its
last analysis a question of
intention; but in ascertaining the
intention by which one is actuated
on a given occasion, we are
necessarily controlled by the
evidence as to the conduct and
outward acts by which alone the
inward motive may with safety, be
determined. So it is that "the
honesty of intention," "the honest
lawful intent," which constitutes
good faith implies a "freedom
from knowledge and
circumstances which ought to put
a person on inquiry," and so it is
that proof of such knowledge
Sales 47 of 70
 overcomes the presumption of
good faith in which the courts
always indulge in the absence of
the proof to the contrary. "Good
faith, or the want of it, is not a
visible, tangible fact that can be
seen or touched, but rather a state
or condition of mind which can
only be judge of by actual or
fancied tokens or signs." (Wilder
vs. Gilman, 55 Vt. 504, 505; Cf.
Cardenas vs. Miller, 108 Cal., 250;
Breaux-Renoudet, Cypress
Lumber Co. vs. Shadel, 52 La.
Ann., 2094-2098; Pinkerton Bros.
Co. vs. Bromely, 119 Mich., 8, 10,
17.) (Emphasis ours)

Damages were awarded by the appellate court on

the basis of its finding that petitioner "was in bad
faith when he filed the suit for specific performance
knowing fully well that his agreement with Genato
did not push through.46 Such bad faith, coupled
with his wrongful interference with the contractual
relations between Genato and the Da Jose
spouses, which culminated in his filing of the
present suit and thereby creating what the counsel
for the respondents describes as "a prolonged and
economically unhealthy gridlock47 on both the land
itself and the respondents' rights provides ample
basis for the damages awarded. Based on these
overwhelming evidence of bad faith on the part of
herein petitioner Ricardo Cheng, we find that the
award of damages made by the appellate court is
in order.

WHEREFORE, premises considered, the instant

petition for review is DENIED and the assailed
decision is hereby AFFIRMED EN TOTO.

SO ORDERED.

Sales 48 of 70
 SECOND DIVISION
G.R. No. 132161 January 17, 2005
CONSOLIDATED RURAL BANK (CAGAYAN
VALLEY), INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS and
HEIRS OF TEODORO DELA CRUZ, respondents.
DECISION
TINGA, J.:
Petitioner Consolidated Rural Bank, Inc. of Cagayan
Valley filed the instant Petition for Certiorari1 under
Rule 45 of the Revised Rules of Court, seeking the
review of the Decision2 of the Court of Appeals Twelfth
Division in CA-G.R. CV No. 33662, promulgated on 27
May 1997, which reversed the judgment3 of the lower
court in favor of petitioner; and the Resolution4 of the
Court of Appeals, promulgated on 5 January 1998,
which reiterated its Decision insofar as respondents
Heirs of Teodoro dela Cruz (the Heirs) are concerned.
From the record, the following are the established
facts:
Rizal, Anselmo, Gregorio, Filomeno and Domingo, all
surnamed Madrid (hereafter the Madrid brothers), were
the registered owners of Lot No. 7036-A of plan Psd-
10188, Cadastral Survey 211, situated in San Mateo,
Isabela per Transfer Certificate of Title (TCT) No. T-
8121 issued by the Register of Deeds of Isabela in
September 1956.5
On 23 and 24 October 1956, Lot No. 7036-A was
subdivided into several lots under subdivision plan
Psd- 50390. One of the resulting subdivision lots was
Lot No. 7036-A-7 with an area of Five Thousand Nine
Hundred Fifty-Eight (5,958) square meters.6
On 15 August 1957, Rizal Madrid sold part of his share
identified as Lot No. 7036-A-7, to Aleja Gamiao
(hereafter Gamiao) and Felisa Dayag (hereafter,
Dayag) by virtue of a Deed of Sale,7 to which his
brothers Anselmo, Gregorio, Filomeno and Domingo
offered no objection as evidenced by their Joint
Affidavit dated 14 August 1957.8 The deed of sale was
not registered with the Office of the Register of Deeds
of Isabela. However, Gamiao and Dayag declared the
property for taxation purposes in their names on March
1964 under Tax Declaration No. 7981.9
On 28 May 1964, Gamiao and Dayag sold the southern
half of Lot No. 7036-A-7, denominated as Lot No.
7036-A-7-B, to Teodoro dela Cruz,10 and the northern
half, identified as Lot No. 7036-A-7-A,11 to Restituto
Hernandez.12 Thereupon, Teodoro dela Cruz and
Restituto Hernandez took possession of and cultivated
the portions of the property respectively sold to them.13
Later, on 28 December 1986, Restituto Hernandez
donated the northern half to his daughter, Evangeline
Hernandez-del Rosario.14 The children of Teodoro
dela Cruz continued possession of the southern half
after their father’s death on 7 June 1970.
In a Deed of Sale15 dated 15 June 1976, the Madrid
brothers conveyed all their rights and interests over Lot
No. 7036-A-7 to Pacifico Marquez (hereafter,
Marquez), which the former confirmed16 on 28
February 1983.17 The deed of sale was registered with
the Office of the Register of Deeds of Isabela on 2
March 1982.18
Subsequently, Marquez subdivided Lot No. 7036-A-7
into eight (8) lots, namely: Lot Nos. 7036-A-7-A to
7036-A-7-H, for which TCT Nos. T-149375 to T-
149382 were issued to him on 29 March 1984.19 On the
same date, Marquez and his spouse, Mercedita
Mariana, mortgaged Lots Nos. 7036-A-7-A to 7036-A-
7-D to the Consolidated Rural Bank, Inc. of Cagayan
Valley (hereafter, CRB) to secure a loan of One
Hundred Thousand Pesos (₱100,000.00).20 These
deeds of real estate mortgage were registered with the
Office of the Register of Deeds on 2 April 1984.
On 6 February 1985, Marquez mortgaged Lot No.
7036-A-7-E likewise to the Rural Bank of Cauayan
(RBC) to secure a loan of Ten Thousand Pesos
(₱10,000.00).21
As Marquez defaulted in the payment of his loan, CRB
caused the foreclosure of the mortgages in its favor
and the lots were sold to it as the highest bidder on 25
April 1986.22
On 31 October 1985, Marquez sold Lot No. 7036-A-7-
G to Romeo Calixto (Calixto).23
Claiming to be null and void the issuance of TCT Nos.
T-149375 to T-149382; the foreclosure sale of Lot Nos.
7036-A-7-A to 7036-A-7-D; the mortgage to RBC; and
the sale to Calixto, the Heirs-now respondents herein-
represented by Edronel dela Cruz, filed a case24 for
reconveyance and damages the southern portion of
Lot No. 7036-A (hereafter, the subject property)
against Marquez, Calixto, RBC and CRB in December
1986.
Evangeline del Rosario, the successor-in-interest of
Restituto Hernandez, filed with leave of court
a Complaint in Intervention25 wherein she claimed the
northern portion of Lot No. 7036-A-7.
In the Answer to the Amended Complaint,26 Marquez,
as defendant, alleged that apart from being the first
registrant, he was a buyer in good faith and for value.
He also argued that the sale executed by Rizal Madrid
to Gamiao and Dayag was not binding upon him, it
being unregistered. For his part, Calixto manifested
that he had no interest in the subject property as he
ceased to be the owner thereof, the same having been
reacquired by defendant Marquez.27
CRB, as defendant, and co-defendant RBC insisted
that they were mortgagees in good faith and that they
had the right to rely on the titles of Marquez which were
free from any lien or encumbrance.28
After trial, the Regional Trial Court, Branch 19 of
Cauayan, Isabela (hereafter, RTC) handed down a
decision in favor of the defendants, disposing as
follows:
WHEREFORE, in view of the foregoing considerations,
judgment is hereby rendered:
1. Dismissing the amended complaint and the
complaint in intervention;
Sales 49 of 70
 2. Declaring Pacifico V. Marquez the lawful
owner of Lots 7036-A-7 now Lots 7036-A-7-A
to 7036-A-7-H, inclusive, covered by TCT
Nos. T-149375 to T-149382, inclusive;
3. Declaring the mortgage of Lots 7036-A-7-
A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-D
in favor of the defendant Consolidated Rural
Bank (Cagayan Valley) and of Lot 7036-A-7-
E in favor of defendant Rural Bank of
Cauayan by Pacifico V. Marquez valid;
4. Dismissing the counterclaim of Pacifico V.
Marquez; and
5. Declaring the Heirs of Teodoro dela Cruz
the lawful owners of the lots covered by TCT
Nos. T-33119, T-33220 and T-7583.
No pronouncement as to costs.
SO ORDERED.29
In support of its decision, the RTC made the following
findings:
With respect to issues numbers 1-3, the Court
therefore holds that the sale of Lot 7036-A-7 made by
Rizal Madrid to Aleja Gamiao and Felisa Dayag and
the subsequent conveyances to the plaintiffs and
intervenors are all valid and the Madrid brothers are
bound by said contracts by virtue of the confirmation
made by them on August 14, 1957 (Exh. B).
Are the defendants Pacifico V. Marquez and Romeo B.
Calixto buyers in good faith and for value of Lot 7036-
A-7?
It must be borne in mind that good faith is always
presumed and he who imputes bad faith has the
burden of proving the same (Art. 527, Civil Code). The
Court has carefully scrutinized the evidence presented
but finds nothing to show that Marquez was aware of
the plaintiffs’ and intervenors’ claim of ownership over
this lot. TCT No. T-8121 covering said property, before
the issuance of Marquez’ title, reveals nothing about
the plaintiffs’ and intervenors’ right thereto for it is an
admitted fact that the conveyances in their favor are
not registered.
The Court is therefore confronted with two sales over
the same property. Article 1544 of the Civil Code
provides:
"ART. 1544. If the same thing should have been sold
to different vendees, the ownership shall be transferred
to the person who may have first taken possession
thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property. x x x "
(Underscoring supplied).
From the foregoing provisions and in the absence of
proof that Marquez has actual or constructive
knowledge of plaintiffs’ and intervenors’ claim, the
Court has to rule that as the vendee who first registered
his sale, Marquez’ ownership over Lot 7036-A-7 must
be upheld.30
The Heirs interposed an appeal with the Court of
Appeals. In their Appellant’s Brief,31 they ascribed the
following errors to the RTC: (1) it erred in finding that
Marquez was a buyer in good faith; (2) it erred in
validating the mortgage of the properties to RBC and
CRB; and (3) it erred in not reconveying Lot No. 7036-
A-7-B to them.32
Intervenor Evangeline del Rosario filed a separate
appeal with the Court of Appeals. It was, however,
dismissed in a Resolution dated 20 September 1993
for her failure to pay docket fees. Thus, she lost her
standing as an appellant.33
On 27 May 1997, the Court of Appeals rendered its
assailed Decision34 reversing the RTC’s judgment. The
dispositive portion reads:
WHEREFORE, the decision appealed from is hereby
REVERSED and SET ASIDE. Accordingly, judgment is
hereby rendered as follows:
1. Declaring the heirs of Teodoro dela Cruz
the lawful owners of the southern half portion
and Evangeline Hernandez-del Rosario the
northern half portion of Lot No. 7036-A-7, now
covered by TCT Nos. T-149375 to T-149382,
inclusive;
2. Declaring null and void the deed of sale
dated June 15, 1976 between Pacifico V.
Marquez and the Madrid brothers covering
said Lot 7036-A-7;
3. Declaring null and void the mortgage made
by defendant Pacifico V. Marquez of Lot Nos.
7036-A-7-A, 7036-A-7-B, 7036-A-7-C and
7036-A-7-D in favor of the defendant
Consolidated Rural Bank and of Lot 7036-A-
7-E in favor of defendant Rural Bank of
Cauayan; and
4. Ordering Pacifico V. Marquez to reconvey
Lot 7036-A-7 to the heirs of Teodoro dela
Cruz and Evangeline Hernandez-del Rosario.
No pronouncement as to costs.
SO ORDERED.35
In upholding the claim of the Heirs, the Court of
Appeals held that Marquez failed to prove that he was
a purchaser in good faith and for value. It noted that
while Marquez was the first registrant, there was no
showing that the registration of the deed of sale in his
favor was coupled with good faith. Marquez admitted
having knowledge that the subject property was "being
taken" by the Heirs at the time of the sale.36 The Heirs
were also in possession of the land at the time.
According to the Decision, these circumstances along
with the subject property’s attractive location—it was
situated along the National Highway and was across a
gasoline station—should have put Marquez on inquiry
as to its status. Instead, Marquez closed his eyes to
these matters and failed to exercise the ordinary care
expected of a buyer of real estate.37
Anent the mortgagees RBC and CRB, the Court of
Appeals found that they merely relied on the
certificates of title of the mortgaged properties. They
Sales 50 of 70
did not ascertain the status and condition thereof
according to standard banking practice. For failure to
observe the ordinary banking procedure, the Court of
Appeals considered them to have acted in bad faith
and on that basis declared null and void the mortgages
made by Marquez in their favor.38
Dissatisfied, CRB filed a Motion for
Reconsideration39 pointing out, among others, that the
Decision promulgated on 27 May 1997 failed to
establish good faith on the part of the Heirs. Absent
proof of possession in good faith, CRB avers, the Heirs
cannot claim ownership over the subject property.
In a Resolution40 dated 5 January 1998, the Court of
Appeals stressed its disbelief in CRB’s allegation that
it did not merely rely on the certificates of title of the
properties and that it conducted credit investigation
and standard ocular inspection. But recalling that
intervenor Evangeline del Rosario had lost her
standing as an appellant, the Court of Appeals
accordingly modified its previous Decision, as follows:
WHEREFORE, the decision dated May 27, 1997, is
hereby MODIFIED to read as follows:
WHEREFORE, the decision appealed from is hereby
REVERSED and SET ASIDE insofar as plaintiffs-
appellants are concerned. Accordingly, judgment is
hereby rendered as follows:
1. Declaring the Heirs of Teodoro dela Cruz
the lawful owners of the southern half portion
of Lot No. 7036-A-7;
2. Declaring null and void the deed of sale
dated June 15, 1976 between Pacifico V.
Marquez and the Madrid brothers insofar as
the southern half portion of Lot NO. (sic)
7036-A-7 is concerned;
3. Declaring the mortgage made by defendant
Pacifico V. Marquez in favor of defendant
Consolidated Rural Bank (Cagayan Valley)
and defendant Rural Bank of Cauayan as null
and void insofar as the southern half portion
of Lot No. 7036-A-7 is concerned;
4. Ordering defendant Pacifico V. Marquez to
reconvey the southern portion of Lot No.
7036-A-7 to the Heirs of Teodoro dela Cruz.
No pronouncement as to costs.
SO ORDERED.41
Hence, the instant CRB petition. However, both
Marquez and RBC elected not to challenge the
Decision of the appellate court.
Petitioner CRB, in essence, alleges that the Court of
Appeals committed serious error of law in upholding
the Heirs’ ownership claim over the subject property
considering that there was no finding that they acted in
good faith in taking possession thereof nor was there
proof that the first buyers, Gamiao and Dayag, ever
took possession of the subject property. CRB also
makes issue of the fact that the sale to Gamiao and
Dayag was confirmed a day ahead of the actual sale,
clearly evincing bad faith, it adds. Further, CRB asserts
Marquez’s right over the property being its registered
owner.
The petition is devoid of merit. However, the dismissal
of the petition is justified by reasons different from
those employed by the Court of Appeals.
Like the lower court, the appellate court resolved the
present controversy by applying the rule on double sale
provided in Article 1544 of the Civil Code. They,
however, arrived at different conclusions. The RTC
made CRB and the other defendants win, while the
Court of Appeals decided the case in favor of the Heirs.
Article 1544 of the Civil Code reads, thus:
ART. 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to
the person who may have first taken possession
thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in
possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good
faith.
The provision is not applicable in the present case. It
contemplates a case of double or multiple sales by a
single vendor. More specifically, it covers a situation
where a single vendor sold one and the same
immovable property to two or more
buyers.42 According to a noted civil law author, it is
necessary that the conveyance must have been made
by a party who has an existing right in the thing and the
power to dispose of it.43 It cannot be invoked where the
two different contracts of sale are made by two different
persons, one of them not being the owner of the
property sold.44 And even if the sale was made by the
same person, if the second sale was made when such
person was no longer the owner of the property,
because it had been acquired by the first purchaser in
full dominion, the second purchaser cannot acquire
any right.45
In the case at bar, the subject property was not
transferred to several purchasers by a single vendor.
In the first deed of sale, the vendors were Gamiao and
Dayag whose right to the subject property originated
from their acquisition thereof from Rizal Madrid with the
conformity of all the other Madrid brothers in 1957,
followed by their declaration of the property in its
entirety for taxation purposes in their names. On the
other hand, the vendors in the other or later deed were
the Madrid brothers but at that time they were no longer
the owners since they had long before disposed of the
property in favor of Gamiao and Dayag.
Citing Manresa, the Court of Appeals in 1936 had
occasion to explain the proper application of Article
1473 of the Old Civil Code (now Article 1544 of the New
Civil Code) in the case of Carpio v. Exevea,46 thus:
In order that tradition may be considered performed, it
is necessary that the requisites which it implies must
have been fulfilled, and one of the indispensable
requisites, according to the most exact Roman
concept, is that the conveyor had the right and the will
to convey the thing. The intention to transfer is not
sufficient; it only constitutes the will. It is, furthermore,
Sales 51 of 70
necessary that the conveyor could juridically perform
that act; that he had the right to do so, since a right
which he did not possess could not be vested by him
in the transferee.
This is what Article 1473 has failed to express: the
necessity for the preexistence of the right on the part
of the conveyor. But even if the article does not express
it, it would be understood, in our opinion, that that
circumstance constitutes one of the assumptions upon
which the article is based.
This construction is not repugnant to the text of Article
1473, and not only is it not contrary to it, but it explains
and justifies the same. (Vol. 10, 4th ed., p. 159)47
In that case, the property was transferred to the first
purchaser in 1908 by its original owner, Juan Millante.
Thereafter, it was sold to plaintiff Carpio in June 1929.
Both conveyances were unregistered. On the same
date that the property was sold to the plaintiff, Juan
Millante sold the same to defendant Exevea. This time,
the sale was registered in the Registry of Deeds. But
despite the fact of registration in defendant’s favor, the
Court of Appeals found for the plaintiff and refused to
apply the provisions of Art. 1473 of the Old Civil Code,
reasoning that "on the date of the execution of the
document, Exhibit 1, Juan Millante did not and could
not have any right whatsoever to the parcel of land in
question."48
Citing a portion of a judgment dated 24 November
1894 of the Supreme Court of Spain, the Court of
Appeals elucidated further:
Article 1473 of the Civil Code presupposes the right of
the vendor to dispose of the thing sold, and does not
limit or alter in this respect the provisions of the
Mortgage Law in force, which upholds the principle that
registration does not validate acts or contracts which
are void, and that although acts and contracts
executed by persons who, in the Registry, appear to be
entitled to do so are not invalidated once recorded,
even if afterwards the right of such vendor is annulled
or resolved by virtue of a previous unrecorded title,
nevertheless this refers only to third parties.49
In a situation where not all the requisites are present
which would warrant the application of Art. 1544, the
principle of prior tempore, potior jure or simply "he who
is first in time is preferred in right," 50 should
apply.51 The only essential requisite of this rule is
priority in time; in other words, the only one who can
invoke this is the first vendee. Undisputedly, he is a
purchaser in good faith because at the time he bought
the real property, there was still no sale to a second
vendee.52 In the instant case, the sale to the Heirs by
Gamiao and Dayag, who first bought it from Rizal
Madrid, was anterior to the sale by the Madrid brothers
to Marquez. The Heirs also had possessed the subject
property first in time. Thus, applying the principle, the
Heirs, without a scintilla of doubt, have a superior right
to the subject property.
Moreover, it is an established principle that no one can
give what one does not have¾nemo dat quod non
habet. Accordingly, one can sell only what one owns or
is authorized to sell, and the buyer can acquire no more
than what the seller can transfer legally.53 In this case,
since the Madrid brothers were no longer the owners
of the subject property at the time of the sale to
Marquez, the latter did not acquire any right to it.
In any event, assuming arguendo that Article 1544
applies to the present case, the claim of Marquez still
cannot prevail over the right of the Heirs since
according to the evidence he was not a purchaser and
registrant in good faith.
Following Article 1544, in the double sale of an
immovable, the rules of preference are:
(a) the first registrant in good faith;
(b) should there be no entry, the first in
possession in good faith; and
(c) in the absence thereof, the buyer who
presents the oldest title in good faith. 54
Prior registration of the subject property does not by
itself confer ownership or a better right over the
property. Article 1544 requires that before the second
buyer can obtain priority over the first, he must show
that he acted in good faith throughout (i.e., in ignorance
of the first sale and of the first buyer’s rights)¾from the
time of acquisition until the title is transferred to him by
registration or failing registration, by delivery of
possession.55
In the instant case, the actions of Marquez have not
satisfied the requirement of good faith from the time of
the purchase of the subject property to the time of
registration. Found by the Court of Appeals, Marquez
knew at the time of the sale that the subject property
was being claimed or "taken" by the Heirs. This was a
detail which could indicate a defect in the vendor’s title
which he failed to inquire into. Marquez also admitted
that he did not take possession of the property and at
the time he testified he did not even know who was in
possession. Thus, he testified on direct examination in
the RTC as follows:
ATTY. CALIXTO –
Q Can you tell us the circumstances to your
buying the land in question?
A In 1976 the Madrid brothers confessed to
me their problems about their lots in San
Mateo that they were being taken by Teodoro
dela Cruz and Atty. Teofilo A. Leonin; that
they have to pay the lawyer’s fee of
₱10,000.00 otherwise Atty. Leonin will
confiscate the land. So they begged me to
buy their properties, some of it. So that on
June 3, 1976, they came to Cabagan where I
was and gave them ₱14,000.00, I think. We
have talked that they will execute the deed of
sale.
Q Why is it, doctor, that you have already this
deed of sale, Exh. 14, why did you find it
necessary to have this Deed of Confirmation
of a Prior Sale, Exh. 15?
A Because as I said a while ago that the first
deed of sale was submitted to the Register of
Deeds by Romeo Badua so that I said that
because when I became a Municipal Health
Officer in San Mateo, Isabela, I heard so
many rumors, so many things about the land
Sales 52 of 70
 and so I requested them to execute a deed of
confirmation.56
...
ATTY. CALIXTO-
Q At present, who is in possession on the
Riceland portion of the lot in question?
A I can not say because the people working
on that are changing from time to time.
Q Why, have you not taken over the
cultivation of the land in question?
A Well, the Dela Cruzes are prohibiting that
we will occupy the place.
Q So, you do not have any possession?
A None, sir.57
One who purchases real property which is in actual
possession of others should, at least, make some
inquiry concerning the rights of those in possession.
The actual possession by people other than the vendor
should, at least, put the purchaser upon inquiry. He can
scarcely, in the absence of such inquiry, be regarded
as a bona fide purchaser as against such
possessions.58 The rule of caveat emptor requires the
purchaser to be aware of the supposed title of the
vendor and one who buys without checking the
vendor’s title takes all the risks and losses consequent
to such failure.59
It is further perplexing that Marquez did not fight for the
possession of the property if it were true that he had a
better right to it. In our opinion, there were
circumstances at the time of the sale, and even at the
time of registration, which would reasonably require a
purchaser of real property to investigate to determine
whether defects existed in his vendor’s title. Instead,
Marquez willfully closed his eyes to the possibility of
the existence of these flaws. For failure to exercise the
measure of precaution which may be required of a
prudent man in a like situation, he cannot be called a
purchaser in good faith.60
As this Court explained in the case of Spouses Mathay
v. Court of Appeals:61
Although it is a recognized principle that a person
dealing on a registered land need not go beyond its
certificate of title, it is also a firmly settled rule that
where there are circumstances which would put a party
on guard and prompt him to investigate or inspect the
property being sold to him, such as the presence of
occupants/tenants thereon, it is, of course, expected
from the purchaser of a valued piece of land to inquire
first into the status or nature of possession of the
occupants, i.e., whether or not the occupants possess
the land en concepto de dueño, in concept of owner.
As is the common practice in the real estate industry,
an ocular inspection of the premises involved is a
safeguard a cautious and prudent purchaser usually
takes. Should he find out that the land he intends to
buy is occupied by anybody else other than the seller
who, as in this case, is not in actual possession, it
would then be incumbent upon the purchaser to verify
the extent of the occupant’s possessory rights. The
failure of a prospective buyer to take such
precautionary steps would mean negligence on his part
and would thereby preclude him from claiming or
invoking the rights of a "purchaser in good faith." 62
This rule equally applies to mortgagees of real
property. In the case of Crisostomo v. Court of
Appeals,63 the Court held:
It is a well-settled rule that a purchaser or mortgagee
cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he
acted in good faith under the belief that there was no
defect in the title of the vendor or mortgagor. His mere
refusal to believe that such defect exists, or his willful
closing of his eyes to the possibility of the existence of
a defect in the vendor’s or mortgagor’s title, will not
make him an innocent purchaser or mortgagee for
value, if it afterwards develops that the title was in fact
defective, and it appears that he had such notice of the
defects as would have led to its discovery had he acted
with the measure of a prudent man in a like situation. 64
Banks, their business being impressed with public
interest, are expected to exercise more care and
prudence than private individuals in their dealings,
even those involving registered lands. Hence, for
merely relying on the certificates of title and for its
failure to ascertain the status of the mortgaged
properties as is the standard procedure in its
operations, we agree with the Court of Appeals that
CRB is a mortgagee in bad faith.
In this connection, Marquez’s obstention of title to the
property and the subsequent transfer thereof to CRB
cannot help the latter’s cause. In a situation where a
party has actual knowledge of the claimant’s actual,
open and notorious possession of the disputed
property at the time of registration, as in this case, the
actual notice and knowledge are equivalent to
registration, because to hold otherwise would be to
tolerate fraud and the Torrens system cannot be used
to shield fraud. 65
While certificates of title are indefeasible, unassailable
and binding against the whole world, they merely
confirm or record title already existing and vested.
They cannot be used to protect a usurper from the true
owner, nor can they be used for the perpetration of
fraud; neither do they permit one to enrich himself at
the expense of others.66
We also find that the Court of Appeals did not err in
awarding the subject property to the Heirs absent proof
of good faith in their possession of the subject property
and without any showing of possession thereof by
Gamiao and Dayag.
As correctly argued by the Heirs in
their Comment,67 the requirement of good faith in the
possession of the property finds no application in cases
where there is no second sale.68 In the case at bar,
Teodoro dela Cruz took possession of the property in
1964 long before the sale to Marquez transpired in
1976 and a considerable length of time—eighteen (18)
years in fact¾before the Heirs had knowledge of the
registration of said sale in 1982. As Article 526 of the
Civil Code aptly provides, "(H)e is deemed a possessor
in good faith who is not aware that there exists in his
title or mode of acquisition any flaw which invalidates
it." Thus, there was no need for the appellate court to
consider the issue of good faith or bad faith with regard
Sales 53 of 70
to Teodoro dela Cruz’s possession of the subject
property.

Likewise, we are of the opinion that it is not necessary

that there should be any finding of possession by
Gamiao and Dayag of the subject property. It should
be recalled that the regularity of the sale to Gamiao and
Dayag was never contested by Marquez.69 In fact the
RTC upheld the validity of this sale, holding that the
Madrid brothers are bound by the sale by virtue of their
confirmation thereof in the Joint Affidavit dated 14
August 1957. That this was executed a day ahead of
the actual sale on 15 August 1957 does not diminish
its integrity as it was made before there was even any
shadow of controversy regarding the ownership of the
subject property.

Moreover, as this Court declared in the case of Heirs

of Simplicio Santiago v. Heirs of Mariano E.
Santiago ,70 tax declarations "are good indicia of
possession in the concept of an owner, for no one in
his right mind would be paying taxes for a property that
is not in his actual or constructive possession."71

WHEREFORE, the Petition is DENIED. The

dispositive portion of the Court of Appeals’ Decision, as
modified by its Resolution dated 5 January 1998, is
AFFIRMED. Costs against petitioner.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and

Chico-Nazario, JJ., concur.

Sales 54 of 70
 FIRST DIVISION
[Noel and Julie] Abrigo, to wit:
G.R. No. 154409 June 21, 2004
As to [Respondent] Romana de Vera:
Spouses NOEL and JULIE ABRIGO, petitioners,
vs.
ROMANA DE VERA, respondent.
DECISION
PANGANIBAN, J.:
Between two buyers of the same immovable property
registered under the Torrens system, the law gives
ownership priority to (1) the first registrant in good faith;
(2) then, the first possessor in good faith; and (3) finally,
the buyer who in good faith presents the oldest title.
This provision, however, does not apply if the property
is not registered under the Torrens system.
The Case
As to [Petitioner-]Spouses [Noel and
Before us is a Petition for Review1 under Rule 45 of the
Rules of Court, seeking to set aside the March 21, 2002
Amended Decision2 and the July 22, 2002
Resolution3 of the Court of Appeals (CA) in CA-GR CV
No. 62391. The Amended Decision disposed as
follows:
de Vera and to [Petitioner-]Spouses ‘On May 27, 1993, Gloria Villafania sold a house and
lot located at Banaoang, Mangaldan, Pangasinan and
covered by Tax Declaration No. 1406 to Rosenda
Tigno-Salazar and Rosita Cave-Go. The said sale
became a subject of a suit for annulment of documents
between the vendor and the vendees.
1. ₱300,000.00 plus 6% per
annum as actual
damages; ‘On December 7, 1993, the Regional Trial Court,
Branch 40 of Dagupan City rendered judgment
approving the Compromise Agreement submitted by
2. ₱50,000.00 as moral the parties. In the said Decision, Gloria Villafania was
damages; given one year from the date of the Compromise
Agreement to buy back the house and lot, and failure
3. ₱50,000.00 as exemplary to do so would mean that the previous sale in favor of
damages; Rosenda Tigno-Salazar and Rosita Cave-Go shall
remain valid and binding and the plaintiff shall
4. ₱30,000.00 as attorney’s voluntarily vacate the premises without need of any
fees; and demand. Gloria Villafania failed to buy back the house
and lot, so the [vendees] declared the lot in their name.
5. Cost of suit.
‘Unknown, however to Rosenda Tigno-Salazar and
Rosita Cave-Go, Gloria Villafania obtained a free
patent over the parcel of land involved [on March 15,
Julie] Abrigo: 1988 as evidenced by OCT No. P-30522]. The said
free patent was later on cancelled by TCT No. 212598
1. ₱50,000.00 as moral on April 11, 1996.
damages;
‘On October 16, 1997, Rosenda Tigno-Salazar and
2. ₱50,000.00 as exemplary Rosita Cave-Go, sold the house and lot to the herein
damages; [Petitioner-Spouses Noel and Julie Abrigo].

"WHEREFORE, the dispositive part of the

original D E C I S I O N of this case,
promulgated on November 19, 2001, is SET
ASIDE and another one is
entered AFFIRMING in part
and REVERSING in part the judgment
appealed from, as follows:
"1. Declaring [Respondent] Romana
de Vera the rightful owner and with
better right to possess the property
in question, being an innocent
purchaser for value therefor;
"2. Declaring Gloria Villafania [liable] to pay the
following to [Respondent] Romana
3. ₱30,000.00 as attorney’s ‘On October 23, 1997, Gloria Villafania sold the same
fees; house and lot to Romana de Vera x x x. Romana de
Vera registered the sale and as a consequence, TCT
No. 22515 was issued in her name.
4. Cost of suit."4
‘On November 12, 1997, Romana de Vera filed an
The assailed Resolution denied reconsideration.
action for Forcible Entry and Damages against
[Spouses Noel and Julie Abrigo] before the Municipal
The Facts Trial Court of Mangaldan, Pangasinan docketed as
Civil Case No. 1452. On February 25, 1998, the parties
Quoting the trial court, the CA narrated the facts as therein submitted a Motion for Dismissal in view of their
follows: agreement in the instant case that neither of them can
physically take possession of the property in question
until the instant case is terminated. Hence the
"As culled from the records, the following are the
ejectment case was dismissed.’5
pertinent antecedents amply summarized by the trial
court:

Sales 55 of 70
"Thus, on November 21, 1997, [petitioners] filed the
instant case [with the Regional Trial Court of Dagupan
City] for the annulment of documents, injunction,
preliminary injunction, restraining order and damages
[against respondent and Gloria Villafania].
"After the trial on the merits, the lower court rendered
the assailed Decision dated January 4, 1999, awarding
the properties to [petitioners] as well as damages.
Moreover, x x x Gloria Villafania was ordered to pay
[petitioners and private respondent] damages and
attorney’s fees.
"Not contented with the assailed Decision, both parties
[appealed to the CA]."6
Ruling of the Court of Appeals
In its original Decision promulgated on November 19,
2001, the CA held that a void title could not give rise to
a valid one and hence dismissed the appeal of Private
Respondent Romana de Vera.7 Since Gloria Villafania
had already transferred ownership to Rosenda Tigno-
Salazar and Rosita Cave-Go, the subsequent sale to
De Vera was deemed void.
The CA also dismissed the appeal of Petitioner-
Spouses Abrigo and found no sufficient basis to award
them moral and exemplary damages and attorney’s
fees.
On reconsideration, the CA issued its March 21, 2002
Amended Decision, finding Respondent De Vera to be
a purchaser in good faith and for value. The appellate
court ruled that she had relied in good faith on the
Torrens title of her vendor and must thus be protected.8
Hence, this Petition.9
Issues
Petitioners raise for our consideration the issues
below:
"1. Whether or not the deed of sale executed
by Gloria Villafania in favor of [R]espondent
Romana de Vera is valid.
"2. Whether or not the [R]espondent Romana
de Vera is a purchaser for value in good faith.
"3. Who between the petitioners and
respondent has a better title over the property
in question."10
In the main, the issues boil down to who between
petitioner-spouses and respondent has a better right to
the property.
The Court’s Ruling
The Petition is bereft of merit.
Main Issue:
Better Right over the Property
Petitioners contend that Gloria Villafania could not
have transferred the property to Respondent De Vera
because it no longer belonged to her.11 They further
claim that the sale could not be validated, since
respondent was not a purchaser in good faith and for
value.12
Law on Double Sale
The present case involves what in legal contemplation
was a double sale. On May 27, 1993, Gloria Villafania
first sold the disputed property to Rosenda Tigno-
Salazar and Rosita Cave-Go, from whom petitioners,
in turn, derived their right. Subsequently, on October
23, 1997, a second sale was executed by Villafania
with Respondent Romana de Vera.
Article 1544 of the Civil Code states the law on double
sale thus:
"Art. 1544. If the same thing should have been
sold to different vendees, the ownership shall
be transferred to the person who may have
first taken possession thereof in good faith, if
it should be movable property.
"Should it be immovable property, the
ownership shall belong to the person
acquiring it who in good faith first recorded it
in the Registry of Property.
"Should there be no inscription, the ownership
shall pertain to the person who in good faith
was first in the possession; and, in the
absence thereof, to the person who presents
the oldest title, provided there is good faith."
Otherwise stated, the law provides that a double sale
of immovables transfers ownership to (1) the first
registrant in good faith; (2) then, the first possessor in
good faith; and (3) finally, the buyer who in good faith
presents the oldest title.13 There is no ambiguity in the
application of this law with respect to lands registered
under the Torrens system.
This principle is in full accord with Section 51 of PD
152914 which provides that no deed, mortgage, lease
or other voluntary instrument -- except a will --
purporting to convey or affect registered land shall take
effect as a conveyance or bind the land until its
registration.15 Thus, if the sale is not registered, it is
binding only between the seller and the buyer but it
does not affect innocent third persons.16
In the instant case, both Petitioners Abrigo and
respondent registered the sale of the property. Since
neither petitioners nor their predecessors (Tigno-
Salazar and Cave-Go) knew that the property was
covered by the Torrens system, they registered their
respective sales under Act 3344.17 For her part,
respondent registered the transaction under the
Torrens system18 because, during the sale, Villafania
had presented the transfer certificate of title (TCT)
covering the property.19
Respondent De Vera contends that her registration
under the Torrens system should prevail over that of
petitioners who recorded theirs under Act 3344. De
Vera relies on the following insight of Justice Edgardo
L. Paras:
Sales 56 of 70
 "x x x If the land is registered under the Land
Registration Act (and has therefore a Torrens
Title), and it is sold but the subsequent sale is
registered not under the Land Registration
Act but under Act 3344, as amended, such
sale is not considered REGISTERED, as the
term is used under Art. 1544 x x x."20
We agree with respondent. It is undisputed that
Villafania had been issued a free patent registered as
Original Certificate of Title (OCT) No. P-30522.21 The
OCT was later cancelled by Transfer Certificate of Title
(TCT) No. 212598, also in Villafania’s name.22 As a
consequence of the sale, TCT No. 212598 was
subsequently cancelled and TCT No. 22515 thereafter
issued to respondent.
Soriano v. Heirs of Magali23 held that registration must
be done in the proper registry in order to bind the land.
Since the property in dispute in the present case was
already registered under the Torrens system,
petitioners’ registration of the sale under Act 3344 was
not effective for purposes of Article 1544 of the Civil
Code.
More recently, in Naawan Community Rural Bank v.
Court of Appeals,24 the Court upheld the right of a party
who had registered the sale of land under the Property
Registration Decree, as opposed to another who had
registered a deed of final conveyance under Act 3344.
In that case, the "priority in time" principle was not
applied, because the land was already covered by the
Torrens system at the time the conveyance was
registered under Act 3344. For the same reason,
inasmuch as the registration of the sale to Respondent
De Vera under the Torrens system was done in good
faith, this sale must be upheld over the sale registered
under Act 3344 to Petitioner-Spouses Abrigo.
Radiowealth Finance Co. v. Palileo25 explained the
difference in the rules of registration under Act 3344
and those under the Torrens system in this wise:
"Under Act No. 3344, registration of
instruments affecting unregistered lands is
‘without prejudice to a third party with a better
right.’ The aforequoted phrase has been held
by this Court to mean that the mere
registration of a sale in one’s favor does not
give him any right over the land if the vendor
was not anymore the owner of the land having
previously sold the same to somebody else
even if the earlier sale was unrecorded.
"The case of Carumba vs. Court of
Appeals26 is a case in point. It was held
therein that Article 1544 of the Civil Code has
no application to land not registered under Act
No. 496. Like in the case at bar, Carumba
dealt with a double sale of the same
unregistered land. The first sale was made by
the original owners and was unrecorded while
the second was an execution sale that
resulted from a complaint for a sum of money
filed against the said original owners.
Applying [Section 33], Rule 39 of the Revised
Rules of Court,27 this Court held that Article
1544 of the Civil Code cannot be invoked to
benefit the purchaser at the execution sale
though the latter was a buyer in good faith and
even if this second sale was registered. It was
explained that this is because the purchaser
of unregistered land at a sheriff’s execution
sale only steps into the shoes of the judgment
debtor, and merely acquires the latter’s
interest in the property sold as of the time the
property was levied upon.
"Applying this principle, x x x the execution
sale of unregistered land in favor of petitioner
is of no effect because the land no longer
belonged to the judgment debtor as of the
time of the said execution sale."28
Petitioners cannot validly argue that they were
fraudulently misled into believing that the property was
unregistered. A Torrens title, once registered, serves
as a notice to the whole world.29 All persons must take
notice, and no one can plead ignorance of the
registration.30
Good-Faith Requirement
We have consistently held that Article 1544 requires
the second buyer to acquire the immovable in good
faith and to register it in good faith.31 Mere registration
of title is not enough; good faith must concur with the
registration.32 We explained the rationale in Uraca v.
Court of Appeals,33 which we quote:
"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 buyer’s
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
buyer’s rights) ---- from the time of acquisition
until the title is transferred to him by
registration, or failing registration, by delivery
of possession.’"34 (Italics supplied)
Equally important, under Section 44 of PD 1529, every
registered owner receiving a certificate of title pursuant
to a decree of registration, and every subsequent
purchaser of registered land taking such certificate for
value and in good faith shall hold the same free from
all encumbrances, except those noted and enumerated
in the certificate.35 Thus, a person dealing with
registered land is not required to go behind the registry
to determine the condition of the property, since such
condition is noted on the face of the register or
certificate of title.36 Following this principle, this Court
has consistently held as regards registered land that a
Sales 57 of 70
purchaser in good faith acquires a good title as against
all the transferees thereof whose rights are not
recorded in the Registry of Deeds at the time of the
sale.37
Citing Santiago v. Court of Appeals,38 petitioners
contend that their prior registration under Act 3344 is
constructive notice to respondent and negates her
good faith at the time she registered the
sale. Santiago affirmed the following commentary of
Justice Jose C. Vitug:
"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 buyer's 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 such 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. 95843, 02
September 1992).
xxx xxx xxx
"Registration of the second buyer under Act
3344, providing for the registration of all
instruments on land neither covered by the
Spanish Mortgage Law nor the Torrens
System (Act 496), cannot improve his
standing since Act 3344 itself expresses that
registration thereunder would not prejudice
prior rights in good faith (see Carumba vs.
Court of Appeals, 31 SCRA
558). Registration, however, by the first
buyer under Act 3344 can have the effect
of constructive notice to the second buyer
that can defeat his right as such buyer in
good faith (see Arts. 708-709, Civil Code;
see also Revilla vs. Galindez, 107 Phil.
480; Taguba vs. Peralta, 132 SCRA 700). Art.
1544 has been held to be inapplicable to
execution sales of unregistered land, since
the purchaser merely steps into the shoes of
the debtor and acquires the latter's interest as
of the time the property is sold (Carumba vs.
Court of Appeals, 31 SCRA 558; see
also Fabian vs. Smith, Bell & Co., 8 Phil. 496)
or when there is only one sale (Remalante vs.
Tibe, 158 SCRA 138)."39 (Emphasis supplied)
Santiago was subsequently applied in Bayoca v.
Nogales,40 which held:
"Verily, there is absence of prior registration
in good faith by petitioners of the second sale
in their favor. As stated in the Santiago case,
registration by the first buyer under Act No.
3344 can have the effect of constructive
notice to the second buyer that can defeat his
right as such buyer. On account of the
undisputed fact of registration under Act No.
3344 by [the first buyers], necessarily, there is
absent good faith in the registration of the sale
by the [second buyers] for which they had
been issued certificates of title in their names.
x x x."41
Santiago and Bayoca are not in point. In Santiago, the
first buyers registered the sale under the Torrens
system, as can be inferred from the issuance of the
TCT in their names.42 There was no registration under
Act 3344. In Bayoca, when the first buyer registered
the sale under Act 3344, the property was still
unregistered land.43 Such registration was therefore
considered effectual.
Furthermore, Revilla and Taguba, which are cited in
Santiago, are not on all fours with the present case.
In Revilla, the first buyer did not register the
sale.44 In Taguba, registration was not an issue.45
As can be gathered from the foregoing, constructive
notice to the second buyer through registration under
Act 3344 does not apply if the property is registered
under the Torrens system, as in this case.
We quote below the additional commentary of Justice
Vitug, which was omitted in Santiago. This omission
was evidently the reason why petitioner misunderstood
the context of the citation therein:
"The registration contemplated under Art.
1544 has been held to refer to registration
under Act 496 Land Registration Act (now PD
1529) which considers the act of registration
as the operative act that binds the land
(see Mediante vs. Rosabal, 1 O.G. [12]
900, Garcia vs. Rosabal, 73 Phil 694). On
lands covered by the Torrens System, the
purchaser acquires such rights and interest
as they appear in the certificate of title,
unaffected by any prior lien or encumbrance
not noted therein. The purchaser is not
required to explore farther than what the
Torrens title, upon its face, indicates. The only
exception is where the purchaser has actual
knowledge of a flaw or defect in the title of the
seller or of such liens or encumbrances
which, as to him, is equivalent to registration
(see Sec. 39, Act 496; Bernales vs. IAC, G.R.
75336, 18 October 1988; Hernandez vs.
Sales, 69 Phil 744; Tajonera vs. Court of
Appeals, L-26677, 27 March 1981),"46
Respondent in Good Faith
The Court of Appeals examined the facts to determine
whether respondent was an innocent purchaser for
value.47 After its factual findings revealed that
Respondent De Vera was in good faith, it explained
thus:
"x x x. Gloria Villafania, [Respondent] De Vera’s
vendor, appears to be the registered owner. The
subject land was, and still is, registered in the name of
Gloria Villafania. There is nothing in her certificate of
title and in the circumstances of the transaction or sale
which warrant [Respondent] De Vera in supposing that
she need[ed] to look beyond the title. She had no notice
of the earlier sale of the land to [petitioners]. She
ascertained and verified that her vendor was the sole
owner and in possession of the subject property by
examining her vendor’s title in the Registry of Deeds
and actually going to the premises. There is no
evidence in the record showing that when she bought
Sales 58 of 70
the land on October 23, 1997, she knew or had the
slightest notice that the same was under litigation in
Civil Case No. D-10638 of the Regional Trial Court of
Dagupan City, Branch 40, between Gloria Villafania
and [Petitioners] Abrigo. She was not even a party to
said case. In sum, she testified clearly and positively,
without any contrary evidence presented by the
[petitioners], that she did not know anything about the
earlier sale and claim of the spouses Abrigo, until after
she had bought the same, and only then when she
bought the same, and only then when she brought an
ejectment case with the x x x Municipal Court of
Mangaldan, known as Civil Case No. 1452. To the
[Respondent] De Vera, the only legal truth upon which
she had to rely was that the land is registered in the
name of Gloria Villafania, her vendor, and that her title
under the law, is absolute and indefeasible. x x x." 48

We find no reason to disturb these findings, which

petitioners have not rebutted. Spouses Abrigo base
their position only on the general averment that
respondent should have been more vigilant prior to
consummating the sale. They argue that had she
inspected the property, she would have found
petitioners to be in possession.49

This argument is contradicted, however, by the

spouses’ own admission that the parents and the sister
of Villafania were still the actual occupants in October
1997, when Respondent De Vera purchased the
property.50 The family members may reasonably be
assumed to be Villafania’s agents, who had not been
shown to have notified respondent of the first sale
when she conducted an ocular inspection. Thus, good
faith on respondent’s part stands.

WHEREFORE, the Petition is DENIED and the

assailed Decision AFFIRMED. Costs against
petitioners.

SO ORDERED.

Davide, Jr., Ynares-Santiago*, Carpio, and Azcuna,

JJ., concur.

Sales 59 of 70
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-18497 May 31, 1965
DAGUPAN TRADING COMPANY, petitioner,
vs.
RUSTICO MACAM, respondent.
Angel Sanchez for petitioner.
Manuel L. Fernandez for respondent.
DIZON, J.:
Appeal taken by the Dagupan Trading Company from
the decision of the Court of Appeals affirming the one
rendered by the Court of First Instance of Pangasinan
in Civil Case No. 13772, dismissing its complaint.
On September 4, 1958, appellant commenced the
action mentioned above against appellee Rustico
Macam, praying that it be declared owner of one-eighth
portion of the land described in paragraph 2 of the
complaint; that a partition of the whole property be
made; that appellee be ordered to pay it the amount of
P500.00 a year as damages from 1958 until said
portion is delivered, plus attorney's fees and costs.
Answering the complaint, appellee alleged, in the main,
that Sammy Maron's share in the property described in
the complaint, as well as that of all his co-heirs, had
been acquired by purchase by appellee since June 19
and September 21, 1955, before the issuance of the
original certificate of title in their name; that at the time
the levy in execution was made on Sammy Maron's
share therein, the latter had no longer any right or
interest in said property; that appellant and its
predecessor in interest were cognizant of the facts
already mentioned; that since the sales made in his
favor, he had enjoyed uninterrupted possession of the
property and introduced considerable improvements
thereon. Appellee likewise sought to recover damages
by way of counterclaim.
After trial upon the issue thus joined, the court
rendered judgment dismissing the complaint, which, on
appeal, was affirmed by the Court of Appeals.
The facts of the case are not disputed.
In the year 1955, Sammy Maron and his seven
brothers and sisters were pro-indiviso owners of a
parcel of unregistered land located in barrio Parayao,
Municipality of Binmaley, Pangasinan. While their
application for registration of said land under Act No.
496 was pending, they executed, on June 19 and
September 21, 1955, two deeds of sale conveying the
property to appellee, who thereafter took possession
thereof and proceeded to introduce substantial
improvements therein. One month later, that is, on
October 14, 1955, Original Certificate of Title No. 6942
covering the land was issued in the name of the
Maron's, free from all liens and encumbrances.
On August 4, 1956, by virtue of a final judgment
rendered in Civil Case No. 42215 of the Municipal
Court of Manila against Sammy Maron in favor of the
Manila Trading and Supply Company, levy was made
upon whatever interest he had in the aforementioned
property, and thereafter said interest was sold at public
auction to the judgment creditor. The corresponding
notice of levy, certificate of sale and the Sheriff's
certificate of final sale in favor of the Manila Trading
and Supply Co. — because nobody exercised the right
of redemptions — were duly registered. On March 1,
1958, the latter sold all its rights and title to the property
to appellant.
The question before Us now is: Who has the better
right as between appellant Dagupan Trading
Company, on the one hand, and appellee Rustico
Macam, on the other, to the one-eighth share of
Sammy Maron in the property mentioned heretofore?
If the property covered by the conflicting sales
were unregistered land, Macam would undoubtedly
have the better right in view of the fact that his claim is
based on a prior sale coupled with public, exclusive
and continuous possession thereof as owner. On the
other hand, were the land involved in the conflicting
transactions duly registered land, We would be inclined
to hold that appellant has the better right because, as
We have consistently held, in case of conveyance of
registered real estate, the registration of the deed of
sale is the operative act that gives validity to the
transfer. This would be fatal to appellee's claim, the
deeds of sale executed in his favor by the Maron's not
having been registered, while the levy in execution and
the provisional certificate of sale as well as the final
deed of sale in favor of appellant were registered.
Consequently, this registered conveyance must prevail
although posterior to the one executed in favor of
appellee, and appellant must be deemed to have
acquired such right, title and interest as appeared on
the certificate of title issued in favor of Sammy Maron,
subject to no lien, encumbrance or burden not noted
thereon. (Anderson & Co. vs. Garcia, 64 Phil. 506;
Reynes, et al. vs. Barrera, et al., 68 Phil. 656; Banco
Nacional, etc. vs. Camus, 70 Phil. 289)
The present case, however, does not fall within either,
situation. Here the sale in favor of appellee was
executed before the land subject-matter thereof was
registered, while the conflicting sale in favor of
appellant was executed after the same property had
been registered. We cannot, therefore, decide the case
in the light of whatever adjudicated cases there are
covering the two situations mentioned in the preceding
paragraph. It is our considered view that what should
determine the issue are the provisions of the last
paragraph of Section 35, Rule 39 of the Rules of Court,
to the effect that upon the execution and delivery of the
final certificate of sale in favor of the purchaser of land
sold in an execution sale, such purchaser "shall be
substituted to and acquire all the right, title, interest and
claim of the judgment debtor to the property as of the
time of the levy." Now We ask: What was the interest
and claim of Sammy Maron on the one-eighth portion
of the property inherited by him and his co-heirs, at the
time of the levy? The answer must necessarily be that
he had none, because for a considerable time prior to
the levy, his interest had already been conveyed to
appellee, "fully and retrievably — as the Court of
Appeals held. Consequently, subsequent levy made on
the property for the purpose of satisfying the judgment
rendered against Sammy Maron in favor of the Manila
Trading Company was void and of no effect (Buson vs.
Licuaco, 13 Phil. 357-358; Landig vs. U.S. Commercial
Company, G.R. No. L-3597, July 31, 1951). Needless
to say, the unregistered sale and the consequent
conveyance of title and ownership in favor of appellee
could not have been cancelled and rendered of no
Sales 60 of 70
effect upon the subsequent issuance of the Torrens
title over the entire parcel of land. We cannot,
therefore, but agree with the following statement
contained in the appealed decision:

... . Separate and apart from this however, we

believe that in the inevitable conflict between
a right of ownership already fixed and
established under the Civil Law and/or the
Spanish Mortgage Law — which cannot be
affected by any subsequent levy or
attachment or execution — and a new law or
system which would make possible the
overthrowing of such ownership on admittedly
artificial and technical grounds, the former
must be upheld and applied.1äwphï1.ñët

But to the above considerations must be added the

important circumstance that, as already stated before,
upon the execution of the deed of sale in his favor by
Sammy Maron, appellee took possession of the land
conveyed as owner thereof, and introduced
considerable improvements thereon. To deprive him
now of the same by sheer force of technicality would
be against both justice and equity.

IN VIEW OF ALL THE FOREGOING, the decision

appealed from is affirmed, with costs.

Bengzon, C.J., Bautista Angelo, Barrera, Regala,

Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.

Sales 61 of 70
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-27587 February 18, 1970
AMADO CARUMBA, petitioner,
vs.
THE COURT OF APPEALS, SANTIAGO BALBUENA
and ANGELES BOAQUIÑA as Deputy Provincial
Sheriff, respondents.
Luis N. de Leon for petitioner.
Reno R. Gonzales for respondents.
REYES, J.B.L., J.:
Amado Carumba petitions this Supreme Court for
a certiorari to review a decision of the Court of
Appeals, rendered in its Case No. 36094-R, that
reversed the judgment in his favor rendered by the
Court of First Instance of Camarines Sur (Civil Case
4646).
The factual background and history of these
proceedings is thus stated by the Court of Appeals
(pages 1-2):
On April 12, 1955, the spouses
Amado Canuto and Nemesia
Ibasco, by virtue of a "Deed of Sale
of Unregistered Land with
Covenants of Warranty" (Exh. A),
sold a parcel of land, partly
residential and partly coconut land
with a periphery (area) of 359.09
square meters, more or less, located
in the barrio of Santo Domingo, Iriga,
Camarines Sur, to the spouses
Amado Carumba and Benita
Canuto, for the sum of P350.00. The
referred deed of sale was never
registered in the Office of the
Register of Deeds of Camarines Sur,
and the Notary, Mr. Vicente Malaya,
was not then an authorized notary
public in the place, as shown by Exh.
5. Besides, it has been expressly
admitted by appellee that he is the
brother-in-law of Amado Canuto, the
alleged vendor of the property sold
to him. Amado Canuto is the older
brother of the wife of the herein
appellee, Amado Carumba.
On January 21, 1957, a complaint
(Exh. B) for a sum or money was
filed by Santiago Balbuena against
Amado Canuto and Nemesia Ibasco
before the Justice of the Peace
Court of Iriga, Camarines Sur,
known as Civil Case No. 139 and on
April 15, 1967, a decision (Exh. C)
was rendered in favor of the plaintiff
and against the defendants. On
October 1, 1968, the ex-
officio Sheriff, Justo V. Imperial, of
Camarines Sur, issued a "Definite
Deed of Sale (Exh. D) of the property
now in question in favor of Santiago
Balbuena, which instrument of sale
was registered before the Office of
the Register of Deeds of Camarines
Sur, on October 3, 1958. The
aforesaid property was declared for
taxation purposes (Exh. 1) in the
name of Santiago Balbuena in 1958.
The Court of First instance, finding that after execution
of the document Carumba had taken possession of the
land, planting bananas, coffee and other vegetables
thereon, declared him to be the owner of the property
under a consummated sale; held void the execution
levy made by the sheriff, pursuant to a judgment
against Carumba's vendor, Amado Canuto; and
nullified the sale in favor of the judgment creditor,
Santiago Balbuena. The Court, therefore, declared
Carumba the owner of the litigated property and
ordered Balbuena to pay P30.00, as damages, plus the
costs.
The Court of Appeals, without altering the findings of
fact made by the court of origin, declared that there
having been a double sale of the land subject of the
suit Balbuena's title was superior to that of his
adversary under Article 1544 of the Civil Code of the
Philippines, since the execution sale had been properly
registered in good faith and the sale to Carumba was
not recorded.
We disagree. While under the invoked Article 1544
registration in good faith prevails over possession in
the event of a double sale by the vendor of the same
piece of land to different vendees, said article is of no
application to the case at bar, even if Balbuena, the
later vendee, was ignorant of the prior sale made by
his judgment debtor in favor of petitioner Carumba. The
reason is that the purchaser of unregistered land at a
sheriff's execution sale only steps into the shoes of the
judgment debtor, and merely acquires the latter's
interest in the property sold as of the time the property
was levied upon. This is specifically provided by
section 35 of Rule 39 of the Revised Rules of Court,
the second paragraph of said section specifically
providing that:
Upon the execution and delivery of
said (final) deed the purchaser,
redemptioner, or his assignee shall
be substituted to and acquire all the
right, title, interest, and claim of the
judgment debtor to the property as
of the time of the levy, except as
against the judgment debtor in
possession, in which case the
substitution shall be effective as of
the time of the deed ... (Emphasis
supplied)
While the time of the levy does not clearly appear, it
could not have been made prior to 15 April 1957, when
the decision against the former owners of the land was
rendered in favor of Balbuena. But the deed of sale in
favor of Canuto had been executed two years before,
on 12 April 1955, and while only embodied in a private
document, the same, coupled with the fact that the
buyer (petitioner Carumba) had taken possession of
Sales 62 of 70
the unregistered land sold, sufficed to vest ownership
on the said buyer. When the levy was made by the
Sheriff, therefore, the judgment debtor no longer had
dominical interest nor any real right over the land that
could pass to the purchaser at the execution
sale.1 Hence, the latter must yield the land to petitioner
Carumba. The rule is different in case of lands covered
by Torrens titles, where the prior sale is neither
recorded nor known to the execution purchaser prior to
the levy;2 but the land here in question is admittedly not
registered under Act No. 496.

WHEREFORE, the decision of the Court of Appeals is

reversed and that of the Court of First Instance
affirmed. Costs against respondent Santiago
Balbuena.

Concepcion, C.J., Dizon, Makalintal, Zaldivar,

Sanchez, Castro, Fernando, Teehankee, Barredo and
Villamor, JJ., concur.

Sales 63 of 70
 Republic of the Philippines
SUPREME COURT
THIRD DIVISION
G.R. No. 148376. March 31, 2005
LEONARDO ACABAL and RAMON
NICOLAS, Petitioners,
vs.
VILLANER ACABAL, EDUARDO ACABAL,
SOLOMON ACABAL, GRACE ACABAL, MELBA
ACABAL, EVELYN ACABAL, ARMIN ACABAL,
RAMIL ACABAL, and BYRON
ACABAL, Respondents.
DECISION
CARPIO MORALES, J.:
Before this Court is a Petition for Review
on Certiorari of the February 15, 2001 Decision1 of the
Court of Appeals reversing that of the Regional Trial
Court (RTC) of Dumaguete City, Branch 35.2
In dispute is the exact nature of the document 3 which
respondent Villaner Acabal (Villaner) executed in favor
of his godson-nephew-petitioner Leonardo Acabal
(Leonardo) on April 19, 1990.
Villaner’s parents, Alejandro Acabal and Felicidad
Balasabas, owned a parcel of land situated in Barrio
Tanglad, Manjuyod, Negros Oriental, containing an
area of 18.15 hectares more or less, described in Tax
Declaration No. 15856.4 By a Deed of Absolute Sale
dated July 6, 1971,5 his parents transferred for
P2,000.00 ownership of the said land to him, who was
then married to Justiniana Lipajan.6
Sometime after the foregoing transfer, it appears that
Villaner became a widower.
Subsequently, he executed on April 19, 1990 a
deed7 conveying the same property8 in favor of
Leonardo.
Villaner was later to claim that while the April 19, 1990
document he executed now appears to be a "Deed of
Absolute Sale" purportedly witnessed by a Bais City
trial court clerk Carmelo Cadalin and his wife Lacorte,
what he signed was a document captioned "Lease
Contract"9 (modeled after a July 1976 lease
agreement10 he had previously executed with previous
lessee, Maria Luisa Montenegro11) wherein he leased
for 3 years the property to Leonardo at ₱1,000.00 per
hectare12 and which was witnessed by two women
employees of one Judge Villegas of Bais City.
Villaner thus filed on October 11, 1993 a
complaint13 before the Dumaguete RTC against
Leonardo and Ramon Nicolas to whom Leonardo in
turn conveyed the property, for annulment of the deeds
of sale.
At the witness stand, Villaner declared:
Q: It appears, Mr. Acabal, that you have signed a
document of sale with the defendant Leonardo Acabal
on April 19, 1990, please tell the court whether you
have really agreed to sell this property to the defendant
on or before April 19, 1990?
A: We had some agreement but not about the selling
of this property.
Q: What was your agreement with the defendant
Leonardo Acabal?
A: Our agreement [was] that he will just rent.14
xxx
Q: Now, please tell the court how were you able to sign
this document on April 19, 1990?
A: I do not know why I signed that, that is why I am
puzzled.
Q: Why, did you not read the contents of this
document?
A: I have not read that. I only happened to read the
title of the Lease Contract.
Q: And do you recall who were the witnesses of the
document which you signed in favor of Leonardo
Acabal?
A: Employees of Judge Villegas of Bais City.
Q: Did you see them sign that document?
A: Yes, sir.
Q: These signatures appearing in this document
marked as Exhibit "C" for the plaintiff and Exhibit
"1" for the defendant, please examine over (sic)
these signatures if these were the signatures of
these witnesses who signed this document?
A: These are not the signatures of the two women.
Q: And after signing this document on April 19, 1990,
did you appear before a notary public to have this
notarized?
A: No, I went home to San Carlos.15
xxx
Q: According to this document, you sell (sic) this
property at ₱10,000.00, did you sell this property to
Leonardo Acabal?
A: No, sir.
Q: How about after April 19, 1990, did you receive this
amount from Leonardo Acabal?
A: No, sir.16
xxx
Q: Now you said that on May 25, 1990, Leonardo
Acabal did not pay the amount that he promised to you,
what did you do of (sic) his refusal to pay that amount?
Sales 64 of 70
A: I went to Mr. [Carmelo] Mellie Cadalin because
he was the one who prepared the papers and to ask
Leonardo Acabal why he will not comply with our
agreement.
Q: By the way, who is this Mellie Cadalin?
A: Mellie Cadalin is also working in the sala of
Judge Villegas.
Q: Who requested Mellie Cadalin to prepare this
document?
A: Maybe it was Leonardo Acabal.
Q: By the way, when for the first time did you talk to
Leonardo Acabal regarding your agreement to lease
this property to him?
A: March 14, 1990, in San Carlos.
Q: And what document did you give to him in order
that that document will be prepared?
A: I have given (sic) some papers and contract of
lease that I have signed to (sic) Mrs.
Montenegro.17 (Emphasis and underscoring supplied)
xxx
Q: Now, Carmelo Cadalin ["Mellie"] also testified before
this court that in fact he identified the document marked
as Exhibit "C" for the plaintiff that what you executed
on April 19, 1990 was a deed of sale and not a contract
of lease, what can you say to that statement?
A: That is a lie.
Q: And what’s the truth then?
A: What really (sic) I have signed was the document of
lease contract.
Q: Now, can you explain to the Honorable Court xxx
why it so happened that on April 19, you were able
to sign a deed of sale? Q: And I would like to ask you Mr. witness why do
you know Villaner Acabal?
A: What I can see now is that perhaps those copies
of the deed of sale were placed by Mr. Cadalin A: At the time that he went to our house together
under the documents which I signed the lease with Leonardo Acabal he requested me to prepare
contract. But why is it that it has already a deed of sale a deed of sale as regards to a sale of the property.22
when what I have signed was only the lease of contract
or the contract of lease.
xxx
Q: Now, Mr. Cadalin also stated before this court that
he handed over to you this Deed of Sale marked as Q: And after they requested you to prepare a
Exhibit "C" and according to him you read this document of sale, what did you do?
document, what can you say to this statement?
A: At first I refused to [do] it because I have so
A: Yes, there was a document that he gave me to read many works to do, but then they insisted so I
it (sic)but it was a contract of lease. prepared the deed.
Q: How sure are you that what you signed on April 19, Q: After you prepared the document, what did you
1990 was really a contract of lease and not a contract do?
of sale?
A: After I prepared it I gave it to him so that he could
A: Because when I signed the contract of lease the read the same.
witnesses that witnessed my signing the document
were the employees of Judge Villegas and then I Q: When you say "him," whom do you refer to?
am now surprised why in the deed of sale which I
purportedly signed are witnessed by Carmelo A: Villaner Acabal.
Cadalin and his wife Lacorte.18 (Emphasis and
underscoring supplied)
Q: And did Villaner Acabal read the document you
prepared?
On the other hand, Leonardo asserts that what Villaner
executed was a Deed of Absolute Sale for a
consideration of ₱10,000.00 which he had already A: Yes, he read it.
paid,19 and as he had become the absolute owner of
the property, he validly transferred it to Ramon Nicolas Q: And after reading it what did Villaner Acabal do?
on May 19, 1990.20
A: He signed the document.
Carmelo Cadalin who admittedly prepared the deed of
absolute sale and who appears as a witness, along
Q: Showing to you a document which is marked
with his wife, to the execution of the document
Exhibit C for the plaintiff and Exhibit 1 for the
corroborated Leonardo’s claim:
defendants, please tell the Honorable Court what
relation this document has to the document which
Q: Mr. Cadalin, do you know the plaintiff Villaner you described earlier?
Acabal?
COURT INTERPRETER:
A: Yes, I know.21
Sales 65 of 70
Witness is confronted with the said document
earlier marked as Exhibit C for the prosecution and
Exhibit 1 for the defense.
A: Yes, this is the one.23
xxx
Q: Also stated in the document is the phrase
"Signed in the presence of" and there is a number
and then two signatures, could you please examine
the document and say whether these signatures
are familiar to you?
A: Yes, number one is my signature and number 2
is the signature of my wife as witness.24
xxx
Q: After Villaner Acabal signed the document, what did
Villaner Acabal do?
A: He was given the payment by Leonardo Acabal.25
xxx
Q: Aside from the document, deed of absolute sale,
that you mentioned earlier that you prepared for
Villaner Acabal and Leonardo Acabal, what other
documents, if any, did you prepare for them?
A: Affidavit of non-tenancy and aggregate
area.26 (Emphasis and underscoring supplied)
The complaint was later amended27 to implead
Villaner’s eight children as party plaintiffs, they being
heirs of his deceased wife.
By Decision of August 8, 1996, the trial court found for
the therein defendants-herein petitioners Leonardo
and Ramon Nicolas and accordingly dismissed the
complaint.
Villaner et al. thereupon brought the case on appeal to
the Court of Appeals which reversed the trial court, it
holding that the Deed of Absolute Sale executed by
Villaner in favor of Leonardo was simulated and
fictitious."28
Hence, Leonardo and Ramon Nicolas’ present petition
for review on certiorari,29 anchored on the following
assignments of error:
I.
THE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR WHEN IT RULED THAT
RESPONDENT VILLANER ACABAL WAS DECEIVED
INTO SIGNING THE DEED OF ABSOLUTE SALE
WHEN THE LATTER KNOWINGLY, FREELY AND
VOLUNTARILY EXECUTED THE SAME IN FAVOR
OF PETITIONER LEONARDO ACABAL.
II.
THE COURT OF APPEALS ERRED WHEN IT RULED
THAT THE CONSIDERATION OF THE DEED OF
ABSOLUTE SALE IN THE AMOUNT OF TEN
THOUSAND PESOS (P10,0000.00) WAS
"UNUSUALLY LOW AND INADEQUATE,"
ESPECIALLY TAKING INTO ACCOUNT THE
LOCATION OF THE SUBJECT PROPERTY.
III.
THE COURT OF APPEALS ERRED WHEN IT FAILED
TO CONSIDER WHY RESPONDENT VILLANER
ACABAL ONLY QUESTIONED THE POSSESSION
AND OWNERSHIP OF PETITIONER RAMON
NICOLAS IN COURT AFTER THE LATTER WAS IN
OPEN, CONTINUOUS AND PEACEFUL
POSSESSION OF THE SUBJECT PROPERTY FOR
ALMOST THREE (3) YEARS.
IV.
THE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN LAW WHEN IT FAILED TO
DECLARE PETITIONER RAMON NICOLAS AS A
BUYER IN GOOD FAITH AS THE LATTER TOOK
THE NECESSARY STEPS AN ORDINARY AND
PRUDENT MAN WOULD HAVE TAKEN BEFORE
BUYING THE QUESTIONED PROPERTY.
V.
THE COURT OF APPEALS ERRED IN RULING IN
FAVOR OF RESPONDENT VILLANER ACABAL
WHEN THE LATTER DID NOT PRESENT A SINGLE
WITNESS TO TESTIFY ON THE ALLEGED
CONTRACT OF LEASE WHICH HE ALLEGEDLY
SIGNED AND WITNESSED BY THE EMPLOYEES
OF JUDGE VILLEGAS.
VI.
THE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN LAW WHEN IT RULED
THAT RULE 8, SECTION 8 OF THE 1987 (sic) RULE
(sic) OF CIVIL PROCEDURE IS NOT APPLICABLE IN
THE CASE AT BAR, CONTRARY TO THE RULING
OF THE LOWER COURT.
VII.
THE COURT OF APPEALS ERRED WHEN IT
ORDERED PETITIONERS TO PAY RESPONDENTS
"JOINTLY AND SEVERALLY BY WAY OF RENTAL
THE SUM OF P10,000.00 PER YEAR FROM 1990 UP
TO THE TIME THEY VACATE THE PREMISES."30
Procedurally, petitioners contend that the Court of
Appeals erred when it failed to apply Section 8, Rule 8
of the Rules of Court, respondent Villaner having failed
to deny under oath the genuineness and due execution
of the April 19, 1990 Deed of Absolute Sale.
Petitioners’ contention does not persuade. The failure
to deny the genuineness and due execution of an
actionable document does not preclude a party from
arguing against it by evidence of fraud, mistake,
compromise, payment, statute of limitations, estoppel,
and want of consideration.31
On the merits, this Court rules in petitioners’ favor.
Sales 66 of 70
It is a basic rule in evidence that the burden of proof
lies on the party who makes the allegations 32 – ei
incumbit probatio, qui dicit, non qui negat; cum per
rerum naturam factum negantis probatio nulla sit.33 If
he claims a right granted by law, he must prove it by
competent evidence, relying on the strength of his own
evidence and not upon the weakness of that of his
opponent.
More specifically, allegations of a defect in or lack of
valid consent to a contract by reason of fraud or undue
influence are never presumed but must be established
not by mere preponderance of evidence but by clear
and convincing evidence.34 For the circumstances
evidencing fraud and misrepresentation are as varied
as the people who perpetrate it in each case, assuming
different shapes and forms and may be committed in
as many different ways.35
In the case at bar, it was incumbent on the plaintiff-
herein respondent Villaner to prove that he was
deceived into executing the Deed of Absolute Sale.
Except for his bare allegation that the transaction was
one of lease, he failed to adduce evidence in support
thereof. His conjecture that "perhaps those copies of
the deed of sale were placed by Mr. Cadalin under the
documents which I signed the contract of
lease,"36 must fail, for facts not conjectures decide
cases.
Attempting to seek corroboration of his account,
Villaner presented Atty. Vicente Real who notarized the
document. While on direct examination, Atty. Real
virtually corroborated Villaner’s claim that he did not
bring the document to him for notarization,37 on cross-
examination, Atty. Real conceded that it was
impossible to remember every person who would ask
him to notarize documents:
Q: And in the course of your notarization, can you
remember each and every face that come (sic) to
you for notarization?
A: No, it is impossible.
Q: In the case of Villaner Acabal which you have his
document notarized (sic) in 1990, can you
remember his face when he came to you?
A: No.
Q: And can you also say, if a person who came to
you having a document to be notarized and if he
will appear again after a month, can you remember
whether he was the one who came to you?
A: Not so much because everyday there are many
people who appear with documents to be
notarized,
Q: So, it is safe to say that if Villaner Acabal came
to you on April 25 or rather April 16, 1990 andhave
(sic) his document notarized if he comes back in,
say May 25, can you still remember if he was the
one who came to you?
A: I cannot be sure but at least, there are times I can
remember persons because he seems to be close
to me already.
Q: Is this Villaner close to you?
A: Because he has been frequenting the house/asking
for a copy of the document.
Q: So, he became close to you after you notarized
the document?
A: Yes.38 (Emphasis and underscoring supplied)
On Villaner’s claim that two women employees of
Judge Villegas signed as witnesses to the deed39 but
that the signatures appearing thereon are not those of
said witnesses,40 the same must be discredited in light
of his unexplained failure to present such alleged
women employee-witnesses.
In another vein, Villaner zeroes in on the purchase
price of the property — ₱10,000.00 — which to him
was unusually low if the transaction were one of sale.
To substantiate his claim, Villaner presented Tax
Declarations covering the property for the years
1971,41 1974,42 1977,43 1980,44 1983,45 1985,46 as
well as a Declaration of Real Property executed in
1994.47
It bears noting, however, that Villaner failed to present
evidence on the fair market value of the property as of
April 19, 1990, the date of execution of the disputed
deed. Absent any evidence of the fair market value of
a land as of the time of its sale, it cannot be concluded
that the price at which it was sold was
inadequate.48 Inadequacy of price must be proven
because mere speculation or conjecture has no place
in our judicial system.49
Victor Ragay, who was appointed by the trial court to
conduct an ocular inspection50 of the property and to
investigate matters relative to the case,51 gave an
instructive report dated December 3, 1994,52 the
pertinent portions of which are hereby reproduced
verbatim:
a) Only three (3) to four (4) hectares of the eighteen
(18) were planted to sugar cane, the rest was never
cultivated;
b) the soil is reddish and somewhat sandy in
composition;
c) the soil contains so much limestones (rocks
consisting mainly of calcium carbonate);
d) no part of the land in question is plain or flat, contrary
to claim of the plaintiff that almost 10 hectares of the
land in question is plain or flat;
e) some areas, eastward of and adjacent of the land in
question (mistakenly to be owned by the defendant
Nicolas) were planted to sugar cane by the owners –
Kadusales;
f) the road going to the land in question (as claimed to
be the road) is no longer passable because it has been
abandoned and not maintained by anyone, thus it
makes everything impossible for anybody to get and
haul the sugar cane from the area;
g) the Commissioner has discovered some stockpiles
of abandoned harvested sugar canes left to rot, along
the side of the road, undelivered to the milling site
because of the difficulty in bringing up trucks to the
scene of the harvest;
Sales 67 of 70
h) the sugarcanes presently planted on the land in
question at the time of the ocular inspection were three
(3) feet in height and their structural built was thin or
lean;
i) Most of the part of the 18 hectares is not planted or
cultivated because the same is too rocky and not
suitable for planting to sugarcane.53
Additionally, Ragay reported that one Anatolio
Cabusog recently purchased a 6-hectare property
adjoining that of the subject property for only
₱1,600.0054 or ₱266.67 per hectare. Given that, had
the 18-hectare subject property been sold at about the
same time, it would have fetched the amount of
₱4,800.00,55 hence, the ₱10,000.00 purchase price
appearing in the questioned April 19, 1990 document
is more than reasonable.
Even, however, on the assumption that the price of
₱10,000.00 was below the fair market value of the
property in 1990, mere inadequacy of the price per
se will not rule out the transaction as one of sale. For
the price must be grossly inadequate or shocking to
the conscience such that the mind revolts at it and such
that a reasonable man would neither directly nor
indirectly be likely to consent to it.56
Still in another vein, Villaner submits that Leonardo’s
transfer of the property to Nicolas in a span of one
month for a profit of ₱30,000.00 conclusively reflects
Leonardo’s fraudulent intent. This submission is a non
sequitur.
As for Villaner’s argument that the sale of the property
to Leonardo and the subsequent sale thereof to
Nicolas are void for being violative of the retention
limits imposed by Republic Act No. 6657, otherwise
known as the Comprehensive Agrarian Reform Law,
the same fails. The pertinent provisions of said law
read:
SECTION 6. Retention Limits. – Except as otherwise
provided in this Act, no person may retain, directly or
indirectly, any public or agricultural land, the size of
which may vary according to factors governing a viable
family-sized farm, such as commodity produced,
terrain, infrastructure, and soil fertility as determined by
the Presidential Agrarian Reform Council (PARC)
created hereunder, but in no case shall retention by
the landowner exceed five (5) hectares. Three (3)
hectares may be awarded to each child of the
landowner, subject to the following qualifications: (1)
that he is at least fifteen (15) years of age; and (2) that
he is tilling the land or directly managing the
farm: Provided, That landowners whose lands have
been covered by Presidential Decree No. 27 shall be
allowed to keep the areas originally retained by them
thereunder:57 Provided further, That original
homestead grantees or direct compulsory heirs who
still own the original homestead at the time of the
approval of this Act shall retain the same areas as long
as they continue to cultivate said homestead.
xxx
Upon the effectivity of this Act, any sale,
disposition, lease, management, contract or
transfer of possession of private lands executed by
the original landowner in violation of this Act shall
be null and void: Provided, however, that those
executed prior to this Act shall be valid only when
registered with the Register of Deeds within a period of
three (3) months after the effectivity of this Act.
Thereafter, all Registers of Deeds shall inform the DAR
within thirty (30) days of any transaction involving
agricultural lands in excess of five (5) hectares.
xxx
SECTION 70. Disposition of Private Agricultural Lands.
– The sale or disposition of agricultural lands retained
by a land owner as a consequence of Section 6 hereof
shall be valid as long as the total landholdings that shall
be owned by the transferee thereof inclusive of the land
to be acquired shall not exceed the landholding ceilings
provided for in this Act.
Any sale or disposition of agricultural lands after
the effectivity of this Act found to be contrary to the
provisions hereof shall be null and void.
Transferees of agricultural lands shall furnish the
appropriate Register of Deeds and the BARC an
affidavit attesting that his total landholdings as a result
of the said acquisition do not exceed the landholding
ceiling. The Register of Deeds shall not register the
transfer of any agricultural land without the submission
of his sworn statement together with proof of service of
a copy thereof to the BARC. (Emphasis and
underscoring supplied)
As the above-quoted provisions of the Comprehensive
Agrarian Reform Law show, only those private lands
devoted to or suitable for agriculture are covered by
it.58 As priorly related, Victor Ragay, who was
appointed by the trial court to conduct an ocular
inspection of the property, observed in his report that
only three (3) to four (4) hectares were planted with
sugarcane while the rest of the property was not
suitable for planting as the soil was full of
limestone.59 He also remarked that the sugarcanes
were only 3 feet in height and very lean,60 whereas
sugarcanes usually grow to a height of 3 to 6 meters
(about 8 to 20 feet) and have stems 2 to 5 centimeters
(1-2 inches) thick.61
It is thus gathered that the property was not suitable for
agricultural purposes. In any event, since the area
devoted to the planting of sugarcane, hence, suitable
for agricultural purposes, comprises only 4 hectares at
the most, it is less than the maximum retention limit
prescribed by law. There was then no violation of the
Comprehensive Agrarian Reform Law.
Even assuming that the disposition of the property by
Villaner was contrary to law, he would still have no
remedy under the law as he and Leonardo were in pari
delicto, hence, he is not entitled to afirmative relief –
one who seeks equity and justice must come to court
with clean hands. In pari delicto potior est conditio
defendentis.62
The proposition is universal that no action arises,
in equity or at law, from an illegal contract; no suit
can be maintained for its specific performance,
or to recover the property agreed to be sold or
delivered, or the money agreed to be paid, or
damages for its violation. The rule has sometimes
been laid down as though it were equally universal, that
where the parties are in pari delicto, no affirmative relief
of any kind will be given to one against the
other.63 (Emphasis and underscoring supplied)
Sales 68 of 70
The principle of pari delicto is grounded on two
premises: first, that courts should not lend their good
offices to mediating disputes among
wrongdoers;64 and second, that denying judicial relief
to an admitted wrongdoer is an effective means of
deterring illegality.65 This doctrine of ancient vintage is
not a principle of justice but one of policy as articulated
in 1775 by Lord Mansfield in Holman v. Johnson:66
The objection, that a contract is immoral or illegal as
between the plaintiff and defendant, sounds at all times
very ill in the mouth of the defendant. It is not for his
sake, however, that the objection is ever allowed; but it
is founded in general principles of policy, which the
defendant has the advantage of, contrary to the real
justice, as between him and the plaintiff, by accident, if
I may so say. The principle of public policy is this; ex
dolo malo non oritur actio.67 No court will lend its aid to
a man who founds his cause of action upon an immoral
or an illegal act. If, from the plaintiff’s own stating or
otherwise, the cause of action appears to arise ex turpi
causa,68 or the transgression of a positive law of this
country, there the court says he has no right to be
assisted. It is upon that ground the court goes; not for
the sake of the defendant, but because they will not
lend their aid to such a plaintiff. So if the plaintiff and
the defendant were to change sides, and the defendant
was to bring his action against the plaintiff, the latter
would then have the advantage of it; for where both are
equally in fault potior est conditio defendentis.69
Thus, to serve as both a sanction and as a deterrent,
the law will not aid either party to an illegal agreement
and will leave them where it finds them.
The principle of pari delicto, however, is not absolute,
admitting an exception under Article 1416 of the Civil
Code.
ART. 1416. When the agreement is not illegal per se
but is merely prohibited, and the prohibition by the law
is designed for the protection of the plaintiff, he may, if
public policy is thereby enhanced, recover what he has
paid or delivered.
Under this article, recovery for what has been paid or
delivered pursuant to an inexistent contract is allowed
only when the following requisites are met: (1) the
contract is not illegal per se but merely prohibited; (2)
the prohibition is for the protection of the plaintiffs; and
(3) if public policy is enhanced thereby.70 The
exception is unavailing in the instant case, however,
since the prohibition is clearly not for the protection of
the plaintiff-landowner but for the beneficiary farmers.71
In fine, Villaner is estopped from assailing and
annulling his own deliberate acts.72
More. Villaner cannot feign ignorance of the law, nor
claim that he acted in good faith, let alone assert that
he is less guilty than Leonardo. Under Article 3 of the
Civil Code, "ignorance of the law excuses no one from
compliance therewith."
And now, Villaner’s co-heirs’ claim that as co-owners
of the property, the Deed of Absolute Sale executed by
Villaner in favor of Leonardo does not bind them as
they did not consent to such an undertaking. There is
no question that the property is conjugal. Article 160 of
the Civil Code73 provides:
ART. 160. All property of the marriage is presumed to
belong to the conjugal partnership, unless it be proved
that it pertains exclusively to the husband or to the
wife.74
The presumption, this Court has held, applies to all
properties acquired during marriage. For the
presumption to be invoked, therefore, the property
must be shown to have been acquired during the
marriage.75
In the case at bar, the property was acquired on July 6,
1971 during Villaner’s marriage with Justiniana
Lipajan. It cannot be seriously contended that simply
because the tax declarations covering the property was
solely in the name of Villaner it is his personal and
exclusive property.
In Bucoy v. Paulino76 and Mendoza v. Reyes77 which
both apply by analogy, this Court held that registration
alone of the properties in the name of the husband
does not destroy the conjugal nature of the
properties.78 What is material is the time when the land
was acquired by Villaner, and that was during the lawful
existence of his marriage to Justiniana.
Since the property was acquired during the existence
of the marriage of Villaner and Justiniana, the
presumption under Article 160 of the Civil Code is that
it is the couple’s conjugal property. The burden is on
petitioners then to prove that it is not. This they failed
to do.
The property being conjugal, upon the death of
Justiniana Lipajan, the conjugal partnership was
terminated.79 With the dissolution of the conjugal
partnership, Villaner’s interest in the conjugal
partnership became actual and vested with respect to
an undivided one-half portion.80 Justiniana's rights to
the other half, in turn, vested upon her death to her
heirs81 including Villaner who is entitled to the same
share as that of each of their eight legitimate
children.82 As a result then of the death of Justiniana,
a regime of co-ownership arose between Villaner and
his co-heirs in relation to the property.83
With respect to Justiniana’s one-half share in the
conjugal partnership which her heirs inherited, applying
the provisions on the law of succession, her eight
children and Villaner each receives one-ninth (1/9)
thereof. Having inherited one-ninth (1/9) of his wife’s
share in the conjugal partnership or one eighteenth
(1/18)84 of the entire conjugal partnership and is
himself already the owner of one half (1/2) or nine-
eighteenths (9/18), Villaner’s total interest amounts to
ten-eighteenths (10/18) or five-ninths (5/9).
While Villaner owns five-ninths (5/9) of the disputed
property, he could not claim title to any definite portion
of the community property until its actual partition by
agreement or judicial decree. Prior to partition, all that
he has is an ideal or abstract quota or proportionate
share in the property.85 Villaner, however, as a co-
owner of the property has the right to sell his undivided
share thereof. The Civil Code provides so:
ART. 493. Each co-owner shall have the full ownership
of his part and of the fruits and benefits pertaining
thereto, and he may therefore alienate, assign or
mortgage it, and even substitute another person in its
enjoyment, except when personal rights are involved.
But the effect of the alienation or the mortgage, with
respect to the co-owners, shall be limited to the portion
which may be allotted to him in the division upon the
termination of the co-ownership.
Sales 69 of 70
Thus, every co-owner has absolute ownership of his
undivided interest in the co-owned property and is free
to alienate, assign or mortgage his interest except as
to purely personal rights. While a co-owner has the
right to freely sell and dispose of his undivided interest,
nevertheless, as a co-owner, he cannot alienate the
shares of his other co-owners – nemo dat qui non
habet.86
Villaner, however, sold the entire property without
obtaining the consent of the other co-owners.
Following the well-established principle that the binding
force of a contract must be recognized as far as it is
legally possible to do so – quando res non valet ut ago,
valeat quantum valere potest87 – the disposition affects
only Villaner’s share pro indiviso, and the transferee
gets only what corresponds to his grantor’s share in the
partition of the property owned in common.88
their shares, but the DIVISION of the common property
as if it continued to remain in the possession of the co-
owners who possessed and administered it.89
Thus, it is now settled that the appropriate recourse of
co-owners in cases where their consent were not
secured in a sale of the entire property as well as in a
sale merely of the undivided shares of some of the co-
owners is an action for PARTITION under Rule 69 of
the Revised Rules of Court. Neither recovery of
possession nor restitution can be granted since the
defendant buyers are legitimate proprietors and
possessors in joint ownership of the common property
claimed.90 (Italics in the original; citations omitted;
underscoring supplied)
This Court is not unmindful of its ruling in Cruz v.
Leis91 where it held:
registered land but not where the property is an
unregistered land.93 One who purchases an
unregistered land does so at his peril.94 Nicolas’ claim
of having bought the land in good faith is thus
irrelevant.95
WHEREFORE, the petition is GRANTED. The Court of
Appeals February 15, 2001 Decision in CA-G.R. CV
No. 56148 is REVERSED and SET ASIDE and another
is rendered declaring the sale in favor of petitioner
Leonardo Acabal and the subsequent sale in favor of
petitioner Ramon Nicolas valid but only insofar as five-
ninths (5/9) of the subject property is concerned.
No pronouncement as to costs.
SO ORDERED.

As early as 1923, this Court has ruled that even if a co-
owner sells the whole property as his, the sale will
affect only his own share but not those of the other co-
owners who did not consent to the sale. This is
because under the aforementioned codal provision, the
sale or other disposition affects only his undivided
share and the transferee gets only what would
correspond to this grantor in the partition of the thing
owned in common. Consequently, by virtue of the sales
made by Rosalia and Gaudencio Bailon which are valid
with respect to their proportionate shares, and the
subsequent transfers which culminated in the sale to
private respondent Celestino Afable, the said Afable
thereby became a co-owner of the disputed parcel of
land as correctly held by the lower court since the sales
produced the effect of substituting the buyers in the
enjoyment thereof.
From the foregoing, it may be deduced that since a co-
owner is entitled to sell his undivided share, a sale of
the entire property by one co-owner without the
consent of the other co-owners is not null and void.
However, only the rights of the co-owner-seller are
transferred., thereby making the buyer a co-owner of
the property.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona,
It is conceded that, as a rule, a co-owner such as and Garcia, JJ., concur.
Gertrudes could only dispose of her share in the
property owned in common. Article 493 of the Civil
Code provides:
xxx
Unfortunately for private respondents, however, the
property was registered in TCT No. 43100 solely in the
name of "Gertrudes Isidro, widow." Where a parcel of
land, forming part of the undistributed properties of the
dissolved conjugal partnership of gains, is sold by a
widow to a purchaser who merely relied on the face of
the certificate of title thereto, issued solely in the name
of the widow, the purchaser acquires a valid title to the
land even as against the heirs of the deceased spouse.
The rationale for this rule is that "a person dealing with
registered land is not required to go behind the register
to determine the condition of the property. He is only
charged with notice of the burdens on the property
which are noted on the face of the register or the
certificate of title. To require him to do more is to defeat
one of the primary objects of the Torrens
system."92 (Citation omitted)

The proper action in cases like this is not for the
nullification of the sale or the recovery of possession of
the thing owned in common from the third person who
substituted the co-owner or co-owners who alienated
Cruz, however, is not applicable for the simple reason
that in the case at bar the property in dispute is
unregistered. The issue of good faith or bad faith of a
buyer is relevant only where the subject of the sale is a
Sales 70 of 70