DAVID VS MISAMIS OCCIDENTAL II ELECTRIC COOP

G.R. No. 194785, July 11, 2012

VIRGILIO S. DAVID, PETITIONER, VS. MISAMIS OCCIDENTAL II ELECTRIC
COOPERATIVE, INC., RESPONDENT.

DECISION

MENDOZA, J.:

Before this Court is a petition for review under Rule 45 of the Rules of Court assailing the July 8, 2010
Decision[1] of the Court of Appeals (CA), in CA-G.R. CR No. 91839, which affirmed the July 17,
2008 Decision[2] of the Regional Trial Court, Branch VIII, Manila (RTC) in Civil Case No. 9469402,
an action for specific performance and damages.

The Facts:

Petitioner Virgilio S. David (David) was the owner or proprietor of VSD Electric Sales, a company
engaged in the business of supplying electrical hardware including transformers for rural electric
cooperatives like respondent Misamis Occidental II Electric Cooperative, Inc. (MOELCI), with
principal office located in Ozamis City.

To solve its problem of power shortage affecting some areas within its coverage, MOELCI expressed
its intention to purchase a 10 MVA power transformer from David. For this reason, its General
Manager, Engr. Reynaldo Rada (Engr. Rada), went to meet David in the latter’s office in Quezon City.
David agreed to supply the power transformer provided that MOELCI would secure a board
resolution because the item would still have to be imported.

On June 8, 1992, Engr. Rada and Director Jose Jimenez (Jimenez), who was in-charge of procurement,
returned to Manila and presented to David the requested board resolution which authorized the
purchase of one 10 MVA power transformer. In turn, David presented his proposal for the acquisition
of said transformer. This proposal was the same proposal that he would usually give to his clients.

After the reading of the proposal and the discussion of terms, David instructed his then secretary and
bookkeeper, Ellen M. Wong, to type the names of Engr. Rada and Jimenez at the end of the proposal.
Both signed the document under the word “conforme.” The board resolution was thereafter attached
to the proposal.

As stated in the proposal, the subject transformer, together with the basic accessories, was valued at
P5,200,000.00. It was also stipulated therein that 50% of the purchase price should be paid as
downpayment and the remaining balance to be paid upon delivery. Freight handling, insurance,
customs duties, and incidental expenses were for the account of the buyer.

1
The Board Resolution, on the other hand, stated that the purchase of the said transformer was to be
financed through a loan from the National Electrification Administration (NEA). As there was no
immediate action on the loan application, Engr. Rada returned to Manila in early December 1992 and
requested David to deliver the transformer to them even without the required downpayment. David
granted the request provided that MOELCI would pay interest at 24% per annum. Engr. Rada
acquiesced to the condition. On December 17, 1992, the goods were shipped to Ozamiz City via
William Lines. In the Bill of Lading, a sales invoice was included which stated the agreed interest rate
of 24% per annum.

When nothing was heard from MOELCI for sometime after the shipment, Emanuel Medina (Medina),
David’s Marketing Manager, went to Ozamiz City to check on the shipment. Medina was able to
confer with Engr. Rada who told him that the loan was not yet released and asked if it was possible
to withdraw the shipped items. Medina agreed.

When no payment was made after several months, Medina was constrained to send a demand letter,
dated September 15, 1993, which MOELCI duly received. Engr. Rada replied in writing that the goods
were still in the warehouse of William Lines again reiterating that the loan had not been approved by
NEA. This prompted Medina to head back to Ozamiz City where he found out that the goods had
already been released to MOELCI evidenced by the shipping company’s copy of the Bill of Lading
which was stamped “Released,” and with the notation that the arrastre charges in the amount of
P5,095.60 had been paid. This was supported by a receipt of payment with the corresponding cargo
delivery receipt issued by the Integrated Port Services of Ozamiz, Inc.

Subsequently, demand letters were sent to MOELCI demanding the payment of the whole amount
plus the balance of previous purchases of other electrical hardware. Aside from the formal demand
letters, David added that several statements of accounts were regularly sent through the mails by the
company and these were never disputed by MOELCI.

On February 17, 1994, David filed a complaint for specific performance with damages with the RTC.
In response, MOECLI moved for its dismissal on the ground that there was lack of cause of action
as there was no contract of sale, to begin with, or in the alternative, the said contract was unenforceable
under the Statute of Frauds. MOELCI argued that the quotation letter could not be considered a
binding contract because there was nothing in the said document from which consent, on its part, to
the terms and conditions proposed by David could be inferred. David knew that MOELCI’s assent
could only be obtained upon the issuance of a purchase order in favor of the bidder chosen by the
Canvass and Awards Committee.

Eventually, pursuant to Rule 16, Section 5 of the Rules of Court, MOELCI filed its Motion for
Preliminary Hearing of Affirmative Defenses and Deferment of the Pre-Trial Conference which was
denied by the RTC to abbreviate proceedings and for the parties to proceed to trial and avoid
piecemeal resolution of issues. The order denying its motion was raised with the CA, and then with
this Court. Both courts sustained the RTC ruling.

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Trial ensued. By reason of MOELCI’s continued failure to appear despite notice, David was allowed
to present his testimonial and documentary evidence ex parte, pursuant to Rule 18, Section 5 of the
Rules. A Very Urgent Motion to Allow Defendant to Present Evidence was filed by MOELCI, but
was denied.

In its July 17, 2008 Decision, the RTC dismissed the complaint. It found that although a contract of
sale was perfected, it was not consummated because David failed to prove that there was indeed a
delivery of the subject item and that MOELCI received it.[3]

Aggrieved, David appealed his case to the CA.

On July 8, 2010, the CA affirmed the ruling of the RTC. In the assailed decision, the CA reasoned out
that although David was correct in saying that MOELCI was deemed to have admitted the
genuineness and due execution of the “quotation letter” (Exhibit A), wherein the signatures of the
Chairman and the General Manager of MOELCI appeared, he failed to offer any textual support to
his stand that it was a contract of sale instead of a mere price quotation agreed to by MOELCI
representatives. On this score, the RTC erred in stating that a contract of sale was perfected between
the parties despite the irregularities that tainted their transaction. Further, the fact that MOELCI’s
representatives agreed to the terms embodied in the agreement would not preclude the finding that
said contract was at best a mere contract to sell.

A motion for reconsideration was filed by David but it was denied.[4]

Hence, this petition.

Before this Court, David presents the following issues for consideration:

I.
WHETHER OR NOT THERE WAS A PERFECTED
CONTRACT OF SALE.

II.
WHETHER OR NOT THERE WAS A DELIVERY
THAT CONSUMMATED THE CONTRACT.

The Court finds merit in the petition.

I.

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On the issue as to whether or not there was a perfected contract of sale, this Court is required to delve
into the evidence of the case. In a petition for review on certiorari under Rule 45 of the Rules of Court,
the issues to be threshed out are generally questions of law only, and not of fact. This was reiterated
in the case of Buenaventura v. Pascual,[5] where it was written:

Time and again, this Court has stressed that its jurisdiction in a petition for review on certiorari under
Rule 45 of the Rules of Court is limited to reviewing only errors of law, not of fact, unless the findings
of fact complained of are devoid of support by the evidence on record, or the assailed judgment is
based on the misapprehension of facts. The trial court, having heard the witnesses and observed their
demeanor and manner of testifying, is in a better position to decide the question of their credibility.
Hence, the findings of the trial court must be accorded the highest respect, even finality, by this Court.

That being said, the Court is not unmindful, however, of the recognized exceptions well-entrenched
in jurisprudence. It has always been stressed that when supported by substantial evidence, the findings
of fact of the CA are conclusive and binding on the parties and are not reviewable by this Court, unless
the case falls under any of the following recognized exceptions:

(1) When the conclusion is a finding grounded entirely on speculation, surmises and conjectures;
(2) When the inference made is manifestly mistaken, absurd or impossible;
(3) Where there is a grave abuse of discretion:
(4) When the judgment is based on a misapprehension of facts;
(5) When the findings of fact are conflicting;
(6) When the Court of Appeals, in making its findings, went beyond the issues of the case and the
same is contrary to the admissions of both appellant and appellee;
(7) When the findings are contrary to those of the trial court;
(8) When the findings of fact are without citation of specific evidence on which the conclusions are
based;
(9) When the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not
disputed by the respondents; and
(10) When the findings of fact of the Court of Appeals are premised on the supposed absence of
evidence and contradicted by the evidence on record.[6] [Emphasis supplied]

In this case, the CA and the RTC reached different conclusions on the question of whether or not
there was a perfected contract of sale. The RTC ruled that a contract of sale was perfected although
the same was not consummated because David failed to show proof of delivery.[7] The CA was of
the opposite view. The CA wrote:

Be that as it may, it must be emphasized that the appellant failed to offer any textual support to his
insistence that Exhibit “A” is a contract of sale instead of a mere price quotation conformed to by
MOELCI representatives. To that extent, the trial court erred in laying down the premise that “indeed

4
a contract of sale is perfected between the parties despite the irregularities attending the transaction.”
xxx

That representatives of MOELCI conformed to the terms embodied in the agreement does not
preclude the finding that such contract is, at best, a mere contract to sell with stipulated costs quoted
should it ultimately ripen into one of sale. The conditions upon which that development may occur
may even be obvious from statements in the agreement itself, that go beyond just “captions.” Thus,
the appellant opens with, “WE are pleased to submit our quotation xxx.” The purported contract also
ends with. “Thank you for giving us the opportunity to quote on your requirements and we hope to
receive your order soon” apparently referring to a purchase order which MOELCI contends to be a
formal requirement for the entire transaction. [8]

In other words, the CA was of the position that Exhibit A was at best a contract to sell.

A perusal of the records persuades the Court to hold otherwise.

The elements of a contract of sale are, to wit: a) Consent or meeting of the minds, that is, consent to
transfer ownership in exchange for the price; b) Determinate subject matter; and c) Price certain in
money or its equivalent.[9] It is the absence of the first element which distinguishes a contract of sale
from that of a contract to sell.

In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective
buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the
property subject of the contract to sell until the happening of an event, such as, in most cases, the full
payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise
to sell the subject property when the entire amount of the purchase price is delivered to him. In other
words, the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment
of which prevents the obligation to sell from arising and, thus, ownership is retained by the prospective
seller without further remedies by the prospective buyer.[10]

In a contract of sale, on the other hand, the title to the property passes to the vendee upon the delivery
of the thing sold. Unlike in a contract to sell, the first element of consent is present, although it is
conditioned upon the happening of a contingent event which may or may not occur. If the suspensive
condition is not fulfilled, the perfection of the contract of sale is completely abated. However, if the
suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already
been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically
transfers to the buyer by operation of law without any further act having to be performed by the seller.
The vendor loses ownership over the property and cannot recover it until and unless the contract is
resolved or rescinded.[11]

An examination of the alleged contract to sell, “Exhibit A,” despite its unconventional form, would
show that said document, with all the stipulations therein and with the attendant circumstances
surrounding it, was actually a Contract of Sale. The rule is that it is not the title of the contract, but its
express terms or stipulations that determine the kind of contract entered into by the parties.[12] First,

5
there was meeting of minds as to the transfer of ownership of the subject matter. The letter (Exhibit
A), though appearing to be a mere price quotation/proposal, was not what it seemed. It contained
terms and conditions, so that, by the fact that Jimenez, Chairman of the Committee on Management,
and Engr. Rada, General Manager of MOELCI, had signed their names under the word
“CONFORME,” they, in effect, agreed with the terms and conditions with respect to the purchase of
the subject 10 MVA Power Transformer. As correctly argued by David, if their purpose was merely
to acknowledge the receipt of the proposal, they would not have signed their name under the word
“CONFORME.”

Besides, the uncontroverted attending circumstances bolster the fact that there was consent or meeting
of minds in the transfer of ownership. To begin with, a board resolution was issued authorizing the
purchase of the subject power transformer. Next, armed with the said resolution, top officials of
MOELCI visited David’s office in Quezon City three times to discuss the terms of the purchase.
Then, when the loan that MOELCI was relying upon to finance the purchase was not forthcoming,
MOELCI, through Engr. Rada, convinced David to do away with the 50% downpayment and deliver
the unit so that it could already address its acute power shortage predicament, to which David acceded
when it made the delivery, through the carrier William Lines, as evidenced by a bill of lading.

Second, the document specified a determinate subject matter which was one (1) Unit of 10 MVA
Power Transformer with corresponding KV Line Accessories. And third, the document stated
categorically the price certain in money which was P5,200,000.00 for one (1) unit of 10 MVA Power
Transformer and P2,169,500.00 for the KV Line Accessories.

In sum, since there was a meeting of the minds, there was consent on the part of David to transfer
ownership of the power transformer to MOELCI in exchange for the price, thereby complying with
the first element. Thus, the said document cannot just be considered a contract to sell but rather a
perfected contract of sale.

II.

Now, the next question is, was there a delivery?

MOELCI, in denying that the power transformer was delivered to it, argued that the Bill of Lading
which David was relying upon was not conclusive. It argued that although the bill of lading was
stamped “Released,” there was nothing in it that indicated that said power transformer was indeed
released to it or delivered to its possession. For this reason, it is its position that it is not liable to pay
the purchase price of the 10 MVA power transformer.

This Court is unable to agree with the CA that there was no delivery of the items. On the contrary,
there was delivery and release.

To begin with, among the terms and conditions of the proposal to which MOELCI agreed stated:

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2. Delivery – Ninety (90) working days upon receipt of your purchase order and downpayment.

C&F Manila, freight, handling, insurance, custom duties and incidental expenses shall be for the
account of MOELCI II.[13] (Emphasis supplied)

On this score, it is clear that MOELCI agreed that the power transformer would be delivered and that
the freight, handling, insurance, custom duties, and incidental expenses shall be shouldered by it.

On the basis of this express agreement, Article 1523 of the Civil Code becomes applicable. It provides:

Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the
buyer delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of
transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the cases
provided for in Article 1503, first, second and third paragraphs, or unless a contrary intent appears.
(Emphasis supplied)

Thus, the delivery made by David to William Lines, Inc., as evidenced by the Bill of Lading, was
deemed to be a delivery to MOELCI. David was authorized to send the power transformer to the
buyer pursuant to their agreement. When David sent the item through the carrier, it amounted to a
delivery to MOELCI.

Furthermore, in the case of Behn, Meyer & Co. (Ltd.) v. Yangco,[14] it was pointed out that a
specification in a contract relative to the payment of freight can be taken to indicate the intention of
the parties with regard to the place of delivery. So that, if the buyer is to pay the freight, as in this case,
it is reasonable to suppose that the subject of the sale is transferred to the buyer at the point of
shipment. In other words, the title to the goods transfers to the buyer upon shipment or delivery to
the carrier.

Of course, Article 1523 provides a mere presumption and in order to overcome said presumption,
MOELCI should have presented evidence to the contrary. The burden of proof was shifted to
MOELCI, who had to show that the rule under Article 1523 was not applicable. In this regard,
however, MOELCI failed.

There being delivery and release, said fact constitutes partial performance which takes the case out of
the protection of the Statute of Frauds. It is elementary that the partial execution of a contract of sale
takes the transaction out of the provisions of the Statute of Frauds so long as the essential requisites
of consent of the contracting parties, object and cause of the obligation concur and are clearly
established to be present.[15]

That being said, the Court now comes to David’s prayer that MOELCI be made to pay the total sum
of P5,472,722.27 plus the stipulated interest at 24% per annum from the filing of the complaint.

7
Although the Court agrees that MOELCI should pay interest, the stipulated rate is, however,
unconscionable and should be equitably reduced. While there is no question that parties to a loan
agreement have wide latitude to stipulate on any interest rate in view of the Central Bank Circular No.
905 s. 1982 which suspended the Usury Law ceiling on interest effective January 1, 1983, it is also
worth stressing that interest rates whenever unconscionable may still be reduced to a reasonable and
fair level. There is nothing in the said circular which grants lenders carte blanche authority to raise
interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their
assets.[16] Accordingly, the excessive interest of 24% per annum stipulated in the sales invoice should
be reduced to 12% per annum.

Indeed, David was compelled to file an action against MOELCI but this reason alone will not warrant
an award of attorney’s fees. It is settled that the award of attorney's fees is the exception rather than
the rule. Counsel's fees are not awarded every time a party prevails in a suit because of the policy that
no premium should be placed on the right to litigate. Attorney's fees, as part of damages, are not
necessarily equated to the amount paid by a litigant to a lawyer. In the ordinary sense, attorney's fees
represent the reasonable compensation paid to a lawyer by his client for the legal services he has
rendered to the latter; while in its extraordinary concept, they may be awarded by the court as
indemnity for damages to be paid by the losing party to the prevailing party. Attorney's fees as part of
damages are awarded only in the instances specified in Article 2208 of the Civil Code[17] which
demands factual, legal, and equitable justification. Its basis cannot be left to speculation or conjecture.
In this regard, none was proven.

Moreover, in the absence of stipulation, a winning party may be awarded attorney's fees only in case
plaintiffs action or defendant's stand is so untenable as to amount to gross and evident bad faith.[18]
MOELCI's case cannot be similarly classified.

Also, David's claim for the balance of P73,059.76 plus the stipulated interest is denied for being
unsubstantiated.

WHEREFORE, the petition is GRANTED. The July 8, 2010 Decision of the Court of Appeals Is
REVERSED and SET ASIDE. Respondent Misamis Occidental II Electric Cooperative, Inc. is
ordered to pay petitioner Virgilio S. David the total sum of P5,472,722.27 with interest at the rate of
12% per annum reckoned from the filing of the complaint until fully paid.

SO ORDERED.

8
 SANTIAGO VS VILLAMOR
G.R. No. 168499, November 26, 2012
SPOUSES EROSTO SANTIAGO AND NELSIE SANTIAGO, PETITIONERS, VS.
MANCER VILLAMOR, CARLOS VILLAMOR, JOHN VILLAMOR AND DOMINGO
VILLAMOR, JR., RESPONDENTS.

DECISION

BRION, J.:

We resolve the petition for review on certiorari[1] filed by spouses Erosto Santiago and Nelsie
Santiago (petitioners) to challenge the August 10, 2004 decision[2] and the June 8, 2005 resolution[3]
of the Court of Appeals (CA) in CA-G.R. CV No. 59112. The CA decision set aside the May 28, 1997
decision[4] of the Regional Trial Court (RTC) of San Jacinto, Masbate, Branch 50, in Civil Case No.
201. The CA resolution denied the petitioners’ subsequent motion for reconsideration.

THE FACTUAL ANTECEDENTS

In January 1982,[5] the spouses Domingo Villamor, Sr. and Trinidad Gutierrez Villamor (spouses
Villamor, Sr.), the parents of Mancer Villamor, Carlos Villamor and Domingo Villamor, Jr.
(respondents) and the grandparents of respondent John Villamor, mortgaged their 4.5-hectare
coconut land in Sta. Rosa, San Jacinto, Masbate, known as Lot No. 1814, to the Rural Bank of San
Jacinto (Masbate), Inc. (San Jacinto Bank) as security for a P10,000.00 loan.

For non-payment of the loan, the San Jacinto Bank extrajudicially foreclosed the mortgage, and, as
the highest bidder at the public auction, bought the land. When the spouses Villamor, Sr. failed to
redeem the property within the prescribed period, the San Jacinto Bank obtained a final deed of sale
in its favor sometime in 1991. The San Jacinto Bank then offered the land for sale to any interested
buyer.[6]

a. The Specific Performance Case

Since the respondents had been in possession and cultivation of the land, they decided, together with
their sister Catalina Villamor Ranchez, to acquire the land from the San Jacinto Bank. The San Jacinto
Bank agreed with the respondents and Catalina to a P65,000.00 sale, payable in installments. The
respondents and Catalina made four (4) installment payments of P28,000.00, P5,500.00, P7,000.00
and P24,500.00 on November 4, 1991, November 23, 1992, April 26, 1993 and June 8, 1994,
respectively.[7]

9
When the San Jacinto Bank refused to issue a deed of conveyance in their favor despite full payment,
the respondents and Catalina filed a complaint against the San Jacinto Bank (docketed as Civil Case
No. 200) with the RTC on October 11, 1994. The complaint was for specific performance with
damages.

The San Jacinto Bank claimed that it already issued a deed of repurchase in favor of the spouses
Villamor, Sr.; the payments made by the respondents and Catalina were credited to the account of
Domingo, Sr. since the real buyers of the land were the spouses Villamor, Sr.[8]

In a February 10, 2004 decision, the RTC dismissed the specific performance case. It found that the
San Jacinto Bank acted in good faith when it executed a deed of “repurchase” in the spouses Villamor,
Sr.’s names since Domingo, Sr., along with the respondents and Catalina, was the one who transacted
with the San Jacinto Bank to redeem the land.[9]

The CA, on appeal, set aside the RTC’s decision.[10] The CA found that the respondents and Catalina
made the installment payments on their own behalf and not as representatives of the spouses Villamor,
Sr. The San Jacinto Bank mistakenly referred to the transaction as a “repurchase” when the
redemption period had already lapsed and the title had been transferred to its name; the transaction
of the respondents and Catalina was altogether alien to the spouses Villamor, Sr.’s loan with mortgage.
Thus, it ordered the San Jacinto Bank to execute the necessary deed of sale in favor of the respondents
and Catalina, and to pay P30,000.00 as attorney’s fees.[11] No appeal appears to have been taken from
this decision.

b. The Present Quieting of Title Case

On July 19, 1994 (or prior to the filing of the respondents and Catalina’s complaint for specific
performance, as narrated above), the San Jacinto Bank issued a deed of sale in favor of Domingo,
Sr.[12] On July 21, 1994, the spouses Villamor, Sr. sold the land to the petitioners for P150,000.00.[13]

After the respondents and Catalina refused the petitioners’ demand to vacate the land, the petitioners
filed on October 20, 1994 a complaint for quieting of title and recovery of possession against the
respondents.[14] This is the case that is now before us.

The respondents and Catalina assailed the San Jacinto Bank’s execution of the deed of sale in favor of
Domingo, Sr., claiming that the respondents and Catalina made the installment payments on their own
behalf.[15]

In its May 28, 1997 decision,[16] the RTC declared the petitioners as the legal and absolute owners of
the land, finding that the petitioners were purchasers in good faith; the spouses Villamor, Sr.’s
execution of the July 21, 1994 notarized deed of sale in favor of the petitioners resulted in the
constructive delivery of the land. Thus, it ordered the respondents to vacate and to transfer possession
of the land to the petitioners, and to pay P10,000.00 as moral damages.[17]

10
On appeal, the CA, in its August 10, 2004 decision, found that the petitioners’ action to quiet title
could not prosper because the petitioners failed to prove their legal or equitable title to the land. It
noted that there was no real transfer of ownership since neither the spouses Villamor, Sr. nor the
petitioners were placed in actual possession and control of the land after the execution of the deeds
of sale. It also found that the petitioners failed to show that the respondents and Catalina’s title or
claim to the land was invalid or inoperative, noting the pendency of the specific performance case, at
that time on appeal with the CA. Thus, it set aside the RTC decision and ordered the dismissal of the
complaint, without prejudice to the outcome of the specific performance case.[18]

When the CA denied[19] the motion for reconsideration[20] that followed, the petitioners filed the
present Rule 45 petition.

THE PETITION

The petitioners argue that the spouses Villamor, Sr.’s execution of the July 21, 1994 deed of sale in
the petitioners’ favor was equivalent to delivery of the land under Article 1498 of the Civil Code; the
petitioners are purchasers in good faith since they had no knowledge of the supposed transaction
between the San Jacinto Bank and the respondents and Catalina; and the respondents and Catalina’s
possession of the land should not be construed against them (petitioners) since, by tradition and
practice in San Jacinto, Masbate, the children use their parents’ property.

THE CASE FOR THE RESPONDENTS

The respondents and respondent John submit that they hold legal title to the land since they perfected
the sale with the San Jacinto Bank as early as November 4, 1991, the first installment payment, and
are in actual possession of the land; the petitioners are not purchasers in good faith since they failed
to ascertain why the respondents were in possession of the land.

THE ISSUE

The case presents to us the issue of whether the CA committed a reversible error when it set aside the
RTC decision and dismissed the petitioners’ complaint for quieting of title and recovery of possession.

OUR RULING

The petition lacks merit.

11
Quieting of title is a common law remedy for the removal of any cloud, doubt or uncertainty affecting
title to real property. The plaintiffs must show not only that there is a cloud or contrary interest over
the subject real property,[21] but that they have a valid title to it.[22] Worth stressing, in civil cases,
the plaintiff must establish his cause of action by preponderance of evidence; otherwise, his suit will
not prosper.[23]

The petitioners anchor their claim over the disputed land on the July 21, 1994 notarized deed of sale
executed in their favor by the spouses Villamor, Sr. who in turn obtained a July 19, 1994 notarized
deed of sale from the San Jacinto Bank. On the other hand, the respondents and respondent John
claim title by virtue of their installment payments to the San Jacinto Bank from November 4, 1991 to
June 8, 1994 and their actual possession of the disputed land.

After considering the parties’ evidence and arguments, we agree with the CA that the petitioners failed
to prove that they have any legal or equitable title over the disputed land.

Execution of the deed of sale only a

prima facie presumption of delivery.

Article 1477 of the Civil Code recognizes that the “ownership of the thing sold shall be transferred to
the vendee upon the actual or constructive delivery thereof.” Related to this article is Article 1497
which provides that “[t]he thing sold shall be understood as delivered, when it is placed in the control
and possession of the vendee.”

With respect to incorporeal property, Article 1498 of the Civil Code lays down the general rule: the
execution of a public instrument “shall be equivalent to the delivery of the thing which is the object
of the contract, if from the deed the contrary does not appear or cannot clearly be inferred.” However,
the execution of a public instrument gives rise only to a prima facie presumption of delivery, which is
negated by the failure of the vendee to take actual possession of the land sold.[24] “[A] person who
does not have actual possession of the thing sold cannot transfer constructive possession by the
execution and delivery of a public instrument.”[25]

In this case, no constructive delivery of the land transpired upon the execution of the deed of sale
since it was not the spouses Villamor, Sr. but the respondents who had actual possession of the land.
The presumption of constructive delivery is inapplicable and must yield to the reality that the
petitioners were not placed in possession and control of the land.

The petitioners are not purchasers in good faith.

The petitioners can hardly claim to be purchasers in good faith.

“A purchaser in good faith is one who buys property without notice that some other person has a
right to or interest in such property and pays its fair price before he has notice of the adverse claims
and interest of another person in the same property.”[26] However, where the land sold is in the
possession of a person other than the vendor, the purchaser must be wary and must investigate the

12
rights of the actual possessor; without such inquiry, the buyer cannot be said to be in good faith and
cannot have any right over the property.[27]

In this case, the spouses Villamor, Sr. were not in possession of the land. The petitioners, as
prospective vendees, carried the burden of investigating the rights of the respondents and respondent
John who were then in actual possession of the land. The petitioners cannot take refuge behind the
allegation that, by custom and tradition in San Jacinto, Masbate, the children use their parents’
property, since they offered no proof supporting their bare allegation. The burden of proving the
status of a purchaser in good faith lies upon the party asserting that status and cannot be discharged
by reliance on the legal presumption of good faith.[28] The petitioners failed to discharge this burden.

Lastly, since the specific performance case already settled the respondents and respondent John’s claim
over the disputed land, the dispositive portion of the CA decision (dismissing the complaint without
prejudice to the outcome of the specific performance case[29]) is modified to reflect this fact; we thus
dismiss for lack of merit the complaint for quieting of title and recovery of possession.

WHEREFORE, we hereby DENY the petition and ORDER the DISMISSAL of Civil Case No. 201
before the Regional Trial Court of San Jacinto, Masbate, Branch 50.

Costs against the petitioners.

SO ORDERED.

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