1.Ang Yu Asuncion et al. vs. Court of Appeals and Buen Art 1479 or an offer under Art. 1319.
rt. 1319. In a Right of First
Realty Corp.
(G.R. No. 109125, December 2, 1994)
Ponente: Vitug
Topic: Sales; Contract of sale v. Contract to sell; remedies
for violation of right of first refusal
Facts:
Petitioners Ang Yu Asuncion et. al. are lessees of
residential and commercial spaces owned by the Unjiengs.
They have been leasing the property and possessing it
since 1935 and have been paying rentals.
In 1986, the Unjiengs informed Petitioners Ang Yu
Asuncion that the property was being sold and that
Petitioners were being given priority to acquire them
(Right of First Refusal). They agreed on a price of P5M but
they had not yet agreed on the terms and conditions.
Petitioners wrote to the Unjiengs twice, asking them to
specify the terms and conditions for the sale but received
no reply. Later, the petitioners found out that the property
was already about to be sold, thus they instituted this case
for Specific Performance [of the right of first refusal]. The
Trial Court dismissed the case. The trial court also held
that the Unjieng’s offer to sell was never accepted by the
Petitioners for the reason that they did not agree upon the
terms and conditions of the proposed sale, hence, there
was no contract of sale at all. Nonetheless, the lower court
ruled that should the defendants subsequently offer their
property for sale at a price of P11-million or below,
plaintiffs will have the right of first refusal. The Court of
Appeals affirmed the decision of the Trial Court.
In the meantime, in 1990, the property was sold to De
Buen Realty, Private Respondent in this case. The title to
the property was transferred into the name of De Buen
and demanded that the Petitioners vacate the premises.
Because of this, Petitioners filed a motion for execution of
the CA judgement. At first, CA directed the Sheriff to
execute an order directing the Unjiengs to issue a Deed of
Sale in the Petitioner’s favour and nullified the sale to De
Buen Realty. But then, the CA reversed itself when the
Private Respondents Appealed.
Issues:
1. Whether or not the Contract of Sale is perfected
by the grant of a Right of First Refusal.
2. Whether or not a Right of First Refusal may be
enforced in an action for Specific Performance.
Held:
1. No. A Right of First Refusal is not a Perfected
Contract of Sale under Art. 1458 or an option under Par. 2
Refusal, only the object of the contract is determinate.
This means that no vinculum juris is created between the
seller-offeror and the buyer-offeree.
2. No. Since a contractual relationship does not exist
between the parties, a Right of First Refusal may not be
enforced through an action for specific performance. Its
conduct is governed by the law on human relations under
Art. 19-21 of the Civil Code and not by contract law.
Therefore, the Supreme Court held that the CA could not
have decreed at the time the execution of any deed of sale
between the Unjiengs and Petitioners.
Other Rules, Comments and Discussion:
This case is notable because it lays down the rules on
options contracts and right of first refusal as well as
promises to buy and sell. First, the Supreme Court
discussed the stages of the formation of a sales contract,
these are:
1. Negotiation – covers the period from the time the
prospective contracting parties indicate interest in the
contract to the time the contract is concluded (perfected).
2. Perfection – takes place upon the concurrence of
the essential elements thereof. In a sales contract this is
governed by Art. 1458
3. Consummation – begins when the parties perform
their respective undertakings under the contract
culminating in the extinguishment thereof
Until the contract is perfected (No. 2), it cannot, as an
independent source of obligation, serve as a binding
juridical relation. A sales contract is perfected when a
person, called the seller, obligates himself, for a price
certain, to deliver and to transfer ownership of a thing or
right to another, called the buyer, over which the latter
agrees (Art 1458).
Under Art. 1458, there is no perfection of a sale under a
“Contract to Sell”. A Contract to Sell is characterized as a
conditional sale and the breach of the suspensive
condition will prevent the obligation to transfer title from
acquiring obligatory force.
Promises to Buy and Sell
Unconditional mutual promise  to buy and sell – As long as
the object is made determinate and the price is fixed, can
be obligatory on the parties, and compliance therewith
may accordingly be exacted. The Right of First Refusal falls
under this classification.
Accepted unilateral promise – If it specifies the thing to be
sold and the price to be paid and when coupled with a
valuable consideration distinct and separate from the
price, is what may properly be termed a perfected
contract of option. This contract is legally binding. (Par. 2
Art. 1458) Note however, that the option is a contract
separate and distinct from the contract of sale. Once the
option is exercised before it is withdrawn, a bilateral
promise to sell and to buy ensues and both parties are
then reciprocally bound to comply with their respective
undertakings.
Offers with a Period
Where a period is given to the offeree within which to
accept the offer, the following rules generally govern:
1. If the period is not itself founded upon or
supported by a consideration – Offeror may withdraw
offer at any time before its acceptance (or knowledge of its
acceptance). However, the right to withdraw must not be
exercised whimsically or arbitrarily otherwise it can give
rise to damages under Art. 19 of the New Civil Code
2. If period is founded on a separate consideration –
This is a perfected contract of option. Withdrawal of the
offer within the period of the option is deemed a breach of
the contract of option (not the sale). “If, in fact, the
optioner-offeror withdraws the offer before its acceptance
(exercise of the option) by the optionee-offeree, the latter
may not sue for specific performance on the proposed
contract (“object” of the option) since it has failed to reach
its own stage of perfection. The optioner-offeror, however,
renders himself liable for damages for breach of the
option.”
3. Earnest money – This is not an offer with a period.
Earnest money is distinguished from the option contract if
the consideration given will be considered as a part of the
purchase price of the object of the sale. Earnest money is
evidence of a perfected contract of sale. (Art. 1482)
Right of First Refusal
This is “an innovative juridical relation” because it is
neither a perfected contract of sale under Art. 1458 nor an
option contract under par. 2 Art 1479. The object might be
made determinate, the exercise of the right, however, is
dependent on the offeror’s eventual intention to enter
into a binding juridical relation with another but also on
terms and conditions such as price. There is no juridical tie
or vinculum juris.
Breach of the right cannot justify correspondingly an
issuance of a writ of execution under a court judgement
that recognizes its existence, such as in Ang Yu Asuncion.
An action for Specific Performance is not allowed under a
Right of First Refusal because doing so would negate the
indispensable element of consensuality in the perfection
of contracts.
This right is not inconsequential because it gives right to an
action for damages under Art. 19.
Other Acts that Won’t Bind
Public advertisements or solicitations – Construed as mere
invitations to make offers and/or proposals.
2.EQUATORIAL REALTY V. MAYFAIR (November 21, 1996)
FACTS:
Petitioner Carmelo and Bauermann Inc. leased its parcel of
land with 2-storey building to respondent Mayfair Theater
Inc. They entered a contract which provides that if the
LESSOR should desire to sell the leased premises, the
LESSEE shall be given 30-days exclusive option to purchase
the same.
Carmelo informed Mayfair that it will sell the property to
Equatorial. Mayfair made known its interest to buy the
property but only to the extent of the leased premises.
Notwithstanding Mayfair’s intention, Carmelo sold the
property to Equatorial.
ISSUE:
WON the sale of the property to Equatorial is valid.
HELD:
The sale of the property should be rescinded
because Mayfair has the right of first refusal. Both
Equatorial and Carmelo are in bad faith because they knew
of the stipulation in the contract regarding the right of first
refusal. The stipulation is a not an option contract but a
right of first refusal and as such the requirement of a
separate consideration for the option, has no applicability
in the instant case. The consideration is built in the
reciprocal obligation of the parties.
In reciprocal contract, the obligation or promise of each
party is the consideration for that of the other. (Promise to
lease in return of the right to first refusal).
With regard to the impossibility of performance, only
Carmelo can be blamed for not including the entire
property in the right of first refusal. Court held
that Mayfair may not have the option to buy the property.
Not only the leased area but the entire property.
3. VILLONCO REALTY V. BORMAHECO (July 25, 1975)
FACTS:
Francisco Cervantes of Bormaheco Inc. agrees to sell to
Villonco Realty a parcel of land and its improvements
located in Buendia, Makati. Bormaheco made the terms
and condition for the sale and Villonco returned it with
some modifications.
The sale is for P400 per square meter but it is only to be
consummated after respondent shall have also
consummated purchase of a property in Sta. Ana, Manila.
Bormaheco won the bidding for the Sta.Ana land and
subsequently bought the property. Villonco issued a check
to Bormaheco amounting to P100,000 as earnest money.
26 days after signing the contract of sale, Bormaheco
returned the P100,000 to Villonco with 10% interest for
the reason that they are not sure yet if they will acquire
the Sta.Ana property.
Villonco rejected the return of the check and demanded
for specific performance.
ISSUE:
WON Bormaheco is bound to perform the contract with
Villonco.
HELD:
The contract is already consummated when Bormaheco
accepted the offer by Villonco. The acceptance can be
proven when Bormaheco accepted the check from
Villonco and then returned it with 10% interest as
stipulated in the terms made by Villonco. On the other
hand, the fact that Villonco did not object when
Bormaheco encashed the check is a proof that it accepted
the offer of Bormaheco.
Whenever earnest money is given in a contract of sale, it
shall be considered as part of the price and as proof of the
perfection of the contract" (Art. 1482, Civil Code
4. DOROMAL V. CA (September 5, 1975)
FACTS:
A parcel of land in Iloilo were co-owned by 7 siblings all
surnamed Horilleno. 5 of the siblings gave a SPA to their
niece Mary Jimenez, who succeeded her father as a co-
owner, for the sale of the land to father and son Doromal.
One of the co-owner, herein petitioner, Filomena Javellana
however did not gave her consent to the sale even though
her siblings executed a SPA for her signature. The co-
owners went on with the sale of 6/7 part of the land and a
new title for the Doromals were issued.
Respondent offered to repurchase the land for 30K as
stated in the deed of sale but petitioners declined invoking
lapse in time for the right of repurchase. Petitioner also
contend that the 30K price was only placed in the deed of
sale to minimize payment of fees and taxes and as such,
respondent should pay the real price paid which was P115,
250.
ISSUE:
WON the period to repurchase of petitioner has already
lapsed.
HELD:
Period of repurchase has not yet lapsed because the
respondent was not notified of the sale. The 30-day period
for the right of repurchase starts only after actual notice
not only of a perfected sale but of actual execution and
delivery of the deed of sale. The letter sent to the
respondent by the other co-owners cannot be considered
as actual notice because the letter was only to inform her
of the intention to sell the property but not its actual sale.
As such, the 30-day period has not yet commenced and
the respondent can still exercise his right to repurchase.
The respondent should also pay only the 30K stipulated in
the deed of sale because a redemptioner’s right is to be
subrogated by the same terms and conditions stipulated in
the contract.
5. GOLDENROD INC. V. CA (November 04, 1998)
FACTS:
Respondents Barreto realty owns 43 parcels of land in
Quiapo Manila which they mortgaged in UCPB.
Respondent sold the property to petitioner Goldenrod
who In turn pays 1M earnest money and promise to pay
respondent’s debt to UCPB. Respondent caused 2 land
titles to the property. Petitioner was not able to pay UCPB
and the latter did not agree for and extension. Hence,
petitioner rescinded the contact and demands the return
of the earnest money. Respondent did not oppose the
recession but did not gave the earnest money. They even
sold the first lot to Asiaworld Trade Center and the other
lot to UCPB for payment of their mortgage.
ISSUE:
WON respondent should return the earnest money of the
petitioner.
HELD:
Earnest money is a part of payment of a sale. Art. 1385 of
the Civil Code provides that rescission creates the
obligation to return the things which were the object of
the contract together with their fruits and interest. Since
the respondent did not oppose the extra-judicial recission,
they should return the earnest money of the petitioner. It
would be most inequitable if resondent BARRETTO REALTY
would be allowed to retain petitioner's payment of
P1,000,000.00 and at the same time appropriate the
proceeds of the second sale made to another.
6. Dalion vs. CA [G.R. No. 78903. February 28, 1990.] First
Division, Medialdea (J): 3 concurring
Facts: On 28 May 1973, Ruperto Sabesaje Jr. sued to
recover ownership of a parcel of land (located at
Panyawan, Sogod, Southern Leyte; TCT 11148, with an
area of 8947 sq.ms., assessed at P180), based on a private
document of absolute sale, dated 1 July 1965, allegedly
executed by Segundo Dalion, who, however denied the
fact of sale, contending that the document sued upon is
fictitious, his signature thereon, a forgery, and that subject
land is conjugal property, which he and his wife (Epifania
Sabesaje-Dalion) acquired in 1960 from Saturnina Sabesaje
as evidenced by the “Escritura de Venta Absoluta.” The
spouses denied claims of Sabesaje that after executing a
deed of sale over the parcel of land, they had pleaded with
Sabesaje, their relative, to be allowed to administer the
land because Dalion did not have any means of livelihood.
They admitted, however, administering since 1958, 5
parcels of land in Sogod, Southern Leyte, which belonged
to Leonardo Sabesaje, grandfather of Sabesaje, who died
in 1956. They never received their agreed 10% and 15% —
commission on the sales of copra and abaca, respectively.
Sabesaje’s suit, they countered, was intended merely to
harass, preempt and forestall Dalion’s threat to sue for
these unpaid commissions. The trial court rendered its
decision on 17 January 1984, ordering Dalion to deliver to
Sabesaje the parcel of land subject of the case and to
execute the corresponding formal deed of conveyance in a
public document in favor of Sabesaje (or in case of default,
the deed shall be executed in their behalf by the Provincial
Sheriff or his deputy), ordering Dalion to pay Sabesaje the
amount of P2,000 as attorney fees and P500 as litigation
fees, and to pay the costs. From the adverse decision of
the trial court, Dalion appealed, assigning errors some of
which, however, were disregarded by the appellate court,
not having been raised in the trial court. On 26 May 1987,
the Court of Appeals affirmed in toto the ruling of the trial
court, upholding the validity of the sale of a parcel of land
by Segundo Dalion in favor of Ruperto Sabesaje, Jr. Hence,
the petition. The Supreme Court denied the petition, and
affirmed the decision of the Court of Appeals upholding
the ruling of the trial court; without costs.
1. Admissibility of a private writing Section 21, Rule 132 of
the Rules of Court (Private writing, its execution and
authenticity, how proved) provides that “Before any
private writing may be received in evidence, its due
execution and authenticity must be proved either: (a) By
anyone who saw the writing executed; (b) By evidence of
the genuineness of the handwriting of the maker; or (c) By
a subscribing witness.”
2. Proof of Handwriting Section 23, Rule 132 of the Rules
of Court (Handwriting, how proved.) provides that “The
handwriting of a person may be proved by any witness
who believes it to be the handwriting of such person, and
has seen the person write, or has seen writing purporting
to be his upon which the witness has acted or been
charged, and has thus acquired knowledge of the
handwriting of such person. Evidence respecting the
handwriting may also be given by a comparison, made by
the witness or the court, with writings admitted or treated
as genuine by the party against whom the evidence is
offered, or proved to be genuine to the satisfaction of the
judge.”
3. Each party must prove his own affirmative allegations
Against Dalion’s mere denial that he signed the document,
the positive testimonies of the instrumental witnesses
Ogsoc (the one who prepared the deed) and Espina, aside
from the testimony of Sabesaje, must prevail. Dalion has
affirmatively alleged forgery, but he never presented any
witness or evidence to prove his claim of forgery. Each
party must prove his own affirmative allegations (Section
1, Rule 131, Rules of Court).
4. Forgery not presumed; Presumption of innocence It is
presumed that a person is innocent of a crime or wrong
(Section 5 (a), idem), and defense should have come
forward with clear and convincing evidence to show that
Sabesaje committed forgery or caused said forgery to be
committed, to overcome the presumption of innocence.
Mere denial of having signed does not suffice to show
forgery.
5. Forger would attempt to forge an unnecessary signature
Two signatures of Segundo D. Dalion appear on the face of
the questioned document, one at the right corner bottom
of the document and the other at the left hand margin
thereof. The second signature is already a surplusage. A
forger would not attempt to forge another signature, an
unnecessary one, for fear he may commit a revealing error
or an erroneous stroke.
6. Conclusions and findings of fact by trial court entitled to
great weight on appeal Appellate courts have consistently
subscribed to the principle that conclusions and findings of
fact by the trial courts are entitled to great weight on
appeal and should not be disturbed unless for strong and
cogent reasons, since it is undeniable that the trial court is
in a more advantageous position to examine real evidence,
as well as to observe the demeanor of the witnesses while
testifying in the case (Chase v. Buencamino, Sr., G.R. No. L-
20395, May 13, 1985, 136 SCRA 365; Pring v. Court of
Appeals, G.R. No. L-41605, August 19, 1985, 138 SCRA 185)
7. Article 1358 for convenience, not for validity or
enforceability The provision of Article 1358 on the
necessity of a public document (i.e. “acts and contracts
which have for their object the creation, transmission,
modification or extinction of real rights over immovable
property must appear in a public instrument”) is only for
convenience, not for validity or enforceability. It is not a
requirement for the validity of a contract of sale of a
parcel of land that this be embodied in a public
instrument.
8. Contract of sale is consensual A contract of sale is a
consensual contract, which means that the sale is
perfected by mere consent. No particular form is required
for its validity. Upon perfection of the contract, the parties
may reciprocally demand performance (Art. 1475, NCC),
i.e., the vendee may compel transfer of ownership of the
object of the sale, and the vendor may require the vendee
to pay the thing sold (Art. 1458, NCC).
9. Delivery; Execution of formal deed of conveyance in
public document equivalent to delivery of thing Under Art.
1498, NCC, when the sale is made through a public
instrument, the execution of the corresponding formal
deed of conveyance in a public document thereof is
equivalent to the delivery of the thing. Delivery may either
be actual (real) or constructive. Thus delivery of a parcel of
land may be done by placing the vendee in control and
possession of the land (real) or by embodying the sale in a
public instrument (constructive).
10. Suit for recovery of ownership is proper Article 1475 of
the Civil Code gives the parties to a perfected contract of
sale the right to reciprocally demand performance, and to
observe a particular form, if warranted, (Art. 1357).
Sabesaje’s complaint sufficiently alleged a cause of action
to compel Dalion to execute a formal deed of sale, and the
suit for recovery of ownership, which is premised on the
binding effect and validity inter partes of the contract of
sale, merely seeks consummation of said contract.
11. Sale of real property may be in a private instrument A
sale of a real property may be in a private instrument, but
that contract is valid and binding between the parties
upon its perfection. And a party may compel the other
party to execute a public instrument embodying their
contract affecting real rights once the contract appearing
in a private instrument has been perfected (See Art. 1357).
7. YUVIENCO V. DACUYCUY (May 27, 1981)
FACTS:
Petitioners own a property in Tacloban City which they
intend to sell for 6.5M. They gave the respondents the
right to purchase the property nut only until July 31, 1978.
Respondents replied that they agree to buy the property
and they will negotiate for details. Petitioner sent another
telegram informing respondents that their proposal is
accepted and a contract will be prepared. Lawyer of
defendant, Mr.Gamboa, arrived bringing a contact with an
altered mode of payment which says that the balance
payment should be paid withing 30 days instead of the
former 90 days. (Otiginal terms: 2M payment upon
execution. 4.5M after 90 days)
ISSUE:
WON there was already a perfected contract of sale
between the parties.
HELD:
There was no perfected contract of sale yet because both
parties are still under negotiation and hence, no meeting
of the minds. Mr.Gamboa even went to the respondents
to negotiate for the sale. Even though there was an
agreement on the terms of payment, there was no
absolute acceptance because respondents still insisted on
further details.
With regard to the alleged violation of terms of payment,
there was no written document to prove that the
respondents agreed to pay not in cash but in installment.
In sale of real property, payment of installment must be in
requisite of a note under the statute of frauds.
8. First Philippine International Bank vs. CA GR 115849 ;
January 24, 1996 ; 252 SCRA 259
DOCTRINE/S:
Conflict of Laws
a)Principle of forum non conveniens - provides that a
court, in conflicts of law cases, may refuse impositions on
its jurisdiction where it is not the most “convenient” or
available forum and the parties are not precluded from
seeking remedies elsewhere.
Corporation Law
a) Essence of a derivative suit:
An individual stockholder is permitted to institute a
derivative suit on behalf of the corporation wherein he
holds stock in order to protect or vindicate corporate
rights, whenever the officials of the corporation refuse to
sue, or are the ones to be sued or hold the control of the
corporation. In such actions, the suing stockholder is
regarded as a nominal party, with the corporation as the
real party in interest. (Gamboa v. Victoriano, 90 SCRA 40,
47 [1979]; emphasis supplied).
Remedial Law
a) Meaning of Forum Shoppng
Forum-shopping – exist whenever, as a result of an
adverse opinion in one forum, a party seeks a favorable
opinion (other than by appeal or certiorari) in another.
b) Elements of Forum shopping
Forum shopping exists where the elements of litis
pendentia are present namely:
(1) Identity of parties, or at least such parties as represent
the same interests in both actions,
(2) Identity of rights asserted and relief prayed for,
(3) The relief being founded on the same facts, 
(4) Identity on the two preceding particulars is such that
any judgment rendered in the other action, will, regardless
of which party is successful, amount to res adjudicata in
the action under consideration.
c) Petition for review under Rule 45 of the Rules of Court
GR: Supreme Court can only review question of law)
Exceptions (Instances questions of fact can be reviewed by
the SC):
finding grounded entirely on speculation, surmises or
conjectures; when the inference made is manifestly
absurd, mistaken or impossible; when there is grave abuse
of discretion in the appreciation of facts; when the
judgment is premised on a misapprehension of facts; when
the findings went beyond the issues of the case and the
same are contrary to the admissions of both appellant and
appellee (Chua Tiong Tay vs. Court of Appeals and
Goldrock Construction and Development Corp).
Sales
a) Requisites of a valid and perfected contract (Article
1318 of the Civil Code):
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the
contract;
(3) Cause of the obligation which is established.
Banking Law
a) Doctrine of "apparent authority"(with special reference
to banks)
- A bank is liable for wrongful acts of its officers done in
the interests of the bank or in the course of dealings of the
officers in their representative capacity but not for acts
outside the scope of their authority
Reason: Banks have a fiduciary relationship with the public
and their stability depends on the confidence of the
people in their honesty and efficiency. Such faith will be
eroded where banks do not exercise strict care in the
selection and supervision of its employees, resulting in
prejudice to their depositors.
FACTS: The Bank has been under conservatorship since
1984. It is the owner of 6 parcels of land. The Bank had an
agreement with Demetria to purchase the parcels of land.
The said agreement was made by Demetria with the
Bank’s manager, Rivera. Thereafter, they had a series of
letters consisting of offers, counter-offers and acceptance
of the counter- offer by Demetria. Later however, the
Bank, through its conservator, Encarnacion, sought the
repudiation of the agreement as it alleged that Rivera was
not authorized to enter into such an agreement. Hence
there was no valid contract of sale. Subsequently,
Demetria sued the Bank. The RTC ruled in favor of
Demetria. The Bank filed an appeal with the Court of
Appeals.
Meanwhile, Henry Co, who holds 80% shares of stocks
with the said Bank, filed a motion for intervention with the
trial court which was denied since the trial has been
concluded already and the case is now pending appeal.
Subsequently, Henry Co, filed a separate civil case against
Ejercito as successor-in-interest (assignee) of Demetria
seeking to have the purported contract of sale be declared
unenforceable against the Bank. Ejercito argued that the
second case constitutes forum shopping since it was
barred by litis pendentia by virtue of the case then
pending in the Court of Appeals. But petitioners explain
that there is no forum-shopping because in the “First
Case” from which this proceeding arose, the Bank was
impleaded as a defendant, whereas in the “Second Case” it
was the plaintiff. The Bank also argued the following: (1)
that there contract of sale was not yet perfected since it
lacks cosent since the Bank did not make a counter-offer;
(2) that the contract is unenforceable since there is no
note, memorandum or writing subscribed by the Bank to
evidence such contract; (3) that the conservator has the
power to revoke or overrule actions of the management or
the board of directors of a bank under Section 28-A of
Republic Act No. 265 hence the conservator can revoke
the said contract between the Bank and Demetria; and (4)
that respondent Court's Decision as "fraught with findings
and conclusions which were not only contrary to the
evidence on record but have no bases at all" hence
questions of fact must be reviewed by SC.
ISSUE/S: 
1) WON there is forum shopping.
2) WON there was a perfected contract.
3) WON the contract is enforceable
4) WON the conservator may revoke a perfected and
enforceable contract.
5) WON SC should review questions of fact
HELD: 
1) YES. Forum-shopping is whenever, as a result of an
adverse opinion in one forum, a party seeks a favorable
opinion (other than by appeal or certiorari) in another.
Forum shopping exists where the elements of litis
pendentia are present namely: (1) identity of parties, or at
least such parties as represent the same interests in both
actions, as well as (2) identity of rights asserted and relief
prayed for, (3) the relief being founded on the same facts,
and the (4) identity on the two preceding particulars is
such that any judgment rendered in the other action, will,
regardless of which party is successful, amount to res
adjudicata in the action under consideration.
In the instant case, there is forum shopping because there
exist identity of parties or interests represented, identity
of rights or causes and identity of reliefs sought between
the first case and the second case. There is identity of
parties even though the first case is in the name of the
bank as defendant, and the second case is in the name of
Henry Co as plaintiff since the rule applies even if the the
defendant in the first case becomes the plaintiff in the
second case. Furthermore, allegations of the complaint in
the Second Case show that the stockholders are bringing a
"derivative suit". Being a derivative suit would mean that
Henry Co in filing the case is really representing the Bank.
So, whether they sued "derivatively" or directly, there is
undeniably an identity of interests/entity
represented. There is also identity of relief being sought
since both cases seeks to enable the petitioner Bank to
escape from the obligation to sell the property to
respondent.
2) YES. Article 1318 of the Civil Code enumerates
the requisites of a valid and perfected contract as
follows: "(1) Consent of the contracting parties; (2) Object
certain which is the subject matter of the contract; (3)
Cause of the obligation which is established."
In this case, there is consent since there was meeting of
the minds between the parties as shown by the fact that
the bank made a counter-offer after the Demetria made an
offer to them. This counter-offer was accepted
by Demetria. The object of the subject contract is the 6
parcels of land. The cause of the obligation for the
petitioner bank is the Php 5.5M that Demetria will pay for
the land while the cause of the obligation for Demetria is
the capacity to own the subject land.
3)  YES.  A contract of sale is binding in whatever form it
may have been entered into. Hence, the letters constitute
sufficient memoranda — since they include the names of
the parties, the terms and conditions of the contract, the
price and a description of the property as the object of the
contract.
4) NO. Section 28-A of Republic Act No. 265 (otherwise
known as the Central Bank Act) merely gives the
conservator power to revoke contracts that are, under
existing law, deemed to be defective — i.e., void, voidable,
unenforceable or rescissible. The contract in this case is a
calid one. Hence he cannot simply repudiate valid
obligations of the Bank.
Furthermore, the conservator’s powers must be related to
the "(preservation of) the assets of the bank, (the
reorganization of) the management thereof and (the
restoration of) its viability." Such powers cannot extend to
the post-facto repudiation of perfected transactions,
otherwise they would infringe against the non-impairment
clause of the Constitution. Hence, the conservator must
exercise his powers without violating the non-impariment
clause in the constitution. If the conservator in this case
would revoke the valid contract between the Bank and
Demetria then such act of the conservator would consist
as a violation of the non-impairment clause in the
Constitution.
5) NO. The general rule is that the Supreme Court can only
review questions of law. This is provided under Rule 45 of
the Rules of Court. The exceptions to this rule are as
follows: finding grounded entirely on speculation, surmises
or conjectures; when the inference made is manifestly
absurd, mistaken or impossible; when there is grave abuse
of discretion in the appreciation of facts; when the
judgment is premised on a misapprehension of facts; when
the findings went beyond the issues of the case and the
same are contrary to the admissions of both appellant and
appellee.
In the instant case, it is quite evident that the legal
conclusions arrived at from the findings of fact by the
lower courts are valid and correct. Hence this Court cannot
disturb these findings to fit the conclusion the peititoner
Bank is espousing.
9. Vda. De Jomoc vs. CA [G.R. No. 92871. August 2, 1991.]
Lim Leong Hong vs. So [G.R. No. 92860. August 2, 1991.]
Facts: The subject lot in Cagayan de Oro City forms part of
the estate of the late Pantaleon Jomoc. Because it was
fictiously sold and transferred to third persons, Maria P.
Vda. Jomoc, as administratrix of the estate and in behalf of
all the heirs, filed suit to recover the property before the
trial court of Misamis Oriental in Civil Case 4750. Mariano
So, the last of the transferees and the husband of Maria
So, intervened. The case was decided in favor of Jomoc
and was accordingly appealed by Mariano So and one Gaw
Sur Cheng to the Court of Appeals. In February 1979,
pending the appeal, Jomoc executed a Deed of
Extrajudicial Settlement and Sale of Land with Maria So for
P300,000. The document was not yet signed by all the
parties nor notarized but in the meantime, Maura So had
made partial payments amounting to P49,000. In 1983,
Mariano So, the appellant in the recovery proceeding,
agreed to settle the case by executing a Deed of
Reconveyance of the land in favor of the heirs of
Pantaleon Jomoc. The reconveyance was in compliance
with the decision in the recovery case and resulted in the
dismissal of his appeal. On 28 February 1983, the heirs of
Jomoc executed another extrajudicial settlement with
absolute sale in favor of intervenors Lim Leong Kang and
Lim Pue King. Later, Maura So demanded from the Jomoc
family the execution of a final deed of conveyance. They
ignored the demand. Maria So sued the heirs for specific
performance to compel them to execute and deliver the
proper registrable deed of sale over the lot (Civil Case
8983). So then filed a notice of lis pendens with the
Register of Deeds on 28 February 1983. It was on the same
date, allegedly upon the Jomocs’ belief that Maura So had
backed out from the transaction that the Jomocs executed
the other extrajudicial settlement with sale of registered
land in favor of the spouses Lim for a consideration of
P200,000.00 part of which amount was allegedly intended
to be returned to Maura So as reimbursement. The
spouses Lim, however, registered their settlement and sale
only on 27 April 1983. The lower court, finding that there
was no sufficient evidence to show
complainantrespondents’ withdrawal from the sale,
concluded that: (1) the case is one of double sale; (2) the
spousesintervenors are registrants in bad faith who
registered their questioned deed of sale long after the
notice of lis pendens of Civil Case 8983 was recorded. On
appeal, the trial court decision was affirmed except for the
award of moral and exemplary damages and attorney’s
fees and expenses for litigation. Hence, the petitions. The
Supreme Court dismissed the petitions, and affirmed the
decision of the Court of Appeals dated 13 September 1989
and its resolution dated 2 April 1990. 1. Valid and existent,
and partially executed (thus enforceable) contract The
heirs do not deny the existence of Exhibit “A”; including its
terms and contents, notwithstanding the incompleteness
in form. The meeting of the minds and the delivery of
sums as partial payment is clear and this is admitted by
both parties to the agreement. Hence, there was already a
valid and existing contract, not merely perfected as the
trial court saw it, but partly executed. It is of no moment
whether or not it is enforceable under the Statute of
Frauds, which rule is not applicable because of partial
payment of the vendee’s obligation and its acceptance by
the vendors-heirs. The contract of sale of real property
even if not complete in form, so long as the essential
requisites of consent of the contracting parties, object,
and cause of the obligation concur and they were clearly
established to be present, is valid and effective as between
the parties. Under Article 1357 of the Civil Code, its
enforceability is recognized as each contracting party is
granted the right to compel the other to execute the
proper public instrument so that the valid contract of sale
of registered land can be duly registered and can bind
third persons. The complainant-respondent correctly
exercised such right simultaneously with a prayer for the
enforcement of the contract in one complaint. 2.
Continuing interest by Maura So; Parole evidence cannot
reform intention of parties Maura So did not subsequently
abandon her intention of purchasing the subject lot. The
facts reveal an agreement between the contracting parties
to Exhibit “A” to the effect that “the consideration of
P300,000 or whatever balance remains after deducting the
advanced payments thereon, shall be paid upon the
termination of (Mariano So’s) appeal in the case involving
the property in question.” (GR 92871). Even if the sums
paid by Maura So were allegedly intended to expedite the
dismissal of the appeal of Mariano So, such payment only
indicates interest in acquiring the subject lot. In addition,
the claim by the defendants petitioners that the payments
were for the gathering of the several heirs from far places
to sign Exhibit “A” confirms Maura So’s continuing
interest. The terms of Exhibit “A” and the actual intention
of the parties are clear and no reform requiring parole
evidence is being sought to elucidate the intention further.
The oral evidence offered by defendants-petitioners to
show a subsequent refusal to proceed with the sale cannot
be considered to reverse the express intention in the
contract. 3. Issue of double sale material to determination
whether So is entitled to reliefs prayed for The issue of
double sale had to be resolved to determine whether or
not complainant Maura So was entitled to the reliefs
prayed for. There was no hard evidence to show that the
vinculum or contractual relation between petitioners-heirs
and Maura So had been cut-off. Yet, petitioners-heirs sold
the same lot to spouses Lim. The case requires the
discernment of who has the better right to the property. 4.
Article 1544, NCC; So has better right of ownership Article
1544 of the Civil Code provides that “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.” In view of this provision, the
spouses Lim do not have a better right. They purchased
the land with full knowledge of a previous sale to Maura
So and without requiring from the vendors-heirs any proof
of the prior vendee’s revocation of her purchase. 5. Lim
spouses not buyers in good faith The spouses Lim cannot
be said to be buyers in good faith as they should have
exercised extra caution in their purchase especially if at
the time of the sale, the land was still covered by TCT
19648 bearing the name of Mariano So and was not yet
registered in the name of the heirs of Pantaleon Jomoc,
although it had been reconveyed to said heirs. When they
registered the sale on 27 April 1983 after having been
charged with notice of lis pendens annotated as early as
28 February 1983, they did so in bad faith or on the belief
that a registration may improve their position being
subsequent buyers of the same lot. Under Article 1544,
mere registration is not enough to acquire new title. Good
faith must concur. (Bergado v. Court of Appeals, 173 SCRA
497 [1989]; Concepcion v. Court of Appeals, G.R. No.
83208, February 6, 1991)
10. EUTIQUIANO CUYUGAN, Plaintiff-Appellee, v.
ISIDORO SANTOS, Defendant-Appellant. G.R. No. 10265.
March 3, 1916

SYLLABUS
1. "PACTO DE RETRO;" MORTGAGES; PAROLE EVIDENCE.
— The beneficent doctrine announced in Cuyugan v.
Santos ([1916], 34 Phil. 100) that parole evidence is
competent and admissible in support of allegations that an
instrument in writing, purporting on its face to transfer the
absolute title to property, or to transfer the title with a
mere right of repurchase, was in truth and in fact given
merely as security for the repayment of a loan, followed
and affirmed.
2. ID.; ID.; ACCEPTANCE OF PARTIAL PAYMENTS; EFFECT.
— The doctrines announced in Lichauco v. Berenguer
([1911], 20 Phil., 12) and in Cuyugan v. Santos ([1916], 34
Phil., 100) that where a sale of lands has been made
reserving to the vendor a right to repurchase under
stipulated conditions, and one or more partial payments
have been made by the vendor and accepted by the
purchaser, the acceptance of such partial payments is
absolutely incompatible "with the idea of irrevocability of
the title of ownership of the purchaser" at the expiration
of the term stipulated in the original contract for the
exercise of the right of repurchase, followed and affirmed.
3. ID.; ID.; ID.; ID. — One C received from one S the sum of
P3,500. C executed in favor of S a document which on its
face appeared to be a venta con pacto de retro [sale with
right of repurchase] of four parcels of land. It is found as a
fact that the sum of P1,000 was later paid by C to S on
account of the redemption of the land. Held: That the
public instrument is no longer a venta con pacto de retro
but a mortgage.
FACTS:
• The plaintiff is the sole heir of his mother, Guillerma
Cuyugan y Canda, deceased;
• that in the year 1895 she borrowed the sum of P3,500
from the defendant and executed, at the same time, the
document, Exhibit C, attached to the complaint, which
purports on its face to be a deed of sale of the land
described therein, with a reservation in favor of the
vendor of the right to repurchase for the sum of P3,500;
• that although the instrument purports on its face to be a
deed of sale, it was intended by the parties merely to
evidence the loan of the nominal purchase price and to
serve as a security for the repayment of the amount of the
loan;
ISSUE: WON the parol evidence should be admitted in
support of allegations versus that of an instrument in
writing
HELD: YES.
PAROL EVIDENCE AFFECTING WRITINGS; ALLEGED “PACTO
DE RETRO”. — Parol evidence is competent and admissible
in support of allegations that an instrument in writing,
purporting on its face to transfer the absolute title to
property, or to transfer the title with a mere right to
repurchase under specified conditions reserved to the
vendor, was in truth and in fact given merely as a security
for the repayment of a loan; and upon proof of the truth of
such allegations, the courts in this jurisdiction have power
to enforce the agreement or understanding in this regard,
in accord with the true intent of the parties at the time
when it was executed.
UNITED STATES DOCTRINE. — The doctrine which must be
applied in such cases in this jurisdiction “does not differ
materially” from the equitable doctrine frequently
announced and applied by the Supreme Court of the
United States in the numerous cases in which similar
questions have come to it from the various States and
Territories within its jurisdiction
MORTGAGE CLAIMED TO BE A SALE. — That court has held
that: “To insist on what was really a mortgage, as a sale, is
in equity a fraud, which cannot be successfully practiced,
under the shelter of any written papers, however precise
and complete they may appear to be.”
CONTRACT OF LOAN ON SECURITY; LOAN ALLEGED TO BE
PURCHASE MONEY. — Also that: “When it is alleged and
proved that a loan on security was really intended, and the
defendant sets up the loan as a payment of purchase
money, and the conveyance as a sale, both fraud and a
vice in the consideration are sufficiently averred to require
a court of equity to hold the transaction to be a
mortgage.”
“PACTO DE RETRO;” AGREEMENT TO CONSIDER IT AS
SECURITY FOR LOAN. — If the parties actually enter into
such an agreement, the lender of the money is legally and
morally bound to fulfill it. Of course, such an oral contract
does not give the borrower a real right in the lands unless
it is executed in compliance with the formalities prescribed
by law. If entered into orally, it creates a mere personal
obligation which in no wise affects the lands, and if the
lender conveys the lands to innocent third persons, the
borrower must content himself with a mere right of action
for damages against the lender, for failure to comply with
his agreement. But so long as the land remains in the
hands of the lender, the borrower may demand the
fulfillment of the agreement, and a mere lack of any of the
formalities prescribed under the Spanish Code for the
execution of contracts affecting real estate will not defeat
his right to have the contract fulfilled, as the lender may
be compelled in appropriate proceedings to execute the
contract with the necessary prescribed formalities.
ORAL CONTRACTS AFFECTING LANDS; REQUISITES UNDER
SPANISH CODES. — Under the Spanish Codes an oral
contract affecting lands, even an oral contract for the sale
of lands, was valid and enforceable, provided none of the
essential requisites of all valid contracts are lacking, that is
to say, (1) consent, (2) definite object, and (3) cause or
consideration. The lack of the formal requisites prescribed
by the Code in order that such contracts may become
effective to bind or convey the property, such as their
execution in public instruments and the like, does not
invalidate them as personal obligations, as “either party
may compel the other to comply with such formalities”
from the moment the valid personal obligation has been
entered into.
“PACTO DE RETRO;” ACCEPTANCE OF PARTIAL PAYMENTS;
EFFECT. — Where a sale of lands has been made reserving
to the vendor a right to repurchase under stipulated
conditions, and one or more partial payments have been
made by the vendor and accepted by the purchaser, the
acceptance of such partial payments is absolutely
incompatible “with the idea of irrevocability of the title of
ownership of the purchaser” at the expiration of the term
stipulated in the original contract for the exercise of the
right of repurchase.
In the light of these elementary and basic principles of the
Code there can be no question, in the absence of express
statutory prohibition, as to the validity of an agreement or
understanding whereby the lender of money, who as
security for the repayment of the loan has taken a deed to
land, absolute on its face or in the form of a deed
reserving a mere right of repurchase to the vendor,
obligates himself to hold such deed, not as evidence of a
contract of sale but by way of security for the repayment
of the debt; and that unless the rights of innocent third
persons have intervened the lender of the money may be
compelled to comply specifically with the terms of such an
agreement, whether it be oral or written; and further, that
he will not be permitted, in violation of its terms, to set up
title in himself or to assert a claim of absolute ownership
II
1. Addison vs. Felix, 38 Phil 404, August 1918
FACTS:
The defendants-appellees spouses Maciana Felix and
Balbino Tioco purchased from plaintiff-appellant A.A.
Addison four parcels of land to which Felix paid, at the
time of the execution of the deed, the sum of P3,000 on
account of the purchase price. She likewise bound herself
to the remainder in installments, the first of P,2000 on July
15, 1914, the second of P5,000 thirty days after the
issuance to her of a certificate of title under the Land
Registration Act, and further, within ten years from the
date of such title, P10 for each cocoanut tree in bearing
and P5 for each such tree not in bearing that might be
growing on said parcels of land on the date of the issuance
of title to her, with the condition that the total price
should not exceed P85,000. It was further stipulated that
Felix was to deliver to the Addison 25% of the value of the
products that she might obtain from the four parcels
"from the moment she takes possession of them until the
Torrens certificate of title be issued in her favor," and that
within 1 year from the date of the certificate of title in her
favor, Marciana Felix may rescind the contract of purchase
and sale.
In January 1915, Addison , filed suit in the CFI of Manila to
compel Felix to pay the first installment of P2,000,
demandable, in accordance with the terms of the contract
of sale. The defendants Felix and her husband Tioco
contended that Addison had absolutely failed to deliver
the lands that were the subject matter of the sale,
notwithstanding the demands they made upon him for
this purpose. The evidence adduced shows Addison was
able to designate only two of the four parcels, and more
than two-thirds of these two were found to be in the
possession of one Juan Villafuerte, who claimed to be the
owner of the parts he so occupied. The trial court held the
contract of sale to be rescinded and ordered Addison to
return to Felix the P3,000 paid on account of the price,
together with interest thereon at the rate of 10% per
annum.
ISSUE: Was there a delivery made and, therefore, a
transfer of ownership of the thing sold?
COURT RULING:
The Supreme Court affirmed the decision of the lower
court, with modification that the interest thereon will be
at the rate of 6% (instead of 10%) per annum from the
date of the filing of the complaint until payment.
The thing is considered to be delivered when it is placed
"in the hands and possession of the vendee." It is true that
the same article declares that the execution of a public
instrument is equivalent to the delivery of the thing which
is the object of the contract, but, in order that this
symbolic delivery may produce the effect of tradition, it is
necessary that the vendor shall have had such control over
the thing sold that, at the moment of the sale, its material
delivery could have been made. Symbolic delivery through
the execution of a public instrument is sufficient when
there is no impediment whatever to prevent the thing sold
passing into the tenancy of the purchaser by the sole will
of the vendor. But if, notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it himself or
through another in his name, because such are opposed by
a third person’s will, then the delivery has not been
effected. In the case at bar, therefore, it is evident, that
the mere execution of the instrument was not a fulfillment
of the vendor's obligation to deliver the thing sold, and
that from such non-fulfillment arises the purchaser's right
to demand, as she has demanded, the rescission of the
sale and the return of the price.
2. DANGUILAN V. IAC
168 SCRA 22
FACTS:
Apolinia sought the recovery of a farm lot and house from
Danguilan. She averred that she acquired the property
through sale. Danguilan on the other hand, contends that
the property is his by virtue of a donation.
HELD:
The donation being of real property, it is void for not
complying with the requirements given by law. Donation
of real property should be in a public instrument. In this
case, it wasn’t.
[G.R. No. L-69970. November 28, 1988.]
Facts: Two lots were owned by Domingo Melad. The lots
are claimed by both Felix Daguilan and Apolonia Melad
(and her husband Jose Tagacay). On 29 January 1962,
Apolonia Melad filed a complaint against Daguilan in the
then CFI Cagayan for recovery of a farm lot and a
residential lot which she claimed she had purchased from
Domingo Melad in 1943 and were now being unlawfully
withheld by Daguilan. In his answer, Daguilan denied the
allegation and averred that he was the owner of the said
lots of which he had been in open, continuous and adverse
possession, having acquired them from Domingo Melad in
1941 and 1943. The case was dismissed for failure to
prosecute but was refiled in 1967. At the trial, Melad
presented a deed of sale dated 4 December 1943,
purportedly signed by Domingo Melad and duly notarized,
which conveyed the said properties to her for the sum of
P80.00. She said the amount was earned by her mother as
a worker at the Tabacalera factory. She claimed to be the
illegitimate daughter of Domingo Melad, with whom she
and her mother were living when he died in 1945. She
moved out of the farm only when in 1946 Felix Danguilan
approached her and asked permission to cultivate the land
and to stay therein. She had agreed on condition that he
would deliver part of the harvest from the farm to her,
which he did from that year to 1958. The deliveries having
stopped, she then consulted the municipal judge who
advised her to file the complaint against Danguilan.
Melad’s mother, her only other witness, corroborated this
testimony. Daguilan testified that he was the husband of
Isidra Melad, Domingo’s niece, whom Domingo Melad and
his wife Juana Malupang had taken into their home as
their ward as they had no children of their own. He and his
wife lived with the couple in their house on the residential
lot and helped Domingo with the cultivation of the farm.
Domingo Melad signed in 1941 a private instrument in
which he gave Daguilan the farm and in 1943 another
private instrument in which he also gave him the
residential lot, on the understanding that the latter would
take care of the grantor and would bury him upon his
death. Danguilan presented three other witnesses to
corroborate his statements and to prove that he had been
living in the land since his marriage to Isidra and had
remained in possession thereof after Domingo Melad’s
death in 1945. Two of said witnesses declared that neither
the plaintiff nor her mother lived in the land with Domingo
Melad. The trial court believed Daguilan and rendered a
decision based mainly on the issue of possession. On
appeal, however, the appellate court upheld Melad as the
true and lawful owner of the disputed property, holding
that the private instruments where Domingo Melad had
conveyed the land to Daguilan were null and void for
reason that donation of real property should be effected
through a public instrument. Hence, the petition to the
Supreme Court. The Supreme Court set aside the decision
of the appellate court and reinstated that of the trial court,
with costs against Apolonia Melad. 1. Onerous donations
not covered by Articled 749, requiring donations of real
properties be effected through a public instrument
Considering the language of the two private instruments
delivering the residential lots, Domingo Melad did intend
to donate the properties to Daqguilan. The donee,
however, was not moved by pure liberality. While truly
donations, the conveyances were onerous donations as
the properties were given to Daguilan in exchange for his
obligation to take care of the donee for the rest of his life
and provide for his burial. Hence, it was not covered by the
rule in Article 749 of the Civil Code requiring donations of
real properties to be effected through a public instrument.
2. Doctrine in Manalo vs. de Mesa applies The present case
is squarely under the doctrine laid down in Manalo v. De
Mesa, where it was held that “the donation in question
was made for a valuable consideration, since the donors
made it conditional upon the donees’ bearing the
expenses that might be occasioned by the death and burial
of the donor, a condition and obligation which the donee
carried out in his own behalf and for his wife. Therefore, in
order to determine whether or not said donation is valid
and effective, it should be sufficient to demonstrate that,
as a contract, it embraces the conditions the law requires
and is valid and effective, although not recorded in a public
instrument. 3. No evidence adduced to support values
exchanged were disproportionate or equal No evidence
has been adduced to support the contention that the
values exchanged (the value of the lands donated and the
services for which they were being exchanged) were
disproportionate or unequal for the two transactions to be
considered pure or gratuitous donations of real rights, and
hence, be effected through a public instrument and not by
mere private writings. 4. Daguilan took care of the Melad
spouses; Proof of onerous donation Both the trial and
appellate court affirmed the factual allegation that
Daguilan took care of Domingo Melad and later arranged
for his burial in accordance with the condition imposed by
the donor. Daguilan farmed the land practically by himself
and so provided for the donee (and his wife) during the
latter part of Domingo Melad’s life. It may be assumed
that there was a fair exchange between the donor and the
donee that made the transaction an onerous donation. 5.
Deed of Sale in favor of Apolonia Melad suspicious The
deed of sale in favor of Apolonia Melad was suspicious. It
was allegedly executed when Apolonia was only three
years old and the consideration was supposedly paid by
her mother, Maria Yedan, from her earnings as a wage
worker in a factory. One may well wonder why the
transfer was not made to the mother herself, who was
after all the one paying for the lands. The sale was made
out in favor of Apolonia Melad although she had been
using the surname Yedan, her mother’s surname, before
that instrument was signed and in fact even after she got
married. Averment was also made that the contract was
simulated and prepared after Domingo Melad’s death in
1945. It was also alleged that even after the supposed
execution of the said contract, Apolonia Melad considered
Domingo Melad the owner of the properties and that she
had never occupied the same. Considering these serious
challenges, the appellate court could have devoted a little
more time to examining the deed and the circumstances
surrounding its execution before pronouncing its validity.
6. Presumption of due execution of a public instrument
Due execution of a public instrument is presumed, the
presumption is disputable and will yield to contradictory
evidence, which in the present case was not refuted. 7.
Melad’s testimony inconsistent, fails to prove actual
delivery of thing sold in the alleged deed of sale Even
assuming the validity of the deed of sale, the record shows
that Melad did not take possession of the disputed
properties and indeed waited until 1962 to file the action
for recovery of the lands from Daguilan. If she did have
possession, she transferred the same to Daguilan in 1946,
by her own sworn admission, and moved out to another
lot belonging to her step-brother. Her claim that Daguilan
was her tenant (later changed to administrator) was
disbelieved by the trial court, and properly so, for its
inconsistency. In short, she failed to show that she
consummated the contract of sale by actual delivery of the
properties to her and her actual possession thereof in
concept of purchaser-owner. 8. Garchitorena vs. Almeda;
Tradition: Ownership does not pass by mere stipulation
but only by delivery As held in Garchitorena v. Almeda, it is
a fundamental and elementary principle that ownership
does not pass by mere stipulation but only by delivery
(Civil Code, Art. 1095; Fidelity and Surety Co. v. Wilson, 8
Phil. 51), and the execution of a public document does not
constitute sufficient delivery where the property involved
is in the actual and adverse possession of third persons
(Addison vs. Felix, 38 Phil. 404; Masallo vs. Cesar, 39 Phil.
134), it becomes incontestable that even if included in the
contract, the ownership of the property in dispute did not
pass to the vendee.
9. Garchitorena vs. Almeda; Proper action against present
possessors: specific performance of sale and not
revindicacion Not having become the owner for lack of
delivery, the vendee cannot presume to recover the
property from its present possessors. His action, therefore,
is not one of revindicacion, but one against his vendor for
specific performance of the sale to him. 9. Non mudis
pactis, sed traditione dominia rerum transferuntur In
Fidelity and Deposit Co. v. Wilson, it was declared that it is
a fundamental principle in all matters of contracts and a
well-known doctrine of law that “non mudis pactis, sed
traditione dominia rerum transferuntur”. As established in
paragraph 2 of article 609 of Civil Code, the ownership and
other property rights are acquired and transmitted by law,
by gift, by testate or intestate succession, and, in
consequence of certain contracts, by tradition. The logical
application of this disposition article 1095 prescribes that a
creditor has the rights to the fruits of a thing from the time
the obligation to deliver it arises. However, he shall not
acquire a real right (and the ownership is surely such) until
the property has been delivered to him. In accordance
with such disposition and provisions the delivery of a thing
constitutes a necessary and indispensable requisite for the
purpose of acquiring the ownership of the same by virtue
of a contract. 10. Doctrine of transfer of property by mere
consent not admitted As Manresa states in his
Commentaries on the Civil Code, volume 10, pages 339
and 340: “Our law does not admit the doctrine of the
transfer of property by mere consent but limits the effect
of the agreement to the due execution of the contract . . .
The ownership, the property right, is only derived from the
delivery of a thing . . . “ 11. Actual delivery of the thing sold
The Code imposes upon the vendor the obligation to
deliver the thing sold. The thing is considered to be
delivered when it is placed in the hands and possession of
the vendee. (Civil Code, art. 1462). It is true that the same
article declares that the execution of a public instrument is
equivalent to the delivery of the thing which is the object
of the contract, but, in order that this symbolic delivery
may produce the effect of tradition, it is necessary that the
vendor shall have had such control over the thing sold
that, at the moment of the sale, its material delivery could
have been made. It is not enough to confer upon the
purchaser the ownership and the right of possession. The
thing sold must be placed in his control. When there is no
impediment whatever to prevent the thing sold passing
into the tenancy of the purchaser by the sole will of the
vendor, symbolic delivery through the execution of a
public instrument is sufficient. But if, notwithstanding the
execution of the instrument, the purchaser cannot have
the enjoyment and material tenancy of the thing and make
use of it himself or through another in his name, because
such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality
— the delivery has not been effected. In the present case,
Daguilan and not Melad is in actual possession of the
litigated properties. 12. In case the respective claims of the
parties are weak; Santos & Espinosa v. Estejada Even if the
respective claims of the parties were both to be discarded
as being inherently weak, the decision should still incline in
favor of Daguilan pursuant to the doctrine announced in
Santos & Espinosa v. Estejada, where the Court announced
that if the claim of both the plaintiff and the defendant are
weak, judgment must be for the one who is in possession,
as he is presumed to be the owner, and cannot be obliged
to show or prove a better right.
3. PASAGUI V. VILLABLANCA (November 10, 1975)
FACTS:
Plaintiffs Calixto Pasagui and Fausta Mosar bought a
property in Leyte from Estaquia and Catalina Bocar for
P2,800. Before they could take possession of the property,
defendant spouses Ester T. Villablanca and Zosimo
Villablanca took possession of it and harvested from the
coconut plantation thereon. Plaintiffs demanded the
return of the property but the defendants refused.
Plaintiffs filed a case in the CFI but respondents contend
that the case is a forcible entry and as such, CFI has no
jurisdiction.
ISSUE:
WON the case is of forcible entry.
HELD:
In order that an action may be considered as one for
forcible entry, it is not only necessary that the plaintiff
should allege his prior physical possession of the property
but also that he was deprived of his possession by any of
the means provided in section 1, Rule 70 of the Revised
Rules of Court.
It is true that the execution of the deed of absolute sale in
a public instrument is equivalent to delivery of the land
subject of the sale. This presumptive delivery only holds
true when there is no impediment that may prevent the
passing of the property from the hands of the vendor into
those of the vendee. It can be negated by the reality that
the vendees actually failed to obtain material possession
of the land subject of the sale.
4. Dy, Jr. v. Court of Appeals 198 SCRA 826 July 8, 1991
FACTS :
Wilfredo Dy purchased a truck and a farm tractor through
LIBRA which was also mortgaged with the latter, as a
security to the loan. Petitioner, expresses his desire to
purchased his brother’s tractor in a letter to LIBRA which
also includes his intention to shoulder its mortgaged.
LIBRA approved the request. At the time that Wilfredo Dy
executed a deed of absolute sale in favor of petitioner, the
tractor and truck were in the possession of LIBRA for his
failure to pay the amortization. When petitioner finally
fulfilled its obligation to pay the tractor, LIBRA would only
release the same only if he would also pay for the truck. In
order to fulfill LIBRA’s condition, petitioner convinced his
sister to pay for the remaining truck, to which she released
a check amounting to P22,000. LIBRA however, insisted
that the check must be first cleared before it delivers the
truck and tractor.
Meanwhile, another case penned “Gelac Trading Inc vs.
Wilfredo Dy” was pending in Cebu as a case to recover for
a sum of money (P12,269.80). By a writ of execution the
court in Cebu ordered to seize and levy the tractor which
was in the premise of LIBRA, it was sold in a public auction
to which it was purchased by GELAC. The latter then sold
the tractor to Antonio Gonzales.
RTC rendered in favor of petitioner. CA dismissed the case,
alleging that it still belongs to Wilfredo Dy.
ISSUE:
Whether or not there was a consummated sale between
Petitioner and LIBRA?
HELD:
NO. The relationship between Libra and the petitioner is
not one of sale but still a mortgage. The payment of the
check was actually intended to extinguish the mortgage
obligation so that the tractor could be released to the
petitioner. It was never intended nor could it be
considered as payment of the purchase price because the
relationship between Libra and the petitioner is not one of
sale but still a mortgage. The clearing or encashment of
the check which produced the effect of payment
determined the full payment of the money obligation and
the release of the chattel mortgage. It was not
determinative of the consummation of the sale. The
transaction between the brothers is distinct and apart
from the transaction between Libra and the petitioner.
The contention, therefore, that the consummation of the
sale depended upon the encashment of the check is
untenable.
5. POWER COMMERCIAL V. CA (June 20, 1997)
FACTS:
Petitioner asbestos manufacturer Power Commercial and
industrial corporation bought the property of spouses
Reynaldo and Angelita Quiambao located in Makati City.
Since there are lessees occupying the subject land, part of
the deed of sale is a warranty of respondents that will
defend its title and peaceful possession in favor of the
petitioners.
The property is mortgage to PNP and as such, petitioners
filed a request to assume responsibility of the mortgage.
Because of petitioners failure to produce the required
papers, their petition was denied.
Petitioners allege that the contract should be rescinded
because of failure of delivery.
ISSUE:
WON the contract is recissible due to breach of contract.
HELD:
There is no breach of contact in this case since there is no
provision in the contract that imposes the obligation to the
respondents to eject the people occupying the property.
There was also a constructive delivery because the deed of
sale was made in a public document. The contention of the
petitioners that there could be no constructive delivery
because the respondents is not in possession of the
property is of no merit. What matters in a constructive
delivery is control and not possession. Control was placed
in the hands of the petitioners that is why they were able
to file an ejectment case. Prior physical delivery or
possession is not legally required and the execution of the
deed of sale is deemed equivalent to delivery.
6. VILLARTA V. CA (May 29, 1987)
FACTS:
Respondent Rosalinda Cruz entrusted to petitioner Victoria
Villarta seven pieces of jewelry on November 1968. On
December of the same year, Villarta exchanges one
jewelry to another and issued a post-dated check in favor
of Cruz. Cruz deposited the check but it was dishonored
for lack of funds.
An estafa case was filed against Villarta but she argued
that she can only be civilly liable because even though the
check bounced, she only gave it for a pre-existing
obligation. She contends a person cannot be imprisoned
for non-payment of debt.
ISSUE:
WON the transaction is a “sale or return”
HELD:
The transaction is not a sale or return but a sale on
approval or sale on acceptance.
When Cruz gave the jewelry to Villarta on November, the
clear intention is to make the latter choose which item she
wanted to buy. There was no meeting of the minds yet at
this point and hence, it cannot be considered as delivery.
If ownership over the jewelry was not transmitted on that
date, then it could have been transmitted only in
December 1968, the date when the check was issued. In
which case, it was a "sale on approval" since ownership
passed to the buyer. Vallarta, only when she signified her
approval or acceptance to the seller, Cruz, and the price
was agreed upon.
It is still criminal fraud or deceit in the issuance of a check
which is made punishable under the Revised Penal Code,
and not the non-payment of the debt.
7. STA.ANA V. HERNANDEZ (January 17, 1966)
FACTS:
Spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo sold
a land in Bulacan to respondent Rosa Hernandez for
P11,000 lump sum. (there were two other previous sales
to different vendees of other portions of the land)
The boundaries of the land were stated in the deed of sale
and its approximate land area.
Petitioners-spouses caused the preparation of the
subdivision plan but Hernandez didn’t agree to the
partition. As such, petitioners-spouses filed a case alleging
that Hernandez is occupying in excess of 17000 square
meter of the land sold. Hernandez claims that the excess
area is part of the land she bought.
ISSUE:
WON the excess area occupied by Hernandez is part of the
land sold.
HELD:
The sale involves a definite and identified tract, a corpus
certum, that obligated the vendors to deliver to the buyer
all the land within the boundaries, irrespective of whether
its real area should be greater or smaller than what is
recited in the deed.
To hold the buyer to no more than the area recited on the
deed, it must be made clear therein that the sale was
made by unit of measure at a definite price for each unit.
The sale in this case only involves the definite boundaries
but only approximate land areas. As such,  Art 1542
concerning the sale for lump sum must be considered.
8. Carbonell vs. Court of Appeals, and Poncio, 69 SCRA 99
January 1976
FACTS:
On January 27, 1955, respondent Jose Poncio executed a
private memorandum of sale of his parcel of land with
improvements situated in San Juan, Rizal in favor of
petitioner Rosario Carbonell who knew that the said
property was at that time subject to a mortgage in favor of
the Republic Savings Bank (RSB) for the sum of P1,500.00.
Four days later, Poncio, in another private memorandum,
bound himself to sell the same property for an improved
price to one Emma Infante for the sum of P2,357.52, with
the latter still assuming the existing mortgage debt in favor
of the RSB in the amount of P1,177.48. Thus, in February 2,
Poncio executed a formal registerable deed of sale in her
(Infante's) favor. So, when the first buyer Carbonell saw
the seller Poncio a few days afterwards, bringing the
formal deed of sale for the latter's signature and the
balance of the agreed cash payment, she was told that he
could no longer proceed with formalizing the contract with
her (Carbonell) because he had already formalized a sales
contract in favor of Infante.
To protect her legal rights as the first buyer, Carbonell
registered on February 8, 1955 with the Register of Deeds
her adverse claim as first buyer entitled to the property.
Meanwhile, Infante, the second buyer, was able to register
the sale in her favor only on February 12, 1955, so that the
transfer certificate of title issued in her name carried the
duly annotated adverse claim of Carbonell as the first
buyer. The trial court declared the claim of the second
buyer Infante to be superior to that of the first buyer
Carbonell, a decision which the Court of Appeals reversed.
Upon motion for reconsideration, however, Court of
Appeals annulled and set aside its first decision and
affirmed the trial court’s decision.
ISSUE:
Who has the superior right over the subject property?
COURT RULING:
The Supreme Court reversed the appellate court’s decision
and declared the first buyer Carbonell to have the superior
right over the subject property, relying on Article 1544 of
the Civil Code. 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 paragraphs, good faith must characterize the
prior possession, while under the second paragraph, good
faith must characterize the act of anterior registration.
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 to
Infante as there was no such sale to Infante then. Hence,
Carbonell's prior purchase of the land was made in good
faith which did not cease after Poncio told her on January
31, 1955 of his second sale of the same lot to Infante.
Carbonell wanted to meet Infante but the latter refused so
to protect her legal rights, Carbonell registered her
adverse claim on February 8, 1955. Under the
circumstances, this recording of Carbonell’s adverse claim
should be deemed to have been done in good faith and
should emphasize Infante's bad faith when the latter
registered her deed of sale 4 days later.
9. QUIMSON V ROSETE
FACTS
The estate belonging to the deceased Dionysus Quimson
was first transferred in favor of his daughter
TomasaQuimson through a deed of conveyance, but
continued in his possession and enjoyment. He sold it to
Francisco Rosete, with a repurchase agreement for the
term of five years granting to this effect the writing of sale.
Since then Rosete is the one in his possession and
enjoyment, in a peaceful and quiet manner, even after the
death of DionisioQuimson, which occurred on June 6, 1939
until January of 1943. TomasaQuimsonpetitioned that the
property should be given to her as she is the true owner
and possessor of the property.
 ISSUE
What were the effects of the registration of plaintiff’s
document?
Who was prior in possession?
 HELD
The Court held that the execution of a public instrument is
equivalent to the delivery of the realty sold and its
possession by the vendee. Under these conditions the sale
is considered consummate and completely transfers to the
vendee all of the vendor’s rights of ownership including his
real rights over the thing. This means that after the sale of
a realty by means of a public instrument, the vendor, who
resells it to another, does not transmit anything to the
second vendee and if the latter, by virtue of this second
sales, take material possession of the thing, he does it as a
mere detainer, and it would be unjust to protect this
detention against the rights to the thing lawfully acquired
by the first vendee. Hence, the Court ruled that
TomasaQuimson is the rightful owner of the property.
10. CHENG V. GENATO (December 29, 1998)
FACTS:
Respondent Genato entered a contract to sell to spouses
Da Jose pertaining to his property in Bulacan. The contract
made in public document states that the spouses shall pay
the down payment and 30 days after verifying the
authenticity of the documents, they shall pay the
remaining purchase price.
Da Jose spouses was not able to finish verifying the
documents and as such asked for a 30 day extension.
Pending the extension and without notice to the spouses,
Genato made a document for the annulment of the
contract.
Petitioner Cheng expressed interest over the property and
paid 50K check with the assurance that the contract
between Genato and the spouses Da Jose will be annulled.
Da Jose spouses protested with the annulment and
persuaded Genato to continue the contract. Genato
returned the check to Cheng and hence, this petition.
HELD:
The contract between Genato and spouses Da Jose was a
contract to sell which is subject to a suspensive condition.
Thus, there will be no contract to speak of, if the obligor
failed to perform the suspensive condition which enforces
a juridical relation. 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.
Even assuming that the spouses defaulted, the contract
also cannot be validly rescinded because no notice was
given to them. Thus, 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.
The contract between Genato and Cheng is a contract to
sell not a contract of sale. But But even assuming that it
should be treated as a conditional contract of sale, it did
not acquire any obligatory force since it was subject to a
suspensive condition that the earlier contract to sell
between Genato and the Da Jose spouses should first be
cancelled or rescinded.
Art.1544 should apply because 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 (PRIMUS TEMPORE, PORTIOR JURE).
(Spouses made annotation on the title of Genato). 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.
III
1. G.R. No. 103577 October 7, 1996, ROMULO A.
CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL,
ANNABELLE C. GONZALES (for herself and on behalf of
Florida C. Tupper, as attorney-in-fact), CIELITO A.
CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS
MABANAG vs. THE COURT OF APPEALS, CONCEPCION D.
ALCARAZ, and RAMONA PATRICIA ALCARAZ, assisted by
GLORIA F. NOEL as attorney-in-fact
Facts:
Romulo Coronel executed a document entitled ³Receipt of
Downpayment´ in favor of Ramona Patricia Alcaraz for
P50,000 downpayment of the amount of P1.24M as
purchase pricefor an inherited house and lot, without
reservation to withhold the transfer of such property
untilfull payment. The purpose of such downpayment was
for the heirs to transfer the title to their name. Upon the
registration of the property to name of the heirs, the
Coronels sold the same property to Catalina B. Mabanag
for P1.58M. The Coronels rescinded the contract with
Alcaraz by depositing the downpayment amount in a bank
account in favor of Alcaraz. Alcaraz filed acomplaint for
specific performance, which the trial and the appellate
court ruled in her favor.
Issue:
Whether the receipt of downpayment´ serves a contract to
sell or a conditional contractof sale.
Held:
The agreement is a contract of sale as there was no
express reservation of ownership or title to the subject
parcel of land. Petitioners did not merely promise to sell
the property to private respondent upon the fulfillment of
the suspensive condition but on the contrary,
havingalready agreed to sell the subject property, they
undertook to have the certificate of title changedto their
names and immediately thereafter, to execute the written
deed of absolute sale. Thesuspensive condition was
fulfilled on 6 February 1985 and thus, the conditional
contract of sale between the parties became obligatory,
the only act required for the consummation thereof
beingthe delivery of the property by means of the
execution of the deed of absolute sale in a
publicinstrument, which petitioners unequivocally
committed themselves to do as evidenced by the³Receipt
of Down Payment.´
2. MENDOZA V. KALAW (October 12, 1921)
FACTS:
Federico Cañet sold his land under a conditional sale to
Primitivo Kalaw. Less than two months after, he sold it
again to Agapito Mendoza under an absolute sale.
Mendoza took possession of the land and enclosed it with
fence. Kalaw attempted to claim possession
but Mendoza refused. Kalaw attempted to have his title
registered in the registry of deeds but was denied by for
the reason that there existed some defect in the
description of the property, and that the title of the
vendor had not therefore been registered. The register of
deeds, however, did make a preventive annotation.
HELD:
The ruling should be in favor of Mendoza because even if
he acquired the property subsequent to the conditional
sale in favor of Kalaw, 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.
3. CORONEL V. CA (October 07, 1996)
FACTS:
Coronel et al. consummated the sale of his property
located in Quezon City to respondent Alcaraz. Since the
title of the property was still in the name of the deceased
father of the Coronels, they agreed to transfer its title to
their name upon payment of the down payment of 50K.
and thereafter an absolute deed of sale will be executed.
Alcaraz’s mother paid the down payment in behalf of her
daughter and as such, Coronel made the transfer of title to
their name. Notwithstanding this fact, Coronel sold the
property to petitioner Mabanag and rescinded its prior
contract with Alcaraz.
ISSUE:
WON the rescission of the first contract between Coronel
and Alcaraz is valid.
HELD:
The case is a contract of sale subject to a suspensive
condition in which consummation is subject only to the
successful transfer of the certificate of title from the name
of petitioners' father, to their names. Thus, the contract of
sale became obligatory.
With regard to double sale, the rule that the first in time,
stronger in right should apply. The contention of the
petitioner that she was a buyer in good faith because the
notice of lis pendens in the title was annotated after she
bought the property is of no merit. In case of double sale,
what finds relevance and materiality is not whether or not
the second buyer was a buyer in good faith but whether or
not said second buyer registers such second sale in good
faith, that is, without knowledge of any defect in the title
of the property sold.
The ruling should be in favor of Alcaraz because Mabanag
registered the property two months after the notice of lis
pendens was annotated in the title and hence, she cannot
be a buyer in good faith.
4. ADALIN V. CA (October 10, 1997)
FACTS:
Appellee-Vendors sold their 5-door commercial building to
Appellants Yu and Lim located in front of Imperial Hotel
in Cotabato City.
Since there are lessees in the property, the vendors
offered it first to them twice but they refused both offers.
As such, appellee-vendors and appellants executed a deed
of conditional sale. The contract states that they
appellants will pay the down payment of 300K first and the
remaining balance after the appellee-vendors completely
evicted the lessees occupying the property.
After the vendors and the tenants made known their
intention to buy the property for a higher price. As such,
the vendors executed three deeds of sale of registered
land in  favor of the lessees.
The vendors offered to return the downpayment paid by
the appellants but the latter refused. The vendors contend
that they can rescind the contract because the condition
to evict the tenants was not completed.
HELD:
Although the contract was a conditional sale, what was
subject to the condition is the payment of the balance.
Both parties have their respective obligations yet to be
fulfilled, the seller the eviction of the tenants and the
buyer, the payment of 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, the sale to the appellants was definitive and
absolute. A clear breach of contract was made by the
vendors.
A case double sale occurred when the vendors sold the
property to the tenants. When the tenants bought the
property, they are fully aware of its prior sale to the
appellants. 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 as such,
there is no legal basis to rule that such second sale prevails
over the first sale of the said property.
5. Espiritu vs. Valerio [G.R. No. L-18018. December 26,
1963.]
En Banc, Dizon (J): 9 concur, 1 took no part
Facts: On 15 September 1955 Valerio filed an action to
quiet title in the CFI Pangasinan (Civil Case 13293)
against Esperanza Espiritu and Antonia Apostol, alleging in
his complaint that he was the owner of a parcel of
unregistered land containing an area of approximately
8,573 square meters situated in Barrio Olo,
Municipality of Mangatarem, Pangasinan, having acquired
the same from the former owner, Pelagia Vegilia,
as evidenced by a deed of sale executed by the latter in his
favor on 31 January 1955; that Espiritu and
Apostol had been asserting adversary rights over said land
and disturbing his possession thereof. Espiritu and
Apostol denied the material allegations of the complaint
and alleged that they were the owners of the land in
question, having acquired it by inheritance from the late
Santiago Apostol, husband and father of appellants
Espiritu and Apostol, respectively; that said deceased
bought the property from Mariano Vegilia on 3 June
1934, as evidenced by the deed of sale, who, in turn, had
acquired it from his niece, Pelagia Vegilia, on 26
May 1932, by virtue of the deed of sale. The CFI rendered
decision declaring Valerio to be the owner of the
land and enjoined Espiritu and Apostol from molesting him
in the peaceful possession thereof. Hence, the
appeal by Espiritu and her daughter Apostol.
The Supreme Court affirmed the decision appealed from,
with costs.
1. Espiritu and Apostol have better right only if both their
deeds were valid
The present appeal depends entirely upon the validity of
the Deed of Sale allegedly executed by
Pelagia Vegilia in favor of Mariano Vegilia, and of the Deed
of Sale allegedly executed by the latter in favor
of Santiago Apostol. If both are valid, Espiritu’s and
Apostol’s contention that they have a better right than
that claimed by Valerio would seem to be meritorious in
the light of the facts of the case and the provisions of
Article 1544 of the New Civil Code, it not being disputed
that the Deed of Sale in favor of Valerio was
registered under the provisions of Act 3344 on 16 June
1955, while the two deeds of Espiritu and Apostol
were similarly registered 11 days before.
2. Deeds / Documents falsified; Witnesses and proof
The document dated 26 May 1932, “is fictitious and a
falsification,” and that the private document of 3 June
1934 is likewise null and void, being without the necessary
formal requisites, aside to its being
fictitious and the fact that the alleged vendor acquired no
right whatsoever in the land. The determination that
the documents are falsified is based upon the testimony of
Pelagia Vegilia and Mariano Vegilia. Pelagia
emphatically denied that she sold the land in question to
Mariano Vegilia, and that she appeared before Notary
Public Lino Abad Pine before whom the ‘Escritura de
Compraventa Definita’, was allegedly ratified. On the
other hand, Mariano denied that he bought the said land
from Pelagia Vegilia, and that he sold the same to
Santiago Apostol as recited in ‘Pecivo’. In giving credence
to the testimony of the two witnesses, the trial
court said that (1) an examination of first deed reveals the
glaring fact that it cannot be determined whose
thumbmark is the one appearing on said document for the
simple reason that it immediately precedes the
name Anselmo Vegilia but it is under the name Pelagia
Vegilia. Ordinarily, this thumbmark would be
considered as the thumbmark of Anselmo Vegilia and not
of Pelagia Vegilia; (2) that the one who wrote the
name Anselmo Vegilia is the very one who wrote the name
Pelagia Vegilia; (3) that Anselmo Vegilia could not
have written the name Anselmo Vegilia in the document
for the simple reason that it has been certified by the
Notary Public that said Anselmo Vegilia is physically
incapable (inutil physicamente); (4) that there is an
apparent difference of the ink used in writing the names of
Pelagia Vegilia and Anselmo Vegilia from the ink
used by the other persons who signed the document
indicating that the names Pelagia Vegilia and Anselmo
Vegilia must have been written in a much later date than
the other names appearing in the said document. On
the other document, the names Mariano Vegilia and Jose
B. Aviles must have been written by only one man.
6. TAÑEDO V. CA (January 22, 1996)
FACTS:
Lazaro Tañedo executed a deed of absolute sale in favor of
Ricardo Tañedo and Teresita Barrera in which he conveyed
a parcel of land which he will inherit. Upon the death of his
father he executed an affidavit of conformity to reaffirm
the said sale. He also executed another deed of sale in
favor of the spouses covering the parcel of land he already
inherited. Ricardo registered the last deed of sale in the
registry of deeds in their favor.
Ricardo later learned that Lazaro sold the same property
to his children through a deed of sale.
ISSUE:
WON the Tañedo spouses have a better right over the
property against the children of Lazaro Tañedo.
HELD:
Since a future inheritance generally cannot be a subject of
a contract, the deed of sale and the affidavit of conformity
made by Lazaro has no effect. The subject of dispute
therefore is the deed of sale made by him in favor of
spouses Tañedo and another to his children after he
already legally acquired the property.
Thus, although the deed of sale in favor of private
respondents was later than the one in favor of petitioners,
ownership would vest in the former because of the
undisputed fact of registration. On the other hand,
petitioners have not registered the sale to them at all.
Petitioners contend that they were in possession of the
property and that private respondents never took
possession thereof. As between two purchasers, the one
who registered the sale in his favor has a preferred right
over the other who has not registered his title, even if the
latter is in actual possession of the immovable property.
7. CRUZ V. CABANA (June 22, 1984)
FACTS:
Leodegaria Cabana sold his real propery first to Teofilo
Legaspi and Illuminada Cabana and then later to Abelardo
Cruz.
Legaspi and Cabana were able to take possession of the
property but they were not able to register the deed of
absolute sale because the property was still mortgaged to
PNB. They however were able to register with the RD the
sale with the right to repurchase.
On the other hand, Cruz succeeded to register the deed of
absolute sale in his favor.
HELD:
Even though Cruz was the first to register the deed of
absolute sale, he cannot be given a better right over the
property because he was a buyer in bad faith.
Cruz knew the prior sale of the property because he was
informed by the RD that Legazpi and Cabana already
registered the sale of the said property.
Knowledge of a prior transfer of a registered property by a
subsequent purchaser makes him a purchaser in bad faith
and his knowledge of such transfer vitiates his title
acquired by virtue of the latter instrument of conveyance
which creates no right as against the first purchaser.
8. NAVERA V. CA (April 26, 1990)
FACTS:
Leocadio Navera owns a parcel of land in Albay which was
inherited by his 5 children. His 3 children already have
their share of the inheritance from the other properties of
Leocadio. The subject land was now owned by his 2
daughters. An OCT was issued in the name of Elena Navera
et.al (et.al refers to his sister Eduarda Navera)
When Elena died, his share of the land was inherited by
her heirs Arsenio and Felix Narez. The other portion was
owned by Eduarda.
Eduarda sold her portion to her nephew Arsenio and then
one year after to Mariano Navera. Both sales were made
in a public instrument but both sales were also not
registered in the Registry of Property.
ISSUE:
WON the second sale of the property is valid.

HELD:
Since the records show that both sales were not recorded
in the Registry of Property, the law clearly vests the
ownership upon the person who in good faith was first in
possession of the disputed lot.
The possession viewed in the law includes not only the
material but also the symbolic possession, which is
acquired by the execution of a public instrument. This
means that after the sale of a realty by means of a public
instrument, the vendor, who resells it to another, does not
transmit anything to the second vendee, and if the latter,
by virtue of this second sale, takes material possession of
the thing, he does it as mere detainer, and it would be
unjust to protect this detention against the rights of the
thing lawfully acquired by the first vendee.
In the case at bar, the prior sale of the land to respondent
Arsenio Nares by means of a public instrument is clearly
tantamount to a delivery of the land resulting in the
material and symbolic possession thereof by the latter.
9. Agricultural and Home Extension Development Group
vs. CA [G.R. No. 92310. September 3, 1992.]
First Division, Cruz (J): 3 concurring
Facts: On 29 March 1972, the spouses Andres Diaz and
Josefa Mia sold to Bruno Gundran a 19-hectare
parcel of land in Las Piñas, Rizal, covered by TCT 287416.
The owner’s duplicate copy of the title was turned
over to Gundran. However, he did not register the Deed of
Absolute Sale because he said he was advised in
the Office of the Register of Deeds of Pasig of the
existence of notices of lis pendens on the title. On 20
November 1972, Gundran and Agricultural and Home
Development Group (AHDG) entered into a Joint
Venture Agreement for the improvement and subdivision
of the land. This agreement was also not annotated
on the title. On 30 August 1976, the spouses Andres Diaz
and Josefa Mia again entered into another contract
of sale of the same property with Librado Cabautan. On 3
September 1976, by virtue of an order of the CFI
Rizal, a new owner’s copy of the certificate of title was
issued to the Diaz spouses, who had alleged the loss
of their copy. On that same date, the notices of lis pendens
annotated on TCT 287416 were canceled and the
Deed of Sale in favor of Cabautan was recorded. A new
TCT S-33850/T-172 was thereupon issued in his
name in lieu of the canceled TCT 287416.
On 14 March 1977, Gundran instituted an action for
reconveyance before the CFI Pasay City * against
Librado Cabautan and Josefa Mia seeking, among others,
the cancellation of TCT 33850/T-172 and the
issuance of a new certificate of title in his name. On 31
August 1977, AHDG, represented by Nicasio D.
Sanchez, Sr. (later substituted by Milagros S. Bucu), filed a
complaint in intervention with substantially the
same allegations and prayers as that in Gundran’s
complaint. In a decision dated 12 January 1987, Gundran’s
complaint and petitioner’s complaint in intervention were
dismissed for lack of merit. So was Cabautan’s
counterclaims, for insufficiency of evidence.
Upon appeal, this decision was affirmed by the Court of
Appeals, with the modification that Josefa Mia was
ordered to pay Gundran the sum of P90,000.00, with legal
interest from 3 September 1976, plus the costs of
suit.
The Supreme Court denied the petition and affirmed in
toto the questioned decision; with costs against
AHDG.
1. Article 1544
Under Article 1544 of the Civil Code of the Philippines, it is
provided that “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.
2. Preferential right of first to register
The first sale to Gundran was not registered while the
second sale to Cabautan was registered.
Preferential rights are accorded to Cabautan, who had
registered the sale in his favor, as against AHDG’s
coventurer whose right to the same property had not been
recorded.
3. Purchaser in good faith
A purchaser in good faith is defined as “one who buys the
property of another without notice that
some other person has a right to or interest in such
property and pays a full and fair price for the same at the
time of such purchase or before he has notice of the claim
or interest of some other person in the property.” In
the present case, an examination of TCT 287416 discloses
no annotation of any sale, lien, encumbrance or
adverse claim in favor of Gundran or AHDC.
4. Registered property under Torrens system; Person
charge with notice of burdens noted on the
register of title
When the property sold is registered under the Torrens
system, registration is the operative act to
convey or affect the land insofar as third persons are
concerned. Thus, a person dealing with registered land is
only charged with notice of the burdens on the property
which are noted on the register or certificate of title.
5. Notices of lis pendes not a lien or encumbrance, merely
notice of litigation of property subject to
the result of the suit
Notices of lis pendens in favor of other persons were
earlier inscribed on the title did not have the
effect of establishing a lien or encumbrance on the
property affected. Their only purpose was to give notice to
third persons and to the whole world that any interest
they might acquire in the property pending litigation
would be subject to the result of the suit.
6. Cabautan a purchaser in good faith and for value
Cabautan took the risk of acquiring the property even in
the light of notice of lis pendens inscribed in
the title. Significantly, three days after the execution of the
deed of sale in his favor, the notices of lis pendens
were canceled by virtue of the orders of the CFI Rizal,
Branch 23, dated 1 and 4 April 1974. Cabautan
therefore acquired the land free of any liens or
encumbrances and so could claim to be a purchaser in
good faith and for value.
7. No evidence of alleged possession by AHDG
AHDG insists that it was already in possession of the
disputed property when Cabautan purchased it
and that he could not have not known of that possession.
Such knowledge should belie his claim that he was
an innocent purchaser for value. However, the courts
below found no evidence of the alleged possession,
which the Supreme Court must also reject in deference to
this factual finding.
8. Casis vs. CA not applicable; Different issues
The issue in the present case is whether Cabautan is an
innocent purchaser for value and so entitled to
the priority granted under Article 1544 of the Civil Code.
The Casis case, on the other hand, involved the
issues of whether or not: 1) certiorari was the proper
remedy of the petitioner: 2) the previous petition for
certiorari which originated from the quieting of title case
was similar to and, hence, a bar to the petition for
certiorari arising from the forcible entry case; and 3) the
court a quo committed grave abuse of discretion
amounting to lack or excess of jurisdiction in issuing the
order which dissolved the restraining order issued in
connection with the ejectment case. The Court was not
called upon in that case to determine who as between
the two purchasers of the subject property should be
preferred.
9. Excerpt used by AHDG a narration of background facts
and not adopted as a doctrine by the Supreme Court
AHDG invokes the ruling of the lower court in that case to
the effect that the registration of the sale
in favor of the second purchaser and the issuance of a new
certificate of title in his favor did not in any
manner vest in him any right of possession and ownership
over the subject property because the seller, by
reason of their prior sale, had already lost whatever right
or interest she might have had in the property at the
time the second sale was made. The excerpt was included
in the ponencia only as part of the narration of the
background facts and was not thereby adopted as a
doctrine of the Court. It was considered only for the
purpose of ascertaining if the court below had determined
the issue of the possession of the subject property
pending resolution of the question of ownership.
Obviously, the Court could not have adopted that
questionable ruling as it would clearly militate against the
provision of Article 1544.
10. No one can sell what he does not own; Article 1544
either an exception to the general rule or a
reiteration of the general rule insofar as innocent third
parties are concerned
Justice Edgardo L. Paras observed that “No one can sell
what he does not own, but this is merely the
general rule. Is Art. 1544 then an exception to the general
rule? In a sense, yes, by reason of public
convenience (See Aitken v. Lao, 36 Phil. 510); in still
another sense, it really reiterates the general rule in that
insofar as innocent third persons are concerned, the
registered owner (in the case of real property) is still the
owner, with power of disposition.
11. Language of Article 1544 clear; Cabautan deemed
owner. The language of Article 1544 is clear and
unequivocal. In light of its mandate and of the facts
established in the present case, Ownership must be
recognized in the private respondent, who bought the
property in good faith and, as an innocent purchaser for
value, duly and promptly registered the sale in his
favor.
10. Balatbat v. CA [G.R. No. 109410. August 28, 1996.]
Second division, Torres Jr (J): 4 concurring
Facts: On 15 June 1977, Aurelio A. Roque filed a complaint
for partition against his children Corazon,
Feliciano, Severa and Osmundo Roque, and Alberto de los
Santos before the CFI Manila (Branch IX, Civil
Case 109032). The Roque children were declared in default
and Aurelio presented evidence ex-parte. On 29
March 1979, the trial court rendered a decision in favor of
Aurelio; holding that Aurelio and his wife Maria
Mesina acquired the lot (TCT 51330) during their conjugal
union, as well as the house that was constructed
thereon; that when Maria Mesina died on 28 August 1966,
leaving no debt, Aurelio (as surviving spouse) was
entitled to ½ share pro-indiviso of the conjugal property
(i.e. house and lot) and that Aurelio and his 4
children were entitled to 1/5 share pro-indiviso each of the
½ share pro-indiviso forming the estate of Maria
Mesina; ordering the partition of the properties; and
dismissing Aurelio’s claim for moral, exemplary and
actual damages and attorney’s fees; without
pronouncement as to costs. On 2 June 1979, the decision
became
final and executory; with the corresponding entry of
judgment made 29 March 1979. On 5 October 1979, the
Register of Deeds of Manila issued TCT 135671 (with
Aurelio Roque having 6/10 share; and the Roque
children with 1/10 share each).
On 1 April 1980, Aurelio sold his 6/10 share in TCT 135671
to spouses Aurora Tuazon-Repuyan and Jose
Repuyan as evidenced by a “Deed of Absolute Sale.” On 21
July 1980, Aurora Tuazon Repuyan caused the
annotation of her affidavit of adverse claim on the TCT
135671, “claiming that she bought 6/10 portion of the
property from Aurelio Roque for the amount of
P50,000.00 with a downpayment of P5,000.00 and the
balance of P45,000.00 to be paid after the partition and
subdivision of the property.” On 20 August 1980,
Aurelio Roque filed a complaint for “Rescission of
Contract” against spouses Repuyan before the then CFI
Manila (Branch IV, Civil Case 134131). The complaint is
grounded on spouses Repuyan’s failure to pay the
balance of P45,000.00 of the purchase price. On 5
September 1980, spouses Repuyan filed their answer with
counterclaim. In the meantime, the trial court issued an
order in Civil Case 109032 (Partition case) dated 2
February 1982, ordering the Deputy Clerk of the court to
sign the deed of absolute sale for and in behalf of Roque
children pursuant to Section 10, Rule 39 of the Rules of
Court, in order to effect the partition of the property
involved in the case (P100,000 purchase price for the 84
sq. ms. In Callejon Sulu, Sta. Cruz, Manila is reasonable and
fair; and that opportunities have been given to the
children to sign the deed voluntarily). A deed of absolute
sale was executed on 4 February 1982 between Aurelio,
Corazon, Feliciano, Severa and Osmundo Roque and
Clara Balatbat, married to Alejandro Balatbat. On 14 April
1982, Clara Balatbat filed a motion for the
issuance of a writ of possession which was granted by the
trial court on 14 September 1982 “subject,
however, to valid rights and interest of third persons over
the same portion thereof, other than vendor or any
other person or persons privy to or claiming any rights or
interest under it.” The corresponding writ of
possession was issued on 20 September 1982.
On 20 May 1982, Clara Balatbat filed a motion to intervene
in Civil Case 134131 which was granted as per
court’s resolution of 21 October 1982. However, Clara
Balatbat failed to file her complaint in intervention. On
15 April 1986, the trial court rendered a decision
dismissing the complaint, and declaring the Deed of
Absolute Sale dated 1 April 1980 as valid and enforceable
and Aurelio is, as he is hereby ordered, to partition
and subdivide the land covered by TCT 135671, and to
aggregate therefrom a portion equivalent to 6/10
thereof, and cause the same to be titled in the name of
spouses Repuyan, and after which, the latter to pay
Aurelio the sum of P45,000.00. Considering further that
the spouses suffered damages since they were forced
to litigate unnecessarily, by way of their counterclaim,
Aurelio is hereby ordered to pay the spouses the sum
of P15,000.00 as moral damages, attorney’s fees in the
amount of P5,000.00; with costs against Aurelio.
On 3 March 1987, Balatbat filed a notice of lis pendens in
Civil Case 109032 before the Register of Deeds of Manila.
On 9 December 1988, Balatbat and her husband filed a
complaint for delivery of the owners duplicate copy of
TCT 135671 before the RTC Manila (Branch 24, Civil Case
88-47176) against Jose and Aurora Repuyan. On
27 January 1989, spouses Repuyan filed their answer with
affirmative defenses and compulsory counterclaim.
The Repuyans and the Balatbats submitted their
memoranda on 13 November 1989 and 23 November
1989, respectively. On 2 August 1990, the RTC Manila
rendered a decision dismissing the complaint, finding that
the Balatbats were not able to establish their cause of
action against the Repuyans and have no right to the
reliefs demanded in the complaint, and ordering Balatbat
to pay the Repuyans the amount of P10,000 as
attorney’s fees, P5,000 as costs of litigation, and to pay the
costs of the suit.
Dissatisfied, Balatbat filed an appeal before the Court of
Appeals (CA-GR CV 29994) which rendered
decision on 12 August 1992, affirming the judgment
appealed from with modification deleting the awards of
P10,000 for attomey’s fees and P5,000 as costs of
litigation. On 22 March 1993, the Court of Appeals denied
Balatbat’s motion for reconsideration. Hence, the petition
for review pursuant to Rule 45 of the Revised Rules
of Court.
The Supreme Court dismissed the petition for review for
lack of merit; without pronouncement as to costs.
1. 1 April 1980 sale consummated, valid and enforceable
The sale dated 1 April 1980 in favor the Repuyan spouses
is consummated, hence, valid and
enforceable; not merely executory for the reason that
there was no delivery of the subject property and that
consideration/price was not fully paid. In a decision dated
15 April 1986 of the RTC Manila (Branch IV, Civil
Case 134131), the Court dismissed Aurelio complaint for
rescission of the deed of sale and declared that the
sale dated 1 April 1980, as valid and enforceable. No
appeal having been made, the decision became final and
executory. It must be noted that Balatbat filed a motion
for intervention in that case but did not file her
complaint in intervention.
2. 1 April 1980 Deed of Sale devoid of stipulation
withholding ownership of thing until full
payment; Ownership pass upon delivery of thing sold even
if purchase price not fully paid
The terms and conditions of the “Deed of Sale” dated 1
April 1980, the P45,000.00 balance is payable
only after the property covered by TCT 135671 has been
partitioned and subdivided, and title issued in the
name of the buyer hence, the vendor cannot demand
payment of the balance unless and until the property has
been subdivided and titled in the name of the Repuyan
spouses. Devoid of any stipulation that “ownership in
the thing shall not pass to the purchaser until he has fully
paid the price”, ownership in the thing shall pass
from the vendor to the vendee upon actual or constructive
delivery of the thing sold even if the purchase price
has not yet been fully paid.
3. Non-payment in a contract of sale merely creates right
to demand fulfillment of obligation or
rescission of contract; Article 1191
The failure of the buyer to make good the price does not,
in law, cause the ownership to revest to the
seller unless the bilateral contract of sale is first rescinded
or resolved pursuant to Article 1191 of the New
Civil Code. Non-payment only creates a right to demand
the fulfillment of the obligation or to rescind the
contract.
With respect to the non-delivery of the possession of the
subject property to the private respondent,
suffice it to say that ownership of the thing sold is acquired
only from the time of delivery thereof, either
actual or constructive. 28
4. Ownership of a thing sold acquired from time of actual
or constructive delivery; Possession of
public instrument of the land accords buyer rights of
ownership
Article 1498 of the Civil Code provides that — when the
sale is made through a public instrument,
the execution thereof 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 be
inferred. The execution of the public instrument,
without actual delivery of the thing, transfers the
ownership from the vendor to the vendee, who may
thereafter exercise the rights of an owner over the same.
It is not necessary that vendee be physically present
at every square inch of the land bought by him, possession
of the public instrument of the land is sufficient to
accord him the rights of ownership. Thus, delivery of a
parcel of land may be done by placing the vendee in
control and possession of the land (real) or by embodying
the sale in a public instrument (constructive). In the
present case, vendor Roque delivered the owner’s
certificate of title to the Repuyan spouses.
5. Necessity of public document merely for convenience,
and not for validity or enforceability of a
contract of sale
The provision of Article 1358 on the necessity of a public
document is only for convenience, not for
validity or enforceability. It is not a requirement for the
validity of a contract of sale of a parcel of land that
this be embodied in a public instrument.
6. Contract of sale consensual, perfected by mere consent
of the parties; Non-payment does not
render sale null and void for lack of consideration
A contract of sale being consensual, it is perfected by the
mere consent of the parties. Delivery of the
thing bought or payment of the price is not necessary for
the perfection of the contract; and failure of the
vendee to pay the price after the execution of the contract
does not make the sale null and void for lack of
consideration but results at most in default on the part of
the vendee, for which the vendor may exercise his
legal remedies.
7. Present case is a double sale
The present case is a case of double sale contemplated
under Article 1544 of the New Civil Code. In
the present case, Aurelio Roque sold 6/10 portion of his
share in TCT 135671 to the Repuyan spouses on 1
April 1980. Subsequently, the same lot was sold again by
vendor Aurelio Roque (6/10) and his children
(4/10), represented by the Clerk of Court pursuant to
Section 10, Rule 39 of the Rules of Court, on 4 February
1982.
8. Article 1544; Double sale
Article 1544 of the New Civil Code provides that “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 movable 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 present the
oldest title, provided there is good faith.” Article 1544 of
the Civil Code provides that in case of double sale of an
immovable property, 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.
9. Ownership vests in person who acquired the immovable
property in good faith and who first
recorded it in the Registry of Property; Annotation of
adverse claim sufficient
In an instance of a double sale of an immovable property,
the ownership shall vests in the person
acquiring it who in good faith first recorded it in the
Registry of Property. In the present case, the Repuyan
spouses caused the annotation of an adverse claim on the
title of the subject property denominated as Entry
5627/T-135671 on 21 July 1980. The annotation of the
adverse claim on TCT 135671 in the Registry of
Property is sufficient compliance as mandated by law and
serves notice to the whole world. Balatbat, on the
other hand, filed a notice of lis pendens only on 2 February
1982. Accordingly, the Repuyan spouses who first
caused the annotation of the adverse claim in good faith
shall have a better right over Balatbat.
10. Possession of Balatbat merely provisionary
The physical possession of Balatbat by virtue of a writ of
possession issued by the trial court on 20
September 1982 is “subject to the valid rights and interest
of third persons over the same portion thereof,
other than vendor or any other person or persons privy to
or claiming any rights to interest under it.”
11. First registrant, first in possession, else oldest title
As between two purchasers, the one who has registered
the sale in his favor, has a preferred right over
the other who has not registered his title even if the latter
is in actual possession of the immovable property.
Even in default of the first registrant or first in possession,
the Repuyan spouses have presented the oldest
title. Thus, the spouses who acquired the subject property
in good faith and for valuable consideration
established a superior right as against Balatbat.
12. Due diligence in the purchase of real estate required to
allege good faith
It is incumbent upon the vendee of the property to ask for
the delivery of the owner’s duplicate copy
of the title from the vendor. A purchaser of a valued piece
of property cannot just close his eyes to facts which
should put a reasonable man upon his guard and then
claim that he acted in good faith and under the belief
that there were no defect in the title of the vendor. One
who purchases real estate with knowledge of a defect
or lack of title in his vendor cannot claim that he has
acquired title thereto in good faith as against the true
owner of the land or of 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. 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 judged of by actual or fancied
tokens or signs.
13. Balatbat not a buyer in good faith
Balatbat cannot be considered as a buyer in good faith. In
the complaint for rescission filed by
Aurelio Roque on 20 August 1980, Balatbat filed a motion
for intervention on 20 May 1982 but did not file
her complaint in intervention, hence, the decision was
rendered adversely against her. If Balatbat did
investigate before buying the land on 4 February 1982, she
should have known that there was a pending case
and an annotation of adverse claim was made in the title
of the property before the Register of Deeds and she
could have discovered that the subject property was
already sold to the Repuyan spouses.
14. Gross negligence equvalent to intentional wrong
Balatbat had nobody to blame but herself in dealing with
the disputed property for failure to inquire
or discover a flaw in the title to the property, thus, it is
axiomatic that — culpa lata dolo aequiparatur — gross
negligence is equivalent to intentional wrong.
IV
1. CRUZ V. CABANA (June 22, 1984)
FACTS:
Leodegaria Cabana sold his real propery first to Teofilo
Legaspi and Illuminada Cabana and then later to Abelardo
Cruz.
Legaspi and Cabana were able to take possession of the
property but they were not able to register the deed of
absolute sale because the property was still mortgaged to
PNB. They however were able to register with the RD the
sale with the right to repurchase.
On the other hand, Cruz succeeded to register the deed of
absolute sale in his favor.
HELD:
Even though Cruz was the first to register the deed of
absolute sale, he cannot be given a better right over the
property because he was a buyer in bad faith.

Cruz knew the prior sale of the property because he was
informed by the RD that Legazpi and Cabana already
registered the sale of the said property.
Knowledge of a prior transfer of a registered property by a
subsequent purchaser makes him a purchaser in bad faith
and his knowledge of such transfer vitiates his title
acquired by virtue of the latter instrument of conveyance
which creates no right as against the first purchaser.
2. RADIOWEALTH V. PALILEO (May 20, 1991)
FACTS:
Spouses Castro sold a parcel of unregistered coconut land
in Surigao del Norte to Manuelito Palileo. The sale is
evidenced by a notarized deed of sale and Palileo
exercised acts of ownership through his mother and also
paid real estate taxes.
Meanwhile, a judgment over a civil case was rendered
agains Enriqur Castro ordering him to pay 22K to
Radiowealth Finance Co.
Pursuant to this, the provincial sheriff levied upon and sold
in public auction the subject land that was previously sold
to Palileo. A certificate of sale was issued in favor of
Radiowealth being the lone bidder and after the expiration
of the period of redemption, a deed of final sale was also
executed in their favor and both deeds was registered to
the Registry of Deeds.
ISSUE:
WON the sale in public auction is valid.
HELD:
Had Art.1544 been applied, the judgment should be
rendered in favor of Radiowealth being the one who
registered the land first. But since the subject land is an
unregistered land, a different rule should apply.
Under Act.3344 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.
Article 1544 of the Civil Code has no application to land
not registered under the torrens system. It was explained
that this is because the purchaser of unregistered land at a
sheriffs 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. As such, the execution sale of the 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.
3. Dagupan Trading vs. Macam
Dagupan Trading vs. Macam
14 SCRA 99
May 1965
FACTS:
Sammy Maron and his seven brothers and sisters were
pro-indiviso owners of a parcel of unregistered land
located in barrio Parayao, Binmaley, Pangasinan. In 1955,
while their application for registration of said land under
Act No. 496 was pending, they executed, on June 19 and
on September 21, two deeds of sale conveying the
property to herein respondent Rustico Macam who
thereafter took possession of the property and made
substantial improvements upon it. On October 14, 1955,
OCT No. 6942 covering the land was issued in the name of
the Marons, free from all liens and encumbrances.
On August 4, 1956, however, by virtue of a final judgment
of the Municipal Court of Manila in a civil case in favor of
Manila Trading and Supply Co. (Manila Trading) against
Sammy Maron, levy was made upon whatever interest he
had in the subject property. Thereafter, said interest was
sold at public auction to the judgment creditor Manila
Trading. The corresponding notice of levy, certificate of
sale and the sheriff's certificate of final sale in favor of
Manila Trading - because nobody exercised the right of
redemption - were duly registered, and on March 1, 1958,
the latter sold all its rights and title in the property to
herein petitioner Dagupan Trading Company (Dagupan
Trading).
On September 4, 1958, Dagupan Trading filed an action
against Macam, praying that it be declared owner of one-
eighth portion of the subject property. The CFI of
Pangasinan dismissed the said complaint, and the Court of
Appeals affirmed its decision.
ISSUE:
Who has the superior right over the one-eight portion of
the subject property?
COURT RULING:
The Supreme Court likewise affirmed both decisions of the
lower courts. At the time of the levy, Sammy Maron
already had no interest on the one-eight portion of the
property he and his siblings have inherited because for a
considerable time prior to the levy, said interest had
already been conveyed upon Macam "fully and
irretrievably" - as the Court of Appeals held. Consequently,
the 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.
The unregistered sale and the consequent conveyance of
title and ownership in favor Macam could not have been
cancelled and rendered of no effect upon the subsequent
issuance of the Torrens title over the entire parcel of land.
Moreover, upon the execution of the deed of sale in his
favor by Sammy Maron, Macam had immediately taken
possession of the land conveyed as its new owner and
introduced considerable improvements upon it himself. To
deprive him, therefore, of the same by sheer force of
technicality would be against both justice and equity.
4. Carumba vs. CA [G.R. No. L-27587. February 18, 1970.]
En Banc, Reyes JBL (J): 10 concurring
Facts: On 12 April 1956, the spouses Amado Canuto and
Nemesia Ibasco, by virtue of a Deed of Sale of
Unregistered Land with Covenants of “Warranty,’ 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. Besides, it has been
expressly admitted by Carumba that he is the brother-in-
law of Canuto, the alleged vendor of the property
sold to him. Canuto is the older brother of the wife of
Carumba.
On 21 January 1957, a complaint for a sum of money was
filed by Santiago Balbuena (and wife Angeles
Boaquina) against Canuto and Ibasco before the Justice of
the Peace Court of Iriga, Camarines Sur (Civil
Case 139) and on 15 April 1967, a decision was rendered in
favor of Balbuena. On 1 October 1958, the exofficio
Sheriff, Justo V. Imperial, of Camarines Sur, issued a
“Definite Deed of Sale of the property in favor of
Balbuena, which instrument of sale was registered before
the Office of the Register of Deeds of Camarines
Sur, on 3 October 1958. The aforesaid property was
declared for taxation purposes in the name of Balbuena in
1958.”
The Court of First Instance Camarines Sur (Civil Case 4646),
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, 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 (Case 36094-R), 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 1644 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. Hence, the petition for review on
certiorari by Amado Carumba.
The Supreme Court reversed the decision of the Court of
Appeals and affirmed that of the CFI; with costs
against Santiago Balbuena.
1. Unregistered land; Article 1544 does not apply
While under the invoked Article 1544, registration in good
faith prevails over possession in the event
of a doubt sale by the vendor of the same piece of land to
different vendees, said article is of no application to
the present case, even if Balbuena, the later vendee, was
ignorant of the prior sale made by his judgment
debtor in favor of 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.”
2. Deed of sale (even in private instrument) coupled with
possession of registered land suffice to
vest ownership
The deed of sale in favor of Canuto had been executed on
12 April 1955, two years before the
decision against the former owners of the land was
rendered in favor of Balbuena (15 April 1957), and while
only embodied in a private document, the same, coupled
with the fact that the buyer (Carumba) had taken
possession of 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. Hence, the latter must yield the land to
petitioner Carumba.
3. Rule different in cases covered by Torrens title
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;
but the land here in question is admittedly not
registered under Act 496.
5. Philippine Trust Company vs. PNB [G.R. No. 16483.
December 7, 1921.]
First Division, Johns (J): 7 concur
Facts: The Philippine Trust company and the Philippine
National Banks are corporations organized under the
laws of the Philippine Islands and domiciled in the city of
Manila. Salvador Hermanos was a copartnership
and during the month of January 1919, executed to PNB 8
promissory notes aggregating P156,000, payable
on demand, and each secured by a quedan, or warehouse
receipt, issued by the firm of Nieva, Ruiz &
Company. Each note recites that it is payable on demand
after date, for value received, and that the firm has
deposited “with the said bank as collateral security for the
payment of this note, or any note given in
extension or renewal thereof, as well as for the payment
of any other liability or liabilities of the undersigned
to the said bank, due or to become due, whether now
existing or hereafter arising, the following property
owned by the undersigned.” The note then specifies the
number of the quedan and the amount of copra in
piculs, and states that the quedan was issued by Nieva,
Ruiz & Company. The note for P8,000, dated 18
January 1919, was secured by warehouse Receipt 30; for
P20,000, dated 22 January 1919, was secured by
Receipt 35; for P20,000, dated 24 January 1919, was
secured by Receipt 38; for P20,000, dated 27 January
1919, was secured by Receipt 41; for P14,000, dated 28
January 1919, was secured by Receipt 42; for
P18,000, dated 21 January 1919, was secured by Receipt
33; for P18,000, dated 23 January 1919, was secured
by Receipt 36; and for P18,000, dated 25 January 1919,
was secured by Receipt 39, making a total of
16,051.10 piculs of copra, covered by the warehouse
receipts of the firm of Nieva, Ruiz & Company issued to
the firm of Salvador Hermanos, and by that firm pledged
as collateral to PNB to secure the payment of the
eight notes. Each of them further recites that “on the
nonperformance of this promise, or upon the nonpayment
of any of the liabilities above-mentioned, or upon the
failure of the undersigned forthwith, with or without
notice, to furnish satisfactory additional securities in case
of decline, as aforesaid, then and in either such case, this
note and all liabilities of the undersigned, or any of them,
shall forthwith become due and payable, without demand
or notice, and full power and authority are hereby given to
said bank to sell, assign transfer and deliver the whole of
the said securities, or any part thereof, or any substitutes
therefor or any additions thereto, or any other securities
or property given unto or left in the possession of or
hereafter given
unto or left in the possession of the said bank by the
undersigned for safe keeping or otherwise, at any
brokers’ board or at public or private sale, at the option of
said bank or of its president or secretary, without
either demand, advertise mentor notice of any kind, which
are hereby expressly waived. At any such sale, the
said bank may itself purchase the whole or any part of the
property sold, free from any right of redemption on
the part of the undersigned, which is hereby waived and
released.” Stamped in red ink across the face of each
quedan are the words “Negotiable Warrant,” and each of
them was in the usual form of warehouse receipts.
On 10 February 1919, the firm of Salvador Hermanos
withdrew from the bank, by and with its consent,
warehouse receipts 33, 36, and 39, which the bank was
holding as collateral security for each of the 3 18,000-
peso notes amounting to P54,000. The total amount of
copra evidenced by the receipts withdrawn was
6,024.55 piculs, the declared value of which, shown on the
face of such receipts, was P90,368.25. At the time
of the withdrawal, the firm executed a writing, promising
to return to the bank the warehouse receipts on or
before the 27 January, the receipts being guaranteed by
the attached certificate of existence of the effects
issued by the firm on 8 February 1919. Neither writing was
in any manner authenticated by a notary or by a
competent public official. The writing of February 10 is in
form a receipt from the firm of Salvador Hermanos
to the PNB of the quedans, or warehouse receipts, for the
copra. The one of February 8 is, in legal effect, the
certificate of Salvador Hermanos “that there exist the
following articles in our bodegas as follows:” That is to
say, that the firm certifies that the property described is in
the warehouse of the firm.
On 21 April 1919, Salvador Hermanos filed a petition of
insolvency in the CFI Manila. On 3 May 1919,
Gregorio Salvador, a member of the firm of Salvador
Hermanos, delivered certain goods, wares, and
merchandise to and in the warehouse of Nieva, Ruiz &
Company, and requested that firm to issue its receipt
therefor to and in favor of the PNB, and that, pursuant to
such request, that firm did issue 8 quedans to the
bank (161 for 32 bales of hemp; 162 for 953 bundles of
rattan; 165 for 72 bundles of empty sacks; 167 for
136 sacks of gum; 168 for 1,461 bales of kapok; 175 for
288 packages of Talcum Powder; 176 for 35
packages of cardboard; and 185 for 134 bundles of empty
sacks). On and between 6 May 1919 and 7 August
1919, acting under the terms and provisions of its
respective notes, the bank sold all of the personal property
for which it held warehouse receipts, or which had been
surrendered to it by the Hermanos firm, save and
except the property described in the three warehouse
receipts, which were released and surrendered to that
firm on 10 February 1919. Based upon its insolvency
petition, and in the ordinary course of business, the firm
of Salvador Hermanos was adjudged insolvent, and on 19
July 1919, the Philippine Trust Company was
elected assignee of said firm and duly qualified. On 13
September 1919, as such assignee, it made a demand
upon the bank for the surrender and delivery of the
property described in all of the above receipts.
Upon the bank’s refusal, Philippine Trust Company
commenced this action to recover its value alleged to be
P242,579.61, claiming that on 21 April 1919, the firm of
Salvador Hermanos was the sole and exclusive
owner of the property, and that, as to the copra, about 28
June 1919, and after the filing of the insolvency
petition, the bank unlawfully seized and converted the
copra to its own use, the value of which was P192,260.
For a second cause of action, Philippine Trust alleged that,
as such assignee, it was the owner of the remaining
personal property, and that, after the insolvency petition
was filed, the bank unlawfully seized and converted
such property to its own use, and that it was of the value
of P50,319.61. For answer, the bank makes a general
denial, as to each cause of action, of all of the material
allegations of the complaint.
The Supreme Court, on the first cause of action, held that
in January 1919, the bank became and remained the
owner of the 5 quedans 30, 35, 38, 41, and 42; that they
were in form negotiable, and that, as such owner, it
was legally entitled to the possession and control of the
property therein described at the time the insolvency
petition was filed and had a right to sell it and apply the
proceeds of the sale to its promissory notes, including the
3 notes of P18,000 each, which were formerly secured by
the 3 quedans 33, 36, and 39, which the bank
surrendered to the firm. That is to say, the bank had a
legal right to apply the Proceeds from the property
described in the five remaining quedans to the payment of
its eight promissory notes. The Court, however
reversed the judgment of the lower court as to the second
cause of action, and one entered in favor of the
Philippine Trust Company and against the PNB, for
P40,742.62, the declared value of the property described
in quedans Nos. 161 to 185, inclusive, and for the further
sum of P7,631.40, the value of the gasoline sold in
May, 1919, or a total of P48,374.02, with interest thereon
from September 22, 1919, at the rate of 6 per cent
per annum, and for the costs and disbursements in the
Courts.
1. Purpose of Act 1956 or the Insolvency Law
Act 1956 of the Philippine Legislature provides for the
suspension of payments, the relief of insolvent
debtors, the protection of creditors, and the punishment
of fraudulent debtors.
2. Section 1 of Act 1956
Section 1 provides that “this Act shall be known and may
be cited as The Insolvency Law, and in
accordance with its provisions every insolvent debtor may
be permitted to suspend payments or be discharged
from his debts and liabilities.”
3. Section 2 of Act 1956
Section 2 provides that debtor who possesses sufficient
property to cover the debts, be it an
individual, firm or corporation, and who is unable to meet
them at maturity, “may petition that he be declared
in the state of suspension of payments by the court, or the
judge thereof in vacation.”
4. Section 3 of Act 1956
Section 3 enacts that upon the filing of the petition, the
court shall make an order calling a meeting of
creditors specifying the time and place; that notice thereof
shall be published in a newspaper, and that “said
order shall further contain an absolute injunction
forbidding the petitioning debtor from disposing in any
manner of his property, except in so far as concerns the
ordinary operations of commerce or of industry in
which the petitioner is engaged, and, furthermore, from
making any payments outside of the necessary or
legitimate expenses of his business or industry, so long as
the proceedings relative to the suspension of
payments are pending, and said proceedings for the
purposes of this Act shall be considered to have been
instituted from the date of the filing of the petition.”
5. Section 14 of Act 1956
Section 14, chapter 3, provides that any person owing
debts exceeding P1,000 may apply to be
discharged from his debts and liabilities by petition to the
Court of First Instance in which he has resided for
six months preceding the filing of the petition.
6. Section 18 of Act 1956
Section 18 enacts that upon receiving and filing of the
petition, schedule, and inventory, the court, or
the judge, shall make an order declaring the petitioner
insolvent, and “shall further forbid the payment to the
debtor of any debts due to him and the delivery to the
debtor, or to any person for him, of any property
belonging to him, and the transfer of any property by him,
and shall further appoint a time and place for a
meeting of the creditors to choose an assignee of the
estate.”
7. Quedans recognized to be owned by PNB
At the time the eight promissory notes were executed, a
given quedan, or warehouse receipt, was
described and incorporated in the note as to its number,
when and by whom issued, and the property it
represented, and each receipt was then delivered by the
firm to the defendant bank, all of which was during
the month of January, 1919. The bank never had the
manual possession or the physical control of any of this
property until after the insolvency petition was filed, and it
is for such reason that the plaintiff claims that it
was the property of the firm, and that the defendant
should account to the assignee. Each quedan, or
warehouse receipt, was specifically described in a given
note, and was made a part of it, and the note recites
that, for any breach of its terms or conditions, the bank
has full power and authority “to sell, assign, transfer
and deliver the whole of the said security, or any part
thereof, etc.,” and that “at any such sale, the said bank
may itself purchase the whole or any part of the property
sold, free from any right of redemption on the part
of the undersigned, which is hereby waived and released.”
In addition, the quedan itself was delivered to and
held by the bank, and the warehouseman recognized the
bank as the owner of the property. Legally speaking,
the owner of the quedans, or warehouse receipts, was the
owner of the property described in them, and the
quedans were given as collateral to secure promissory
notes, which, for value received, were executed to the
bank.
8. The execution of the notes, the physical possession of
the negotiable quedan, or warehouse
receipt, and the recognition of ownership by the
warehouseman, legally carries with it both the title to,
and the possession of, the property
The execution of the notes, the physical possession of the
negotiable quedan, or warehouse receipt,
and the recognition of ownership by the warehouseman,
legally carries with it both the title to, and the
possession of, the property. In such a case, title is not
founded on a public instrument which should be
authenticated by a notary or by a competent public
official. Legally speaking, the execution of the promissory
notes and the pledging of the quedans, or warehouse
receipts, as collateral, and the describing of them in the
notes, and the manual delivery of the quedan, or
warehouse receipt itself, carries with it not only the title,
but
the legal possession of the property. In other words, as to
the property described in the quedans, or warehouse
receipts, which were pledged, as collateral, in January,
1919, to secure the eight respective promissory notes,
both the title and the possession of that property were
delivered to and vested in PNB in January 31919.
Three of those quedans, or warehouse receipts, were
returned to the firm by the bank on 10 February 1919,
but the bank still owned and held the notes, which were
secured but those warehouse receipts, and no part of
the debt itself was paid by or through the surrender of the
receipts.
9. Legal effect of the 10 February receipt; Statement of 8
February merely a representation of
property inside its warehouse; Writing does not vest
ownership of warehoused items to PNB
The legal effect of this receipt is a promise on the part of
the firm to return the three quedans on or
before 27 January 1919, and a statement that such
receipts are guaranteed by the attached certificate of the
existence in the warehouse of the property described in
the certificate. The statement of February 8, recites
“we hereby certify that there exist the following articles in
our bodegas.” Then follows a description of the
property. This is nothing but a statement or representation
to the effect that the firm has the property in its
warehouse. Nothing more. After describing the property,
the certificate then says: “And promise that none of
the above articles would be removed without consulting
first with the Philippine National Bank.” There is no
statement or representation of any kind showing when or
from whom the property was received, or how it
was held, or who was the owner, or when or to whom it
would be delivered. When analyzed, this writing is
nothing more than a certificate of the firm that the
described property was then in its warehouse, and a
promise that none of the “articles would be removed
without consulting first with the Philippine National
Bank.” Such a writing would not transfer the title of the
property to the bank, or give it possession, either
actual or constructive. It will be noted that both the
receipt of February 10 and the certificate and promise of
February 8, are signed by the firm of Salvador Hermanos,
and that the certificate says that the property was
then in the firm’s warehouse, and that neither instrument
was in any manner authenticated by a notary or a
competent public official, as provided by article 1216 of
the Civil Code, and that the property was in the
warehouse of the firm.
10. Article 1863 of the Civil Code; Property not left to the
possession of the bank; thus it cannot
sell, transfer and deliver the whole or part of said
securities
Article 1863 of the Civil Code provides “In addition to the
requisites mentioned in article 1857, it
shall be necessary, in order to constitute the contract of
pledge, that the pledge be placed in the possession of
the creditor or of a third person appointed by common
consent.” It appears in the present case however that
from the certificate that the property was then in the
possession of the firm, who made the certificate, and that
it was in the possession of that firm when its insolvency
petition was filed on 21 April 1919. It will be noted
that the promissory notes executed by the firm to the
bank recite that “Full power and authority are hereby
given to said bank to sell, assign, transfer and deliver the
whole of the said securities, or any part thereof, or
any substitutes therefor or any additions thereto, or any
other securities or property given unto or left in the
possession of or hereafter given unto or left in the
possession of the said Bank by the undersigned.” Thus, the
power and authority of the bank to sell, assign, or transfer
is confined to property which was given unto or left
in its possession. None of the property described in the
certificate of February 8 was ever given unto or left in
the possession of the bank.
11. Capacity of Philippine Trust Company; Although
appointed July 19, power and authority was
vested on it 21 April 1919 when the insolvency petition
was filed
The insolvency petition was filed 21 April 1919, and the
Philippine Trust Co was duly elected and
qualified, as assignee, on 19 July 1919, and, as such, it
represents both the creditors and the firm. Although it
was not appointed until July 1919, yet when it did qualify
its right and title to all the property of the firm
related back and became vested as of 21 April 1919, when
the insolvency petition was filed, and from that
time it alone had the power and authority to act for and
represent the firm. Under the terms and provisions of
Act 1956 of the Philippine Legislature, after it was filed, the
power of the firm or any member of it to deliver
possession of the property to secure a preexisting debt
was suspended pending final adjudication. That is to
say, if the debt was not legally secured before the
insolvency petition was filed, no member of the firm had
any legal right to secure it after the petition was filed, and
any attempt to do so would be null and void.
6. Siy Cong Bieng and Co. vs. Hongkong and Shanghai
Banking Corp. [G.R. No. 34655. March 5, 1932.]
En Banc, Ostrand (J): 6 concur
Facts: Siy Cong Bieng & Co., a corporation engaged in
business generally, and Hongkong & Shanghai
Banking Corporation, a foreign bank authorized to engage
in the banking business in the Philippines, are
domiciled in the City of Manila. On 25 June 1926, certain
negotiable warehouse receipts were pledged by
Otto Ranft to the bank to secure the payment of his
preexisting debts to the latter (Siy Cong Bieng as
depositor: 1707, Public Warehouse Co., 27 bales; 133, W.F.
Stevenson Co, 67 bales; 1722, Public Warehouse
Co., 60 bales; 1723, W.F. Stevenson Co, 4 bales; 1634, The
Philippine Warehouse Company, 99 bales; 1702,
The Philippine Warehouse Company, 39 bales. O. Ranft as
depositor: 1918, Public Warehouse Co, 166 bales;
2, Siy Cong Bieng & Co. Inc., 2 bales). The baled hemp
covered by the warehouse receipts was worth
P31,635; receipts numbers 1707, 133, 1722, 1723, 1634,
and 1702 being endorsed in blank by Siy Cong
Bieng and Otto Ranft, and numbers 1918 and 2, by Otto
Ranft alone. On 25 June 1926, Ranft called at the
office of Siy Cong Bieng to purchase hemp (abaca), and he
was offered the bales of hemp as described in the
quedans. The parties agreed to the price (P31,645), and on
the same date the quedans, together with the
covering invoice, were sent to Ranft, without having been
paid for the hemp, but Siy Cong Bieng’s
understanding was that the payment would be made
against the same quedans, and it appears that in previous
transactions of the same kind between the bank and Siy
Cong Bieng, quedans were paid one or two days after
their delivery to them. In the evening of the day upon
which the quedans in question were delivered to the
bank, Ranft died suddenly at his home in the city of
Manila, and when Siy Cong Bieng found that such was
the case, it immediately demanded the return of the
quedans, or the payment of the value, but was told that
the quedans had been sent to the bank as soon as they
were received by Ranft.
Siy Cong Bieng filed a claim for the sum of P31,645 (the
value of 464 bales of hemp deposited in certain
bonded warehouses) in the intestate proceedings of the
estate of the deceased Otto Ranft, which on an appeal
from the decision of the committee on claims, was allowed
by the CFI in case 31372 (City of Manila). In the
meantime, demand had been made by Siy Cong Bieng on
the bank for the return of the quedans (warehouse
receipts), or their value, which demand was refused by the
bank on the ground that it was a holder of the
quedans in due course. Thereupon Siy Cong Bieng filed its
first complaint against the bank, wherein it alleged
that it had “sold” the quedans in question to the deceased
Ranft for cash, but that the said Ranft had not
fulfilled the conditions of the sale. Later on, Siy Cong Bieng
filed an amended complaint, wherein they
changed the word “sold” referred to in the first complaint
to the words “attempted to sell”. Upon trial the
judge of the lower court rendered judgment in favor of Siy
Cong Bieng.
The Supreme Court reversed the appealed judgment and
absolved the bank from the complaint; Without costs.
1. Circumstances involving the quedans
The quedans in question were negotiable in form. They
were pledged by Otto Ranft to the bank to
secure the payment of his preexisting debts to said bank.
Such of the quedans as were issued in the name of
Siy Cong Bieng were duly endorsed in blank by Siy Cong
Bieng and by Otto Ranft. The two remaining
quedans which were issued directly in the name of Otto
Ranft were also duly endorsed in blank by him.
2. Quedans were received by the bank to secure the
payment of Ranft’s preexisting debts
When the quedans were negotiated, Otto Ranft was
indebted to the Hongkong & Shanghai Banking
Corporation in the sum of P622,753.22, which
indebtedness was partly covered by quedans. He was also
being pressed to deposit additional payments as a further
security to the bank.
3. No evidence that bank is bound to pay back Ranft the
amount of the quedans; On the delivery
of the quedans, indorser does not own property anymore
unless he liquidated his debt with the bank.
It has been the practice of the bank in its transactions with
Ranft that the value of the quedans has
been entered in the current accounts between Ranft and
the bank, but there is no evidence to the effect that the
bank was at any time bound to pay back to Ranft the
amount of any of the quedans. There is also nothing in
the record to show that the bank has promised to pay the
value of the quedans neither to Ranft nor to Siy
Cong Bieng. On the contrary, as stated in the stipulation of
facts, the “negotiable warehouse receipts — were
pledged by Otto Ranft to the Hongkong & Shanghai
Banking Corporation to secure the payment of his
preexisting debts to the latter”, and taking into
consideration that the quedans were negotiable in form
and duly endorsed in blank by Siy Cong Bieng and by Otto
Ranft, it follows that on the delivery of the quedans to
the bank they were no longer the property of the indorser
unless he liquidated his debt with the bank.
4. No compelling reason to compel bank to investigate
indorser. There is nothing in the record which in any
manner would have compelled the bank to investigate the
indorser, especially as to his authority to negotiate the
quedans. The bank had a perfect right to act as it did,
and its action is in accordance with sections 47, 38, and 40
of the Warehouse Receipts Act (Act 2137).
5. Section 47 of the Warehouse Receipts Act; When
negotiation not impaired by fraud, mistake or
Duress. Section 47 (When negotiation not impaired by
fraud, mistake, or duress) provides that “the validity of
the negotiation of a receipt is not impaired by the fact that
such negotiation was a breach of duty on the part of
the person making the negotiation, or by the fact that the
owner of the receipt was induced by fraud, mistake,
or duress to intrust the possession or custody of the
receipt to such person, if the person to whom the receipt
was negotiated, or a person to whom the receipt was
subsequently negotiated, paid value therefor, without
notice of the breach of duty, or fraud, mistake, or duress.”
6. Section 38 of the Warehouse Receipts Act; Negotiation
of negotiable receipts by indorsement
Section 38 (Negotiation of negotiable receipts by
indorsement) provides that “a negotiable receipt
may be negotiated by the indorsement of the person to
whose order the goods are, by the terms of the receipt,
deliverable. Such indorsement may be in blank, to bearer
or to a specified person. . . Subsequent negotiation
may be made in like manner.”
7. Section 40 of the Warehouse Receipts Act; Who may
negotiate a receipt
Section 40 (Who may negotiate a receipt) provides that “a
negotiable receipt may be negotiated “(a)
By the owner thereof, or (b) By any person to whom the
possession or custody of the receipt has been
entrusted by the owner, if, by the terms of the receipt, the
warehouseman undertakes to deliver the goods to
the order of the person to whom the possession or
custody of the receipt has been entrusted, or if at the time
of such entrusting the receipt is in such form that it may be
negotiated by delivery.”
8. Rights of bank over the quedans after indorsement;
Section 41 of the Warehouse Receipts Act
The rights the bank acquired over the quedans after
indorsement and delivery to it by Ranft are
covered by Section 41 of the Warehouse Receipt Act.
Section 41 (Rights of person to whom a receipt has been
negotiated) provides that “a person to whom a negotiable
receipt has been duly negotiated acquires thereby:
(a) Such title to the goods as the person negotiating the
receipt to him had or had ability to convey to a
purchaser in good faith for value, and also such title to the
goods as the depositor of person to whose order the
goods were to be delivered by the terms of the receipt had
or had ability to convey to a purchaser in good faith
for value.”
9. Use of warehouse receipts as documents of title;
Intrusting receipts more than delivery, it is to
intrust title to the goods; Purchasers for value entitled to
rely on representation despite breach of trust
and agreement
In the case of the Commercial National Bank of New
Orleans vs. Canal-Louisiana Bank & Trust
Co. (239 U. S., 520), it was observed that “one who takes
by trespass or a finder is not included within the
description of those who may negotiate.” (Report of
Commissioner on Uniform State Laws, January 1, 1910,
p. 204.) Aside from this, the intention is plain to facilitate
the use of warehouse receipts as documents of title.
Under Section 40, the person who may negotiate the
receipt is either the “owner thereof”, or a “person to
whom the possession or custody of the receipt has been
intrusted by the owner” if the receipt is in the form
described. The warehouse receipt represents the goods,
but the intrusting of the receipt, as stated, is more than
the mere delivery of the goods; it is a representation that
the one to whom the possession of the receipt has
been so intrusted has the title to the goods. By Section 47,
the negotiation of the receipt to a purchaser for
value without notice is not impaired by the fact that it is a
breach of duty, or that the owner of the receipt was
induced “by fraud, mistake, or duress” to intrust the
receipt to the person who negotiated it. And, under
Section 41, one to whom the negotiable receipt has been
duly negotiated acquires such title to the goods as the
person negotiating the receipt to him, or the depositor or
person to whose order the goods were deliverable by
the terms of the receipt, either had or “had ability to
convey to a purchaser in good faith for value.” The clear
import of these provisions is that if the owner of the goods
permits another to have the possession or custody
of negotiable warehouse receipts running to the order of
the latter, or to bearer, it is a representation of title
upon which bona fide purchasers for value are entitled to
rely, despite breaches of trust or violations of
agreement on the part of the apparent owner.
10. Siy Cong Bieng estopped to deny bank had valid title to
the quedans
Siy Cong Bieng is estopped to deny that the bank had a
valid title to the quedans for the reason that
Siy Cong Bieng had voluntarily clothed Ranft with all the
attributes of ownership and upon which the bank
relied.
11. Equitable estoppel; Where one or two innocent
persons must suffer a loss, he who by his
conduct made the loss possible must bear it
In the National Safe Deposit vs. Hibbs (229 U. S., 391),
certain certificates of stock were pledged as
collateral by the defendant in error to the bank, which
certificates were converted by one of the trusted
employees of the bank to his own use and sold by him. The
stock certificates were unqualifiedly endorsed in
blank by the defendant when delivered to the bank. The
Supreme Court of the United States applied the
familiar rule of equitable estoppel that where one of two
innocent persons must suffer a loss he who by his
conduct made the loss possible must bear it. Thus, when
the broker obtained the stock certificates, containing
all the indicia of ownership and possible of ready transfer,
from one who had possession with the bank’s
consent, and who brought the certificates to him,
apparently clothed with the full ownership thereof by all
the
tests usually applied by business men to gain knowledge
upon the subject before making a purchase of such
property. On the other hand, the bank, for a legitimate
purpose, with confidence in one of its own employees,
instrusted the certificates to him, with every evidence of
title and transferability upon them. The bank’s
trusted agent, in gross breach of his duty, whether with
technical criminality or not is unimportant, took such
certificates, thus authenticated with evidence of title, to
one who, in the ordinary course of business, sold
them to parties who paid full value for them. In such case
we think the principles which underlie equitable
estoppel place the loss upon him whose misplaced
confidence has made the wrong possible.
12. No remedy available to Siy Cong Bieng
Siy Cong Bieng has suffered the loss of the quedans, but
there is now no remedy available to it. The
bank is not responsible for the loss; the negotiable
quedans wee duly negotiated to the bank and as far as the
record shows, there has been no fraud on the part of the
bank.
8. Almendra vs. IAC [G.R. No. 75111. November 21, 1991.]
Third Division, Fernan (CJ): 4 concurring
Facts: The mother, Aleja Ceno, was first married to Juanso
Yu Book with whom she had 3 children named
Magdaleno, Melecia and Bernardina, all surnamed Ceno.
Sometime in the 1920’s, Juanso Yu Book took his
family to China where he eventually died. Aleja and her
daughter Bernardina later returned to the Philippines.
During said marriage, Aleja acquired a parcel of land which
she declared in her name under Tax Declaration 11500.
After Juanso Yu Book’s death, Bernardina filed against her
mother a case for the partition of the said
property in the then CFI Leyte. On 17 August 1970, the
lower court rendered a “supplemental decision”
finding that the said property had been subdivided into
Lots 6354 (13,738 sq.ms.), 6353 (16,604 sq.ms.), 6352
(23,868 sq.ms.) and 6366 (71,656 sq.ms.). The Court
declared Bernardina Ojeda owner of and entitled to
possession of Lot 6354; Ojeda as owner of and entitled to
possession of Lot 6353 without prejudice to
whatever rights her sister Melecia Ceno (presently in
China) may have over the property; Aleja Almendra as
owner of and entitled to possession of Lot 6366; and Aleja
Almendra as owner of and entitled to possession of
Lot 6352, subject to whatever may be the rights thereto of
her son Magdaleno Ceno (presently in China). The
Court ordered the parties to bear the fees of the
commissioner. Meanwhile, Aleja married Santiago
Almendra
with whom she had 4 children named Margarito, Angeles,
Roman and Delia. During said marriage Aleja and
Santiago acquired a 59,196-sq.ms. parcel of land in
Cagbolo, Abuyog, Leyte. OCT 10094 was issued therefor
in the name of Santiago Almendra married to Aleja Ceno
and it was declared for tax purposes in his name. In
addition to said properties, Aleja inherited from her father,
Juan Geno, a 16,000-sq.ms. parcel of land also in
Cagbolo. For his part, her husband Santiago inherited from
his mother, Nicolasa Alvero, a 16-sq. ms. parcel of
residential land located in Nalibunan, Abuyog, Leyte. While
Santiago was alive, he apportioned these
properties among Aleja’s children in the Philippines,
including Bernardina, who, in turn, shared the produce
of the properties with their parents. After Santiago’s
death, Aleja sold to her daughter, Angeles Almendra, for
P2,000 two parcels of land in the deed of sale dated 10
August 1973 (½ portion or conjugal share of land [TD
22234, OCT 10094], and ½ portion or conjugal share of
land [TD 27190] both located in Bo. Cagbolo,
Abuyog, Leyte. On 26 December 1973, Aleja sold to her
son, Roman Almendra, also for P2,000 a parcel of
land described in the deed of sale as located in Cagbolo,
Abuyog, Leyte “under T/D 11500 which cancelled
T/D 9635; having an area of 6.6181 hec., assessed at
P1,580.00.” On the same day, Aleja sold to Angeles and
Roman again for P2,000 yet another parcel of land
described in the deed of sale (Lot 6352). Aleja died on 7
May 1975.
On 21 January 1977 Margarito, Delia and Bernardina
(plaintiffs) filed a complaint against Angeles and
Roman for the annulment of the deeds of sale in their
favor, partition of the properties subjects therein and
accounting of their produce. From China, their sister
Melecia signed a special power of attorney in favor of
Bernardina. Magdaleno, who was still in China, was
impleaded as a defendant in the case and summons by
publication was made on him. Later, the plaintiffs
informed the court that they had received a document in
Chinese characters which purportedly showed that
Magdaleno had died. Said document, however, was not
produced in court. Thereafter, Magdaleno was considered
as in default without prejudice to the provisions of
Section 4, Rule 18 of the Rules of Court which allows the
court to decide a case wherein there are several
defendants upon the evidence submitted only by the
answering defendants. On 30 April 1981, the lower court
rendered a decision declaring the deeds of sale to be
simulated and therefore null and void; ordering the
partition of the estate of the deceased Aleja Ceno among
her heirs and assigns; appointing the Acting Clerk of
Court, Atty. Cristina T. Pontejos, as commissioner, for the
purpose of said partition, who is expected to
proceed accordingly upon receipt of a copy of this
decision; and to render her report on or before 30 days
from said receipt. The expenses of the commissioner shall
be borne proportionately by the parties.
The defendants appealed to the then Intermediate
Appellate Court which, on 20 February 1986 rendered a
decision upholding the validity of the deeds of sale and
ordered the partition of the “undisposed” properties
left by Aleja and Santiago Almendra and, if an extrajudicial
partition can be had, that it be made within a
reasonable period of time after receipt of its decision. The
plaintiffs filed their motion for reconsideration,
which was denied. Hence, the petition for review on
certiorari.
The Supreme Court affirmed the decision of the then
Intermediate Appellate Court subject to the
modifications stated in the present decision. The Court
directed the lower court to facilitate with dispatch the
preparation and approval of a project of partition of the
properties considered unsold under the present
decision.
1. No convincing reason to nullify deeds of sale; Testimony
of the notary given more credence
There is no valid, legal and convincing reason for nullifying
the questioned deeds of sale. Petitioner
had not presented any strong, complete and conclusive
proof to override the evidentiary value of the duly
notarized deeds of sale. Moreover, the testimony of the
lawyer who notarized the deeds of sale that he saw not
only Aleja signing and affixing her thumbmark on the
questioned deeds but also Angeles and Aleja “counting
money between them,” deserves more credence than the
self-serving allegations of the petitioners. Such
testimony is admissible as evidence without further proof
of the due execution of the deeds in question and is
conclusive as to the truthfulness of their contents in the
absence of clear and convincing evidence to the
contrary.
2. No proof that price (P2,000) was grossly inadequate
The petitioners’ allegations that the deeds of sale were
“obtained through fraud, undue influence and
misrepresentation,” and that there was a defect in the
consent of Aleja in the execution of the documents
because she was then residing with Angeles, had not been
fully substantiated. They failed to show that the
uniform price of P2,000 in all the sales was grossly
inadequate. It should be emphasized that the sales were
effected between a mother and two of her children in
which case filial love must be taken into account.
3. Defendants proved they have means to purchase the
properties
Angeles and Roman amply proved that they had the
means to purchase the properties. Petitioner
Margarito Almendra himself admitted that Angeles had a
sari-sari store and was engaged in the business of
buying and selling logs. 20 Roman was a policeman before
he became an auto mechanic and his wife was a
school teacher.
4. Conjugal property; Aleja cannot claim title for definite
portion of the conjugal property before
its partition
The 10 August 1973 sale to Angeles of one-half portion of
the conjugal property covered by OCT P10094 may only be
considered valid as a sale of Aleja’s one-half interest
therein. Aleja could not have sold the
particular hilly portion specified in the deed of sale in the
absence of proof that the conjugal partnership
property had been partitioned after the death of Santiago.
Before such partition, Aleja could not claim title to
any definite portion of the property for all she had was an
ideal or abstract quota or proportionate share in the
entire property.
5. Paraphernal property; Sale valid
The sale of the one-half portion of the parcel of land
covered by Tax Declaration 27190 is valid
because the said property is paraphernal being Aleja’s
inheritance from her own father.
6. Land subject to Civil Case 4387; Aleja could not have
intended the sale of whole property
already subdivided
As regards the sale of the property covered by Tax
Declaration 11500, since the property had been
found in Civil Case 4387 to have been subdivided, Aleja
could not have intended the sale of the whole
property covered by said tax declaration. She could
exercise her right of ownership only over Lot 6366 which
was unconditionally adjudicated to her in said case.
7. Caveat emptor on Lot 6352; Lot still subject to rights of
Magdaleno Ceno
Lot 6352 was given to Aleja in Civil Case 4387 “subject to
whatever may be the rights thereto of her son
Magdaleno Ceno.” A reading of the deed of Sale covering
this parcel of land would show that the sale is
subject to the condition stated above; hence, the rights of
Magdaleno Ceno are amply protected. The role on
caveat emptor applies.
9. Paulmitan vs. CA [G.R. No. 61584. November 25, 1992.]
Third Division, Romero (J): 4 concur
Facts: From her marriage with Ciriaco Paulmitan,
deceased, Agatona Sagario Paulmitan begot two legitimate
children, Pascual and Donato Paulmitan. Agatona Sagario
Paulmitan died sometime in 1953 and left the 2
parcels of land located in the Province of Negros
Occidental (Lot 757 with an area of 1,946 sq.ms., OCT
RO8376; and Lot 1091 with an area of 69,080 sq.ms., OCT
RO-11653). Pascual Paulmitan also died in 1953,
apparently shortly after his mother passed away, leaving
his children, namely: Alicio, Elena, Abelino, Adelina,
Anita, Baking and Anito, all surnamed Paulmitan. Until
1963, the estate of Agatona Sagario Paulmitan
remained unsettled and the titles to the two lots remained
in the name of Agatona. However, on 11 August
1963, Donato Paulmitan executed an Affidavit of
Declaration of Heirship, extrajudicially adjudicating unto
himself Lot 757 based on the claim that he is the only
surviving heir of Agatona Sagario. The affidavit was
filed with the Register of Deeds of Negros Occidental who,
on 20 August 1963, cancelled OCT RO-8376 in
the name of Agatona Sagario and issued TCT 35979 in
Donato’s name. As regards Lot 1091, Donato executed
on 28 May 1974 a Deed of Sale over the same in favor of
Juliana P. Fanesa, his daughter (married to Rodolfo
Fanesa). In the meantime, sometime in 1952, for non-
payment of taxes, Lot 1091 was forfeited and sold at a
public auction, with the Provincial Government of Negros
Occidental being the buyer. A Certificate of Sale
over the land was executed by the Provincial Treasurer in
favor of the Provincial Board of Negros Occidental.
On 29 May 1974, Juliana P. Fanesa redeemed the property
from the Provincial Government of Negros
Occidental for the amount of P2,959.09.
On learning of these transactions, the children of the Late
Pascual Paulmitan filed on 18 January 1975 with
the CFI Negros Occidental (12th Judicial District, Branch IV,
Bacolod City, Civil Case 11770) a Complaint
against Donato and Juliana to partition the properties plus
damages. Donato and Juliana set up the affirmative
defense of prescription (complaint being filed 11 years
after the issuance of the title) with respect to Lot 757.
The trial court issued an order dated 22 April 1976
dismissing the complaint as to the said property upon
finding merit in Donato’s and Juliana’s affirmative defense.
This order became final after Pascual’s children
failed to appeal therefrom.
Trial proceeded with respect to Lot 1091. In a decision
dated 20 May 1977, the trial court decided in favor of
Pascual’s children as to Lot 1091. According to the trial
court, the respondents, as descendants of Agatona
Sagario Paulmitan were entitled to ½ of Lot 1091, pro
indiviso. The sale by Donato Paulmitan to his daughter,
Juliana Fanesa, did not prejudice their rights; and the
repurchase by Juliana of the land from the Provincial
Government of Negros Occidental did not vest in Juliana
exclusive ownership over the entire land but only
gave her the right to be reimbursed for the amount paid to
redeem the property. The trial court ordered the
partition of the land and directed Donato and Juliana to
pay pascual’s Children certain amounts representing
the latter’s share in the fruits of the land. On the other
hand, the children were directed to pay P1,479.55 to
Juliana as their share in the redemption price paid by
Fanesa to the Provincial Government of Negros
Occidental.
On appeal and on 14 July 1982 (CA-GR 62255-R), the Court
of Appeals affirmed the trial court’s decision.
Hence the petition for review on certiorari.
The Supreme Court denied the petition and affirmed the
decision of the Court of Appeals.
1. Pascual predecease mother, precludes operation of
provisions on right of representation
Pascual did not predecease his mother, decedent Agatona
Sagario Paulmitan, thus precluding the
operation of the provisions in the Civil Code on the right of
representation with respect to his seven children.
2. Rights of succession transmitted at the moment of the
decedent’s death; Both Pascual and
Donato entitled to ownership
When Agatona Sagario Paulmitan died intestate in 1952,
her two (2) sons Donato and Pascual were
still alive. Since it is well-settled by virtue of Article 777 of
the Civil Code that “[t]he rights to the succession
are transmitted from the moment of the death of the
decedent,” the right of ownership, not only of Donato but
also of Pascual, over their respective shares in the
inheritance was automatically and by operation of law
vested in them in 1953 when their mother died intestate.
At that stage, the children of Donato and Pascual did
not yet have any right over the inheritance since “[i]n
every inheritance the relative nearest in degree excludes
the more distant ones.” Donato and Pascual excluded their
children as to the right to inherit from Agatona
Sagario Paulmitan, their mother.
3. Heirs own in common the estate of the decedent before
its partition
From the time of the death of Agatona Sagario Paulmitan
to the subsequent passing away of her son
Pascual in 1953, the estate remained unpartitioned.
Donato and Pascual Paulmitan were co-owners of the
estate left by their mother as no partition was ever made,
pursuant to Article 1078 of the Civil Code, which
provides that “where there are two or more heirs, the
whole estate of the decedent is, before its partition,
owned in common by such heirs, subject to the payment
of debts of the deceased.”
4. Pascual’s children succeeded him in the co-ownership of
the property when he died intestate
When Pascual Paulmitan died intestate in 1953, his
children succeeded him in the co-ownership of
the disputed property. Pascual Paulmitan’s right of
ownership over an undivided portion of the property
passed on to his children, who, from the time of Pascual’s
death, became co-owners with their uncle Donato
over the disputed decedent estate.
5. Fanesa’s claim of ownership
Juliana P. Fanesa, Donato’s daughter, claims ownership
over Lot 1091 by virtue of two transactions,
namely: (a) the sale made in her favor by her father
Donato Paulmitan; and (b) her redemption of the land
from the Provincial Government of Negros Occidental after
it was forfeited for non-payment of taxes.
6. Sale of Lot 1091 by Donato to Juliana did not prejudice
rights of Pascual’s children over the ½
undivided share
When Donato Paulmitan sold on 28 May 1974 Lot 1091 to
his daughter Juliana P. Fanesa, he was
only a co-owner with Pascual’s children and as such, he
could only sell that portion which may be allotted to
him upon termination of the co-ownership. The sale did
not prejudice the rights of the children to ½ undivided
share of the land which they inherited from their father. It
did not vest ownership in the entire land with the
buyer but transferred only the seller’s pro indiviso share in
the property and consequently made the buyer a
co-owner of the land until it is partitioned.
7. Effect of sale of property by one co-owner without the
consent of all co-owners; Article 493:
Only the rights of the seller are transferred, buyer
becomes co-owner
In Bailon-Casilao v. Court of Appeals, the Court outlined
the effects of a sale by one co-owner
without the content of all the co-owners. The rights of a
co-owner of a certain property are clearly specified
in Article 493 of the Civil Code which provides that “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 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.” 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
[Punsalan v. Boon Liat, 44 Phil. 320 (1923)]. This is because
under the codal provision, the sale or other
disposition affects only his undivided share and the
transferee gets only what would correspond to his grantor
in the partition of the thing owned in common. [Ramirez v.
Bautista, 14 Phil. 528 (1909)]. Thus, it may be
deduced that since a co-owner is entitled to sell his
undivided share, a sale of the entire property by one
coowner without the consent of the other co-owners is
not null and void. However, only the rights of the
coowner-seller are transferred, thereby making the buyer
a co-owner of the property.” Thus, in the present case,
the sale by Donato Paulmitan of the land to his daughter
did not give to the latter ownership over the entire
land but merely transferred to her the ½ undivided share
of her father, thus making her the co-owner of the
land in question with her first cousins.
8. Redemption does not terminate the co-ownership nor
give her title to the entire land
The redemption of the land made by Fanesa did not
terminate the co-ownership nor give her title to
the entire land subject of the co-ownership. Speaking on
the same issue, the Court, in Adille v. Court of
Appeals, resolved the same by holding that the right of
repurchase may be exercised by a co-owner with
respect to his share alone (CIVIL CODE, art. 1612; CIVIL
CODE (1889), art. 1514.). While the records show
that the property was redeemed in its entirety, the
plaintiff shouldering the expenses therefor, that did not
make him the owner of all of it. In other words, it did not
put to end the existing state of co-ownership (Supra,
art. 489). There is no doubt that redemption of property
entails a necessary expense.
9. Right to compel other co-owners to contribute to
expenses of preservation of thing owned in
common; Payer in redemption holds lien upon the subject
property until reimbursed
Article 488 of the Civil Code provides that “each co-owner
shall have a right to compel the other coowners to
contribute to the expenses of preservation of the thing or
right owned in common and to the taxes.
Any one of the latter may exempt himself from this
obligation by renouncing so much of his undivided
interest as may be equivalent to his share of the expenses
and taxes. No such waiver shall be made if it is
prejudicial to the co-ownership.” Thus, although Fanesa
did not acquire ownership over the entire lot by
virtue of the redemption she made, nevertheless, she did
acquire the right to be reimbursed for half of the
redemption price she paid to the Provincial Government of
Negros Occidental on behalf of her co-owners.
Until reimbursed, Fanesa holds a lien upon the subject
property for the amount due her.
10. Lease issue not passed on as it is a factual issue;
Factual findings of lower courts final and
conclusive upon the Supreme Court
Donato and Juliana dispute the order of the trial court,
which the Court of Appeals affirmed, for them
to pay Pascual’s children P5,000.00 per year from 1966
until the partition of the estate which represents the
latter’s share in the fruits of the land. According to the
former, the land is being leased for P2,000.00 per year
only. This assigned error, however, raises a factual
question. The settled rule is that only questions of law may
be raised in a petition for review. As a general rule,
findings of fact made by the trial court and the Court of
Appeals are final and conclusive and cannot be reviewed
on appeal.
10. Mindanao Academy vs. Yap [G.R. No. L-17681.
February 26, 1965.]
De Nuqui vs. Yap [G.R. No. L-17682. February 26, 1965]
En Banc, Makalintal (J): 6 concur, 4 took no part
Facts: By deed entitled “Mutual Agreement,” executed on
10 May 1964, Rosenda A. de Nuqui (widow of
Sotero Dionisio) and her son Sotero Dionisio, Jr. sold 3
parcels of residential land in Oroquieta, Misamis
Occidental, and another parcel in Ozamis City in favor of
Ildefonso D. Yap. Included in the sale were certain
buildings situated on said lands as well as laboratory
equipment, books, furniture and fixtures used by 2
schools established in the respective properties: the
Mindanao Academy in Oroquieta and the Misamis
Academy in Ozamis City. The aggregate price stated in the
deed was P100,700.00, to be paid according to the
terms and conditions specified in the contract. Besides
Rosenda and her son Sotero, Jr., both of whom signed
the instrument, Adelaida Dionisio Nuesa (a daughter of
Rosenda, and married to Wilson Nuesa) is also named
therein as co-vendor, but actually did not take part either
personally or through her uncle and supposed
attorney-in-fact, Restituto Abuton. These three (mother
and children) are referred to in the deed as the owners
pro-indiviso of the properties sold. The truth, however,
was that there were other co-owners of the lands,
namely, Erlinda D. Diaz (and Antolin Diaz), Ester Aida D.
Bas (and Mauricio O. Bas), Rosalinda D. Belleza
(and Apolinario Belleza) and Luz Minda D. Dajao (and Elifio
C. Dajao), children also of Rosenda by her
deceased husband Sotero Dionisio, Sr., and that as far as
the school buildings, equipment, books, furniture and
fixtures were concerned, they were owned by the
Mindanao Academy, Inc., a corporation operating both the
Mindanao Academy in Oroquieta and the Misamis
Academy in Ozamis City. The buyer, Ildefonso D. Yap,
obtained possession of the properties by virtue of the sale,
took over the operation of the two schools and even
changed their names to Harvardian Colleges.
Two actions were commenced in the CFI Misamis
Occidental; one for annulment of the sale and recovery of
rents and damages (Civil Case 1774, filed 3 May 1955) with
the Mindanao Academy, Inc., the five children of
Rosenda Nuqui who did not take part in the deed of sale,
and several other persons who were stockholders of
the said corporation (Pedro N. Abuton, Sy Paoco, Josefa
Dignum and Perfecto Velasquez), as plaintiffs, and
the parties who signed the deed of sale as defendants; and
another for rescission (Civil Case 1907, filed 17
July 1956) with Rosenda Nuqui, Sotero Dionisio, Jr. and
Erlinda D. Diaz (and the latter’s husband Antolin
Diaz) as plaintiffs, and Ildefonso D. Yap as lone defendant.
The other 4 children of Rosenda did not join,
having previously ceded and quitclaimed their shares in
the litigated properties in favor of their sister Erlinda
D. Diaz. The actions were tried jointly and on 31 March
1960 the court rendered judgment, declaring the
Mutual Agreement null and void ab initio and ordering
Ildefonso Yap to pay the costs of the proceedings in
both cases. The Court also ordered Yap, in Civil Case 1907,
to restore to the plaintiffs in said case all the
buildings and grounds described in the Mutual Agreement
together with all the permanent improvements
thereon; and to pay to the plaintiffs therein the amount of
P300.00 monthly from 31 July 1956 up to the time
he shall have surrendered the properties in question to the
plaintiffs therein, plus P1,000.00 as attorney’s fees
to plaintiffs Antolin and Erlinda D. Diaz. The Court ordered
Yap, in Civil Case 1774, to restore to the
Mindanao Academy, Inc., all the books, laboratory
apparatus, furniture and other equipments described in
the Mutual Agreement and specified in the Inventory
attached to the Records of this case; or in default thereof,
their value in the amount of P23,500.00; to return all the
Records of the Mindanao Academy and Misamis
Academy; and to pay to the plaintiffs stockholders of the
Mindanao Academy, Inc., the amount of P10,000.00
as nominal damages; P3,000.00 as exemplary damages;
and P2,000.00 as attorney’s fees. These damages
being apportioned to each of the plaintiff-stockholders in
proportion to their respective interests in the
corporation. Ildefonso D. Yap appealed from the
judgment.
The Supreme Court affirmed the judgment appealed from
but modified it by eliminating therefrom the award
of attorney’s fees of P1,000.00 in favor of Erlinda D. Diaz
and her husband, and the award of nominal and
exemplary damages in Civil Case 1774; and making the
award of attorney’s fees in the sum of P2,000.00
payable to counsel for the account of the Mindanao
Academy, Inc. instead of the plaintiff stockholders;
without pronouncement as to costs.
1. Mutual Agreement entirely void and non-existent;
Question on rescission not categorically ruled on
The mutual agreement dated 10 May 1954 is entirely void
and legally non-existent in that the vendors
therein ceded to Yap not only their interest, rights, shares
and participation in the property sold but also those
that belonged to persons who were not parties thereto.
This conclusion is premised on two grounds: (a) the
contract purported to sell properties of which the sellers
were not the only owners, since of the four parcels of
land mentioned in the deed their shares consisted only of
7/12, (6/12: Rosenda Nuqui and 1/12 for Sotero, Jr.),
while in the buildings, laboratory equipment, books,
furniture and fixtures they had no participation at all, the
owner being the Mindanao Academy, Inc.; and (b) the
prestation involved in the sale was indivisible, and
therefore incapable of partial annulment, inasmuch as Yap
would not have entered into the transaction except
to acquire all of the properties purchased by him.
2. No bad faith committed by co-owners who did not take
part in sale
The quitclaim, in the form of an extrajudicial partition, was
made on 6 May 1956, after the action for
annulment was filed, wherein, the plaintiffs were not only
Erlinda but also the other co-owners who took no
part in the sale and to whom there has been no
imputation of bad faith. Further, the trial courts’ finding of
bad faith is an erroneous conclusion induced by a manifest
oversight of an undisputed fact, namely, that on 10
June 1954, just a month after the deed of sale in question,
Erlinda D. Diaz did file an action against Ildefonso
D. Yap and Rosenda Nuqui, among others, asserting her
rights as co-owner of the properties (Case 1646).
Finally, bad faith on the part of Erlinda would not militate
against the nullity of the sale, considering that it
included not only the lands in common by Rosenda Nuqui
and her six children but also the buildings and
school facilities owned by the Mindanao Academy, Inc., an
entity which had nothing to do with the
transaction and which could be represented solely by its
Board of Trustees.
3. Vendor and vendee both in bad faith; treated to have
acted in good faith vis-à-vis each other
Both vendors and vendee in the sale acted in bad faith and
therefore must be treated, vis-a-vis each
other, as having acted in good faith. The return of the
properties by the vendee is a necessary consequence of
the decree of annulment. No part of the purchase price
having been paid, as far as the record shows, the trial
court correctly made no corresponding order for the
restitution thereof. Rosenda Nuqui and her son Sotero, it
is true, acted in bad faith when they sold the properties as
theirs alone; but so did the defendant Yap when he
purchased them with knowledge of the fact that there
were other co-owners. Although the bad faith of one
party neutralizes that of the other and hence as between
themselves their rights would be as if both of them
had acted in good faith at the time of the transaction, this
legal fiction of Yap’s good faith ceased when they
sold the properties as theirs alone.
4. Erlinda Diaz entitled to recover share of rents in
proportion to her own interest; Possessor in
good faith entitled to fruits as long as possession is not
legally interrupted
Prior to the sale, the Mindanao Academy Inc. was paying
P300.00 monthly for its occupancy of the
lands on which the buildings are situated. This is the
amount the defendant has been ordered to pay to the
plaintiffs in Civil Case 1907, beginning 31 July 1956, when
he filed his “first pleading” in the case. There can
be no doubt that Erlinda D. Diaz is entitled to recover a
share of the said rents in proportion to her own
interest in the lands and the interest of her four co-owners
which she had acquired. A possessor in good faith
is entitled to the fruits only so long as his possession is not
legally interrupted, and such interruption takes
place upon service of judicial summons (Arts. 544 and
1123, Civil Code).
5. Award of attorney’s fees to Erlinda Diaz erroneous;
Erlinda had no cause of action for rescission in Civil Case
1907 as she was not party to the agreement. The award of
attorney’s fees to Erlinda D. Diaz and her husband is
erroneous. Civil Case 1907, in which said fees have been
adjudged, is for rescission (more properly resolution) of
the so-called “mutual agreement” on the ground that Yap
failed to comply with certain undertakings specified
therein relative to the payment of the purchase price.
Erlinda Diaz was not a party to that agreement and hence
had no cause of action for rescission. The trial court did
not decide the matter of rescission because of the decree
of annulment it rendered in the other case (Civil Case
1774), wherein the defendants are not only Ildefonso D.
Yap but also Rosenda Nuqui and her son Sotero. Erlinda D.
Diaz could just as well have refrained from joining as
plaintiff in the action for rescission, not being a part to the
contract sought to be rescinded and being already one of
the plaintiffs in the other action. In other words, it cannot
be said with justification that she was constrained to
litigate, in Civil Case 1907, because of some cause
attributable to the appellant.
6. Builder in bad faith not entitled to reimbursement (New
building). Yap claims reimbursement for the value of the
improvements he allegedly introduced in the schools,
consisting of new building worth P8,000.00 and a toilet
costing P800.00, besides laboratory equipment,
furniture, fixtures and books for the libraries. It should be
noted that the judgment of the trial court specifies,
for delivery to the plaintiffs (in Civil Case 1907), only “the
buildings and grounds described in the mutual
agreement together with all the permanent improvements
thereon.” If Yap constructed a new building, he
cannot recover its value because the construction was
done after the filing of the action for annulment, thus
rendering him a builder in bad faith who is denied by law
any right of reimbursement.
7. Equipment, books, furniture and fixture brought in by
him may be retained by him as they are
outside the scope of the judgment
In connection with the equipment, books, furniture and
fixtures brought in by him, he is not entitled
to reimbursement either, because the judgment does not
award them to any of the plaintiffs in the two actions.
What is adjudged (in Civil Case 1774) is for Yap to restore
to the Mindanao Academy, Inc. all the books,
laboratory apparatus, furniture and other equipment
“described in the Mutual Agreement and specified in the
Inventory attached to the records of this case; or in default
thereof, their value in the amount of P23,500.00.”
In other words, whatever has been brought in by the
defendant is outside the scope of the judgment and may
be retained by him.
8. Stockholders not entitled to nominal and exemplary
damages. According to the second amended complaint the
stockholders were joined merely pro forma, and “for
the sole purpose of the moral damage which has been all
the time alleged in the original complaint.” Indeed
the interests of the said stockholders, if any, were already
represented by the corporation itself, which was the
proper party plaintiff; and no cause of action accruing to
them separately from the corporation is alleged in
the complaint, other than that for moral damages due to
“extreme mental anguish, serious anxiety and
wounded feelings.” The trial court, however, ruled out the
claim for moral damages and no appeal from such
ruling has taken. The award for nominal and exemplary
damages should be eliminated in toto.
9. Award for attorney’s fees upheld for the corporation but
not to stockholders
The award for attorney’s fees in the amount of P2,000.00
was upheld, although the same should be
for the account of the corporation and not of the plaintiff
stockholders of the Mindanao Academy, Inc.; and
payable to their common counsel as prayed for in the
complaint.
10. Nullity of contract precludes enforcement of its
stipulation
A warranty clause in the deeds provides that if any claim
shall be filed against the properties or any
right, share or interest which are in the possession of the
party of the vendors which had been hereby
transferred, ceded and conveyed unto the vendee the
vendor assumes as it hereby holds itself answerable. It is
unnecessary to pass upon the question in view of the total
annulment of the sale on grounds concerning which
both parties thereto were at fault. The nullity of the
contract precludes enforcement of any of its stipulations.