1|Sales & Lease HW#3
(1) THIRD DIVISION
[G.R. No. 149750. June 16, 2003]
AURORA ALCANTARA-DAUS, petitioner, vs. Spouses HERMOSO and
SOCORRO DE LEON, respondents.
DECISION
PANGANIBAN,  J.:
While a contract of sale is perfected by mere consent, ownership of the thing
sold is acquired only upon its delivery to the buyer. Upon the perfection of
the sale, the seller assumes the obligation to transfer ownership and to
deliver the thing sold, but the real right of ownership is transferred only by
tradition or delivery thereof to the buyer.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court,
seeking to set aside the February 9, 2001 Decision and the August 31, 2001
Resolution of the Court of Appeals[2](CA) in CA-GR CV No. 47587. The
dispositive portion of the assailed Decision reads as follows:
WHEREFORE, premises considered, the decision of the trial court is
hereby REVERSED, and judgment rendered:
1. Declaring null and void and of no effect, the [D]eed of [A]bsolute [S]ale
dated December 6, 1975, the [D]eed of [E]xtra-judicial [P]artition and
[Q]uitclaim dated July 1, 1985, and T.C.T. No. T-31262;
2. Declaring T.C.T. No. 42238 as valid and binding;
3. Eliminating the award of P5,000.00 each to be paid to defendants-
appellees.[3]
The assailed Resolution[4] denied petitioners Motion for Reconsideration.
The Facts
The antecedents of the case were summarized by the Regional Trial Court
(RTC) and adopted by the CA as follows:
This is a [C]omplaint for annulment of documents and title, ownership,
possession, injunction, preliminary injunction, restraining order and
damages.
[Respondents] alleged in their [C]omplaint that they are the owners of a
parcel of land hereunder described as follows, to wit:
A parcel of land (Lot No. 4786 of the Cadastral Survey of San Manuel)
situated in the Municipality of San Manuel, Bounded on the NW., by Lot No.
4785; and on the SE., by Lot Nos. 11094 & 11096; containing an area of
Four Thousand Two Hundred Twelve (4,212) sq. m., more or less. Covered
by Original Certificate of Title No. 22134 of the Land Records of Pangasinan.
which [Respondent] Hermoso de Leon inherited from his father Marcelino de
Leon by virtue of a [D]eed of [E]xtra-judicial [P]artition. Sometime in the early
1960s, [respondents] engaged the services of the late Atty. Florencio Juan
to take care of the documents of the properties of his parents. Atty. Juan let
them sign voluminous documents. After the death of Atty. Juan, some
documents surfaced and most revealed that their properties had been
conveyed by sale or quitclaim to [Respondent] Hermosos brothers and
sisters, to Atty. Juan and his sisters, when in truth and in fact, no such
conveyances were ever intended by them. His signature in the [D]eed of
[E]xtra-judicial [P]artition with [Q]uitclaim made in favor of x x x Rodolfo de
VILLAR
Leon was forged. They discovered that the land in question was sold by x x
x Rodolfo de Leon to [Petitioner] Aurora Alcantara. They demanded
annulment of the document and reconveyance but defendants refused x x x.
x x x x x x x x x
[Petitioner] Aurora Alcantara-Daus [averred] that she bought the land in
question in good faith and for value on December 6, 1975. [She] has been in
continuous, public, peaceful, open possession over the same and has been
appropriating the produce thereof without objection from anyone.[5]
On August 23, 1994, the RTC (Branch 48) of Urdaneta,
Pangasinan[6] rendered its Decision[7] in favor of herein petitioner. It ruled that
respondents claim was barred by laches, because more than 18 years had
passed since the land was sold. It further ruled that since it was a notarial
document, the Deed of Extrajudicial Partition in favor of Rodolfo de Leon
was presumptively authentic.
Ruling of the Court of Appeals
In reversing the RTC, the CA held that laches did not bar respondents from
pursuing their claim. Notwithstanding the delay, laches is a doctrine in equity
and may not be invoked to resist the enforcement of a legal right.
The appellate court also held that since Rodolfo de Leon was not the owner
of the land at the time of the sale, he could not transfer any land rights to
petitioner. It further declared that the signature of Hermoso de Leon on the
Deed of Extrajudicial Partition and Quitclaim -- upon which petitioner bases
her claim -- was a forgery. It added that under the above circumstances,
petitioner could not be said to be a buyer in good faith.
Hence, this Petition.[8]
The Issues
Petitioner raises the following issues for our consideration:
1. Whether or not the Deed of Absolute Sale dated December 6, 1975
executed by Rodolfo de Leon (deceased) over the land in question in favor
of petitioner was perfected and binding upon the parties therein?
2. Whether or not the evidentiary weight of the Deed of Extrajudicial Partition
with Quitclaim, executed by [R]espondent Hermoso de Leon, Perlita de Leon
and Carlota de Leon in favor of Rodolfo de Leon was overcome by more
than [a] preponderance of evidence of respondents?
3. Whether or not the possession of petitioner including her predecessor-in-
interest Rodolfo de Leon over the land in question was in good faith?
4. And whether or not the instant case initiated and filed by respondents on
February 24, 1993 before the trial court has prescribed and respondents are
guilty of laches?[9]
The Courts Ruling
The Petition has no merit.
First Issue:
Validity of the Deed of Absolute Sale
Petitioner argues that, having been perfected, the Contract of Sale executed
on December 6, 1975 was thus binding upon the parties thereto.
A contract of sale is consensual. It is perfected by mere consent,[10] upon a
meeting of the minds[11] on the offer and the acceptance thereof based on
subject matter, price and terms of payment.[12] At this stage, the sellers
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ownership of the thing sold is not an element in the perfection of the contract
of sale.
The contract, however, creates an obligation on the part of the seller to
transfer ownership and to deliver the subject matter of the contract.[13] It is
during the delivery that the law requires the seller to have the right to
transfer ownership of the thing sold.[14] In general, a perfected contract of
sale cannot be challenged on the ground of the sellers non-ownership of the
thing sold at the time of the perfection of the contract.[15]
Further, even after the contract of sale has been perfected between the
parties, its consummation by delivery is yet another matter. It is through
tradition or delivery that the buyer acquires the real right of ownership over
the thing sold.[16]
Undisputed is the fact that at the time of the sale, Rodolfo de Leon was not
the owner of the land he delivered to petitioner. Thus, the consummation of
the contract and the consequent transfer of ownership would depend on
whether he subsequently acquired ownership of the land in accordance with
Article 1434 of the Civil Code.[17] Therefore, we need to resolve the issue of
the authenticity and the due execution of the Extrajudicial Partition and
Quitclaim in his favor.
Second Issue:
Authenticity of the Extrajudicial Partition
Petitioner contends that the Extrajudicial Partition and Quitclaim is authentic,
because it was notarized and executed in accordance with law. She claims
that there is no clear and convincing evidence to set aside the presumption
of regularity in the issuance of such public document. We disagree.
As a general rule, the due execution and authenticity of a document must be
reasonably established before it may be admitted in evidence.[18] Notarial
documents, however, may be presented in evidence without further proof of
their authenticity, since the certificate of acknowledgment is prima facie
evidence of the execution of the instrument or document involved.[19]To
contradict facts in a notarial document and the presumption of regularity in
its favor, the evidence must be clear, convincing and more than merely
preponderant.[20]
The CA ruled that the signature of Hermoso de Leon on the Extrajudicial
Partition and Quitclaim was forged. However, this factual finding is in conflict
with that of the RTC. While normally this Court does not review factual
issues,[21] this rule does not apply when there is a conflict between the
holdings of the CA and those of the trial court,[22] as in the present case.
After poring over the records, we find no reason to reverse the factual finding
of the appellate court. A comparison of the genuine signatures of Hermoso
de Leon[23] with his purported signature on the Deed of Extrajudicial Partition
with Quitclaim[24] will readily reveal that the latter is a forgery. As aptly held
by the CA, such variance cannot be attributed to the age or the mechanical
acts of the person signing.[25]
Without the corroborative testimony of the attesting witnesses, the lone
account of the notary regarding the due execution of the Deed is insufficient
to sustain the authenticity of this document. He can hardly be expected to
dispute the authenticity of the very Deed he notarized.[26] For this reason, his
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testimony was -- as it should be --minutely scrutinized by the appellate court,
and was found wanting.
Third Issue:
Possession in Good Faith
Petitioner claims that her possession of the land is in good faith and that,
consequently, she has acquired ownership thereof by virtue of
prescription. We are not persuaded.
It is well-settled that no title to registered land in derogation of that of the
registered owner shall be acquired by prescription or adverse possession.
[27]
 Neither can prescription be allowed against the hereditary successors of
the registered owner, because they merely step into the shoes of the
decedent and are merely the continuation of the personality of their
predecessor in interest.[28] Consequently, since a certificate of
registration[29] covers it, the disputed land cannot be acquired by prescription
regardless of petitioners good faith.
Fourth Issue:
Prescription of Action and Laches
Petitioner also argues that the right to recover ownership has prescribed,
and that respondents are guilty of laches. Again, we disagree.
Article 1141 of the New Civil Code provides that real actions over immovable
properties prescribe after thirty years. This period for filing an action is
interrupted when a complaint is filed in court.[30] Rodolfo de Leon alleged that
the land had been allocated to him by his brother Hermoso de Leon in March
1963,[31] but that the Deed of Extrajudicial Partition assigning the contested
land to the latter was executed only on September 16, 1963.[32] In any case,
the Complaint to recover the land from petitioner was filed on February 24,
1993,[33] which was within the 30-year prescriptive period.
On the claim of laches, we find no reason to reverse the ruling of the
CA. Laches is based upon equity and the public policy of discouraging stale
claims.[34] Since laches is an equitable doctrine, its application is controlled
by equitable considerations.[35] It cannot be used to defeat justice or to
perpetuate fraud and injustice.[36] Thus, the assertion of laches to thwart the
claim of respondents is foreclosed, because the Deed upon which petitioner
bases her claim is a forgery.
WHEREFORE, the Petition is DENIED and the assailed
Decision AFFIRMED. Costs against petitioner.
SO ORDERED.
Puno, (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales,
JJ.,  concur.
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(2) FIRST DIVISION
G.R. No. L-43059 October 11, 1979
SAMPAGUITA PICTURES, INC., plaintiff-appellant,  as the highest bidder for P6,000.00.
vs.
JALWINDOR MANUFACTURERS, INC., defendant-appellee.
DE CASTRO, J:
This case was certified to this Court by the Court of Appeals pursuant to the
provisions of Section 17, paragraph (6) in relation to Section 31 of the
Judiciary Act of 1948.
Plaintiff-appellant Sampaguita Pictures, Inc. (hereinafter referred to as
Sampaguita) is the owner of the Sampaguita Pictures Building located at the
corner of General Araneta and General Roxas Streets, Cubao, Quezon City.
The roofdeck of the building and all existing improvements thereon were
leased by Sampaguita to Capitol "300" Inc. (Capitol for short), and it was
agreed, among other things, that the premises shall be used by said club for
social purposes exclusively for its members and guests; that all permanent
improvements made by the lessee on the leased premises shall belong to
the lessor without any obligation on the part of the lessor to reimburse the
lessee for the sum spent for said improvements; that the improvements
made by lessee have been considered as part of the consideration of the
monthly rental and said improvements belong to the lessor; that any
remodelling, alterations and/or addition to the premises shall be at the
expense of the lessee and such improvements belong to the lessor, without
any obligation to reimburse the lessee of any sum spent for said
improvements. (pp. 29-32, Record on Appeal).
Capitol "300" purchased on credit from defendant-appellee Jalwindor
Manufacturers, Inc. (hereinafter referred to as Jalwindor) glass and wooden
jalousies which were delivered and installed in the leased premises by
Jalwindor replacing the existing windows. On June 1, 1964, Jalwindor filed
with the Court of First Instance of Rizal, Quezon City, an action for collection
of a sum of money with a petition for preliminary attachment against Capitol
for its failure to pay its purchases. The parties submitted to the trial court a
Compromise Agreement wherein Capitol acknowledged its indebtedness to
Jalwindor in the amount of P9,531.09, exclusive of attorney's fees and
interest, payable in monthly installments of at least P300.00 a month
beginning December 15, 1964; and pending liquidation of the said obligation,
all the materials purchased by Capitol will be considered as security for such
undertaking. (p. 13, Record on Appeal).
In the meantime, Capitol "300" was not able to pay rentals to Sampaguita
from March 1, 1964 to April 30, 1965, water, electric and telephone services.
Sampaguita filed a complaint for ejectment and for collection of a sum of
money against Capitol and on June 8, 1965, the City Court of Quezon City
rendered judgment ordering Capitol to vacate the premises and to pay
Sampaguita.
On the other hand, Capitol likewise failed to comply with the terms of the
Compromise Agreement, and on July 31, 1965, the Sheriff of Quezon City
made levy on the glass and wooden jalousies in question. Sampaguita filed
a third party claim alleging that it is the owner of said materials and not
VILLAR
Capitol, Jalwindor however, filed an indemnity bond in favor of the Sheriff
and the items were sold et public auction on August 30, 1965 with Jalwindor
Sampaguita filed with the Court of First Instance of Rizal, Branch IV of
Quezon City, an action to nullify the Sheriff's Sale and for the issuance of a
writ of preliminary injunction against Jalwindor from detaching the glass and
wooden jalousies. Jalwindor was ordered to maintain the status quo pending
final determination of the case. No actual hearing was held and the parties
submitted the following stipulation of facts for the consideration of the court.
1. That plaintiff and defendant are both domestic corporations duly
organized and existing by and under the laws of the Philippines:
2. That plaintiff leased to the CAPITOL "300", Inc. the roofdeck of the
Sampaguita building and all the existing improvements thereon for a
monthly, rental of P650.00; that the parties to the lease contract agreed that
all permanent improvements made by the lessee on the leased premises
shall belong to the lessor without any obligation on the part of the lessor to
reimburse the lessee for the sum spent for said improvements; that it was
agreed upon by the parties that the improvements made by the lessee have
been considered as part of the consideration of the monthly rental;
3. That CAPITOL "300", Inc. made alterations on the leased premises; that it
removed the then existing windows and replaced 'them with the following
items bought on credit from the JALWINDOR MANUFACTURERS INC..
valued at P9,531.09, to wit:
J-21(lever-type) Solex Bluepane
Glass Jaluosies
11 Sets 15'-1 3/4" x 47-7/8" (5 units)
4 Sets 13'-5 3/4" x 47-7/8" (5 units)
3 Sets 10'-9 3/4" x 47-7/7" (4 units)
2 Sets 18'-1 3/3" x 56-3/8" (6 units)
1 Set 9'-1 3/4" x 65-3/8" (3 units)
115 Pcs. Roto Operators for J-21
MODEL J-21 (Roto-type) Glass
and Wood Jalousies
8 Sets 32-1/2" x 60" Solex Bluepane
19 Sets 31-1/4" x 48" Solex Bluepane
18 Sets 34" x 48" Wood
4. That after the CAPITOL "300", Inc. failed to pay the price of the items
mentioned in the preceding paragraph, JALWINDOR MANUFACTURERS,
Inc, filed a case for collection of a sum of money against CAPITOL "300",
Inc. with the Court of First Instance of Rizal (Branch IV Quezon City), Civil
Case No. Q-8040; that by virtue of a Compromise Agreement, CAPITOL
"300", Inc. acknowledged indebtedness in favor of JALWINDOR in the
amount of P9,531,09, with a stipulation in the said Compromise Agreement,
that the items forming part of the improvements will form as security for such
an undertaking;
5. That due to non-compliance by CAPITOL "300", Inc., JALWINDOR
executed judgment that the Sheriff of Quezon City made levy on the items
above-stated in paragraph 3 hereof and sold them at a public auction to
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JALWINDOR MANUFACTURERS, INC. as the highest bidder, on August
30, 1965, for the total amount of P 6,000.00:
6. That after CAPITOL "300", Inc. failed to pay the rentals in arrears from
March 1, 1964 to April 30, 1965, water, electric and telephone services
amounting to P 10,772.90, the plaintiff SAMPAGUITA PICTURES, INC. filed
with the City Court of Quezon City, Civil Case No. 11-13161 for ejectment
and collection of a sum of money against the CAPITOL "300", Inc,; that the
City Court rendered judgment in favor of the Sampaguita Pictures, Inc., on
June 8, 1965, ordering the CAPITOL "300", Inc. to vacate the premises
located at the Sampaguita Building and to pay the Sampaguita Pictures,
Inc.;
7. That after the Sheriff of Quezon City made levy on the items above-stated
in paragraph 3 hereof situated on the roofdeck of the Sampaguita Building,
plaintiff filed a Third Party Claim stated in its affidavit on the ground of its
right and title to the possession of the items and that CAPITOL "300", Inc.
has no right or title whatsoever to the possession over said items; that
defendant filed a bond to indemnify the Sheriff against the claim, and the
Sheriff sold the items to the defendant; that the JALWINDOR
MANUFACTURERS, Inc., being the highest bidder and the execution
creditor, considered itself paid to the amount of P6,000.00;
8. That the parties herein agree that the matter of attorney's fees be left to
the sound discretion of the Court, which shall not be less than P500.00.
(Record on Appeal, pp. 11-14).
On October 20, 1967, based on said Stipulation of Facts, the lower court
dismissed the complaint and ordered Sampaguita to pay Jalwindor the
amount of P500.00 as attorney's fees. Sampaguita filed a motion for
reconsideration which was likewise denied, hence, the instant appeal.
Petitioner-appellant raised the following assignment of errors:
I upon by the sheriff pursuant to a writ of execution is claimed by a third
The lower court erred in holding that Capitol "300" Inc. could not legally
transfer or assign the glass and wooden jalousies in question to the plaintiff-
appellant.
II
The lower court erred in not holding that plaintiff-appellant was the rightful
owner of the glass and wooden jalousies when they were sold by the Sheriff
at the public auction,
III
The lower court erred in not declaring as null and void the levy on execution
and the Sheriff's sale at public auction of the glass and wooden jalousies.
IV
The lower court erred in holding that defendant-appellee became the rightful
owner of the glass and wooden jalousies.
When the glass and wooden jalousies in question were delivered and
installed in the leased premises, Capitol became the owner thereof.
Ownership is not transferred by perfection of the contract but by delivery,
either actual or constructive. This is true even if the purchase has been
made on credit, as in the case at bar. Payment of the purchase price is not
essential to the transfer of ownership as long as the property sold has been
VILLAR
delivered. Ownership is acquired from the moment the thing sold was
delivered to vendee, as when it is placed in his control and possession.
(Arts. 1477, 1496 and 1497, Civil Code of the Phil.)
Capitol entered into a lease Contract with Sampaguita in 1964, and the latter
became the owner of the items in question by virtue of the agreement in said
contract "that all permanent improvements made by lessee shall belong to
the lessor and that said improvements have been considered as part of the
monthly rentals." When levy or said items was made on July 31, 1965,
Capitol, the judgment debtor, was no longer the owner thereof.
The action taken by Sampaguita to protect its interest is sanctioned by
Section 17, Rule 39 of the Rules of Court, which reads:
Section 17, Proceedings where property claimed by third person.
... The officer is not liable for damages for the taking or keeping of the
property to any third-party claimant unless a claim is made by the latter and
unless an action for damages is brought by him against the officer within one
hundred twenty (120) days from the date of the filing of the bond. But
nothing herein contained shall prevent claimant from vindicating his claim to
the property by any action.
It is, likewise, recignized in the case of Bayer Phil., Inc. vs. Agana, et al., 63
SCRA 358, wherein the Court declared, "that the rights of third party
claimants over certain properties levied upon by the sheriff to satisfy the
judgment, may not be taken up in the case where such claims are presented
but in a separate and independent action instituted by claimants. ... and
should a third-party appear to claim is denied, the remedy contemplated by
the rules in the filing by said party of a reinvicatiry action against the
execution creditor or the purchaser of the property after the sale is
completed or that a complaint for damages to be charged against the bond
filed by the creditor in favor of the sheriff. ... Thus, when a property levied
person in a sworn statement of ownership thereof, as prescribed by the
rules, an entirely different matter calling for a new adjudication arises."
The items in question were illegally levied upon since they do not belong to
the judgemnt debtor. The power of the Court in execution of judgment
extends only to properties unquestionably belonging to the judgment debtor.
The fact that Capitol failed to pay Jalwindor the purchase price of the items
levied upon did not prevent the transfer of ownership to Capitol. The
complaint of Sampaguita to nullify the Sheriff's sale well-founded, and should
prosper. Execution sales affect the rights of judgment debtor only, and the
purchaser in the auction sale acquires only the right as the debtor has at the
time of sale. Since the items already belong to Sampaguita and not to
Capitol, the judgment debtor, the levy and auction sale are, accordingly, null
and void. It is well-settled in this jurisdiction that the sheriff is not authorized
to attach property not belonging to the judgment debtor. (Arabay, Inc. vs.
Salvador, et al., 3 PHILAJUR, 413 [1978], Herald Publishing vs. Ramos, 88
Phil. 94, 100).
WHEREFORE, the decision appealed from is hereby reversed, and plaintiff-
appellant Sampaguita is declared the lawful owner of the disputed glass and
wooden jalousies. Defendant-appellee Jalwindor is permanently enjoined
5|Sales & Lease HW#3
from detaching said items from the roofdeck of the Sampaguita Pictures
Building, and is also ordered to pay plaintiff-appellant the sum of P1,000.00
for and as attorney's fees, and costs.
SO ORDERED.
Teehankee, Actg. C.J., (Chairman), Makasiar, Fernan, Guerrero and
Melencio-Herrera, JJ., concur.
(3) SECOND DIVISION
G.R. No. 91029             February 7, 1991
NORKIS DISTRIBUTORS, INC., petitioner,  On March 20, 1980, DBP released the proceeds of private respondent's
vs.
THE COURT OF APPEALS & ALBERTO NEPALES, respondents.
Jose D. Palma for petitioner.
Public Attorney's Office for private respondent.
GRIÑO-AQUINO, J.:
Subject of this petition for review is the decision of the Court of Appeals
(Seventeenth Division) in CA-G.R. No. 09149, affirming with modification the
judgment of the Regional Trial Court, Sixth (6th) Judicial Region, Branch
LVI. Himamaylan, Negros Occidental, in Civil Case No. 1272, which was
private respondent Alberto Nepales' action for specific performance of a
contract of sale with damages against petitioner Norkis Distributors, Inc.
The facts borne out by the record are as follows:
Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the distributor of
Yamaha motorcycles in Negros Occidental with office in Bacolod City with
Avelino Labajo as its Branch Manager. On September 20, 1979, private
respondent Alberto Nepales bought from the Norkis-Bacolod branch a brand
new Yamaha Wonderbike motorcycle Model YL2DX with Engine No. L2-
329401K Frame No. NL2-0329401, Color Maroon, then displayed in the
Norkis showroom. The price of P7,500.00 was payable by means of a Letter
of Guaranty from the Development Bank of the Philippines (DBP),
Kabankalan Branch, which Norkis' Branch Manager Labajo agreed to
accept. Hence, credit was extended to Nepales for the price of the
motorcycle payable by DBP upon release of his motorcycle loan. As security
for the loan, Nepales would execute a chattel mortgage on the motorcycle in
favor of DBP. Branch Manager Labajo issued Norkis Sales Invoice No. 0120
(Exh.1) showing that the contract of sale of the motorcycle had been
perfected. Nepales signed the sales invoice to signify his conformity with the
terms of the sale. In the meantime, however, the motorcycle remained in
Norkis' possession.
On November 6, 1979, the motorcycle was registered in the Land
Transportation Commission in the name of Alberto Nepales. A registration
certificate (Exh. 2) in his name was issued by the Land Transportation
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Commission on November 6, 1979 (Exh. 2-b). The registration fees were
paid by him, evidenced by an official receipt, Exhibit 3.
On January 22, 1980, the motorcycle was delivered to a certain Julian
Nepales who was allegedly the agent of Alberto Nepales but the latter
denies it (p. 15, t.s.n., August 2, 1984). The record shows that Alberto and
Julian Nepales presented the unit to DBP's Appraiser-Investigator Ernesto
Arriesta at the DBP offices in Kabankalan, Negros Occidental Branch (p.
12, Rollo). The motorcycle met an accident on February 3, 1980 at
Binalbagan, Negros Occidental. An investigation conducted by the DBP
revealed that the unit was being driven by a certain Zacarias Payba at the
time of the accident (p. 33, Rollo). The unit was a total wreck (p. 36, t.s.n.,
August 2,1984; p. 13, Rollo), was returned, and stored inside Norkis'
warehouse.
motorcycle loan to Norkis in the total sum of P7,500. As the price of the
motorcycle later increased to P7,828 in March, 1980, Nepales paid the
difference of P328 (p. 13, Rollo) and demanded the delivery of the
motorcycle. When Norkis could not deliver, he filed an action for specific
performance with damages against Norkis in the Regional Trial Court of
Himamaylan, Negros Occidental, Sixth (6th) Judicial Region, Branch LVI,
where it was docketed as Civil Case No. 1272. He alleged that Norkis failed
to deliver the motorcycle which he purchased, thereby causing him
damages.
Norkis answered that the motorcycle had already been delivered to private
respondent before the accident, hence, the risk of loss or damage had to be
borne by him as owner of the unit.
After trial on the merits, the lower court rendered a decision dated August
27, 1985 ruling in favor of private respondent (p. 28, Rollo.) thus:
WHEREFORE, judgment is rendered in favor of the plaintiff and against the
defendants. The defendants are ordered to pay solidarity to the plaintiff the
present value of the motorcycle which was totally destroyed, plus interest
equivalent to what the Kabankalan Sub-Branch of the Development Bank of
the Philippines will have to charge the plaintiff on fits account, plus P50.00
per day from February 3, 1980 until full payment of the said present value of
the motorcycle, plus P1,000.00 as exemplary damages, and costs of the
litigation. In lieu of paying the present value of the motorcycle, the
defendants can deliver to the plaintiff a brand-new motorcycle of the same
brand, kind, and quality as the one which was totally destroyed in their
possession last February 3, 1980. (pp. 28-29, Rollo.)
On appeal, the Court of appeals affirmed the appealed judgment on August
21, 1989, but deleted the award of damages "in the amount of Fifty (P50.00)
Pesos a day from February 3, 1980 until payment of the present value of the
damaged vehicle" (p35, Rollo). The Court of Appeals denied Norkis' motion
for reconsideration. Hence, this Petition for Review.
The principal issue in this case is who should bear the loss of the
motorcycle. The answer to this question would depend on whether there had
already been a transfer of ownership of the motorcycle to private respondent
at the time it was destroyed.
6|Sales & Lease HW#3
Norkis' theory is that:
. . . After the contract of sale has been perfected (Art. 1475) and even before
delivery, that is, even before the ownership is transferred to the vendee, the
risk of loss is shifted from the vendor to the vendee. Under Art. 1262, the
obligation of the vendor to deliver a determinate thing becomes extinguished
if the thing is lost by fortuitous event (Art. 1174), that is, without the fault or
fraud of the vendor and before he has incurred in delay (Art. 11 65, par. 3). If
the thing sold is generic, the loss or destruction does not extinguish the
obligation (Art. 1263). A thing is determinate when it is particularly
designated or physically segregated from all others of the same class (Art.
1460). Thus, the vendor becomes released from his obligation to deliver the
determinate thing sold while the vendee's obligation to pay the price
subsists. If the vendee had paid the price in advance the vendor may retain
the same. The legal effect, therefore, is that the vendee assumes the risk of
loss by fortuitous event (Art. 1262) after the perfection of the contract to the
time of delivery. (Civil Code of the Philippines, Ambrosio Padilla, Vol. 5,1987
Ed., p. 87.)
Norkis concedes that there was no "actual" delivery of the vehicle. However,
it insists that there was constructive delivery of the unit upon: (1) the
issuance of the Sales Invoice No. 0120 (Exh. 1) in the name of the private
respondent and the affixing of his signature thereon; (2) the registration of
the vehicle on November 6, 1979 with the Land Transportation Commission
in private respondent's name (Exh. 2); and (3) the issuance of official receipt
(Exh. 3) for payment of registration fees (p. 33, Rollo).
That argument is not well taken. As pointed out by the private respondent,
the issuance of a sales invoice does not prove transfer of ownership of the
thing sold to the buyer. An invoice is nothing more than a detailed statement
of the nature, quantity and cost of the thing sold and has been considered
not a bill of sale (Am. Jur. 2nd Ed., Vol. 67, p. 378).
In all forms of delivery, it is necessary that the act of delivery whether
constructive or actual, be coupled with the intention of delivering the thing.
The act, without the intention, is insufficient (De Leon, Comments and Cases
on Sales, 1978 Ed., citing Manresa, p. 94).
When the motorcycle was registered by Norkis in the name of private
respondent, Norkis did not intend yet to transfer the title or ownership to
Nepales, but only to facilitate the execution of a chattel mortgage in favor of
the DBP for the release of the buyer's motorcycle loan. The Letter of
Guarantee (Exh. 5) issued by the DBP, reveals that the execution in its favor
of a chattel mortgage over the purchased vehicle is a pre-requisite for the
approval of the buyer's loan. If Norkis would not accede to that arrangement,
DBP would not approve private respondent's loan application and,
consequently, there would be no sale.
In other words, the critical factor in the different modes of effecting delivery,
which gives legal effect to the act, is the actual intention of the vendor to
deliver, and its acceptance by the vendee. Without that intention, there is no
tradition (Abuan vs. Garcia, 14 SCRA 759).
In the case of Addison vs. Felix and Tioco (38 Phil. 404, 408), this Court
held:
VILLAR
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 riot been effects .
(Emphasis supplied.)
The Court of Appeals correctly ruled that the purpose of the execution of the
sales invoice dated September 20, 1979 (Exh. B) and the registration of the
vehicle in the name of plaintiff-appellee (private respondent) with the Land
Registration Commission (Exhibit C) was not to transfer to Nepales the
ownership and dominion over the motorcycle, but only to comply with the
requirements of the Development Bank of the Philippines for processing
private respondent's motorcycle loan. On March 20, 1980, before private
respondent's loan was released and before he even paid Norkis, the
motorcycle had already figured in an accident while driven by one Zacarias
Payba. Payba was not shown by Norkis to be a representative or relative of
private respondent. The latter's supposed relative, who allegedly took
possession of the vehicle from Norkis did not explain how Payba got hold of
the vehicle on February 3, 1980. Norkis' claim that Julian Nepales was
acting as Alberto's agent when he allegedly took delivery of the motorcycle
(p. 20, Appellants' Brief), is controverted by the latter. Alberto denied having
authorized Julian Nepales to get the motorcycle from Norkis Distributors or
to enter into any transaction with Norkis relative to said motorcycle. (p. 5,
t.s.n., February 6, 1985). This circumstances more than amply rebut the
disputable presumption of delivery upon which Norkis anchors its defense to
Nepales' action (pp. 33-34, Rollo).
Article 1496 of the Civil Code which provides that "in the absence of an
express assumption of risk by the buyer, the things sold remain at seller's
risk until the ownership thereof is transferred to the buyer," is applicable to
this case, for there was neither an actual nor constructive delivery of the
thing sold, hence, the risk of loss should be borne by the seller, Norkis,
which was still the owner and possessor of the motorcycle when it was
wrecked. This is in accordance with the well-known doctrine of res perit
domino.
7|Sales & Lease HW#3
WHEREFORE, finding no reversible error in the decision of the Court of
Appeals in CA-G.R. No. 09149, we deny the petition for review and hereby
affirm the appealed decision, with costs against the petitioner.
SO ORDERED.
Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.
(4) EN BANC
G.R. No. L-12342            August 3, 1918
A. A. ADDISON, plaintiff-appellant,  possession of one Juan Villafuerte, who claimed to be the owner of the parts
vs.
MARCIANA FELIX and BALBINO TIOCO, defendants-appellees.
Thos. D. Aitken for appellant.
Modesto Reyes and Eliseo Ymzon for appellees.
FISHER, J.:
By a public instrument dated June 11, 1914, the plaintiff sold to the
defendant Marciana Felix, with the consent of her husband, the defendant
Balbino Tioco, four parcels of land, described in the instrument. The
defendant Felix paid, at the time of the execution of the deed, the sum of
P3,000 on account of the purchase price, and bound herself to pay the
remainder in installments, the first of P2,000 on July 15, 1914, and 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 coconut tree in bearing and P5 for each such tree
not in bearing, that might be growing on said four 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 the purchaser was to deliver to
the vendor 25 per centum 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."
It was also covenanted that "within one year from the date of the certificate
of title in favor of Marciana Felix, this latter may rescind the present contract
of purchase and sale, in which case Marciana Felix shall be obliged to return
to me, A. A. Addison, the net value of all the products of the four parcels
sold, and I shall obliged to return to her, Marciana Felix, all the sums that
she may have paid me, together with interest at the rate of 10 per cent per
annum."
In January, 1915, the vendor, A. A. Addison, filed suit in Court of First
Instance of Manila to compel Marciana Felix to make payment of the first
installment of P2,000, demandable in accordance with the terms of the
contract of sale aforementioned, on July 15, 1914, and of the interest in
arrears, at the stipulated rate of 8 per cent per annum. The defendant, jointly
with her husband, answered the complaint and alleged by way of special
defense that the plaintiff had absolutely failed to deliver to the defendant the
lands that were the subject matter of the sale, notwithstanding the demands
VILLAR
made upon him for this purpose. She therefore asked that she be absolved
from the complaint, and that, after a declaration of the rescission of the
contract of the purchase and sale of said lands, the plaintiff be ordered to
refund the P3,000 that had been paid to him on account, together with the
interest agreed upon, and to pay an indemnity for the losses and damages
which the defendant alleged she had suffered through the plaintiff's non-
fulfillment of the contract.
The evidence adduced shows that after the execution of the deed of the sale
the plaintiff, at the request of the purchaser, went to Lucena, accompanied
by a representative of the latter, for the purpose of designating and
delivering the lands sold. He was able to designate only two of the four
parcels, and more than two-thirds of these two were found to be in the
so occupied by him. The plaintiff admitted that the purchaser would have to
bring suit to obtain possession of the land (sten. notes, record, p. 5). In
August, 1914, the surveyor Santamaria went to Lucena, at the request of the
plaintiff and accompanied by him, in order to survey the land sold to the
defendant; but he surveyed only two parcels, which are those occupied
mainly by the brothers Leon and Julio Villafuerte. He did not survey the other
parcels, as they were not designated to him by the plaintiff. In order to make
this survey it was necessary to obtain from the Land Court a writ of
injunction against the occupants, and for the purpose of the issuance of this
writ the defendant, in June, 1914, filed an application with the Land Court for
the registration in her name of four parcels of land described in the deed of
sale executed in her favor by the plaintiff. The proceedings in the matter of
this application were subsequently dismissed, for failure to present the
required plans within the period of the time allowed for the purpose.
The trial court rendered judgment in behalf of the defendant, holding the
contract of sale to be rescinded and ordering the return to the plaintiff the
P3,000 paid on account of the price, together with interest thereon at the
rate of 10 per cent per annum. From this judgment the plaintiff appealed.
In decreeing the rescission of the contract, the trial judge rested his
conclusion solely on the indisputable fact that up to that time the lands sold
had not been registered in accordance with the Torrens system, and on the
terms of the second paragraph of clause (h) of the contract, whereby it is
stipulated that ". . . within one year from the date of the certificate of title in
favor of Marciana Felix, this latter may rescind the present contract of
purchase and sale . . . ."
The appellant objects, and rightly, that the cross-complaint is not founded on
the hypothesis of the conventional rescission relied upon by the court, but on
the failure to deliver the land sold. He argues that the right to rescind the
contract by virtue of the special agreement not only did not exist from the
moment of the execution of the contract up to one year after the registration
of the land, but does not accrue until the land is registered. The wording of
the clause, in fact, substantiates the contention. The one year's deliberation
granted to the purchaser was to be counted "from the date of the certificate
of title ... ." Therefore the right to elect to rescind the contract was subject to
a condition, namely, the issuance of the title. The record show that up to the
8|Sales & Lease HW#3
present time that condition has not been fulfilled; consequently the
defendant cannot be heard to invoke a right which depends on the existence
of that condition. If in the cross-complaint it had been alleged that the
fulfillment of the condition was impossible for reasons imputable to the
plaintiff, and if this allegation had been proven, perhaps the condition would
have been considered as fulfilled (arts. 1117, 1118, and 1119, Civ. Code);
but this issue was not presented in the defendant's answer.
However, although we are not in agreement with the reasoning found in the
decision appealed from, we consider it to be correct in its result. The record
shows that the plaintiff did not deliver the thing sold. With respect to two of
the parcels of land, he was not even able to show them to the purchaser;
and as regards the other two, more than two-thirds of their area was in the
hostile and adverse possession of a third person.
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." (Civ. Code, art. 1462.) It is true that the same
article declares that the execution of a public instruments 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.
As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on
article 1604 of the French Civil code, "the word "delivery" expresses a
complex idea . . . the abandonment of the thing by the person who makes
the delivery and the taking control of it by the person to whom the delivery is
made."
The execution of a public instrument is sufficient for the purposes of the
abandonment made by the vendor; but it is not always sufficient to permit of
the apprehension of the thing by the purchaser.
The supreme court of Spain, interpreting article 1462 of the Civil Code, held
in its decision of November 10, 1903, (Civ. Rep., vol. 96, p. 560) that this
article "merely declares that when the sale is made through the means of a
public instrument, the execution of this latter is equivalent to the delivery of
the thing sold: which does not and cannot mean that this fictitious tradition
necessarily implies the real tradition of the thing sold, for it is incontrovertible
that, while its ownership still pertains to the vendor (and with greater reason
if it does not), a third person may be in possession of the same thing;
wherefore, though, as a general rule, he who purchases by means of a
VILLAR
public instrument should be deemed . . . to be the possessor in fact, yet this
presumption gives way before proof to the contrary."
It is evident, then, in the case at bar, that the mere execution of the
instrument was not a fulfillment of the vendors' 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. (Civ. Code, arts. 1506 and 1124.)
Of course if the sale had been made under the express agreement of
imposing upon the purchaser the obligation to take the necessary steps to
obtain the material possession of the thing sold, and it were proven that she
knew that the thing was in the possession of a third person claiming to have
property rights therein, such agreement would be perfectly valid. But there is
nothing in the instrument which would indicate, even implicitly, that such was
the agreement. It is true, as the appellant argues, that the obligation was
incumbent upon the defendant Marciana Felix to apply for and obtain the
registration of the land in the new registry of property; but from this it cannot
be concluded that she had to await the final decision of the Court of Land
Registration, in order to be able to enjoy the property sold. On the contrary, it
was expressly stipulated in the contract that the purchaser should deliver to
the vendor one-fourth "of the products ... of the aforesaid four parcels from
the moment when she takes possession of them until the Torrens certificate
of title be issued in her favor." This obviously shows that it was not forseen
that the purchaser might be deprived of her possession during the course of
the registration proceedings, but that the transaction rested on the
assumption that she was to have, during said period, the material
possession and enjoyment of the four parcels of land.
Inasmuch as the rescission is made by virtue of the provisions of law and not
by contractual agreement, it is not the conventional but the legal interest that
is demandable.
It is therefore held that the contract of purchase and sale entered into by and
between the plaintiff and the defendant on June 11, 1914, is rescinded, and
the plaintiff is ordered to make restitution of the sum of P3,000 received by
him on account of the price of the sale, together with interest thereon at the
legal rate of 6 per annum from the date of the filing of the complaint until
payment, with the costs of both instances against the appellant. So ordered.
Torres, Johnson, Street, Malcolm and Avanceña, JJ., concur.
(5) THIRD DIVISION
[G.R. No. 151212. September 10, 2003]
9|Sales & Lease HW#3
TEN FORTY REALTY AND DEVELOPMENT CORP., Represented by its
President, VERONICA G. LORENZANA, petitioner, vs. MARINA
CRUZ, respondent.
DECISION
PANGANIBAN, J.:
In an ejectment suit, the question of ownership may be provisionally ruled
upon for the sole purpose of determining who is entitled to possession de
facto. In the present case, both parties base their alleged right to possess on
their right to own. Hence, the Court of Appeals did not err in passing upon
the question of ownership to be able to decide who was entitled to physical
possession of the disputed land.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court,
seeking to nullify the August 31, 2001 Decision[2] and December 19, 2001
Resolution[3] of the Court of Appeals (CA) in CA- GR SP No. 64861. The
dispositive portion of the assailed Decision is as follows:
WHEREFORE, premises considered, the petition is hereby DISMISSED and
the Decision dated May 4, 2001 is hereby AFFIRMED.[4]
The assailed Resolution denied petitioner's Motion for Reconsideration.
The Facts
The facts of the case are narrated by the CA as follows:
A complaint for ejectment was filed by [Petitioner Ten Forty Realty and
Development Corporation] against x x x [Respondent Marina Cruz] before
the Municipal Trial Court in Cities (MTCC) of Olongapo City, docketed as
Civil Case 4269, which alleged that: petitioner is the true and absolute owner
of a parcel of lot and residential house situated in #71 18th Street, E.B.B.
Olongapo City, particularly described as:
A parcel of residential house and lot situated in the above-mentioned
address containing an area of 324 square meters more or less bounded on
the Northeast by 041 (Lot 255, Ts-308); on the Southeast by 044 (Lot 255,
Ts-308); on the Southwest by 043 (Lot 226-A & 18th street) and on the
Northwest by 045 (Lot 227, Ts-308) and declared for taxation purposes in
the name of [petitioner] under T.D. No. 002-4595-R and 002-4596.
having acquired the same on December 5, 1996 from Barbara Galino by
virtue of a Deed of Absolute Sale; the sale was acknowledged by said
Barbara Galino through a 'Katunayan'; payment of the capital gains tax for
the transfer of the property was evidenced by a Certification Authorizing
Registration issued by the Bureau of Internal Revenue; petitioner came to
know that Barbara Galino sold the same property on April 24, 1998 to Cruz,
who immediately occupied the property and which occupation was merely
tolerated by petitioner; on October 16, 1998, a complaint for ejectment was
filed with the Barangay East Bajac-Bajac, Olongapo City but for failure to
arrive at an amicable settlement, a Certificate to File Action was issued; on
April 12, 1999 a demand letter was sent to [respondent] to vacate and pay
reasonable amount for the use and occupation of the same, but was ignored
by the latter; and due to the refusal of [respondent] to vacate the premises,
petitioner was constrained to secure the services of a counsel for an agreed
VILLAR
fee of P5,000.00 as attorneys fee and P500.00 as appearance fee and
incurred an expense of P5,000.00 for litigation.
In respondents Answer with Counterclaim, it was alleged that: petitioner is
not qualified to own the residential lot in dispute, being a public land;
according to Barbara Galino, she did not sell her house and lot to petitioner
but merely obtained a loan from Veronica Lorenzana; the payment of the
capital gains tax does not necessarily show that the Deed of Absolute Sale
was at that time already in existence; the court has no jurisdiction over the
subject matter because the complaint was filed beyond the one (1) year
period after the alleged unlawful deprivation of possession; there is no
allegation that petitioner had been in prior possession of the premises and
the same was lost thru force, stealth or violence; evidence will show that it
was Barbara Galino who was in possession at the time of the sale and
vacated the property in favor of respondent; never was there an occasion
when petitioner occupied a portion of the premises, before respondent
occupied the lot in April 1998, she caused the cancellation of the tax
declaration in the name of Barbara Galino and a new one issued in
respondents name; petitioner obtained its tax declaration over the same
property on November 3, 1998, seven (7) months [after] the respondent
[obtained hers]; at the time the house and lot [were] bought by respondent,
the house was not habitable, the power and water connections were
disconnected; being a public land, respondent filed a miscellaneous sales
application with the Community Environment and Natural Resources Office
in Olongapo City; and the action for ejectment cannot succeed where it
appears that respondent had been in possession of the property prior to the
petitioner.[5]
In a Decision[6] dated October 30, 2000, the Municipal Trial Court in Cities
(MTCC) ordered respondent to vacate the property and surrender to
petitioner possession thereof. It also directed her to pay, as damages for its
continued unlawful use, P500 a month from April 24, 1999 until the property
was vacated, P5,000 as attorneys fees, and the costs of the suit.
On appeal, the Regional Trial Court[7] (RTC) of Olongapo City (Branch 72)
reversed the MTCC. The RTC ruled as follows: 1) respondents entry into the
property was not by mere tolerance of petitioner, but by virtue of a Waiver
and Transfer of Possessory Rights and Deed of Sale in her favor; 2) the
execution of the Deed of Sale without actual transfer of the physical
possession did not have the effect of making petitioner the owner of the
property, because there was no delivery of the object of the sale as provided
for in Article 1428 of the Civil Code; and 3) being a corporation, petitioner
was disqualified from acquiring the property, which was public land.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioner had failed to make a case for
unlawful detainer, because no contract -- express or implied -- had been
entered into by the parties with regard to possession of the property. It ruled
that the action should have been for forcible entry, in which prior physical
possession was indispensable -- a circumstance petitioner had not shown
either.
10 | S a l e s & L e a s e H W # 3
The appellate court also held that petitioner had challenged the RTCs ruling
on the question of ownership for the purpose of compensating for the latters
failure to counter such ruling.The RTC had held that, as a corporation,
petitioner had no right to acquire the property which was alienable public
land.
Hence, this Petition.[8]
Issues
Petitioner submits the following issues for our consideration:
1. The Honorable Court of Appeals had clearly erred in not holding that
[r]espondents occupation or possession of the property in question was
merely through the tolerance or permission of the herein [p]etitioner;
[2.] The Honorable Court of Appeals had likewise erred in holding that the
ejectment case should have been a forcible entry case where prior physical
possession is indispensable; and
[3.] The Honorable Court of Appeals had also erred when it ruled that the
herein [r]espondents possession or occupation of the said property is in the
nature of an exercise of ownership which should put the herein [p]etitioner
on guard.[9]
The Courts Ruling
The Petition has no merit.
First Issue:
Alleged Occupation by Tolerance
Petitioner faults the CA for not holding that the former merely tolerated
respondents occupation of the subject property. By raising this issue,
petitioner is in effect asking this Court to reassess factual findings. As a
general rule, this kind of reassessment cannot be done through a petition for
review on certiorari under Rule 45 of the Rules of Court, because this Court
is not a trier of facts; it reviews only questions of law.[10] Petitioner has not
given us ample reasons to depart from the general rule.
On the basis of the facts found by the CA and the RTC, we find that
petitioner failed to substantiate its case for unlawful detainer. Admittedly, no
express contract existed between the parties. Not shown either was the
corporations alleged tolerance of respondents possession.
While possession by tolerance may initially be lawful, it ceases to be so
upon the owners demand that the possessor by tolerance vacate the
property.[11] To justify an action for unlawful detainer, the permission or
tolerance must have been present at the beginning of the possession.
[12]
 Otherwise, if the possession was unlawful from the start, an action for
unlawful detainer would be an improper remedy. Sarona v.
Villegas[13] elucidates thus:
A close assessment of the law and the concept of the word tolerance
confirms our view heretofore expressed that such tolerance must be present
right from the start of possession sought to be recovered, to categorize a
cause of action as one of unlawful detainer not of forcible entry. Indeed, to
hold otherwise would espouse a dangerous doctrine. And for two
reasons. First. Forcible entry into the land is an open challenge to the right of
the possessor. Violation of that right authorizes the speedy redress in the
inferior court provided for in the rules. If one year from the forcible entry is
VILLAR
allowed to lapse before suit is filed, then the remedy ceases to be speedy;
and the possessor is deemed to have waived his right to seek relief in the
inferior court. Second, if a forcible entry action in the inferior court is allowed
after the lapse of a number of years, then the result may well be that no
action for forcible entry can really prescribe. No matter how long such
defendant is in physical possession, plaintiff will merely make a demand,
bring suit in the inferior court upon a plea of tolerance to prevent prescription
to set in and summarily throw him out of the land. Such a conclusion is
unreasonable. Especially if we bear in mind the postulates that proceedings
of forcible entry and unlawful detainer are summary in nature, and that the
one year time bar to suit is but in pursuance of the summary nature of the
action.[14]
In this case, the Complaint and the other pleadings do not recite
any averment of fact that would substantiate the claim of petitioner that it
permitted or tolerated the occupation of the property by Respondent
Cruz. The Complaint contains only bare allegations that 1) respondent
immediately occupied the subject property after its sale to her, an action
merely tolerated by petitioner;[15] and 2) her allegedly illegal occupation of the
premises was by mere tolerance.[16]
These allegations contradict, rather than support, petitioners theory that its
cause of action is for unlawful detainer. First, these arguments advance the
view that respondents occupation of the property was unlawful at its
inception. Second, they counter the essential requirement in unlawful
detainer cases that petitioners supposed act of sufferance or tolerance must
be present right from the start of a possession that is later sought to be
recovered.[17]
As the bare allegation of petitioners tolerance of respondents occupation of
the premises has not been proven, the possession should be deemed illegal
from the beginning. Thus, the CA correctly ruled that the ejectment case
should have been for forcible entry -- an action that had already prescribed,
however, when the Complaint was filed on May 12, 1999. The prescriptive
period of one year for forcible entry cases is reckoned from the date of
respondents actual entry into the land, which in this case was on April 24,
1998.
Second Issue:
Nature of the Case
Much of the difficulty in the present controversy stems from the legal
characterization of the ejectment Complaint filed by petitioner. Specifically,
was it for unlawful detainer or for forcible entry?
The answer is given in Section 1 of Rule 70 of the Rules of Court, which we
reproduce as follows:
SECTION 1. Who may institute proceedings, and when. - Subject to the
provisions of the next succeeding section, a person deprived of the
possession of any land or building by force, intimidation, threat, strategy, or
stealth, or a lessor, vendor, vendee, or other person against whom the
possession of any land or building is unlawfully withheld after the expiration
or termination of the right to hold possession, by virtue of any contract,
express or implied, or the legal representatives or assigns of any such
11 | S a l e s & L e a s e H W # 3
lessor, vendor, vendee, or other person, may, at any time within one (1) year
after such unlawful deprivation or withholding of possession, bring an action
in the proper Municipal Trial Court against the person or persons unlawfully
withholding or depriving of possession, or any person or persons claiming
under them, for the restitution of such possession, together with damages
and costs.
While both causes of action deal only with the sole issue of physical or de
facto possession,[18] the two cases are really separate and distinct, as
explained below:
x x x. In forcible entry, one is deprived of physical possession of land or
building by means of force, intimidation, threat, strategy, or stealth. In
unlawful detainer, one unlawfully withholds possession thereof after the
expiration or termination of his right to hold possession under any contract,
express or implied. In forcible entry, the possession is illegal from the
beginning and the basic inquiry centers on who has the prior possession de
facto. In unlawful detainer, the possession was originally lawful but became
unlawful by the expiration or termination of the right to possess, hence the
issue of rightful possession is decisive for, in such action, the defendant is in
actual possession and the plaintiffs cause of action is the termination of the
defendants right to continue in possession.
What determines the cause of action is the nature of defendants entry into
the land. If the entry is illegal, then the action which may be filed against the
intruder within one year therefrom is forcible entry.If, on the other hand, the
entry is legal but the possession thereafter became illegal, the case is one of
unlawful detainer which must be filed within one year from the date of the
last demand.[19]
It is axiomatic that what determines the nature of an action as well as which
court has jurisdiction over it are the allegations in the complaint[20] and the
character of the relief sought.[21]
In its Complaint, petitioner alleged that, having acquired the subject property
from Barbara Galino on December 5, 1996,[22] it was the true and absolute
owner[23] thereof; that Galino had sold the property to Respondent Cruz on
April 24, 1998;[24] that after the sale, the latter immediately occupied the
property, an action that was merely tolerated by petitioner;[25] and that, in a
letter given to respondent on April 12, 1999,[26] petitioner had demanded that
the former vacate the property, but that she refused to do so.[27] Petitioner
thereupon prayed for judgment ordering her to vacate the property and to
pay reasonable rentals for the use of the premises, attorneys fees and the
costs of the suit.[28]
The above allegations appeared to show the elements of unlawful
detainer. They also conferred initiatory jurisdiction on the MTCC, because
the case was filed a month after the last demand to vacate -- hence, within
the one-year prescriptive period.
However, what was actually proven by petitioner was that possession by
respondent had been illegal from the beginning. While the Complaint was
crafted to be an unlawful detainer suit, petitioners real cause of action was
for forcible entry, which had already prescribed. Consequently, the MTCC
had no more jurisdiction over the action.
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The appellate court, therefore, did not err when it ruled that petitioners
Complaint for unlawful detainer was a mere subterfuge or a disguised
substitute action for forcible entry, which had already prescribed. To repeat,
to maintain a viable action for forcible entry, plaintiff must have been in prior
physical possession of the property; this is an essential element of the suit.
[29]
Third Issue:
Alleged Acts of Ownership
Petitioner next questions the CAs pronouncement that respondents
occupation of the property was an exercise of a right flowing from a claim of
ownership. It submits that the appellate court should not have passed upon
the issue of ownership, because the only question for resolution in an
ejectment suit is that of possession de facto.
Clearly, each of the parties claimed the right to possess the disputed
property because of alleged ownership of it. Hence, no error could have
been imputed to the appellate court when it passed upon the issue of
ownership only for the purpose of resolving the issue of possession de facto.
[30]
 The CAs holding is moreover in accord with jurisprudence and the law.
Execution of a Deed of Sale
Not Sufficient as Delivery
In a contract of sale, the buyer acquires the thing sold only upon its delivery
in any of the ways specified in Articles 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred from the vendor
to the vendee.[31] With respect to incorporeal property, Article 1498 lays down
the general rule: the execution of a public instrument shall be equivalent to
the delivery of the thing that is the object of the contract if, from the deed, the
contrary does not appear or cannot be clearly inferred.
However, ownership is transferred not by contract but by tradition or
delivery.[32] Nowhere in the Civil Code is it provided that the execution of a
Deed of Sale is a conclusivepresumption of delivery of possession of a piece
of real estate.[33]
This Court has held that the execution of a public instrument gives rise only
to a prima facie presumption of delivery. Such presumption is destroyed
when the delivery is not effected because of a legal impediment.[34] Pasagui
v. Villablanca[35] had earlier ruled that such constructive or symbolic delivery,
being merely presumptive, was deemed negated by the failure of the vendee
to take actual possession of the land sold.
It is undisputed that petitioner did not occupy the property from the time it
was allegedly sold to it on December 5, 1996 or at any time thereafter.
Nonetheless, it maintains that Galinos continued stay in the premises from
the time of the sale up to the time respondents occupation of the same on
April 24, 1998, was possession held on its behalf and had the effect of
delivery under the law.[36]
Both the RTC and the CA disagreed. According to the RTC, petitioner did
not gain control and possession of the property, because Galino had
continued to exercise ownership rights over the realty. That is, she had
remained in possession, continued to declare it as her property for tax
purposes and sold it to respondent in 1998.
12 | S a l e s & L e a s e H W # 3
For its part, the CA found it highly unbelievable that petitioner -- which claims
to be the owner of the disputed property -- would tolerate possession of the
property by respondent from April 24, 1998 up to October 16, 1998. How
could it have been so tolerant despite its knowledge that the property had
been sold to her, and that it was by virtue of that sale that she had
undertaken major repairs and improvements on it?
Petitioner should have likewise been put on guard by respondents
declaration of the property for tax purposes on April 23, 1998,[37] as
annotated in the tax certificate filed sevenmonths later.[38] Verily, the tax
declaration represented an adverse claim over the unregistered property and
was inimical to the right of petitioner.
Indeed, the above circumstances derogated its claim of control and
possession of the property.
Order of Preference in Double
Sale of Immovable Property
The ownership of immovable property sold to two different buyers at different
times is governed by Article 1544 of the Civil Code, which reads as follows:
Article 1544. x x x
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who
in good faith was first in possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith.
Galino allegedly sold the property in question to petitioner on December 5,
1996 and, subsequently, to respondent on April 24, 1998. Petitioner thus
argues that being the first buyer, it has a better right to own the
realty. However, it has not been able to establish that its Deed of Sale was
recorded in the Registry of Deeds of Olongapo City.[39] Its claim of an
unattested and unverified notation on its Deed of Absolute Sale[40] is not
equivalent to registration. It admits that, indeed, the sale has not been
recorded in the Registry of Deeds.[41]
In the absence of the required inscription, the law gives preferential right to
the buyer who in good faith is first in possession. In determining the question
of who is first  in possession, certain basic parameters have been
established by jurisprudence.
First, the possession mentioned in Article 1544 includes not only material but
also symbolic possession.[42] Second, possessors in good faith are those
who are not aware of any flaw in their title or mode of acquisition.[43] Third,
buyers of real property that is in the possession of persons other than the
seller must be wary -- they must investigate the rights of the possessors.
[44]
 Fourth, good faith is always presumed; upon those who allege bad faith
on the part of the possessors rests the burden of proof.[45]
Earlier, we ruled that the subject property had not been delivered to
petitioner; hence, it did not acquire possession either materially or
symbolically. As between the two buyers, therefore, respondent was first in
actual possession of the property.
Petitioner has not proven that respondent was aware that her mode of
acquiring the property was defective at the time she acquired it from
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Galino. At the time, the property -- which was public land -- had not been
registered in the name of Galino; thus, respondent relied on the tax
declarations thereon. As shown, the formers name appeared on the tax
declarations for the property until its sale to the latter in 1998. Galino was in
fact occupying the realty when respondent took over possession. Thus,
there was no circumstance that could have placed the latter upon inquiry or
required her to further investigate petitioners right of ownership.
Disqualification from Ownership
of Alienable Public Land
Private corporations are disqualified from acquiring lands of the public
domain, as provided under Section 3 of Article XII of the Constitution, which
we quote:
Sec. 3. Lands of the public domain are classified into agricultural, forest or
timber, mineral lands, and national parks. Agricultural lands of the public
domain may be further classified by law according to the uses to which they
may be devoted. Alienable lands of the public domain shall be limited to
agricultural lands. Private corporations or associations may not hold such
alienable lands of the public domain except by lease, for a period not
exceeding twenty-five years, and not to exceed one thousand hectares in
area. Citizens of the Philippines may not lease not more than five hundred
hectares, or acquire not more than twelve hectares thereof by purchase,
homestead, or grant. x x x. (Italics supplied)
While corporations cannot acquire land of the public domain, they can
however acquire private land.[46] Hence, the next issue that needs to be
resolved is the determination of whether the disputed property is private land
or of the public domain.
According to the certification by the City Planning and Development Office of
Olongapo City, the contested property in this case is alienable and
disposable public land.[47] It was for this reason that respondent filed a
miscellaneous sales application to acquire it.[48]
On the other hand, petitioner has not presented proof that, at the time it
purchased the property from Galino, the property had ceased to be of the
public domain and was already private land. The established rule is that
alienable and disposable land of the public domain held and occupied by a
possessor -- personally or through predecessors-in-interest, openly,
continuously, and exclusively for 30 years -- is ipso jure converted to private
property by the mere lapse of time.[49]
In view of the foregoing, we affirm the appellate courts ruling that respondent
is entitled to possession de facto. This determination, however, is only
provisional in nature.[50] Well-settled is the rule that an award of
possession de facto over a piece of property does not constitute res
judicata as to the issue of its ownership.[51]
WHEREFORE, this Petition is DENIED and the assailed
Decision AFFIRMED. Costs against petitioner.
SO ORDERED.
Sandoval-Gutierrez, Corona,  and  Carpio-Morales, JJ.,  concur.
Puno, (Chairman), on official leave.
13 | S a l e s & L e a s e H W # 3
(6) SECOND DIVISION
 RUDOLF LIETZ, INC., G.R. No. 122463
Petitioner,
Present:
 - versus- PUNO, J.,
Chairman, AUSTRIA-MARTINEZ,
CALLEJO, SR.,
THE COURT OF APPEALS, TINGA, and
AGAPITO BURIOL, TIZIANA CHICO-NAZARIO, JJ.
TURATELLO & PAOLA SANI,
Respondents. Promulgated:
 December 19, 2005
 
x --------------------------------------------------------------------x
DECISION
 
Tinga, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules
of Court, praying for the annulment of the Decision[1] dated April 17, 1995
and the Resolution[2] dated October 25, 1995 of the Court of Appeals in CA-
G.R. CV No. 38854. The Court of Appeals affirmed the Decision[3] in Civil
Case No. 2164 of the Regional Trial Court (RTC), Branch 48, of Palawan
and Puerto Princesa City with the modification that herein respondents
Tiziana Turatello and Paola Sani are entitled to damages, attorneys fees,
and litigation expenses.
 
The dispositive portion of the RTC Decision reads:
 
WHEREFORE, in view of the foregoing and as prayed for by the defendants,
the instant complaint is hereby DISMISSED. Defendants counterclaim is
likewise DISMISSED. Plaintiff, however, is ordered to pay defendant
Turatello and Sanis counsel the sum of P3,010.38 from August 9, 1990 until
fully paid representing the expenses incurred by said counsel when the trial
was cancelled due to the non-appearance of plaintiffs witnesses. With costs
against the plaintiff.
 
SO ORDERED.[4]
 
As culled from the records, the following antecedents appear:
 
Respondent Agapito Buriol previously owned a parcel of unregistered land
situated at Capsalay Island, Port Barton, San Vicente, Palawan. On August
15, 1986, respondent Buriol entered into a lease agreement with Flavia
Turatello and respondents Turatello and Sani, all Italian citizens, involving
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one (1) hectare of respondent Buriols property. The lease agreement was for
a period of 25 years, renewable for another 25 years. The lessees took
possession of the land after paying respondent Buriol a down payment
of P10,000.00.[5] The lease agreement, however, was reduced into writing
only in January 1987.
 
On November 17, 1986, respondent Buriol sold to petitioner Rudolf Lietz,
Inc. the same parcel of land for the amount of P30,000.00. The Deed of
Absolute Sale embodying the agreement described the land as follows:
 
A parcel of land, consisting of FIVE (5) hectares, more or less, a portion of
that parcel of land declared in the name of Agapito Buriol, under Tax
Declaration No. 0021, revised in the year 1985, together with all
improvements thereon, situated at the Island of Capsalay, Barangay Port
Barton, municipality of San Vicente, province of Palawan which segregated
from the whole parcel described in said tax declaration, has the following
superficial boundaries: NORTH, Sec. 01-017; and remaining property of the
vendor; EAST, by Seashore; SOUTH, 01-020; and WEST, by 01-018 (now
Elizabeth Lietz).[6]
 
Petitioner later discovered that respondent Buriol owned only four (4)
hectares, and with one more hectare covered by lease, only three (3)
hectares were actually delivered to petitioner. Thus, petitioner instituted on
April 3, 1989 a complaint for Annulment of Lease with Recovery of
Possession with Injunction and Damages against respondents and Flavia
Turatello before the RTC. The complaint alleged that with evident bad faith
and malice, respondent Buriol sold to petitioner five (5) hectares of land
when respondent Buriol knew for a fact that he owned only four (4) hectares
and managed to lease one more hectare to Flavia Turatello and respondents
Tiziana Turatello and Paola Sani. The complaint sought the issuance of a
restraining order and a writ of preliminary injunction to prevent Flavia
Turatello and respondents Turatello and Sani from introducing
improvements on the property, the annulment of the lease agreement
between respondents, and the restoration of the amount paid by petitioner in
excess of the value of the property sold to him. Except for Flavia Turatello,
respondents filed separate answers raising similar defenses of lack of cause
of action and lack of jurisdiction over the action for recovery of possession.
Respondents Turatello and Sani also prayed for the award of damages and
attorneys fees.[7]
 
After trial on the merits, the trial court rendered judgment on May 27, 1992,
dismissing both petitioners complaint and respondents counterclaim for
damages. Petitioner and respondents Turatello and Sani separately
appealed the RTC Decision to the Court of Appeals, which affirmed the
dismissal of petitioners complaint and awarded respondents Turatello and
Sani damages and attorneys fees. The dispositive portion of the Court of
Appeals Decision reads:
14 | S a l e s & L e a s e H W # 3
 
WHEREFORE, the decision appealed from is hereby AFFIRMED, with the
following modification:
Plaintiff-appellant Rudolf Lietz, Inc. is hereby (1) ordered to pay defendants-
appellants Turatello and Sani, the sum of P100,000.00 as moral damages;
(2) P100,000.00 as exemplary damages; (3) P135,728.73 as attorneys fees;
and (4) P10,000.00 as litigation expenses.
 
SO ORDERED.[8]
 
Petitioner brought to this Court the instant petition after the denial of its
motion for reconsideration of the Court of Appeal Decision. The instant
petition imputes the following errors to the Court of Appeals.
I.                   IN DEFENDING AGAPITO BURIOLS GOOD FAITH AND IN
STATING THAT ASSUMING THAT HE (BURIOL) WAS IN BAD FAITH
PETITIONER WAS SOLELY RESPONSIBLE FOR ITS INEXCUSABLE
CREDULOUSNESS.
 
II.                 IN ASSERTING THAT ARTICLES 1542 AND 1539 OF THE
NEW CIVIL CODE ARE, RESPECTIVELY, APPLICABLE AND
INAPPLICABLE IN THE CASE AT BAR.
 
III.              IN NOT GRANTING PETITIONERS CLAIM FOR ACTUAL AND
EXEMPLARY DAMAGES.
 
IV.              IN GRANTING RESPONDENTS TIZIANA TURATELLO AND
PAOLA SANI EXHORBITANT [sic] AMOUNTS AS DAMAGES WHICH ARE
EVEN BEREFT OF EVIDENTIARY BASIS.[9]
 
 
Essentially, only two main issues confront this Court, namely: (i) whether or
not petitioner is entitled to the delivery of the entire five hectares or its
equivalent, and (ii) whether or not damages may be awarded to either party.
Petitioner contends that it is entitled to the corresponding reduction of the
purchase price because the agreement was for the sale of five (5) hectares
although respondent Buriol owned only four (4) hectares. As in its appeal to
the Court of Appeals, petitioner anchors its argument on the second
paragraph of Article 1539 of the Civil Code, which provides:
 
Art. 1539. The obligation to deliver the thing sold includes that of placing in
the control of the vendee all that is mentioned in the contract, in conformity
with the following rules:
If the sale of real estate should be made with a statement of its area, at the
rate of a certain price for a unit of measure or number, the vendor shall be
obliged to deliver to the vendee, if the latter should demand it, all that may
have been stated in the contract; but, should this be not possible, the
vendee may choose between a proportional reduction of the price and the
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rescission of the contract, provided that, in the latter case, the lack in the
area be not less than one-tenth of that stated.
 
....
 
 
The Court of Appeals Decision, however, declared as inapplicable the
abovequoted provision and instead ruled that petitioner is no longer entitled
to a reduction in price based on the provisions of Article 1542 of the Civil
Code, which read:
 
Art. 1542. In the sale of real estate, made for a lump sum and not at the rate
of a certain sum for a unit of measure or number, there shall be no increase
or decrease of the price, although there be a greater or lesser area or
number than that stated in the contract.
 
The same rule shall be applied when two or more immovables are sold for a
single price; but if, besides mentioning the boundaries, which is
indispensable in every conveyance of real estate, its area or number should
be designated in the contract, the vendor shall be bound to deliver all that is
included within said boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to do so, he shall suffer
a reduction in the price, in proportion to what is lacking in the area or
number, unless the contract is rescinded because the vendee does not
accede to the failure to deliver what has been stipulated.
 
 
Article 1539 governs a sale of immovable by the unit, that is, at a stated rate
per unit area. In a unit price contract, the statement of area of immovable is
not conclusive and the price may be reduced or increased depending on the
area actually delivered. If the vendor delivers less than the area agreed
upon, the vendee may oblige the vendor to deliver all that may be stated in
the contract or demand for the proportionate reduction of the purchase price
if delivery is not possible. If the vendor delivers more than the area stated in
the contract, the vendee has the option to accept only the amount agreed
upon or to accept the whole area, provided he pays for the additional area at
the contract rate.[10]
 
In some instances, a sale of an immovable may be made for a lump sum
and not at a rate per unit. The parties agree on a stated purchase price for
an immovable the area of which may be declared based on an estimate or
where both the area and boundaries are stated.
In the case where the area of the immovable is stated in the contract based
on an estimate, the actual area delivered may not measure up exactly with
the area stated in the contract. According to Article 1542[11] of the Civil Code,
in the sale of real estate, made for a lump sum and not at the rate of a
certain sum for a unit of measure or number, there shall be no increase or
15 | S a l e s & L e a s e H W # 3
decrease of the price although there be a greater or lesser area or number
than that stated in the contract. However, the discrepancy must not be
substantial. A vendee of land, when sold in gross or with the description
more or less with reference to its area, does not thereby ipso facto take all
risk of quantity in the land. The use of more or less or similar words in
designating quantity covers only a reasonable excess or deficiency.[12]
 
Where both the area and the boundaries of the immovable are declared, the
area covered within the boundaries of the immovable prevails over the
stated area. In cases of conflict between areas and boundaries, it is the
latter which should prevail. What really defines a piece of ground is not the
area, calculated with more or less certainty, mentioned in its description, but
the boundaries therein laid down, as enclosing the land and indicating its
limits. In a contract of sale of land in a mass, it is well established that the
specific boundaries stated in the contract must control over any statement
with respect to the area contained within its boundaries. It is not of vital
consequence that a deed or contract of sale of land should disclose the area
with mathematical accuracy. It is sufficient if its extent is objectively indicated
with sufficient precision to enable one to identify it. An error as to the
superficial area is immaterial.[13] Thus, the obligation of the vendor is to
deliver everything within the boundaries, inasmuch as it is the entirety
thereof that distinguishes the determinate object.[14]
 
As correctly noted by the trial court and the Court of Appeals, the sale
between petitioner and respondent Buriol involving the latters property is one
made for a lump sum. The Deed of Absolute Sale shows that the parties
agreed on the purchase price on a predetermined area of five hectares
within the specified boundaries and not based on a particular rate per area.
In accordance with Article 1542, there shall be no reduction in the purchase
price even if the area delivered to petitioner is less than that stated in the
contract. In the instant case, the area within the boundaries as stated in the
contract shall control over the area agreed upon in the contract.
 
The Court rejects petitioners contention that the propertys boundaries as
stated in the Deed of Absolute Sale are superficial and unintelligible and,
therefore, cannot prevail over the area stated in the contract. First, as
pointed out by the Court of Appeals, at an ocular inspection prior to the
perfection of the contract of sale, respondent Buriol pointed to petitioner the
boundaries of the property. Hence, petitioner gained a fair estimate of the
area of the property sold to him. Second, petitioner cannot now assail the
contents of the Deed of Absolute Sale, particularly the description of the
boundaries of the property, because petitioners subscription to the Deed of
Absolute Saleindicates his assent to the correct description of the
boundaries of the property.
 
Petitioner also asserts that respondent Buriol is guilty of misleading
petitioner into believing that the latter was buying five hectares when he
knew prior to the sale that he owned only four hectares. The review of the
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circumstances of the alleged misrepresentation is factual and, therefore,
beyond the province of the Court. Besides, this issue had already been
raised before and passed upon by the trial court and the Court of Appeals.
The factual finding of the courts below that no sufficient evidence supports
petitioners allegation of misrepresentation is binding on the Court.
 
The Court of Appeals reversed the trial courts dismissal of respondents
Turatello and Sanis counterclaim for moral and exemplary damages,
attorneys fees and litigation expenses. In awarding moral damages in the
amount of P100,000 in favor of Turatello and Sani, the Court of Appeals
justified the award to alleviate the suffering caused by petitioners unfounded
civil action. The filing alone of a civil action should not be a ground for an
award of moral damages in the same way that a clearly unfounded civil
action is not among the grounds for moral damages.[15]
 
Exemplary or corrective damages are imposed, by way of example or
correction for the public good, in addition to the moral, temperate, liquidated
or compensatory damages.[16] With the deletion of the award for moral
damages, there is no basis for the award of exemplary damages.
 
WHEREFORE, the instant petition for review on certiorari is GRANTED in
PART. The Court of Appeals Decision in CA-G.R. CV No. 38854 is
AFFIRMED with the MODIFICATION that the award of moral and exemplary
damages is DELETED. SO ORDERED.
 
DANTE O. TINGA Associate Justice
(7) THIRD DIVISION
G.R. No. 170405               February 2, 2010
RAYMUNDO S. DE LEON, Petitioner, 
vs.
BENITA T. ONG.1 Respondent.
DECISION
CORONA, J.:
On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of
land2 with improvements situated in Antipolo, Rizal to respondent Benita T.
Ong. As these properties were mortgaged to Real Savings and Loan
Association, Incorporated (RSLAI), petitioner and respondent executed a
notarized deed of absolute sale with assumption of mortgage3 stating:
x x x           x x x          x x x
That for and in consideration of the sum of ONE MILLION ONE HUNDRED
THOUSAND PESOS (₱1.1 million), Philippine currency, the receipt whereof
is hereby acknowledged from [RESPONDENT] to the entire satisfaction of
[PETITIONER], said [PETITIONER] does hereby sell, transfer and
16 | S a l e s & L e a s e H W # 3
convey in a manner absolute and irrevocable, unto
said [RESPONDENT], his heirs and assigns that certain real estate together
with the buildings and other improvements existing thereon, situated in
[Barrio] Mayamot, Antipolo, Rizal under the following terms and conditions:
1. That upon full payment of [respondent] of the amount of FOUR
HUNDRED FIFTEEN THOUSAND FIVE HUNDRED (₱415,000), [petitioner]
shall execute and sign a deed of assumption of mortgage in favor of
[respondent] without any further cost whatsoever;
2. That [respondent] shall assume payment of the outstanding loan of SIX
HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS
(₱684,500) with REAL SAVINGS AND LOAN,4 Cainta, Rizal… (emphasis
supplied)
x x x           x x x          x x x
Pursuant to this deed, respondent gave petitioner ₱415,500 as partial
payment. Petitioner, on the other hand, handed the keys to the properties
and wrote a letter informing RSLAI of the sale and authorizing it to accept
payment from respondent and release the certificates of title.
Thereafter, respondent undertook repairs and made improvements on the
properties.5 Respondent likewise informed RSLAI of her agreement with
petitioner for her to assume petitioner’s outstanding loan. RSLAI required
her to undergo credit investigation.
Subsequently, respondent learned that petitioner again sold the same
properties to one Leona Viloria after March 10, 1993 and changed the locks,
rendering the keys he gave her useless. Respondent thus proceeded to
RSLAI to inquire about the credit investigation. However, she was informed
that petitioner had already paid the amount due and had taken back the
certificates of title.
Respondent persistently contacted petitioner but her efforts proved futile.
On June 18, 1993, respondent filed a complaint for specific performance,
declaration of nullity of the second sale and damages 6 against petitioner and
Viloria in the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She
claimed that since petitioner had previously sold the properties to her on
March 10, 1993, he no longer had the right to sell the same to Viloria. Thus,
petitioner fraudulently deprived her of the properties.
Petitioner, on the other hand, insisted that respondent did not have a cause
of action against him and consequently prayed for the dismissal of the
complaint. He claimed that since the transaction was subject to a condition
(i.e., that RSLAI approve the assumption of mortgage), they only entered
into a contract to sell. Inasmuch as respondent did apply for a loan from
RSLAI, the condition did not arise. Consequently, the sale was not perfected
and he could freely dispose of the properties. Furthermore, he made a
counter-claim for damages as respondent filed the complaint allegedly with
gross and evident bad faith.
Because respondent was a licensed real estate broker, the RTC concluded
that she knew that the validity of the sale was subject to a condition. The
perfection of a contract of sale depended on RSLAI’s approval of the
assumption of mortgage. Since RSLAI did not allow respondent to assume
petitioner’s obligation, the RTC held that the sale was never perfected.
VILLAR
In a decision dated August 27, 1999,7 the RTC dismissed the complaint for
lack of cause of action and ordered respondent to pay petitioner ₱100,000
moral damages, ₱20,000 attorney’s fees and the cost of suit.
Aggrieved, respondent appealed to the Court of Appeals (CA), 8 asserting
that the court a quo erred in dismissing the complaint.
The CA found that the March 10, 2003 contract executed by the parties did
not impose any condition on the sale and held that the parties entered into a
contract of sale. Consequently, because petitioner no longer owned the
properties when he sold them to Viloria, it declared the second sale void.
Moreover, it found petitioner liable for moral and exemplary damages for
fraudulently depriving respondent of the properties.
In a decision dated July 22, 2005,9 the CA upheld the sale to respondent and
nullified the sale to Viloria. It likewise ordered respondent to reimburse
petitioner ₱715,250 (or the amount he paid to RSLAI). Petitioner, on the
other hand, was ordered to deliver the certificates of titles to respondent and
pay her ₱50,000 moral damages and ₱15,000 exemplary damages.
Petitioner moved for reconsideration but it was denied in a resolution dated
November 11, 2005.10 Hence, this petition,11 with the sole issue being
whether the parties entered into a contract of sale or a contract to sell.
Petitioner insists that he entered into a contract to sell since the validity of
the transaction was subject to a suspensive condition, that is, the approval
by RSLAI of respondent’s assumption of mortgage. Because RSLAI did not
allow respondent to assume his (petitioner’s) obligation, the condition never
materialized. Consequently, there was no sale.
Respondent, on the other hand, asserts that they entered into a contract of
sale as petitioner already conveyed full ownership of the subject properties
upon the execution of the deed.
We modify the decision of the CA.
Contract of Sale or Contract to Sell?
The RTC and the CA had conflicting interpretations of the March 10, 1993
deed. The RTC ruled that it was a contract to sell while the CA held that it
was a contract of sale.
In a contract of sale, the seller conveys ownership of the property to the
buyer upon the perfection of the contract. Should the buyer default in the
payment of the purchase price, the seller may either sue for the collection
thereof or have the contract judicially resolved and set aside. The non-
payment of the price is therefore a negative resolutory condition.12
On the other hand, a contract to sell is subject to a positive suspensive
condition. The buyer does not acquire ownership of the property until he fully
pays the purchase price. For this reason, if the buyer defaults in the payment
thereof, the seller can only sue for damages.13
The deed executed by the parties (as previously quoted) stated that
petitioner sold the properties to respondent "in a manner absolute and
irrevocable" for a sum of ₱1.1 million. 14 With regard to the manner of
payment, it required respondent to pay ₱415,500 in cash to petitioner upon
the execution of the deed, with the balance15 payable directly to RSLAI (on
behalf of petitioner) within a reasonable time.16 Nothing in said instrument
implied that petitioner reserved ownership of the properties until the full
17 | S a l e s & L e a s e H W # 3
payment of the purchase price.17 On the contrary, the terms and conditions
of the deed only affected the manner of payment, not the immediate transfer
of ownership (upon the execution of the notarized contract) from petitioner
as seller to respondent as buyer. Otherwise stated, the said terms and
conditions pertained to the performance of the contract, not the perfection
thereof nor the transfer of ownership.
Settled is the rule that the seller is obliged to transfer title over the properties
and deliver the same to the buyer. 18 In this regard, Article 1498 of the Civil
Code19 provides that, as a rule, the execution of a notarized deed of sale is
equivalent to the delivery of a thing sold.
In this instance, petitioner executed a notarized deed of absolute sale in
favor of respondent. Moreover, not only did petitioner turn over the keys to
the properties to respondent, he also authorized RSLAI to receive payment
from respondent and release his certificates of title to her. The totality of
petitioner’s acts clearly indicates that he had unqualifiedly delivered and
transferred ownership of the properties to respondent. Clearly, it was a
contract of sale the parties entered into.
Furthermore, even assuming arguendo that the agreement of the parties
was subject to the condition that RSLAI had to approve the assumption of
mortgage, the said condition was considered fulfilled as petitioner prevented
its fulfillment by paying his outstanding obligation and taking back the
certificates of title without even notifying respondent. In this connection,
Article 1186 of the Civil Code provides:
Article 1186. The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
Void Sale Or Double Sale?
Petitioner sold the same properties to two buyers, first to respondent and
then to Viloria on two separate occasions.20 However, the second sale was
not void for the sole reason that petitioner had previously sold the same
properties to respondent. On this account, the CA erred.
This case involves a double sale as the disputed properties were sold
validly on two separate occasions by the same seller to the two different
buyers in good faith.
Article 1544 of the Civil Code provides:
Article 1544. If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry of
Property.
Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in the possession; and, in the
absence thereof, to the person who presents the oldest title, provided
there is good faith. (emphasis supplied)
This provision clearly states that the rules on double or multiple sales apply
only to purchasers in good faith. Needless to say, it disqualifies any
purchaser in bad faith.
VILLAR
A purchaser in good faith is one who buys the property of another without
notice that some other person has a right to, or an 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 some other person’s claim or interest in the
property.21 The law requires, on the part of the buyer, lack of notice of a
defect in the title of the seller and payment in full of the fair price at the time
of the sale or prior to having notice of any defect in the seller’s title.
Was respondent a purchaser in good faith? Yes.
Respondent purchased the properties, knowing they were encumbered only
by the mortgage to RSLAI. According to her agreement with petitioner,
respondent had the obligation to assume the balance of petitioner’s
outstanding obligation to RSLAI. Consequently, respondent informed RSLAI
of the sale and of her assumption of petitioner’s obligation. However,
because petitioner surreptitiously paid his outstanding obligation and took
back her certificates of title, petitioner himself rendered respondent’s
obligation to assume petitioner’s indebtedness to RSLAI impossible to
perform.
Article 1266 of the Civil Code provides:
Article 1266. The debtor in obligations to do shall be released when the
prestation become legally or physically impossible without the fault of the
obligor.
Since respondent’s obligation to assume petitioner’s outstanding balance
with RSLAI became impossible without her fault, she was released from the
said obligation. Moreover, because petitioner himself willfully prevented the
condition vis-à-vis the payment of the remainder of the purchase price, the
said condition is considered fulfilled pursuant to Article 1186 of the Civil
Code. For purposes, therefore, of determining whether respondent was a
purchaser in good faith, she is deemed to have fully complied with the
condition of the payment of the remainder of the purchase price.
Respondent was not aware of any interest in or a claim on the properties
other than the mortgage to RSLAI which she  undertook to assume.
Moreover, Viloria bought the properties from petitioner after the latter sold
them to respondent. Respondent was therefore a purchaser in good faith.
Hence, the rules on double sale are applicable.
Article 1544 of the Civil Code provides that when neither buyer registered
the sale of the properties with the registrar of deeds, the one who took prior
possession of the properties shall be the lawful owner thereof.
In this instance, petitioner delivered the properties to respondent when he
executed the notarized deed22 and handed over to respondent the keys to
the properties. For this reason, respondent took actual possession and
exercised control thereof by making repairs and improvements thereon.
Clearly, the sale was perfected and consummated on March 10, 1993. Thus,
respondent became the lawful owner of the properties.
Nonetheless, while the condition as to the payment of the balance of the
purchase price was deemed fulfilled, respondent’s obligation to pay it
subsisted. Otherwise, she would be unjustly enriched at the expense of
petitioner.
18 | S a l e s & L e a s e H W # 3
Therefore, respondent must pay petitioner ₱684,500, the amount stated in
the deed. This is because the provisions, terms and conditions of the
contract constitute the law between the parties. Moreover, the deed itself
provided that the assumption of mortgage "was without any further cost
whatsoever." Petitioner, on the other hand, must deliver the certificates of
title to respondent. We likewise affirm the award of damages.
WHEREFORE, the July 22, 2005 decision and November 11, 2005
resolution of the Court of Appeals in CA-G.R. CV No. 59748 are
hereby AFFIRMED with MODIFICATION insofar as respondent Benita T.
Ong is ordered to pay petitioner Raymundo de Leon ₱684,500 representing
the balance of the purchase price as provided in their March 10, 1993
agreement. Costs against petitioner. SO ORDERED.
(8) SECOND DIVISION
ASSET PRIVATIZATION TRUST, G.R. No. 167195
Petitioner,
Present:
 CARPIO MORALES, J.,*
- versus - Acting Chairperson,
TINGA,
VELASCO, JR.,
LEONARDO-DE CASTRO,** and
BRION, JJ.
T.J. ENTERPRISES,
Respondent. Promulgated:
May 8, 2009
x----------------------------------------------------------------------------------x
DECISION
TINGA, J.::
This is a Rule 45 petition[1] which seeks the reversal of the Court of Appeals
decision[2] and resolution[3] affirming the RTCs decision[4] holding petitioner
liable for actual damages for breach of contract.
Petitioner Asset Privatization Trust[5] (petitioner) was a government entity
created for the purpose to conserve, to provisionally manage and to dispose
assets of government institutions.[6] Petitioner had acquired from the
Development Bank of the Philippines (DBP) assets consisting of machinery
and refrigeration equipment which were then stored
at Golden City compound, Pasay City. The compound was then leased to
and in the physical possession of Creative Lines, Inc., (Creative Lines).
These assets were being sold on an as-is-where-is basis.
On 7 November 1990, petitioner and respondent entered into an absolute
deed of sale over certain machinery and refrigeration equipment identified as
Lots Nos. 2, 3 and 5. Respondent paid the full amount of P84,000.00 as
evidenced by petitioners Receipt No. 12844. After two (2) days, respondent
VILLAR
demanded the delivery of the machinery it had purchased. Sometime in
March 1991, petitioner issued Gate Pass No. 4955. Respondent was able to
pull out from the compound the properties designated as Lots Nos. 3 and 5.
However, during the hauling of Lot No. 2 consisting of sixteen (16) items,
only nine (9) items were pulled out by respondent. The seven (7) items that
were left behind consisted of the following: (1) one (1) Reefer Unit 1; (2) one
(1) Reefer Unit 2; (3) one (1) Reefer Unit 3; (4) one (1) unit blast freezer with
all accessories; (5) one (1) unit chest freezer; (6) one (1) unit room air-
conditioner; and (7) one (1) unit air compressor. Creative Lines employees
prevented respondent from hauling the remaining machinery and equipment.
Respondent filed a complaint for specific performance and damages against
petitioner and Creative Lines.[7] During the pendency of the case, respondent
was able to pull out the remaining machinery and equipment. However, upon
inspection it was discovered that the machinery and equipment were
damaged and had missing parts.
 
Petitioner argued that upon the execution of the deed of sale it had complied
with its obligation to deliver the object of the sale since there was no
stipulation to the contrary. It further argued that being a sale on an as-is-
where-is basis, it was the duty of respondent to take possession of the
property. Petitioner claimed that there was already a constructive delivery of
the machinery and equipment.
 
The RTC ruled that the execution of the deed of absolute sale did not result
in constructive delivery of the machinery and equipment. It found that at the
time of the sale, petitioner did not have control over the machinery and
equipment and, thus, could not have transferred ownership by constructive
delivery. The RTC ruled that petitioner is liable for breach of contract and
should pay for the actual damages suffered by respondent.
 
 
 
On petitioners appeal, the Court of Appeals affirmed in toto the decision of
the RTC.
 
Hence this petition.
 
Before this Court, petitioner raises issues by attributing the following errors
to the Court of Appeals, to wit:
 
I.
 The Court of Appeals erred in not finding that petitioner had complied with
its obligation to make delivery of the properties subject of the contract of
sale.
 
II.
19 | S a l e s & L e a s e H W # 3
 The Court of Appeals erred in not considering that the sale was on an as-is-
where-is basis wherein the properties were sold in the condition and in the
place where they were located.
III.
 The Court of Appeals erred in not considering that respondents acceptance
of petitioners disclaimer of warranty forecloses respondents legal basis to
enforce any right arising from the contract.
 
IV.
 The reason for the failure to make actual delivery of the properties was not
attributable to the fault and was beyond the control of petitioner. The claim
for damages against petitioner is therefore bereft of legal basis.[8]
 
 
 
The first issue hinges on the determination of whether there was a
constructive delivery of the machinery and equipment upon the execution of
the deed of absolute sale between petitioner and respondent.
 
The ownership of a thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof.[9] The thing sold shall be understood
as delivered when it is placed in the control and possession of the vendee.[10]
 
As a general rule, 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 clearly be inferred. And with regard to movable property, its delivery
may also be made by the delivery of the keys of the place or depository
where it is stored or kept.[11] In order for the execution of a public instrument
to effect tradition, the purchaser must be placed in control of the thing sold.
[12]
However, the execution of a public instrument only gives rise to a prima
facie presumption of delivery. Such presumption is destroyed when the
delivery is not effected because of a legal impediment.[13] It is necessary that
the vendor shall have control over the thing sold that, at the moment of sale,
its material delivery could have been made.[14] Thus, a person who does not
have actual possession of the thing sold cannot transfer constructive
possession by the execution and delivery of a public instrument.[15]
In this case, there was no constructive delivery of the machinery and
equipment upon the execution of the deed of absolute sale or upon the
issuance of the gate pass since it was not petitioner but Creative Lines
which had actual possession of the property. The presumption of
constructive delivery is not applicable as it has to yield to the reality that the
purchaser was not placed in possession and control of the property.
 
VILLAR
On the second issue, petitioner posits that the sale being in an as-is-where-
is basis, respondent agreed to take possession of the things sold in the
condition where they are found and from the place
 
where they are located. The phrase as-is where-is basis  pertains solely to
the physical condition of the thing sold, not to its legal situation.[16] It is merely
descriptive of the state of the thing sold. Thus, the as-is where-is basis
merely describes the actual state and location of the machinery and
equipment sold by petitioner to respondent. The depiction does not alter
petitioners responsibility to deliver the property to respondent.
 
Anent the third issue, petitioner maintains that the presence of the disclaimer
of warranty in the deed of absolute sale absolves it from all warranties,
implied or otherwise. The position is untenable.
 
The vendor is bound to transfer the ownership of and deliver, as well as
warrant the thing which is the object of the sale.[17] Ownership of the thing
sold is acquired by the vendee from the moment it its delivered to him in any
of the ways specified in articles 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred from the vendor
to the vendee.[18] A perusal of the deed of absolute sale shows that both the
vendor and the vendee represented and warranted to each other that each
had all the requisite power and authority to enter into the deed of absolute
sale and that they shall perform each of their respective obligations under
the deed of absolute in accordance with the terms thereof.[19] As previously
shown, there was no actual or constructive delivery of the things sold. Thus,
petitioner has not performed its obligation to transfer ownership and
possession of the things sold to respondent.
 
As to the last issue, petitioner claims that its failure to make actual delivery
was beyond its control. It posits that the refusal of Creative Lines to allow the
hauling of the machinery and equipment was unforeseen and constituted a
fortuitous event.
 
The matter of fortuitous events is governed by Art. 1174 of the Civil Code
which provides that except in cases expressly specified by the law, or when
it is otherwise declared by stipulation, or when the nature of the obligation
requires assumption of risk, no person shall be responsible for those events
which could not be foreseen, or which though foreseen, were inevitable. The
elements of a fortuitous event are: (a) the cause of the unforeseen and
unexpected occurrence, must have been independent of human will; (b) the
event that constituted the caso fortuito must have been impossible to
foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have
been such as to render it impossible for the debtors to fulfill their obligation in
a normal manner, and; (d) the obligor must have been free from any
participation in the aggravation of the resulting injury to the creditor.[20]
20 | S a l e s & L e a s e H W # 3
 
A fortuitous event may either be an act of God, or natural occurrences such
as floods or typhoons, or an act of man such as riots, strikes or wars.
[21]
 However, when the loss is found to be partly the result of a persons
participationwhether by active intervention, neglect or failure to actthe whole
occurrence is humanized and removed from the rules applicable to a
fortuitous event.[22]
We quote with approval the following findings of the Court of Appeals, to wit:
 
We find that Creative Lines refusal to surrender the property to the vendee
does not constitute force majeure which exculpates APT from the payment
of damages. This event cannot be considered unavoidable or unforeseen.
APT knew for a fact that the properties to be sold were housed in the
premises leased by Creative Lines. It should have made arrangements with
Creative Lines beforehand for the smooth and orderly removal of the
equipment. The principle embodied in the act of God doctrine strictly
requires that the act must be one occasioned exclusively by the violence of
nature and all human agencies are to be excluded from creating or entering
into the cause of the mischief. When the effect, the cause of which is to be
considered, is found to be in part the result of the participation of man,
whether it be from active intervention or neglect, or failure to act, the whole
occurrence is thereby humanized, as it were, and removed from the rules
applicable to the acts of God.[23]
 
Moreover, Art. 1504 of the Civil Code provides that where actual delivery
has been delayed through the fault of either the buyer or seller the goods are
at the risk of the party in fault. The risk of loss or deterioration of the goods
sold does not pass to the buyer until there is actual or constructive delivery
thereof. As previously discussed, there was no actual or constructive
delivery of the machinery and equipment. Thus, the risk of loss or
deterioration of property is borne by petitioner. Thus, it should be liable for
the damages that may arise from the delay.
 
Assuming arguendo that Creative Lines refusal to allow the hauling of the
machinery and equipment is a fortuitous event, petitioner will still be liable for
damages. This Court agrees with the appellate courts findings on the matter
of damages, thus:
Article 1170 of the Civil Code states: Those who in the performance of their
obligations are guilty of fraud, negligence, or delay and those who in any
manner contravene the tenor thereof are liable for damages. In contracts
and quasi-contracts, the damages for which the obligor who acted in good
faith is liable shall be those that are the natural and probable consequences
of the breach of the obligation, and which the parties have foreseen or could
have reasonably foreseen at the time the obligation was constituted.[24] The
trial court correctly awarded actual damages as pleaded and proven during
trial.[25]
VILLAR
WHEREFORE, the Court AFFIRMS in toto the Decision of the Court of
Appeals dated 31 August 2004. Cost against petitioner.SO ORDERED.
 DANTE O. TINGA
Associate Justice
 
(9) SECOND DIVISION
[G.R. No. 124242. January 21, 2005]
SAN LORENZO DEVELOPMENT CORPORATION, petitioner, vs. COURT
OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA
ZAVALLA LU, respondents.
DECISION
TINGA, J.:
From a coaptation of the records of this case, it appears that respondents
Miguel Lu and Pacita Zavalla, (hereinafter, the Spouses Lu) owned two (2)
parcels of land situated in Sta. Rosa, Laguna covered by TCT No. T-39022
and TCT No. T-39023 both measuring 15,808 square meters or a total of
3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land
to respondent Pablo Babasanta, (hereinafter, Babasanta) for the price of
fifteen pesos (P15.00) per square meter. Babasanta made a downpayment
of fifty thousand pesos (P50,000.00) as evidenced by a memorandum
receipt issued by Pacita Lu of the same date. Several other payments
totaling two hundred thousand pesos (P200,000.00) were made by
Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the
execution of a final deed of sale in his favor so that he could effect full
payment of the purchase price. In the same letter, Babasanta notified the
spouses about having received information that the spouses sold the same
property to another without his knowledge and consent. He demanded that
the second sale be cancelled and that a final deed of sale be issued in his
favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she
acknowledged having agreed to sell the property to him at fifteen pesos
(P15.00) per square meter. She, however, reminded Babasanta that when
the balance of the purchase price became due, he requested for a reduction
of the price and when she refused, Babasanta backed out of the sale. Pacita
added that she returned the sum of fifty thousand pesos (P50,000.00) to
Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the
Regional Trial Court (RTC), Branch 31, of San Pedro, Laguna, a Complaint
for Specific Performance and Damages[1] against his co-respondents herein,
the Spouses Lu. Babasanta alleged that the lands covered by TCT No. T-
39022 and T-39023 had been sold to him by the spouses at fifteen pesos
(P15.00) per square meter. Despite his repeated demands for the execution
of a final deed of sale in his favor, respondents allegedly refused.
21 | S a l e s & L e a s e H W # 3
In their Answer,[2] the Spouses Lu alleged that Pacita Lu obtained loans from
Babasanta and when the total advances of Pacita reached fifty thousand
pesos (P50,000.00), the latter and Babasanta, without the knowledge and
consent of Miguel Lu, had verbally agreed to transform the transaction into a
contract to sell the two parcels of land to Babasanta with the fifty thousand
pesos (P50,000.00) to be considered as the downpayment for the property
and the balance to be paid on or before 31 December 1987. Respondents
Lu added that as of November 1987, total payments made by Babasanta
amounted to only two hundred thousand pesos (P200,000.00) and the latter
allegedly failed to pay the balance of two hundred sixty thousand pesos
(P260,000.00) despite repeated demands. Babasanta had purportedly asked
Pacita for a reduction of the price from fifteen pesos (P15.00) to twelve
pesos (P12.00) per square meter and when the Spouses Lu refused to grant
Babasantas request, the latter rescinded the contract to sell and declared
that the original loan transaction just be carried out in that the spouses would
be indebted to him in the amount of two hundred thousand pesos
(P200,000.00). Accordingly, on 6 July 1989, they purchased Interbank
Managers Check No. 05020269 in the amount of two hundred thousand
pesos (P200,000.00) in the name of Babasanta to show that she was able
and willing to pay the balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January
1990[3] wherein he prayed for the issuance of a writ of preliminary injunction
with temporary restraining order and the inclusion of the Register of Deeds
of Calamba, Laguna as party defendant. He contended that the issuance of
a preliminary injunction was necessary to restrain the transfer or conveyance
by the Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition[4] to the amended complaint
contending that it raised new matters which seriously affect their substantive
rights under the original complaint. However, the trial court in its Order dated
17 January 1990[5] admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development
Corporation (SLDC) filed a Motion for Intervention[6] before the trial court.
SLDC alleged that it had legal interest in the subject matter under litigation
because on 3 May 1989, the two parcels of land involved, namely Lot 1764-
A and 1764-B, had been sold to it in a Deed of Absolute Sale with Mortgage.
[7]
 It alleged that it was a buyer in good faith and for value and therefore it
had a better right over the property in litigation.
In his Opposition to SLDCs motion for intervention,[8] respondent Babasanta
demurred and argued that the latter had no legal interest in the case
because the two parcels of land involved herein had already been conveyed
to him by the Spouses Lu and hence, the vendors were without legal
capacity to transfer or dispose of the two parcels of land to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to
intervene. SLDC filed its Complaint-in-Intervention on 19 April 1990.
[9]
 Respondent Babasantas motion for the issuance of a preliminary
injunction was likewise granted by the trial court in its Order dated 11
January 1991[10] conditioned upon his filing of a bond in the amount of fifty
thousand pesos (P50,000.00).
VILLAR
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the
Spouses Lu executed in its favor an Option to Buy the lots subject of the
complaint. Accordingly, it paid an option money in the amount of three
hundred sixteen thousand one hundred sixty pesos (P316,160.00) out of the
total consideration for the purchase of the two lots of one million two
hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After
the Spouses Lu received a total amount of six hundred thirty-two thousand
three hundred twenty pesos (P632,320.00) they executed on 3 May 1989
a Deed of Absolute Sale with Mortgage in its favor. SLDC added that the
certificates of title over the property were delivered to it by the spouses clean
and free from any adverse claims and/or notice of lis pendens. SLDC further
alleged that it only learned of the filing of the complaint sometime in the early
part of January 1990 which prompted it to file the motion to intervene without
delay. Claiming that it was a buyer in good faith, SLDC argued that it had no
obligation to look beyond the titles submitted to it by the Spouses Lu
particularly because Babasantas claims were not annotated on the
certificates of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993
upholding the sale of the property to SLDC. It ordered the Spouses Lu to pay
Babasanta the sum of two hundred thousand pesos (P200,000.00) with legal
interest plus the further sum of fifty thousand pesos (P50,000.00) as and for
attorneys fees. On the complaint-in-intervention, the trial court ordered the
Register of Deeds of Laguna, Calamba Branch to cancel the notice of lis
pendens annotated on the original of the TCT No. T-39022 (T-7218) and No.
T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both
Babasanta and SLDC did not register the respective sales in their favor,
ownership of the property should pertain to the buyer who first acquired
possession of the property. The trial court equated the execution of a public
instrument in favor of SLDC as sufficient delivery of the property to the latter.
It concluded that symbolic possession could be considered to have been first
transferred to SLDC and consequently ownership of the property pertained
to SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of
Appeals alleging in the main that the trial court erred in concluding that
SLDC is a purchaser in good faith and in upholding the validity of the sale
made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They
contended that the trial court erred in failing to consider that the contract to
sell between them and Babasanta had been novated when the latter
abandoned the verbal contract of sale and declared that the original loan
transaction just be carried out. The Spouses Lu argued that since the
properties involved were conjugal, the trial court should have declared the
verbal contract to sell between Pacita Lu and Pablo Babasanta null and
void ab initio for lack of knowledge and consent of Miguel Lu. They further
averred that the trial court erred in not dismissing the complaint filed by
Babasanta; in awarding damages in his favor and in refusing to grant the
reliefs prayed for in their answer.
22 | S a l e s & L e a s e H W # 3
On 4 October 1995, the Court of Appeals rendered its Decision[11] which set
aside the judgment of the trial court. It declared that the sale between
Babasanta and the Spouses Lu was valid and subsisting and ordered the
spouses to execute the necessary deed of conveyance in favor of
Babasanta, and the latter to pay the balance of the purchase price in the
amount of two hundred sixty thousand pesos (P260,000.00). The appellate
court ruled that the Absolute Deed of Sale with Mortgage in favor of SLDC
was null and void on the ground that SLDC was a purchaser in bad faith.
The Spouses Lu were further ordered to return all payments made by SLDC
with legal interest and to pay attorneys fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with
the appellate court.[12] However, in a Manifestation dated 20 December 1995,
[13]
 the Spouses Lu informed the appellate court that they are no longer
contesting the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,[14] the appellate court considered as
withdrawn the motion for reconsideration filed by the Spouses Lu in view of
their manifestation of 20 December 1995. The appellate court denied SLDCs
motion for reconsideration on the ground that no new or substantial
arguments were raised therein which would warrant modification or reversal
of the courts decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate
court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO
WAS NOT A BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER
PACITA ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE
OF P200,000.00, SAN LORENZO WAS PUT ON INQUIRY OF A PRIOR
TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE
ESTABLISHED FACT THAT THE ALLEGED FIRST BUYER,
RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE
DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND TOOK
POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN,
ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE
FACT THAT RESPONDENT BABASANTA HAS SUBMITTED NO
EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF HIS
RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT
NOTWITHSTANDING ITS FULL CONCURRENCE ON THE FINDINGS OF
FACT OF THE TRIAL COURT, IT REVERSED AND SET ASIDE THE
DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF SAN
LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH. [15]
SLDC contended that the appellate court erred in concluding that it had prior
notice of Babasantas claim over the property merely on the basis of its
having advanced the amount of two hundred thousand pesos (P200,000.00)
to Pacita Lu upon the latters representation that she needed the money to
pay her obligation to Babasanta. It argued that it had no reason to suspect
VILLAR
that Pacita was not telling the truth that the money would be used to pay her
indebtedness to Babasanta. At any rate, SLDC averred that the amount of
two hundred thousand pesos (P200,000.00) which it advanced to Pacita Lu
would be deducted from the balance of the purchase price still due from it
and should not be construed as notice of the prior sale of the land to
Babasanta. It added that at no instance did Pacita Lu inform it that the lands
had been previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it
immediately took possession of the property and asserted its rights as new
owner as opposed to Babasanta who has never exercised acts of
ownership. Since the titles bore no adverse claim, encumbrance, or lien at
the time it was sold to it, SLDC argued that it had every reason to rely on the
correctness of the certificate of title and it was not obliged to go beyond the
certificate to determine the condition of the property. Invoking the
presumption of good faith, it added that the burden rests on Babasanta to
prove that it was aware of the prior sale to him but the latter failed to do so.
SLDC pointed out that the notice of lis pendens was annotated only on 2
June 1989 long after the sale of the property to it was consummated on 3
May 1989.
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the
Spouses Lu informed the Court that due to financial constraints they have no
more interest to pursue their rights in the instant case and submit
themselves to the decision of the Court of Appeals.[16]
On the other hand, respondent Babasanta argued that SLDC could not have
acquired ownership of the property because it failed to comply with the
requirement of registration of the sale in good faith. He emphasized that at
the time SLDC registered the sale in its favor on 30 June 1990, there was
already a notice of lis pendens annotated on the titles of the property made
as early as 2 June 1989. Hence, petitioners registration of the sale did not
confer upon it any right. Babasanta further asserted that petitioners bad faith
in the acquisition of the property is evident from the fact that it failed to make
necessary inquiry regarding the purpose of the issuance of the two hundred
thousand pesos (P200,000.00) managers check in his favor.
The core issue presented for resolution in the instant petition is who between
SLDC and Babasanta has a better right over the two parcels of land subject
of the instant case in view of the successive transactions executed by the
Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta
presented a document signed by Pacita Lu acknowledging receipt of the
sum of fifty thousand pesos (P50,000.00) as partial payment for 3.6 hectares
of farm lot situated at Barangay Pulong, Sta. Cruz, Sta. Rosa, Laguna.
[17]
 While the receipt signed by Pacita did not mention the price for which the
property was being sold, this deficiency was supplied by Pacita Lus letter
dated 29 May 1989[18] wherein she admitted that she agreed to sell the 3.6
hectares of land to Babasanta for fifteen pesos (P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence
presented by the parties, irresistibly leads to the conclusion that the
23 | S a l e s & L e a s e H W # 3
agreement between Babasanta and the Spouses Lu is a contract to sell and
not a contract of sale.
Contracts, in general, are perfected by mere consent,[19] which is manifested
by the meeting of the offer and the acceptance upon the thing which are to
constitute the contract. The offer must be certain and the acceptance
absolute.[20] Moreover, contracts shall be obligatory in whatever form they
may have been entered into, provided all the essential requisites for their
validity are present.[21]
The receipt signed by Pacita Lu merely states that she accepted the sum of
fifty thousand pesos (P50,000.00) from Babasanta as partial payment of 3.6
hectares of farm lot situated in Sta. Rosa, Laguna. While there is no
stipulation that the seller reserves the ownership of the property until full
payment of the price which is a distinguishing feature of a contract to sell,
the subsequent acts of the parties convince us that the Spouses Lu never
intended to transfer ownership to Babasanta except upon full payment of the
purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein
that despite his repeated requests for the execution of the final deed of sale
in his favor so that he could effect full payment of the price, Pacita Lu
allegedly refused to do so. In effect, Babasanta himself recognized that
ownership of the property would not be transferred to him until such time as
he shall have effected full payment of the price. Moreover, had the sellers
intended to transfer title, they could have easily executed the document of
sale in its required form simultaneously with their acceptance of the partial
payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu
should legally be considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite
germane. In a contract of sale, title passes to the vendee upon the delivery
of the thing sold; whereas in a contract to sell, by agreement the ownership
is reserved in the vendor and is not to pass until the full payment of the
price.[22] In a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded; whereas in
a contract to sell, title is retained by the vendor until the full payment of the
price, such payment being a positive suspensive condition and failure of
which is not a breach but an event that prevents the obligation of the vendor
to convey title from becoming effective.[23]
The perfected contract to sell imposed upon Babasanta the obligation to pay
the balance of the purchase price. There being an obligation to pay the
price, Babasanta should have made the proper tender of payment and
consignation of the price in court as required by law. Mere sending of a letter
by the vendee expressing the intention to pay without the accompanying
payment is not considered a valid tender of payment.[24] Consignation of the
amounts due in court is essential in order to extinguish Babasantas
obligation to pay the balance of the purchase price. Glaringly absent from
the records is any indication that Babasanta even attempted to make the
proper consignation of the amounts due, thus, the obligation on the part of
the sellers to convey title never acquired obligatory force.
VILLAR
On the assumption that the transaction between the parties is a contract of
sale and not a contract to sell, Babasantas claim of ownership should
nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent[25] and from
that moment, the parties may reciprocally demand performance.[26] The
essential elements of a contract of sale, to wit: (1) consent or meeting of the
minds, that is, to transfer ownership in exchange for the price; (2) object
certain which is the subject matter of the contract; (3) cause of the obligation
which is established.[27]
The perfection of a contract of sale should not, however, be confused with its
consummation. In relation to the acquisition and transfer of ownership, it
should be noted that sale is not a mode, but merely a title. A mode is the
legal means by which dominion or ownership is created, transferred or
destroyed, but title is only the legal basis by which to affect dominion or
ownership.[28] Under Article 712 of the Civil Code, ownership and other real
rights over property are acquired and transmitted by law, by donation, by
testate and intestate succession, and in consequence of certain contracts,
by tradition. Contracts only constitute titles or rights to the transfer or
acquisition of ownership, while delivery or tradition is the mode of
accomplishing the same.[29] Therefore, sale by itself does not transfer or
affect ownership; the most that sale does is to create the obligation to
transfer ownership. It is tradition or delivery, as a consequence of sale, that
actually transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired by
the vendee from the moment it is delivered to him in any of the ways
specified in Article 1497 to 1501.[30]The word delivered should not be taken
restrictively to mean transfer of actual physical possession of the property.
The law recognizes two principal modes of delivery, to wit: (1) actual
delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and
possession of the vendee.[31] Legal or constructive delivery, on the other
hand, may be had through any of the following ways: the execution of a
public instrument evidencing the sale;[32] symbolical tradition such as the
delivery of the keys of the place where the movable sold is being kept;
[33]
traditio longa manu or by mere consent or agreement if the movable sold
cannot yet be transferred to the possession of the buyer at the time of the
sale;[34] traditio brevi manu if the buyer already had possession of the object
even before the sale;[35] and traditio constitutum possessorium, where the
seller remains in possession of the property in a different capacity.[36]
Following the above disquisition, respondent Babasanta did not acquire
ownership by the mere execution of the receipt by Pacita Lu acknowledging
receipt of partial payment for the property. For one, the agreement between
Babasanta and the Spouses Lu, though valid, was not embodied in a public
instrument. Hence, no constructive delivery of the lands could have been
effected. For another, Babasanta had not taken possession of the property
at any time after the perfection of the sale in his favor or exercised acts of
dominion over it despite his assertions that he was the rightful owner of the
lands. Simply stated, there was no delivery to Babasanta, whether actual or
24 | S a l e s & L e a s e H W # 3
constructive, which is essential to transfer ownership of the property. Thus,
even on the assumption that the perfected contract between the parties was
a sale, ownership could not have passed to Babasanta in the absence of
delivery, since in a contract of sale ownership is transferred to the vendee
only upon the delivery of the thing sold.[37]
However, it must be stressed that the juridical relationship between the
parties in a double sale is primarily governed by Article 1544 which lays
down the rules of preference between the two purchasers of the same
property. It provides:
Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who
in good faith was first in the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith.
The principle of primus tempore, potior jure (first in time, stronger in right)
gains greater significance in case of double sale of immovable property.
When the thing sold twice is an immovable, the one who acquires it and first
records it in the Registry of Property, both made in good faith, shall be
deemed the owner.[38] Verily, the act of registration must be coupled with
good faith that is, the registrant must have no knowledge of the defect or
lack of title of his vendor or must not have been aware of facts which should
have put him upon such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor.[39]
Admittedly, SLDC registered the sale with the Registry of Deeds after it had
acquired knowledge of Babasantas claim. Babasanta, however, strongly
argues that the registration of the sale by SLDC was not sufficient to confer
upon the latter any title to the property since the registration was attended by
bad faith. Specifically, he points out that at the time SLDC registered the
sale on 30 June 1990, there was already a notice of lis pendens on the file
with the Register of Deeds, the same having been filed one year before on 2
June 1989.
Did the registration of the sale after the annotation of the notice of lis
pendens obliterate the effects of delivery and possession in good faith which
admittedly had occurred prior to SLDCs knowledge of the transaction in
favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu
executed the Option to Buy  in favor of SLDC upon receiving P316,160.00 as
option money from SLDC. After SLDC had paid more than one half of the
agreed purchase price of P1,264,640.00, the Spouses Lu subsequently
executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC. At the
time both deeds were executed, SLDC had no knowledge of the prior
transaction of the Spouses Lu with Babasanta. Simply stated, from the time
of execution of the first deed up to the moment of transfer and delivery of
possession of the lands to SLDC, it had acted in good faith and the
VILLAR
subsequent annotation of lis pendens has no effect at all on the
consummated sale between SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of another without  notice
that some other person has a right to, or interest in, such property and pays
a full and fair price for the same at the time of such purchase, or before he
has notice of the claim or interest of some other person in the property.
[40]
 Following the foregoing definition, we rule that SLDC qualifies as a buyer
in good faith since there is no evidence extant in the records that it had
knowledge of the prior transaction in favor of Babasanta. At the time of the
sale of the property to SLDC, the vendors were still the registered owners of
the property and were in fact in possession of the lands. Time and again,
this Court has ruled that a person dealing with the owner of registered land
is not bound to go beyond the certificate of title as he is charged with notice
of burdens on the property which are noted on the face of the register or on
the certificate of title.[41] In assailing knowledge of the transaction between
him and the Spouses Lu, Babasanta apparently relies on the principle of
constructive notice incorporated in Section 52 of the Property Registration
Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage,
lease, lien, attachment, order, judgment, instrument or entry affecting
registered land shall, if registered, filed, or entered in the office of the
Register of Deeds for the province or city where the land to which it relates
lies, be constructive notice to all persons from the time of such registering,
filing, or entering.
However, the constructive notice operates as suchby the express wording of
Section 52from the time of the registration of the notice of lis pendens which
in this case was effected only on 2 June 1989, at which time the sale in favor
of SLDC had long been consummated insofar as the obligation of the
Spouses Lu to transfer ownership over the property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of
Babasanta the annotation of the notice of lis pendens cannot help
Babasantas position a bit and it is irrelevant to the good or bad faith
characterization of SLDC as a purchaser. A notice of lis pendens, as the
Court held in Natao v. Esteban,[42] serves as a warning to a prospective
purchaser or incumbrancer that the particular property is in litigation; and
that he should keep his hands off the same, unless he intends to gamble on
the results of the litigation. Precisely, in this case SLDC has intervened in
the pending litigation to protect its rights. Obviously, SLDCs faith in the merit
of its cause has been vindicated with the Courts present decision which is
the ultimate denouement on the controversy.
The Court of Appeals has made capital[43] of SLDCs averment in
its Complaint-in-Intervention[44] that at the instance of Pacita Lu it issued a
check for P200,000.00 payable to Babasanta and the confirmatory testimony
of Pacita Lu herself on cross-examination.[45] However, there is nothing in the
said pleading and the testimony which explicitly relates the amount to the
transaction between the Spouses Lu and Babasanta for what they attest to
is that the amount was supposed to pay off the advances made by
Babasanta to Pacita Lu. In any event, the incident took place after the
25 | S a l e s & L e a s e H W # 3
Spouses Lu had already executed the Deed of Absolute Sale with
Mortgage in favor of SLDC and therefore, as previously explained, it has no
effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had been
tainted by the prior notice of lis pendens and assuming further for the same
nonce that this is a case of double sale, still Babasantas claim could not
prevail over that of SLDCs. In Abarquez v. Court of Appeals,[46] this Court
had the occasion to rule that if a vendee in a double sale registers the sale
after he has acquired knowledge of a previous sale, the registration
constitutes a registration in bad faith and does not confer upon him any right.
If the registration is done in bad faith, it is as if there is no registration at all,
and the buyer who has taken possession first of the property in good faith
shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered
only after the second vendee, Abarquez, registered their deed of sale with
the Registry of Deeds, but the Israels were first in possession. This Court
awarded the property to the Israels because registration of the property by
Abarquez lacked the element of good faith. While the facts in the instant
case substantially differ from that in Abarquez, we would not hesitate to rule
in favor of SLDC on the basis of its prior possession of the property in good
faith. Be it noted that delivery of the property to SLDC was immediately
effected after the execution of the deed in its favor, at which time SLDC had
no knowledge at all of the prior transaction by the Spouses Lu in favor of
Babasanta.
The law speaks not only of one criterion. The first criterion is priority of entry
in the registry of property; there being no priority of such entry, the second is
priority of possession; and, in the absence of the two priorities, the third
priority is of the date of title, with good faith as the common critical element.
Since SLDC acquired possession of the property in good faith in contrast to
Babasanta, who neither registered nor possessed the property at any time,
SLDCs right is definitely superior to that of Babasantas.
At any rate, the above discussion on the rules on double sale would be
purely academic for as earlier stated in this decision, the contract between
Babasanta and the Spouses Lu is not a contract of sale but merely a
contract to sell. In Dichoso v. Roxas,[47] we had the occasion to rule that
Article 1544 does not apply to a case where there was a sale to one party of
the land itself while the other contract was a mere promise to sell the land or
at most an actual assignment of the right to repurchase the same land.
Accordingly, there was no double sale of the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the
Court of Appeals appealed from is REVERSED and SET ASIDE and the
decision of the Regional Trial Court, Branch 31, of San Pedro, Laguna is
REINSTATED. No costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario,
JJ.,  concur.
VILLAR
(10) EN BANC
G.R. No. L-20091             July 30, 1965
PERPETUA ABUAN, ET AL., plaintiffs-appellants, 
vs.
EUSTAQUIO S. GARCIA, ET AL., defendants-appellees.
Emilio R. Gombio for plaintiffs-appellants.
Ruperto G. Martin and Associates for defendants-appellees.
BENGZON, C.J.:
This is an action for legal redemption under Section 119 of the Public Land
Law 1 which provides that:
Every conveyance of land acquired under the free patient or homestead
provisions, when proper, shall be subject to re-purchase by the applicant, his
widow, or legal heirs, for a period of five years from the date of conveyance.
Acquired by Laureano Abuan the homestead passed after his death to his
legal heirs, the plaintiffs herein. Consequently, the Original Certificate of Title
in his name was cancelled, and in lieu thereof, Transfer Certificate of Title
No. T-5486 was issued in their names.
On August 7, 1953, plaintiffs sold the parcel of land to defendants, the sale
being evidenced by a public instrument entitled "Deed of Absolute Sale"; and
by virtue thereof, Transfer Certificate of Title No. T-5906 was issued to
defendants.
Later, plaintiffs filed an action to recover the land, alleging that the deed of
absolute sale had been executed through fraud, without consideration.
However, the case was subsequently settled amicably, when the parties
entered into an "Agreement" dated February 28, 1955, under the terms of
which defendants paid P500.00 on that day as partial payment of the
purchase price of the land, and promised to pay the balance of P1,500.00 on
or before April 30, 1955, with a grace period of thirty days. The parties also
stipulated in said Agreement that it "shall supersede all previous agreements
or contracts heretofore entered into and executed by and between plaintiff
and defendants, involving the same parcel of riceland ... .
Claiming that full payment had been effected only sometime in May, 1955,
plaintiffs instituted the present action on March 4, 1960.
Defendants moved to dismiss, on the ground that plaintiffs' right of action
was already barred, because the five-year redemption period had already
expired.
Sustaining the motion, the Nueva Vizcaya court dismissed the complaint.
Plaintiffs appealed to the Court of Appeals, which certified the case to this
Court because only a legal issue remains to be determined.
The sole question is: When did the five-year period (within which plaintiffs
may exercise their right of repurchase) begin to run? Should it be August 7,
1953, when the Deed of Absolute Sale was executed, or February 28, 1955,
when the compromise "Agreement" was entered into; or should it be in May,
1955, upon full payment of the purchase price? It is obvious that counted
from either of the first two dates more than five years had elapsed when this
26 | S a l e s & L e a s e H W # 3
action for redemption was brought (March 1960); whereas the action would
be well within the period, if computed from the date of full payment of the
purchase price.
The lower court, in dismissing plaintiffs' complaint, fixed the starting date as
February 28, 1955, when the Agreement (Annex "B") was entered into. It is
plaintiffs' contention, on the other hand, that the prescriptive period should
be counted from the full payment of the purchase price, that is, from May,
1955, since it was on this date that the contract was consummated.
Plaintiffs' contention is untenable. The law speaks of "five years from date of
conveyance." Conveyance means transfer of ownership; it means the date
when the title to the land is transferred from one person to another.  2 The
five-year period should, therefore, be reckoned with from the date that
defendants acquired ownership of the land. Now, when did defendants
legally acquire ownership over the land?
Art. 1477 of the New Civil Code provides that ownership of the thing sold
shall be transferred to the vendee upon the actual or constructive delivery
thereof; and Art. 1496 points out that ownership of the thing sold is acquired
by the vendee from the moment it is delivered to him in any of the ways
specified in articles 1497 to 1501. Under Art. 1498, When the sale is made
through a public instrument — as in this case — 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 clearly
inferred. 3 This manner of delivery of the thing through the execution of a
public document is common to personal as well as real property. 4
It is clear, therefore, that defendants acquired ownership to the land in
question upon the execution of the deed of sale. The deed of sale was
executed on August 7, 1953, which was "superseded" by the Agreement of
February 28, 1955, as to the terms and conditions of payment of the
purchase price. The latter agreement did not operate to revest the
ownership of the land in the plaintiffs. 5
It is apparent that five years had elapsed since the execution of the deed of
sale at the time plaintiffs filed this action for redemption. Our view finds
support in a long line of decisions holding, that the five-year period starts
from the date of the execution of the instrument of conveyance. 6
But assuming arguendo that Annex "A" is null and void, as plaintiffs aver,
and did not serve to effectuate delivery of the property, we can consider the
date of the Agreement (Annex "B"), at the latest, as the time within which
ownership is vested in the defendants. True, Annex "B" is a private
instrument the execution of which could not be construed as constructive
delivery under Art. 1498 of the New Civil Code. But Art. 1496 explicitly
provides that ownership of the thing sold is acquired by the vendee from the
moment it is delivered to him "in any other manner signifying an agreement
that the possession is transferred from the vendor to the vendee." The
intention to give possession (and ownership) is manifest in the agreement
(Annex "B") entered into by the parties, specially considering the following
circumstances: (1) the payment of part of the purchase price, there being no
stipulation in the agreement that ownership will not vest in the vendees until
full payment of the price; and (2) the fact that the agreement was entered
VILLAR
into in consideration of plaintiffs' desistance, as in fact they did desist, in
prosecuting their reivindicatory action, thereby leaving the property in the
hands of the then and now defendants — as owners thereof, necessarily.
This was delivery brevi manu permissible under Articles 1499 and 1501 of
the New Civil Code.
The circumstance that full payment was made only, as plaintiffs allege, in
May, 1955, does not alter the fact that ownership of the land passed to
defendants upon the execution of the agreement with the intention of letting
them hold it as owners. In the absence of an express stipulation to the
contrary, the payment of the price is not a condition precedent to the transfer
of ownership, which passes by delivery of the thing to the buyer. 7
IN VIEW OF THE FOREGOING, the order of the court a quo dismissing the
complaint is hereby affirmed, with costs against plaintiffs-appellants.
Bautista Angelo, Reyes, J.B.L., Paredes, Dizon, Regala, Makalintal,
Bengzon, J.P., and Zaldivar, JJ., concur.
Concepcion, J., took no part.
Barrera, J., is on leave.
(11) THIRD DIVISION
G.R. No. 92989             July 8, 1991
PERFECTO DY, JR. petitioner, 
vs.
COURT OF APPEALS, GELAC TRADING INC., and ANTONIO V.
GONZALES, respondents.
Zosa & Quijano Law Offices for petitioner.
Expedito P. Bugarin for respondent GELAC Trading, Inc.
GUTIERREZ, JR., J.:
This is a petition for review on certiorari seeking the reversal of the March
23, 1990 decision of the Court of Appeals which ruled that the petitioner's
purchase of a farm tractor was not validly consummated and ordered a
complaint for its recovery dismissed.
The facts as established by the records are as follows:
The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979,
Wilfredo Dy purchased a truck and a farm tractor through financing extended
by Libra Finance and Investment Corporation (Libra). Both truck and tractor
were mortgaged to Libra as security for the loan.
The petitioner wanted to buy the tractor from his brother so on August 20,
1979, he wrote a letter to Libra requesting that he be allowed to purchase
from Wilfredo Dy the said tractor and assume the mortgage debt of the
latter.
In a letter dated August 27, 1979, Libra thru its manager, Cipriano Ares
approved the petitioner's request.
Thus, on September 4, 1979, Wilfredo Dy executed a deed of absolute sale
in favor of the petitioner over the tractor in question.
27 | S a l e s & L e a s e H W # 3
At this time, the subject tractor was in the possession of Libra Finance due
to Wilfredo Dy's failure to pay the amortizations.
Despite the offer of full payment by the petitioner to Libra for the tractor, the
immediate release could not be effected because Wilfredo Dy had obtained
financing not only for said tractor but also for a truck and Libra insisted on
full payment for both.
The petitioner was able to convince his sister, Carol Dy-Seno, to purchase
the truck so that full payment could be made for both. On November 22,
1979, a PNB check was issued in the amount of P22,000.00 in favor of
Libra, thus settling in full the indebtedness of Wilfredo Dy with the financing
firm. Payment having been effected through an out-of-town check, Libra
insisted that it be cleared first before Libra could release the chattels in
question.
Meanwhile, Civil Case No. R-16646 entitled "Gelac Trading, Inc. v. Wilfredo
Dy", a collection case to recover the sum of P12,269.80 was pending in
another court in Cebu.
On the strength of an alias writ of execution issued on December 27, 1979,
the provincial sheriff was able to seize and levy on the tractor which was in
the premises of Libra in Carmen, Cebu. The tractor was subsequently sold
at public auction where Gelac Trading was the lone bidder. Later, Gelac sold
the tractor to one of its stockholders, Antonio Gonzales.
It was only when the check was cleared on January 17, 1980 that the
petitioner learned about GELAC having already taken custody of the subject
tractor. Consequently, the petitioner filed an action to recover the subject
tractor against GELAC Trading with the Regional Trial Court of Cebu City.
On April 8, 1988, the RTC rendered judgment in favor of the petitioner. The
dispositive portion of the decision reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
against the defendant, pronouncing that the plaintiff is the owner of the
tractor, subject matter of this case, and directing the defendants Gelac
Trading Corporation and Antonio Gonzales to return the same to the plaintiff
herein; directing the defendants jointly and severally to pay to the plaintiff the
amount of P1,541.00 as expenses for hiring a tractor; P50,000 for moral
damages; P50,000 for exemplary damages; and to pay the cost. (Rollo, pp.
35-36)
On appeal, the Court of Appeals reversed the decision of the RTC and
dismissed the complaint with costs against the petitioner. The Court of
Appeals held that the tractor in question still belonged to Wilfredo Dy when it
was seized and levied by the sheriff by virtue of the alias writ of execution
issued in Civil Case No. R-16646.
The petitioner now comes to the Court raising the following questions:
A.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
MISAPPREHENDED THE FACTS AND ERRED IN NOT AFFIRMING THE
TRIAL COURT'S FINDING THAT OWNERSHIP OF THE FARM TRACTOR
HAD ALREADY PASSED TO HEREIN PETITIONER WHEN SAID
TRACTOR WAS LEVIED ON BY THE SHERIFF PURSUANT TO
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AN ALIAS WRIT OF EXECUTION ISSUED IN ANOTHER CASE IN FAVOR
OF RESPONDENT GELAC TRADING INC.
B.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
EMBARKED ON MERE CONJECTURE AND SURMISE IN HOLDING THAT
THE SALE OF THE AFORESAID TRACTOR TO PETITIONER WAS DONE
IN FRAUD OF WILFREDO DY'S CREDITORS, THERE BEING NO
EVIDENCE OF SUCH FRAUD AS FOUND BY THE TRIAL COURT.
C.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
MISAPPREHENDED THE FACTS AND ERRED IN NOT SUSTAINING THE
FINDING OF THE TRIAL COURT THAT THE SALE OF THE TRACTOR BY
RESPONDENT GELAC TRADING TO ITS CO-RESPONDENT ANTONIO
V. GONZALES ON AUGUST 2, 1980 AT WHICH TIME BOTH
RESPONDENTS ALREADY KNEW OF THE FILING OF THE INSTANT
CASE WAS VIOLATIVE OF THE HUMAN RELATIONS PROVISIONS OF
THE CIVIL CODE AND RENDERED THEM LIABLE FOR THE MORAL AND
EXEMPLARY DAMAGES SLAPPED AGAINST THEM BY THE TRIAL
COURT. (Rollo, p. 13)
The respondents claim that at the time of the execution of the deed of sale,
no constructive delivery was effected since the consummation of the sale
depended upon the clearance and encashment of the check which was
issued in payment of the subject tractor.
In the case of Servicewide Specialists Inc. v. Intermediate Appellate Court.
(174 SCRA 80 [1989]), we stated that:
x x x           x x x          x x x
The rule is settled that the chattel mortgagor continues to be the owner of
the property, and therefore, has the power to alienate the same; however, he
is obliged under pain of penal liability, to secure the written consent of the
mortgagee. (Francisco, Vicente, Jr., Revised Rules of Court in the
Philippines, (1972), Volume IV-B Part 1, p. 525). Thus, the instruments of
mortgage are binding, while they subsist, not only upon the parties executing
them but also upon those who later, by purchase or otherwise, acquire the
properties referred to therein.
The absence of the written consent of the mortgagee to the sale of the
mortgaged property in favor of a third person, therefore, affects not the
validity of the sale but only the penal liability of the mortgagor under the
Revised Penal Code and the binding effect of such sale on the mortgagee
under the Deed of Chattel Mortgage.
x x x           x x x          x x x
The mortgagor who gave the property as security under a chattel mortgage
did not part with the ownership over the same. He had the right to sell it
although he was under the obligation to secure the written consent of the
mortgagee or he lays himself open to criminal prosecution under the
provision of Article 319 par. 2 of the Revised Penal Code. And even if no
consent was obtained from the mortgagee, the validity of the sale would still
not be affected.
28 | S a l e s & L e a s e H W # 3
Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor can not
sell the subject tractor. There is no dispute that the consent of Libra Finance
was obtained in the instant case. In a letter dated August 27, 1979, Libra
allowed the petitioner to purchase the tractor and assume the mortgage debt
of his brother. The sale between the brothers was therefore valid and
binding as between them and to the mortgagee, as well.
Article 1496 of the Civil Code states that the ownership of the thing sold is
acquired by the vendee from the moment it is delivered to him in any of the
ways specified in Articles 1497 to 1501 or in any other manner signing an
agreement that the possession is transferred from the vendor to the vendee.
We agree with the petitioner that Articles 1498 and 1499 are applicable in
the case at bar.
Article 1498 states:
Art. 1498. 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 clearly
be inferred.
x x x           x x x          x x x
Article 1499 provides:
Article 1499. The delivery of movable property may likewise be made by the
mere consent or agreement of the contracting parties, if the thing sold
cannot be transferred to the possession of the vendee at the time of the
sale, or if the latter already had it in his possession for any other reason.
(1463a)
In the instant case, actual delivery of the subject tractor could not be made.
However, there was constructive delivery already upon the execution of the
public instrument pursuant to Article 1498 and upon the consent or
agreement of the parties when the thing sold cannot be immediately
transferred to the possession of the vendee. (Art. 1499)
The respondent court avers that the vendor must first have control and
possession of the thing before he could transfer ownership by constructive
delivery. Here, it was Libra Finance which was in possession of the subject
tractor due to Wilfredo's failure to pay the amortization as a preliminary step
to foreclosure. As mortgagee, he has the right of foreclosure upon default by
the mortgagor in the performance of the conditions mentioned in the contract
of mortgage. The law implies that the mortgagee is entitled to possess the
mortgaged property because possession is necessary in order to enable him
to have the property sold.
While it is true that Wilfredo Dy was not in actual possession and control of
the subject tractor, his right of ownership was not divested from him upon his
default. Neither could it be said that Libra was the owner of the subject
tractor because the mortgagee can not become the owner of or convert and
appropriate to himself the property mortgaged. (Article 2088, Civil Code)
Said property continues to belong to the mortgagor. The only remedy given
to the mortgagee is to have said property sold at public auction and the
proceeds of the sale applied to the payment of the obligation secured by the
mortgagee. (See Martinez v. PNB, 93 Phil. 765, 767 [1953]) There is no
showing that Libra Finance has already foreclosed the mortgage and that it
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was the new owner of the subject tractor. Undeniably, Libra gave its consent
to the sale of the subject tractor to the petitioner. It was aware of the transfer
of rights to the petitioner.
Where a third person purchases the mortgaged property, he automatically
steps into the shoes of the original mortgagor. (See Industrial Finance Corp.
v. Apostol, 177 SCRA 521 [1989]). His right of ownership shall be subject to
the mortgage of the thing sold to him. In the case at bar, the petitioner was
fully aware of the existing mortgage of the subject tractor to Libra. In fact,
when he was obtaining Libra's consent to the sale, he volunteered to
assume the remaining balance of the mortgage debt of Wilfredo Dy which
Libra undeniably agreed to.
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.
The sale of the subject tractor was consummated upon the execution of the
public instrument on September 4, 1979. At this time constructive delivery
was already effected. Hence, the subject tractor was no longer owned by
Wilfredo Dy when it was levied upon by the sheriff in December, 1979. Well
settled is the rule that only properties unquestionably owned by the judgment
debtor and which are not exempt by law from execution should be levied
upon or sought to be levied upon. For the power of the court in the execution
of its judgment extends only over properties belonging to the judgment
debtor. (Consolidated Bank and Trust Corp. v. Court of Appeals, G.R. No.
78771, January 23, 1991).
The respondents further claim that at that time the sheriff levied on the
tractor and took legal custody thereof no one ever protested or filed a third
party claim.
It is inconsequential whether a third party claim has been filed or not by the
petitioner during the time the sheriff levied on the subject tractor. A person
other than the judgment debtor who claims ownership or right over levied
properties is not precluded, however, from taking other legal remedies to
prosecute his claim. (Consolidated Bank and Trust Corp. v. Court of
Appeals, supra) This is precisely what the petitioner did when he filed the
action for replevin with the RTC.
Anent the second and third issues raised, the Court accords great respect
and weight to the findings of fact of the trial court.1âwphi1 There is no
sufficient evidence to show that the sale of the tractor was in fraud of
Wilfredo and creditors. While it is true that Wilfredo and Perfecto are
brothers, this fact alone does not give rise to the presumption that the sale
was fraudulent. Relationship is not a badge of fraud (Goquiolay v. Sycip, 9
29 | S a l e s & L e a s e H W # 3
SCRA 663 [1963]). Moreover, fraud can not be presumed; it must be
established by clear convincing evidence.
We agree with the trial court's findings that the actuations of GELAC Trading
were indeed violative of the provisions on human relations. As found by the
trial court, GELAC knew very well of the transfer of the property to the
petitioners on July 14, 1980 when it received summons based on the
complaint for replevin filed with the RTC by the petitioner. Notwithstanding
said summons, it continued to sell the subject tractor to one of its
stockholders on August 2, 1980.
WHEREFORE, the petition is hereby GRANTED. The decision of the Court
of Appeals promulgated on March 23, 1990 is SET ASIDE and the decision
of the Regional Trial Court dated April 8, 1988 is REINSTATED.
SO ORDERED.
Fernan, C.J., Feliciano and Bidin, JJ., concur.
Davide, Jr., J., took no part.
(12) THIRD DIVISION
G.R. No. 66140 January 21, 1993
INDUSTRIAL TEXTILE MANUFACTURING COMPANY OF THE
PHILIPPINES, INC., petitioner,  17, March 19, and April 17, 1971 (p. 74, Rollo). Respondent, on the other
vs.
LPJ ENTERPRISES, INC., respondent.
Bengzon, Zarraga, Narciso, Cudala, Pecson, Azcuna & Bengzon Law Office
for petitioner.
MELO, J.:
Before Us is a petition for review on certiorari seeking the reversal of the
November 9, 1983 decision of the then Intermediate Appellate Court in
CA-G.R. CV No. 68281, penned by the Honorable Justice Eduardo P.
Caguioa, with Justices Gaviola and Quetulio-Losa concurring, which
dismissed petitioner's complaint and absolved herein respondent from any
liability to the former.
It appears on record that respondent LPJ Enterprises, Inc. had a contract to
supply 300,000 bags of cement per year to Atlas Consolidated Mining and
Development Corporation (Atlas for short), a member of the Soriano Group
of Companies. The cement was delivered packed in kraft paper bags, then
as now, in common use.
Sometime in October, 1970, Cesar Campos, a Vice-President of petitioner
Industrial Textile Manufacturing Company of the Philippines (or Itemcop, for
brevity), asked Lauro Panganiban, Jr., President of respondent corporation,
if he would like to cooperate in an experiment to develop plastic cement
bags. Panganiban acquiesced, principally because Itemcop is a sister
corporation of Atlas, respondent's major client. A few weeks later,
Panganiban accompanied Paulino Ugarte, another Vice-President of
Itemcop, to the factory of respondent's supplier, Luzon Cement Corporation
in Norzagaray, Bulacan, to test fifty (50) pieces of plastic cement bags. The
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experiment, however, was unsuccessful. Cement dust oozed out under
pressure through the small holes of the woven plastic bags and the loading
platform was filled with dust. The second batch of plastic bags subjected to
trial was likewise a failure. Although the weaving of the plastic bags was
already tightened, cement dust still spilled through the gaps. Finally, with
three hundred (300) "improved bags", the seepage was substantially
reduced. Ugarte then asked Panganiban to send 180 bags of cement to
Atlas via commercial shipping. Campos, Ugarte, and two other officials of
petitioner company followed the 180 bags to the plant of Atlas in Sangi,
Toledo, Cebu where they professed satisfaction at the performance of their
own plastic bags. On December 29, 1970, Campos sent Panganiban a letter
proclaiming dramatic results in the experiment. Consequently, Panganiban
agreed to use the plastic cement bags. Four purchase orders (P.O.s) were
thereafter issued, to wit:
DATE NUMBER OF BAGS UNIT COST AMOUNT
5 January 1971 53,800 P .83 P44,654.00
24 February 1971 11,000 .90 9,900.00
March 1971 41,000 .92 37,720.00
6 April 1971 10,000 .92 9,200.00
————
TOTAL: P101,474.00
Petitioner delivered the above orders consecutively on January 12, February
hand, remitted the amounts of P1,640.00, P2,480.00. and P13,230.00 on
March 31, April 31, and May 3, 1971 respectively, thereby leaving a balance
of P84,123.80 (p. 58, Ibid.). No other payments were made, thus prompting
A. Soriano y Cia of petitioner's Legal Department to send demand letters to
respondent corporation. Reiterations thereof were later sent by petitioner's
counsel. A collection suit was filed on April 11, 1973 when the demands
remained unheeded.
At the trial on the merits, respondent admitted its liability for the 53,800
polypropylene lime bags covered by the first purchase order. (TSN, January
5, 1971, p. 131). With respect to the second, third, and fourth purchase
orders, respondent, however, denied full responsibility therefor. Respondent
said that it will pay, as it did pay for, only the 15,000 plastic bags it actually
used in packing cement. As for the remaining 47,000 bags, the workers of
Luzon Cement strongly objected to the use thereof due to the serious health
hazards posed by the continued seepage of cement dust. Notwithstanding
the measures adopted by respondent such as the use of masks, gloves. and
conveyor system, the workers still refused to utilize the plastic bags.
Respondent was, therefore, constrained to revert to the use of kraft paper
bags in packing cement. Thereafter, petitioner was asked to take back the
unused plastic bags. Considering however, that the bags were in the cement
factory of respondent's supplier, petitioner maintained that it was
respondent's obligation to return the bags to them. Apparently, this was not
done and so petitioner demanded payment for the said bags.
On May 25, 1981, the trial court rendered its decision, the dispositive portion
of which reads:
30 | S a l e s & L e a s e H W # 3
WHEREFORE, judgment is hereby rendered sentencing the defendant to
pay the sum of P84,123.80 with l2% interest per annum from May, 1971
plus 15% of the total obligation as attorney's fees, and the costs.
SO ORDERED. (p. 80, Ibid.)
Respondent corporation's appeal was upheld by the appellate court when it
reversed the trial court's decision and dismissed the case with costs against
petitioner. (p. 28, Ibid.). Hence, the present recourse.
The first issue to be resolved is the propriety of this petition as it calls for a
re-examination of the factual findings of the appellate court.
As asserted by herein respondent, it is well-entrenched in Our jurisprudence
that this Court is not a trier of facts (Valdez v. CA, 194 SCRA 360 [1991]). As
a rule, it is also settled that the factual findings of the appellate court are final
and conclusive (Bustamante v. CA, 193 SCRA 603 [1991]; Radiowealth
Finance Company v. Palileo, 197 SCRA 245 [1991]). However, in a long line
of cases, We have pronounced certain exceptions, as when the inference
made is manifestly mistaken or when the judgment is based on
misapprehension of facts or when the appellate court overlooked relevant
facts not disputed by the parties and which if properly considered, would
justify a different conclusion (Aquino v. CA, 204 SCRA 247 [1991]; Manlapaz
v. CA, 147 SCRA 236 [1987]; Sacay v. Sandiganbayan, 142 SCRA 593,
[1986]; Moran v. CA, 133 SCRA 88 [1984]).
A review of the record instantly reveals that the case at bar falls under the
last exception. As earlier adverted to, respondent has repeatedly admitted its
liability for the 53,800 plastic lime bags amounting to P44,654.00 yet the
appellate court disregarded this fact and totally cleared respondent from all
responsibility. On this point alone, the decision of the appellate court may be
overturned, or at least modified.
Let Us now turn to the crux of the controversy, which is whether or not
respondent may be held liable for the 47,000 plastic bags which were not
actually used for packing cement as originally intended.
It is beyond dispute that prior to respondent's transaction with petitioner, the
bags were already tested and the results thereof, albeit initially unsuccessful,
were nevertheless favorably considered after due alterations were made.
Verily, it is on the basis of such experimental findings that respondent
agreed to use the plastic cement bags and thereafter issued the purchase
orders heretofore mentioned. Significantly, the quantity of bags ordered by
respondent also negates its position that the bags were still under
experimentation. Indeed, if it were so, the bags ordered should have been
considerably lesser in number and would normally increase as the suitability
of the plastic bags became more definite. Likewise, it is worthy to note that
as of the date of petitioner's third delivery on March 19, 1971, respondent
has received a total of 52,000 bags. By then, it was very probable that the
problems alluded to by respondent could no longer be resolved, thus, only
15,000 bags were actually used and 37,000 bags were already considered
unfit for packing cement. Under such predicament, it was but logical for
respondent to cancel then the fourth purchase order for another 10,000
bags. Surprisingly, respondent still accepted the same upon delivery on April
17, 1971 and remitted its payments until May 3, 1971. When petitioner sent
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letters demanding the full payment of the bags, respondent simply declared
that it did not receive any because it transferred its offices to another place.
In the meantime, the bags remained in the custody of Luzon Cement,
respondent's supplier and virtually a stranger as far as petitioner is
concerned. It is for this reason that petitioner may not be expected to just
pull out its bags from Luzon Cement.
Not to be overlooked also is the fact that Panganiban, respondent
corporation's president, also collected due commissions for the four
purchase orders issued in favor of petitioner. (p. 79, Rollo).
Finally, the conditions which allegedly govern the transaction according to
respondent may not be considered. The trial court correctly observed that
such conditions should have been distinctly specified in the purchase orders
and respondent's failure to do so is fatal to its cause. We find that Article
1502 of the Civil Code, invoked by both parties herein, has no application at
all to this case. The provision in the Uniform Sales Act and the Uniform
Commercial Code from which Article 1502 was taken, clearly requires an
express written agreement to make a sales contract either a "sale or return"
or a "sale on approval". Parol or extrinsic testimony could not be admitted for
the purpose of showing that an invoice or bill of sale that was complete in
every aspect and purporting to embody a sale without condition or restriction
constituted a contract of sale or return. If the purchaser desired to
incorporate a stipulation securing to him the right of return, he should have
done so at the time the contract was made. On the other hand, the buyer
cannot accept part and reject the rest of the goods since this falls outside the
normal intent of the parties in the "on approval" situation. (67 Am Jur  2d, pp.
733, 748).
In the light of these principles, We hold that the transaction between
respondent and petitioner constituted an absolute sale. Accordingly,
respondent is liable for the plastic bags delivered to it by petitioner.
WHEREFORE, premises considered, the decision appealed from is hereby
SET ASIDE and the decision of the trial court REINSTATED.
SO ORDERED.
Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.
(13) EN BANC
G.R. No. L-34697             March 26, 1932
JESUS TERAN, plaintiff-appellee, 
vs.
FRANCISCA VILLANUEVA, VIUDA DE RIOSA, ET AL., defendants-
appellants.
Domingo Imperial for appellants.
Bonto & Gutierrez Lora for appellee.
VILLAMOR, J.:
31 | S a l e s & L e a s e H W # 3
On October 6, 1928, the parties in this case executed the deed of sale
Exhibit A, whereby the defendants sold to the plaintiff for P4,000 the parcel
of land therein described as containing an area of 34 hectares, 52 ares, and
43 centares.
The plaintiff brought this action for rescission of the contract, with damages,
upon discovering that the parcel of land contained only about then hectares.
The trial court found no evidence of bad faith on the part of the defendants,
and we agree with this finding. This land, with the same area stated in the
contract, was inherited by the defendants from their late father, Mariano
Villanueva; and the same area appears in the tax declaration given to the
plaintiff by an agent of the defendants, named Rafael Villanueva. The latter,
accompanied by the plaintiff, inspected the land. Villanueva pointed out
some of the boundaries, as they did not go over all of them. Without further
investigating the area of the land, the plaintiff agreed to purchase it for the
sum of four thousand pesos, paying the amount and taking possession
thereof. The plaintiff alleges that after the 1928 harvest he discovered that
the boundaries pointed out to him by Rafael Villanueva were not the real
ones, and, in order to ascertain the exact area of the land, he went to the
cadastral office in Malinao and got a sketch of the property (Exh. B), which
shows that the land in question contains only ten hectares, and not thirty-
four, as appears in the deed of sale.
In view of these facts, the plaintiff now seeks to rescind the contract on the
ground that the property contains a smaller area than that stated in the deed
of sale. Evidently this is a sale of real estate with area and boundaries given,
for a lump sum and not so much per unit of measure, provided for in article
1471 of the Civil Code.
The plaintiff's allegation that Rafael Villanueva did not point out to him the
real boundaries, is but a half-truth; for, as has been stated, when the
property was inspected, Villanueva did not go over all the boundaries of the
land, as testified to by Leopoldo Teran. It is true that the owners of the
adjoining lands mentioned in Exhibit B are different from those mentioned in
Exhibit A; but there is nothing in the record to show that the property
described in the deed Exhibit A was not delivered to the plaintiff. The names
of the adjoining landowners may of then change, for obvious reasons; but
the plaintiff's evidence does not establish that outside the boundaries
mentioned in the deed Exhibit A there are portions of the property not yet
delivered to him, or that all the land included within those boundaries have
not been delivered to the vendee.
According to Manresa and Scaevola, illustration commentators of the Civil
Code, whenever a certain real estate is sold for a lump sum (case 1, article
1471) the rule in law is that there shall be no increase or decreased in price
even if the area or extent is found to be more or less than that stated in the
contract; but, if the vendor cannot deliver to the vendee all that is included
within the boundaries stated in the contract the latter has the option either to
reduce the price in proportion to the deficiency, or to set aside the contract.
(See Comm. Civ. Code. Manresa, ed. of 1905, vol. 10, pp. 146-148;
Scaevola, vol. 23, pp. 500-503.) In this case the Civil Code presumes that
the purchaser had in mind a determined piece of land, and that he
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ascertained its area and quality before the contract was perfected. If he did
not do so, or it, having done so, he made no objection and consented to the
transaction, he can blame no one but himself; and, because, as Professor
Antonio Gomez says, it is presumed that he intended to buy a determined
object, any proof of misrepresentation will not avail him, neither will it vitiate
the transaction. (Scaevola, supra.)
Manresa expresses himself in similar terms, saying that, "if the sale was
made for a lump sum, the cause of the contract is the thing sold, irrespective
of area or quantity, the real estate as defined by the stipulated boundaries,
known in law as the cuerpo cierto. . . . If all that is included within the
stipulated boundaries is not delivered, then the object of the contract, its
cause so far as the vendee is concerned, is not delivered: hence, he is
entitled to rescind it. He may however think (and of this there can be no
judge but himself), that although he did not receive the land within the
stipulated boundaries, he would like to have it: hence, his right to enforce the
contract with the corresponding decrease in price as provided in article
1471."
Furthermore, in Azarraga vs. Gay  (52 Phil., 599), it was held:
When the purchaser proceeds to make investigations by himself, and the
vendor does nothing to prevent such investigation from being as complete
as the former might made false representations to him.
One who contracts for the purchase of real estate is reliance on the
representations and statements of the vendor as to its character and value,
but after he has visited and examined it for himself, and has had the means
and opportunity of verifying such statements, cannot avoid the contract on
the ground that they were false or exaggerate.
In Songco vs. Sellner (37 Phil., 254), the court said:
The law allows considerable latitude to seller's statements, or dealer's talk;
and experience teaches that it is exceedingly risky to accept it at its face
value. . . .
Assertions concerning the property which is the subject of a contract of sale,
or in regard to its qualities and characteristics, are the usual and ordinary
means used by sellers to obtain a high price and are always understood as
affording to buyers no ground for omitting to make inquiries. A man who
relies upon such an affirmation made by a person whose interest might so
readily prompted him to exaggerate the value of his property does so at his
peril, and must take the consequences of his own imprudence.
The plaintiff had ample opportunity to investigate the conditions of the land
he was purchasing, without the defendant's doing anything to prevent him
from making as many inquiries as he deemed expedient, for which reason
he cannot now allege that the vendors made false representations. (National
Cash Register Co. vs.Townsend, 137 N. C., 515.) The same doctrine is
upheld by the courts of the United States, in the following case among
others: "Misrepresentation by a vendor of real property with reference to its
area are not actionable, where a correct description of the property was
given in the deed and recorded chain of title, which the purchaser's agent
undertook to investigate and report upon, and the vendor made no effort to
prevent a full investigation." (Shappirio vs. Goldberg, 48 Law. ed., 419.)
32 | S a l e s & L e a s e H W # 3
The Spanish cases decided the matter in the same way.
Doña Dolores Amoros Soler brought suit against Francisco Gisbert Richart
to recover two parcels of land which, she alleged, were lacking from the
property her brother Francisco sold her. The civil branch of the Valencia
Audencia decided against the plaintiff, who appealed to the Supreme Court.
In dismissing the appeal, the Supreme Court held that, "since the vendee
has all the land included within the boundaries mentioned in the titles shown
to the bidders at the auction sale, the trial court must be held to have rightly
applied article 1471 of the Civil Code in its decision, if the stipulated price
was fixed in relation to the area of the land or cuerpo cierto which had to be,
or was delivered to the vendee." (Decision of the Supreme Court of April
20th, published June 2, 1913.)
Francisco Fernandez Parra filed a complaint against Pedro Joaquin del
Portillo to recover some parcels of land which formed part of those which he
had sold to the latter. The civil branch of the Albacete Audience decided
against the plaintiff, and on appeal this judgment was affirmed by the
Supreme Court, which held that, "as the court found that the parcels of land
which the plaintiff sought to recover were within the boundaries of the
property sold as a cuerpo cierto, and that the sale was made for a lump sum,
and not at a certain price for each unit of measure, it did not violate article
1471 of the Civil Code in absolving the vendee from the complaint."
(Decision of the Supreme Court of July 2, 1914, published January 4, 1915.)
Martinez Ruiz (El Codigo Civil, 2d ed., vol. XV, pp. 298- 299) proposes the
following question: If real estate is sold for a lump sum and not at so much
per unit of measure, may the vendee allege error in giving consent, based
upon its inferior quality or deficiency in area?
The Supreme Court decided this question negatively in its decision dated
May 9, 1914.
By deed of August 21, 1901, Mariano de Cieza sold a piece of property
204 fanegas in area for 35,000  pesetas  to Bernardino Rodriguez. Several
years later Rodriguez brought suit against the Cieza heirs to annul the
contract on the ground of misrepresentation in the deed of sale, with
reference to the area, which was less than that stated, and not of the first-
class quality, so that the price fixed was exorbitant and unjust — according
to the data obtained, it should have been less than one-third of that shown in
the contract. An answer was filed and the Audience of Valladolid absolved
the defendants, whereupon Rodriguez appealed, invoking articles 1265 and
1266 of the Civil Code which, he contended, under the first assignment of
error, had been violated, in that the trial court had not held the contract of
sale void due to error in the subject matter and principal conditions of the
transaction; for the vendee had believed, upon the strength of statements
made by the vendor and other persons connected with the sale, and of the
deed of sale, that he was getting a piece of land of good quality from which,
by employing capital and labor, he would reap a legitimate return, which
however, he failed to realize. The Supreme Court dismissed the appeal,
"inasmuch as the error which invalidates contractual consent must, in order
to effect nullity, necessarily relate to the very substance or the essential
qualities of the thing agreed upon, according to a correct understanding of
VILLAR
articles 1265 and 1266 of the Civil Code; and this being granted, the first and
second grounds are untenable, inasmuch as when the court a quo  held,
from the evidence adduced, that there was no such error, against the
contention of the appellant, who had the burden of proof to show the
contrary, it acted correctly because the property appears to have been sold
for a lump sum, thereby excluding every argument about quality and area."
In Irureta Goyena vs. Tambunting  (1 Phil., 490), the matter dealt with was
the sale of a piece of land and the building thereon, situated at No. 20 San
Jose Street, Ermita, Manila. This land contained 152.46 square meters. The
vendee signed a private document stating that he had purchased of
Francisco Irureta Goyena a lot at No. 20 San Jose Street, Ermita, for the
sum of three thousand pesos, payable as soon as the deed of sale was
signed. The proper notarial document was drawn up, setting the price of the
realty at P3,200. The vendee requested a reduction because the land did not
have the area that the plaintiff had, through a broker, told him it contained.
The vendor would not reduce the price, and hence the litigation between the
parties, decided by the trial court in favor of the plaintiff. Upon appeal, the
Supreme court, applying article 1471 of the Civil Code, affirmed the
judgement appealed from on the ground that the sale was made for a lump
sum and not at so much per unit of measure.
In Azarraga vs. Gay (52 Phil., 599), Leodegario Azarraga sold two parcels of
land to Maria Gay for the lump sum of P47,000 to be paid as provided aid
the contract. The contract recites that the parties agreed upon the sale of
two parcels of land, the first containing 102 hectares, 67 ares, and 32
centares, and the second, 98 hectares, more or less, for the lump sum of
P47,000 payable, partly in cash and partly in installments. Said two parcels
are defined by means of the boundaries given in the contract. The defendant
refused to pay the full stipulated price, alleging that the second parcel with
an area of 98 hectares according to the deed of sale, had only 70 hectares,
and therefore asked for a reduction of the price. The plaintiff refused to grant
the request, and brought suit against the vendee to recover the whole price
agreed upon. The court rendered judgment in favor of the plaintiff. On
appeal, the Supreme Court, applying article 1471 of the Civil Code, affirmed
the judgment appealed from, on the ground that the rule given in the second
paragraph of article 1471 was not applicable to the case, because all the
land contained within the given boundaries of the two parcels sold had been
delivered to the vendee; the land contained within the boundaries of the
property sold had not been broken up and the cuerpo cierto which is the
object of the contract had all been delivered by the vendor, as he had
undertaken to do. Wherefore, the vendor cannot claim anything should the
area turn out to be greater than that stated in the deed; neither can the
vendee, should the area of the second parcel prove to be much smaller.
In the case of Asiain vs. Jalandoni  (45 Phil., 296), when the parties agreed
upon the sale of the land there in question, they had in mind chiefly the area
and quality of the land, the subject of the contract, as will be seen from the
letter of Asiain dated May 6, 1920, in which, among other things, he said:
"DEAR BENJAMIN: I am in receipt of your letter and with regard to your
statement that that parcel does not contain 21 hectares I do not believe. I bet
33 | S a l e s & L e a s e H W # 3
anything that that part only which is planted with cane contains more than 20
hectares, I bet 2 against 1.
"If you agree, I would bet that you pay only one half, I am not a surveyor, but
these days I had the pleasure to survey the land and I know more or less its
area.
"Here we are not to deceive each other. If you like that parcel and if you
want to buy it I will give you good propositions. I don't know where and how
they learned that I was selling the hacienda  and they made me a good offer,
but as we do not want to part but with that parcel, hence my propositions are
the following, in view of the time that has elapsed and the progress of the
cane.
"I assure (aseguro) that there are 2,000 piculs and sell on that basis,
provided that the case is milled in due time. In case the sugar does not
amount to 2,000 piculs, I will pay in sugar all such amount as will be
necessary to complete the 2,000 but if after milling the cane, as I say, there
is an excess over 2,000 piculs, all the excess shall be mine. So that if you
like, I make the sale for the same price that we talked about and the same
conditions, not a dime more or less."
And also from the written memorandum signed by both contracting parties,
containing among other things the following:
"Purchase of land of Mr. Luis Asiain and his wife Maria Cadenas, by B.
Jalandoni, containing 25 hectares more or less of land bounded by property
of the purchaser, with its corresponding crop, estimated at 2,000 piculs, the
total value of which is 55 thousand. The price is to be paid by paying 30
thousand at the signing of the document, and 25 thousand within one year
with interest at the rate of 10 per cent."
In accordance with the foregoing memorandum the deed of sale was
executed in the City of Iloilo, the parties stipulating among other things, the
following:
"(1) That Luis Asiain does hereby promise and bind himself to sell to
Benjamin Jalandoni a parcel of land of the hacienda "Maria" of the aforesaid
Luis Asiain, situated in the municipality of La Carlota, Province of Occidental
Negros, P.I.
"(2) That Benjamin Jalandoni does hereby promise and bind himself to
purchase the aforesaid parcel of land in the sum of P55,000 upon certain
conditions specified in a memorandum signed by the parties which is in the
hands of Attorneys Padilla & Treñas."
Jalandoni then took possession of the land, milled the cane at La Carlota
Central, from which he realized 800 piculs and 23 cates  of the centrifugal
sugar. And after he had secured from Asiain the certificate of title, he had a
surveyor measure the land, which was found to contain only 18 hectares, 54
ares, and 22 centares. Jalandoni had paid P30,000 leaving an unpaid
balance of P25,000 of the purchase price of P55,000 stipulated in the
contract. Asiain sued to recover the balance from Jalandoni. The competent
court declared the deed of sale void, absolved the defendant from paying
P25,000 and ordered the parties to return what they had received under the
contract.
VILLAR
Upon appeal to the Supreme Court, the judgment was affirmed on the
ground that both parties had acted by a mutual mistake.
Comparing the facts in that case of Asiain with those before us now, we note
a fundamental difference: In that case the vendor undertook to deliver to the
vendee a parcel of land some 25 hectares in area and of such a quality as to
be able to produce 2,000 piculs of centrifugal sugar. The vendee, in turn,
agreed to buy said parcel of land with the understanding that it contained
that area and was of the quality guaranteed by the vendor. Inasmuch as the
land had neither the area nor the quality the vendor had assured the vendee
it had, it is clear the latter was entitled to rescind the contract, upon the
strength of the authorities cited in the opinion of the court. We believe that
Jalandoni was entitled to rescind that contract, inasmuch as the vendor did
not deliver a parcel of land of the area and quality stipulated in the contract.
In the present case the parties did not consider the area as an essential
element of the contract. There is no evidence of the negotiation leading up to
the sale of the land, except that the parties executed the deed Exhibit A.
There is no evidence of record that the parties fixed the price at so much per
hectare. If the plaintiff wanted to but the land at so much per unit of
measure, he should have so stated in the contract. The plaintiff testified that
one of the defendants, Francisca Villanueva, signified her willingness to set
aside the contract in case there was a considerable difference in area. But in
her letter Exhibit E-1, this defendant stated that she had to wait for the
decision of her sister or the latter's husband before acting upon the plaintiff's
claim. We believe that he most that can be inferred from such a statement is
that she was disposed to settle the case with a view to avoiding litigation; but
this does not mean that the parties agreed to fix the price of the land at so
much per unit of measure.
For the foregoing considerations, the judgment appealed from is reversed,
and it is held that the contract Exhibit A between the parties is valid and
binding upon them. Wherefore, the defendants are absolved from the
complaint without special pronouncement of costs. So ordered.
Avanceña, C.J., Johnson, Street, Malcolm, Ostrand, Romualdez and Villa-
Real, JJ., concur.
(14) SECOND DIVISION
[G.R. No. 132161. January 17, 2005]
CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC., petitioner,
vs. THE HONORABLE COURT OF APPEALS and HEIRS OF TEODORO
DELA CRUZ, respondents.
DECISION
TINGA, J.:
Petitioner Consolidated Rural Bank, Inc. of Cagayan Valley filed the
instant Petition for Certiorari[1] under Rule 45 of the Revised Rules of Court,
seeking the review of the Decision[2]of the Court of Appeals Twelfth Division
34 | S a l e s & L e a s e H W # 3
in CA-G.R. CV No. 33662, promulgated on 27 May 1997, which reversed the
judgment[3] of the lower court in favor of petitioner; and the Resolution[4] of
the Court of Appeals, promulgated on 5 January 1998, which reiterated its
Decision insofar as respondents Heirs of Teodoro dela Cruz (the Heirs) are
concerned.
From the record, the following are the established facts:
Rizal, Anselmo, Gregorio, Filomeno and Domingo, all surnamed Madrid
(hereafter the Madrid brothers), were the registered owners of Lot No. 7036-
A of plan Psd-10188, Cadastral Survey 211, situated in San Mateo, Isabela
per Transfer Certificate of Title (TCT) No. T-8121 issued by the Register of
Deeds of Isabela in September 1956.[5]
On 23 and 24 October 1956, Lot No. 7036-A was subdivided into several
lots under subdivision plan Psd- 50390. One of the resulting subdivision lots
was Lot No. 7036-A-7 with an area of Five Thousand Nine Hundred Fifty-
Eight (5,958) square meters.[6]
On 15 August 1957, Rizal Madrid sold part of his share identified as Lot No.
7036-A-7, to Aleja Gamiao (hereafter Gamiao) and Felisa Dayag (hereafter,
Dayag) by virtue of a Deed of Sale,[7] to which his brothers Anselmo,
Gregorio, Filomeno and Domingo offered no objection as evidenced by
their Joint Affidavit dated 14 August 1957.[8] The deed of sale was not
registered with the Office of the Register of Deeds of Isabela. However,
Gamiao and Dayag declared the property for taxation purposes in their
names on March 1964 under Tax Declaration No. 7981.[9]
On 28 May 1964, Gamiao and Dayag sold the southern half of Lot No. 7036-
A-7, denominated as Lot No. 7036-A-7-B, to Teodoro dela Cruz,[10] and the
northern half, identified as Lot No. 7036-A-7-A,[11] to Restituto Hernandez.
[12]
 Thereupon, Teodoro dela Cruz and Restituto Hernandez took possession
of and cultivated the portions of the property respectively sold to them.[13]
Later, on 28 December 1986, Restituto Hernandez donated the northern half
to his daughter, Evangeline Hernandez-del Rosario.[14] The children of
Teodoro dela Cruz continued possession of the southern half after their
fathers death on 7 June 1970.
In a Deed of Sale[15] dated 15 June 1976, the Madrid brothers conveyed all
their rights and interests over Lot No. 7036-A-7 to Pacifico Marquez
(hereafter, Marquez), which the former confirmed[16] on 28 February 1983.
[17]
 The deed of sale was registered with the Office of the Register of Deeds
of Isabela on 2 March 1982.[18]
Subsequently, Marquez subdivided Lot No. 7036-A-7 into eight (8) lots,
namely: Lot Nos. 7036-A-7-A to 7036-A-7-H, for which TCT Nos. T-149375
to T-149382 were issued to him on 29 March 1984.[19] On the same date,
Marquez and his spouse, Mercedita Mariana, mortgaged Lots Nos. 7036-A-
7-A to 7036-A-7-D to the Consolidated Rural Bank, Inc. of Cagayan Valley
(hereafter, CRB) to secure a loan of One Hundred Thousand Pesos
(P100,000.00).[20] These deeds of real estate mortgage were registered with
the Office of the Register of Deeds on 2 April 1984.
On 6 February 1985, Marquez mortgaged Lot No. 7036-A-7-E likewise to the
Rural Bank of Cauayan (RBC) to secure a loan of Ten Thousand Pesos
(P10,000.00).[21]
VILLAR
As Marquez defaulted in the payment of his loan, CRB caused the
foreclosure of the mortgages in its favor and the lots were sold to it as the
highest bidder on 25 April 1986.[22]
On 31 October 1985, Marquez sold Lot No. 7036-A-7-G to Romeo Calixto
(Calixto).[23]
Claiming to be null and void the issuance of TCT Nos. T-149375 to T-
149382; the foreclosure sale of Lot Nos. 7036-A-7-A to 7036-A-7-D; the
mortgage to RBC; and the sale to Calixto, the Heirs-now respondents
herein-represented by Edronel dela Cruz, filed a case[24] for reconveyance
and damages the southern portion of Lot No. 7036-A (hereafter, the subject
property) against Marquez, Calixto, RBC and CRB in December 1986.
Evangeline del Rosario, the successor-in-interest of Restituto Hernandez,
filed with leave of court a Complaint in Intervention[25] wherein she claimed
the northern portion of Lot No. 7036-A-7.
In the Answer to the Amended Complaint,[26] Marquez, as defendant, alleged
that apart from being the first registrant, he was a buyer in good faith and for
value. He also argued that the sale executed by Rizal Madrid to Gamiao and
Dayag was not binding upon him, it being unregistered. For his part, Calixto
manifested that he had no interest in the subject property as he ceased to be
the owner thereof, the same having been reacquired by defendant Marquez.
[27]
CRB, as defendant, and co-defendant RBC insisted that they were
mortgagees in good faith and that they had the right to rely on the titles of
Marquez which were free from any lien or encumbrance.[28]
After trial, the Regional Trial Court, Branch 19 of Cauayan, Isabela
(hereafter, RTC) handed down a decision in favor of the defendants,
disposing as follows:
WHEREFORE, in view of the foregoing considerations, judgment is hereby
rendered:
1. Dismissing the amended complaint and the complaint in intervention;
2. Declaring Pacifico V. Marquez the lawful owner of Lots 7036-A-7 now Lots
7036-A-7-A to 7036-A-7-H, inclusive, covered by TCT Nos. T-149375 to T-
149382, inclusive;
3. Declaring the mortgage of Lots 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and
7036-A-7-D in favor of the defendant Consolidated Rural Bank (Cagayan
Valley) and of Lot 7036-A-7-E in favor of defendant Rural Bank of Cauayan
by Pacifico V. Marquez valid;
4. Dismissing the counterclaim of Pacifico V. Marquez; and
5. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the lots
covered by TCT Nos. T-33119, T-33220 and T-7583.
No pronouncement as to costs.
SO ORDERED.[29]
In support of its decision, the RTC made the following findings:
With respect to issues numbers 1-3, the Court therefore holds that the sale
of Lot 7036-A-7 made by Rizal Madrid to Aleja Gamiao and Felisa Dayag
and the subsequent conveyances to the plaintiffs and intervenors are all
valid and the Madrid brothers are bound by said contracts by virtue of the
confirmation made by them on August 14, 1957 (Exh. B).
35 | S a l e s & L e a s e H W # 3
Are the defendants Pacifico V. Marquez and Romeo B. Calixto buyers in
good faith and for value of Lot 7036-A-7?
It must be borne in mind that good faith is always presumed and he who
imputes bad faith has the burden of proving the same (Art. 527, Civil Code).
The Court has carefully scrutinized the evidence presented but finds nothing
to show that Marquez was aware of the plaintiffs and intervenors claim of
ownership over this lot. TCT No. T-8121 covering said property, before the
issuance of Marquez title, reveals nothing about the plaintiffs and intervenors
right thereto for it is an admitted fact that the conveyances in their favor are
not registered.
The Court is therefore confronted with two sales over the same property.
Article 1544 of the Civil Code provides:
ART. 1544. If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property. x x
x (Underscoring supplied).
From the foregoing provisions and in the absence of proof that Marquez has
actual or constructive knowledge of plaintiffs and intervenors claim, the
Court has to rule that as the vendee who first registered his sale, Marquez
ownership over Lot 7036-A-7 must be upheld.[30]
The Heirs interposed an appeal with the Court of Appeals. In
their Appellants Brief,[31] they ascribed the following errors to the RTC: (1) it
erred in finding that Marquez was a buyer in good faith; (2) it erred in
validating the mortgage of the properties to RBC and CRB; and (3) it erred in
not reconveying Lot No. 7036-A-7-B to them.[32]
Intervenor Evangeline del Rosario filed a separate appeal with the Court of
Appeals. It was, however, dismissed in a Resolution dated 20 September
1993 for her failure to pay docket fees. Thus, she lost her standing as an
appellant.[33]
On 27 May 1997, the Court of Appeals rendered its assailed
Decision[34] reversing the RTCs judgment. The dispositive portion reads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET
ASIDE. Accordingly, judgment is hereby rendered as follows:
1. Declaring the heirs of Teodoro dela Cruz the lawful owners of the
southern half portion and Evangeline Hernandez-del Rosario the northern
half portion of Lot No. 7036-A-7, now covered by TCT Nos. T-149375 to T-
149382, inclusive;
2. Declaring null and void the deed of sale dated June 15, 1976 between
Pacifico V. Marquez and the Madrid brothers covering said Lot 7036-A-7;
3. Declaring null and void the mortgage made by defendant Pacifico V.
Marquez of Lot Nos. 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-D
in favor of the defendant Consolidated Rural Bank and of Lot 7036-A-7-E in
favor of defendant Rural Bank of Cauayan; and
4. Ordering Pacifico V. Marquez to reconvey Lot 7036-A-7 to the heirs of
Teodoro dela Cruz and Evangeline Hernandez-del Rosario.
No pronouncement as to costs.
VILLAR
SO ORDERED.[35]
In upholding the claim of the Heirs, the Court of Appeals held that Marquez
failed to prove that he was a purchaser in good faith and for value. It noted
that while Marquez was the first registrant, there was no showing that the
registration of the deed of sale in his favor was coupled with good faith.
Marquez admitted having knowledge that the subject property was being
taken by the Heirs at the time of the sale.[36] The Heirs were also in
possession of the land at the time. According to the Decision, these
circumstances along with the subject propertys attractive locationit was
situated along the National Highway and was across a gasoline
stationshould have put Marquez on inquiry as to its status. Instead, Marquez
closed his eyes to these matters and failed to exercise the ordinary care
expected of a buyer of real estate.[37]
Anent the mortgagees RBC and CRB, the Court of Appeals found that they
merely relied on the certificates of title of the mortgaged properties. They did
not ascertain the status and condition thereof according to standard banking
practice. For failure to observe the ordinary banking procedure, the Court of
Appeals considered them to have acted in bad faith and on that basis
declared null and void the mortgages made by Marquez in their favor.[38]
Dissatisfied, CRB filed a Motion for Reconsideration[39] pointing out, among
others, that the Decision promulgated on 27 May 1997 failed to establish
good faith on the part of the Heirs. Absent proof of possession in good faith,
CRB avers, the Heirs cannot claim ownership over the subject property.
In a Resolution[40] dated 5 January 1998, the Court of Appeals stressed its
disbelief in CRBs allegation that it did not merely rely on the certificates of
title of the properties and that it conducted credit investigation and standard
ocular inspection. But recalling that intervenor Evangeline del Rosario had
lost her standing as an appellant, the Court of Appeals accordingly modified
its previous Decision, as follows:
WHEREFORE, the decision dated May 27, 1997, is hereby MODIFIED to
read as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and SET
ASIDE insofar as plaintiffs-appellants are concerned. Accordingly, judgment
is hereby rendered as follows:
1. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the
southern half portion of Lot No. 7036-A-7;
2. Declaring null and void the deed of sale dated June 15, 1976 between
Pacifico V. Marquez and the Madrid brothers insofar as the southern half
portion of Lot NO. (sic) 7036-A-7 is concerned;
3. Declaring the mortgage made by defendant Pacifico V. Marquez in favor
of defendant Consolidated Rural Bank (Cagayan Valley) and defendant
Rural Bank of Cauayan as null and void insofar as the southern half portion
of Lot No. 7036-A-7 is concerned;
4. Ordering defendant Pacifico V. Marquez to reconvey the southern portion
of Lot No. 7036-A-7 to the Heirs of Teodoro dela Cruz.
No pronouncement as to costs.
SO ORDERED.[41]
36 | S a l e s & L e a s e H W # 3
Hence, the instant CRB petition. However, both Marquez and RBC elected
not to challenge the Decision of the appellate court.
Petitioner CRB, in essence, alleges that the Court of Appeals committed
serious error of law in upholding the Heirs ownership claim over the subject
property considering that there was no finding that they acted in good faith in
taking possession thereof nor was there proof that the first buyers, Gamiao
and Dayag, ever took possession of the subject property. CRB also makes
issue of the fact that the sale to Gamiao and Dayag was confirmed a day
ahead of the actual sale, clearly evincing bad faith, it adds. Further, CRB
asserts Marquezs right over the property being its registered owner.
The petition is devoid of merit. However, the dismissal of the petition is
justified by reasons different from those employed by the Court of Appeals.
Like the lower court, the appellate court resolved the present controversy by
applying the rule on double sale provided in Article 1544 of the Civil Code.
They, however, arrived at different conclusions. The RTC made CRB and
the other defendants win, while the Court of Appeals decided the case in
favor of the Heirs.
Article 1544 of the Civil Code reads, thus:
ART. 1544. If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who
in good faith was first in possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith.
The provision is not applicable in the present case. It contemplates a case of
double or multiple sales by a single vendor. More specifically, it covers a
situation where a single vendor sold one and the same immovable property
to two or more buyers.[42] According to a noted civil law author, it is
necessary that the conveyance must have been made by a party who has
an existing right in the thing and the power to dispose of it.[43] It cannot be
invoked where the two different contracts of sale are made by two different
persons, one of them not being the owner of the property sold.[44] And even if
the sale was made by the same person, if the second sale was made when
such person was no longer the owner of the property, because it had been
acquired by the first purchaser in full dominion, the second purchaser cannot
acquire any right.[45]
In the case at bar, the subject property was not transferred to several
purchasers by a single vendor. In the first deed of sale, the vendors were
Gamiao and Dayag whose right to the subject property originated from their
acquisition thereof from Rizal Madrid with the conformity of all the other
Madrid brothers in 1957, followed by their declaration of the property in its
entirety for taxation purposes in their names. On the other hand, the vendors
in the other or later deed were the Madrid brothers but at that time they were
no longer the owners since they had long before disposed of the property in
favor of Gamiao and Dayag.
VILLAR
Citing Manresa, the Court of Appeals in 1936 had occasion to explain the
proper application of Article 1473 of the Old Civil Code (now Article 1544 of
the New Civil Code) in the case of Carpio v. Exevea,[46] thus:
In order that tradition may be considered performed, it is necessary that the
requisites which it implies must have been fulfilled, and one of the
indispensable requisites, according to the most exact Roman concept, is that
the conveyor had the right and the will to convey the thing. The intention to
transfer is not sufficient; it only constitutes the will. It is, furthermore,
necessary that the conveyor could juridically perform that act; that he had
the right to do so, since a right which he did not possess could not be vested
by him in the transferee.
This is what Article 1473 has failed to express: the necessity for the
preexistence of the right on the part of the conveyor. But even if the article
does not express it, it would be understood, in our opinion, that that
circumstance constitutes one of the assumptions upon which the article is
based.
This construction is not repugnant to the text of Article 1473, and not only is
it not contrary to it, but it explains and justifies the same. (Vol. 10, 4th ed., p.
159)[47]
In that case, the property was transferred to the first purchaser in 1908 by its
original owner, Juan Millante. Thereafter, it was sold to plaintiff Carpio in
June 1929. Both conveyances were unregistered. On the same date that the
property was sold to the plaintiff, Juan Millante sold the same to defendant
Exevea. This time, the sale was registered in the Registry of Deeds. But
despite the fact of registration in defendants favor, the Court of Appeals
found for the plaintiff and refused to apply the provisions of Art. 1473 of the
Old Civil Code, reasoning that on the date of the execution of the document,
Exhibit 1, Juan Millante did not and could not have any right whatsoever to
the parcel of land in question.[48]
Citing a portion of a judgment dated 24 November 1894 of the Supreme
Court of Spain, the Court of Appeals elucidated further:
Article 1473 of the Civil Code presupposes the right of the vendor to dispose
of the thing sold, and does not limit or alter in this respect the provisions of
the Mortgage Law in force, which upholds the principle that registration does
not validate acts or contracts which are void, and that although acts and
contracts executed by persons who, in the Registry, appear to be entitled to
do so are not invalidated once recorded, even if afterwards the right of such
vendor is annulled or resolved by virtue of a previous unrecorded title,
nevertheless this refers only to third parties.[49]
In a situation where not all the requisites are present which would warrant
the application of Art. 1544, the principle of prior tempore, potior jure or
simply he who is first in time is preferred in right,[50] should apply.[51] The only
essential requisite of this rule is priority in time; in other words, the only one
who can invoke this is the first vendee. Undisputedly, he is a purchaser in
good faith because at the time he bought the real property, there was still no
sale to a second vendee.[52] In the instant case, the sale to the Heirs by
Gamiao and Dayag, who first bought it from Rizal Madrid, was anterior to the
sale by the Madrid brothers to Marquez. The Heirs also had possessed the
37 | S a l e s & L e a s e H W # 3
subject property first in time. Thus, applying the principle, the Heirs, without
a scintilla of doubt, have a superior right to the subject property.
Moreover, it is an established principle that no one can give what one does
not havenemo dat quod non habet. Accordingly, one can sell only what one
owns or is authorized to sell, and the buyer can acquire no more than what
the seller can transfer legally.[53] In this case, since the Madrid brothers were
no longer the owners of the subject property at the time of the sale to
Marquez, the latter did not acquire any right to it.
In any event, assuming arguendo that Article 1544 applies to the present
case, the claim of Marquez still cannot prevail over the right of the Heirs
since according to the evidence he was not a purchaser and registrant in
good faith.
Following Article 1544, in the double sale of an immovable, the rules of
preference are:
(a) the first registrant in good faith;
(b) should there be no entry, the first in possession in good faith; and
(c) in the absence thereof, the buyer who presents the oldest title in good
faith. [54]
Prior registration of the subject property does not by itself confer ownership
or a better right over the property. Article 1544 requires that before the
second buyer can obtain priority over the first, he must show that he acted in
good faith throughout (i.e., in ignorance of the first sale and of the first
buyers rights)from the time of acquisition until the title is transferred to him
by registration or failing registration, by delivery of possession.[55]
In the instant case, the actions of Marquez have not satisfied the
requirement of good faith from the time of the purchase of the subject
property to the time of registration. Found by the Court of Appeals, Marquez
knew at the time of the sale that the subject property was being claimed or
taken by the Heirs. This was a detail which could indicate a defect in the
vendors title which he failed to inquire into. Marquez also admitted that he
did not take possession of the property and at the time he testified he did not
even know who was in possession. Thus, he testified on direct examination
in the RTC as follows:
ATTY. CALIXTO
Q Can you tell us the circumstances to your buying the land in question?
A In 1976 the Madrid brothers confessed to me their problems about their
lots in San Mateo that they were being taken by Teodoro dela Cruz and Atty.
Teofilo A. Leonin; that they have to pay the lawyers fee of P10,000.00
otherwise Atty. Leonin will confiscate the land. So they begged me to buy
their properties, some of it. So that on June 3, 1976, they came to Cabagan
where I was and gave them P14,000.00, I think. We have talked that they
will execute the deed of sale.
Q Why is it, doctor, that you have already this deed of sale, Exh. 14, why did
you find it necessary to have this Deed of Confirmation of a Prior Sale, Exh.
15?
A Because as I said a while ago that the first deed of sale was submitted to
the Register of Deeds by Romeo Badua so that I said that because when I
became a Municipal Health Officer in San Mateo, Isabela, I heard so many
VILLAR
rumors, so many things about the land and so I requested them to execute a
deed of confirmation.[56]
...
ATTY. CALIXTO-
Q At present, who is in possession on the Riceland portion of the lot in
question?
A I can not say because the people working on that are changing from time
to time.
Q Why, have you not taken over the cultivation of the land in question?
A Well, the Dela Cruzes are prohibiting that we will occupy the place.
Q So, you do not have any possession?
A None, sir.[57]
One who purchases real property which is in actual possession of others
should, at least, make some inquiry concerning the rights of those in
possession. The actual possession by people other than the vendor should,
at least, put the purchaser upon inquiry. He can scarcely, in the absence of
such inquiry, be regarded as a bona fide purchaser as against such
possessions.[58] The rule of caveat emptor requires the purchaser to be
aware of the supposed title of the vendor and one who buys without
checking the vendors title takes all the risks and losses consequent to such
failure.[59]
It is further perplexing that Marquez did not fight for the possession of the
property if it were true that he had a better right to it. In our opinion, there
were circumstances at the time of the sale, and even at the time of
registration, which would reasonably require a purchaser of real property to
investigate to determine whether defects existed in his vendors title. Instead,
Marquez willfully closed his eyes to the possibility of the existence of these
flaws. For failure to exercise the measure of precaution which may be
required of a prudent man in a like situation, he cannot be called a purchaser
in good faith.[60]
As this Court explained in the case of Spouses Mathay v. Court of Appeals:
[61]
Although it is a recognized principle that a person dealing on a registered
land need not go beyond its certificate of title, it is also a firmly settled rule
that where there are circumstances which would put a party on guard and
prompt him to investigate or inspect the property being sold to him, such as
the presence of occupants/tenants thereon, it is, of course, expected from
the purchaser of a valued piece of land to inquire first into the status or
nature of possession of the occupants, i.e., whether or not the occupants
possess the land en concepto de dueo, in concept of owner. As is the
common practice in the real estate industry, an ocular inspection of the
premises involved is a safeguard a cautious and prudent purchaser usually
takes. Should he find out that the land he intends to buy is occupied by
anybody else other than the seller who, as in this case, is not in actual
possession, it would then be incumbent upon the purchaser to verify the
extent of the occupants possessory rights. The failure of a prospective buyer
to take such precautionary steps would mean negligence on his part and
38 | S a l e s & L e a s e H W # 3
would thereby preclude him from claiming or invoking the rights of a
purchaser in good faith.[62]
This rule equally applies to mortgagees of real property. In the case of
Crisostomo v. Court of Appeals,[63] the Court held:
It is a well-settled rule that a purchaser or mortgagee cannot close his eyes
to facts which should put a reasonable man upon his guard, and then claim
that he acted in good faith under the belief that there was no defect in the
title of the vendor or mortgagor. His mere refusal to believe that such defect
exists, or his willful closing of his eyes to the possibility of the existence of a
defect in the vendors or mortgagors title, will not make him an innocent
purchaser or mortgagee for value, if it afterwards develops that the title was
in fact defective, and it appears that he had such notice of the defects as
would have led to its discovery had he acted with the measure of a prudent
man in a like situation.[64]
Banks, their business being impressed with public interest, are expected to
exercise more care and prudence than private individuals in their dealings,
even those involving registered lands. Hence, for merely relying on the
certificates of title and for its failure to ascertain the status of the mortgaged
properties as is the standard procedure in its operations, we agree with the
Court of Appeals that CRB is a mortgagee in bad faith.
In this connection, Marquezs obstention of title to the property and the
subsequent transfer thereof to CRB cannot help the latters cause. In a
situation where a party has actual knowledge of the claimants actual, open
and notorious possession of the disputed property at the time of registration,
as in this case, the actual notice and knowledge are equivalent to
registration, because to hold otherwise would be to tolerate fraud and the
Torrens system cannot be used to shield fraud. [65]
While certificates of title are indefeasible, unassailable and binding against
the whole world, they merely confirm or record title already existing and
vested. They cannot be used to protect a usurper from the true owner, nor
can they be used for the perpetration of fraud; neither do they permit one to
enrich himself at the expense of others.[66]
We also find that the Court of Appeals did not err in awarding the subject
property to the Heirs absent proof of good faith in their possession of the
subject property and without any showing of possession thereof by Gamiao
and Dayag.
As correctly argued by the Heirs in their Comment,[67] the requirement of
good faith in the possession of the property finds no application in cases
where there is no second sale.[68] In the case at bar, Teodoro dela Cruz took
possession of the property in 1964 long before the sale to Marquez
transpired in 1976 and a considerable length of timeeighteen (18) years in
factbefore the Heirs had knowledge of the registration of said sale in 1982.
As Article 526 of the Civil Code aptly provides, (H)e is deemed a possessor
in good faith who is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it. Thus, there was no need for the
appellate court to consider the issue of good faith or bad faith with regard to
Teodoro dela Cruzs possession of the subject property.
VILLAR
Likewise, we are of the opinion that it is not necessary that there should be
any finding of possession by Gamiao and Dayag of the subject property. It
should be recalled that the regularity of the sale to Gamiao and Dayag was
never contested by Marquez.[69] In fact the RTC upheld the validity of this
sale, holding that the Madrid brothers are bound by the sale by virtue of their
confirmation thereof in the Joint Affidavit dated 14 August 1957. That this
was executed a day ahead of the actual sale on 15 August 1957 does not
diminish its integrity as it was made before there was even any shadow of
controversy regarding the ownership of the subject property.
Moreover, as this Court declared in the case of Heirs of Simplicio Santiago
v. Heirs of Mariano E. Santiago,[70] tax declarations are good indicia of
possession in the concept of an owner, for no one in his right mind would be
paying taxes for a property that is not in his actual or constructive
possession.[71]
WHEREFORE, the Petition is DENIED. The dispositive portion of the Court
of Appeals Decision, as modified by its Resolution dated 5 January 1998, is
AFFIRMED. Costs against petitioner.
SO ORDERED. Puno, (Chairman), Austria-Martinez, Callejo,
Sr.,  and  Chico-Nazario, JJ.,  concur.
(15) FIRST DIVISION
[G. R. No. 123935. December 14, 2001]
LEONCIO and ENRIQUETA, both surnamed BARRERA, petitioners,
vs.  COURT OF APPEALS and ROSENDO C.
PALABASAN, respondents.
DECISION
PARDO, J.:
The Case
In this petition for certiorari,[1] petitioners seek to annul the decision of the
Court of Appeals[2] affirming the decision of the Regional Trial Court,
[3]
 Makati, Branch 66, as well as its resolution[4]denying reconsideration
thereof.
The Facts
Azalia Salome (Salome) owned a house and lot located at No. 2641
Bonifacio St., Bangkal, Makati City, covered by Transfer Certificate of Title
No. 61772. Salome mortgaged the property to Country Bankers Insurance
and Surety Company to secure a P10,000.00 loan.
On July 1, 1966, Salome sold the property to Rosendo C. Palabasan.
[5]
 Transfer Certificate of Title No. 61772 was cancelled and a new one,
Transfer Certificate of Title No. 167387,[6] was issued in the name of
Rosendo C. Palabasan and Bella S. Palabasan.
On April 19, 1989, Leoncio and Enriqueta Barrera (spouses Barrera) filed
with the Regional Trial Court, Makati City, Branch 138, a complaint[7] against
Palabasan for reconveyance with damages. They alleged that they had been
in possession of the property since 1962 by virtue of a Deed of Sale with
Assumption of Mortgage which was not notarized; that Salome executed a
notarized Deed of Sale with Assumption of Mortgage in their favor on March
31, 1966; that, pursuant to this notarized deed, they settled Salomes
39 | S a l e s & L e a s e H W # 3
obligations with the Country Bankers Insurance and Surety Company; that
they tried to redeem the property but were not able to do so because
Palabasan had done so and the title to the property was released to
Palabasan; that in 1970, they signed a blank document which was supposed
to become Palabasan's authority to sell the land for them; that in 1975, they
were surprised to learn that the blank document which they had signed
turned out to be a contract of lease wherein they were the lessees and
Palabasan was the lessor of the property; and that Palabasan registered the
property in his name and was able to secure Transfer Certificate of Title No.
167387.
In his answer to the complaint, Palabasan asserted that he bought the
property from Salome on June 30, 1966, after he had paid the obligation of
Salome with Country Bankers Insurance and Surety Company; that he had
been issued Transfer Certificate of Title No. 167387 in his name after he had
the deed of sale registered; that the spouses Barrera were in possession of
the property as lessees of Salome; and that a contract of lease was
executed by and between the spouses Barrera and Palabasan in 1970.
Consequently, he claimed that the spouses Barrera had no legal right to
claim reconveyance of the property in question.
On February 23, 1993, after trial, the lower court rendered a
decision[8] declaring Palabasan to have validly acquired title to the property
in question. The trial court, ruling that the case is one of double sale of an
immovable, applied the second paragraph of Article 1544[9] of the Civil Code.
In time, the spouses Barrera appealed[10] the decision to the Court of
Appeals.[11]
On October 25, 1995, the Court of Appeals promulgated a decision
affirming in toto  the decision of the trial court. The appellate court, however,
found Article 1544 of the Civil Code inapplicable to the case as there was no
sale between the spouses Barrera and Salome because Salomes testimony
given in a previous case[12] to this effect was stricken off the record since she
died prior to cross-examination; the testimony of Cenon Mateo, the common-
law husband of Salome showed that he was not aware of the transaction
entered into on March 31, 1966; and counsel for spouses Barrera
admittedthat the sale transaction in 1962 did not materialize as the property
was mortgaged to Country Bankers Insurance and Surety Company.
On December 4, 1995, the spouses Barrera filed a motion for
reconsideration[13] of the decision; however, on February 21, 1996, the Court
of Appeals denied the same.[14]
Hence, this petition.[15]
The Issues
The issues raised are: whether respondent Palabasan is the owner of the
property in question; and whether there was double sale of an immovable
property covered by Article 1544 of the Civil Code.
The Court's Ruling
The petition is without merit.
An action for reconveyance of a property is the sole remedy of a landowner
whose property has been wrongfully or erroneously registered in anothers
name after one year from the date of the decree so long as the property has
VILLAR
not passed to an innocent purchaser for value.[16] The action does not seek
to reopen the registration proceedings and set aside the decree of
registration but only purports to show that the person who secured the
registration of the property in controversy is not the real owner thereof.
[17]
 Fraud may be a ground for reconveyance. For an action for reconveyance
based on fraud to prosper, the party seeking reconveyance must prove by
clear and convincing evidence his title to the property and the fact of fraud.[18]
It must be stressed that mere allegations of fraud are not enough. Intentional
acts to deceive and deprive another of his right, or in some manner, injure
him, must be specifically alleged and proved.[19]The burden of proof rests on
petitioners; this, the petitioners failed to do.
Petitioners offered no proof that there was misrepresentation or concealment
in the registration of the deed that led to the issuance of Transfer Certificate
of Title No. 167387. With the presumption of regularity in the performance of
official functions, the claim of petitioners that the issuance of Transfer
Certificate of Title No. 167387 was tainted with fraud must fail.
As to proof of title to the property, respondent Palabasan offered the
following: Transfer Certificate of Title No. 167387,[20] Tax Declaration No.
03251,[21] the Deed of Absolute Sale[22] dated June 30, 1966, executed by
Salome in favor of respondent Palabasan, the Contract of Lease,[23] with
respondent Palabasan as the lessor and petitioner Leoncio Barrera as the
lessee, and the decision of the Court of First Instance, Pasig, Branch XIX in
Civil Case No. 38608,[24] finding respondent Palabasan to be the lawful
owner of the property covered by Transfer Certificate of Title No. 167387.
On the other hand, petitioner spouses Barrera only have the Deed of
Absolute Sale with Assumption of Real Estate Mortgage[25] evidencing a
transaction which occurred in 1962, a Deed of Sale with Assumption of
Mortgage[26] dated March 31, 1966 and the testimonies of Cenon
Mateo[27] and petitioner Leoncio Barrera.[28] The spouses Barrera attempted
to offer in evidence the transcript of stenographic notes taken of the
testimony of Salome in Civil Case No. 14009.[29] Respondent objected to the
offer which opposition the trial court sustained.[30]
We find respondent Palabasan to be the owner of the property.
The decision of the then Court of First Instance, Pasig, Branch XIX in Civil
Case No. 38608, promulgated on September 4, 1981[31] and reinstated on
August 10, 1990,[32] finding respondent Palabasan to be the lawful owner of
the property covered by Transfer Certificate of Title No. 167387 may not be
invoked in this case since said decision had become stale.[33]
Article 1144(3) of the Civil Code provides that an action upon a judgment
must be brought within ten years from the time the right of action accrues.
On the other hand, Section 6, Rule 39, Revised Rules of Court, states:
A final and executory judgment or order may be executed on motion within
five (5) years from the date of its entry. After the lapse of such time, and
before it is barred by the statute of limitations, a judgment may be enforced
by motion within five (5) years from the date of its entry and thereafter by
action before it is barred by the statute of limitations.
The rule is that the court could issue a writ of execution by motion within five
(5) years from finality of the decision.[34] A writ of execution issued after the
40 | S a l e s & L e a s e H W # 3 VILLAR

expiration of that period is null and void.[35] There is a need for the interested The only sale that materialized in this case was the sale by Salome to
party to file an independent action for revival of judgment. The judgment may respondent Palabasan that was evidenced by a deed of absolute sale that
be enforced after the lapse of this period and before the same is barred by enabled respondent Palabasan to redeem the property from Country
the statute of limitations, by instituting an ordinary civil action.[36] The reason Bankers Insurance and Surety Company and consequently to secure
is that after the lapse of the five-year period, the judgment is reduced to a Transfer Certificate of Title No. 167387 in his favor over the same property.
mere right of action, which judgment must be enforced, as all other ordinary The Fallo
actions, by the institution of a complaint in the regular form. Such action WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of
must be filed within ten (10) years from the date the judgment became final. the Court of Appeals in CA-G. R. CV No. 40909 and its resolution denying
[37]
reconsideration.
The decision having become stale, any action to enforce or revive it has No costs.
prescribed.[38] SO ORDERED.
This notwithstanding, the greater weight of evidence lies in favor of Davide, Jr., C.J., (Chairman), Kapunan, and Ynares-Santiago, JJ., concur.
respondent Palabasans claim of ownership over the land. Surely, Transfer Puno, J., on official leave.
Certificate of Title No. 167387 and Tax Declaration No. 03251 which
respondent Palabasan offered in evidence is more convincing than
petitioners evidence.
The certificate of title issued is an absolute and indefeasible evidence of
ownership of the property in favor of the person whose name appears (16) SECOND DIVISION
therein. It is binding and conclusive upon the whole world.[39]   
Anent the question of whether this case is one of double sale, suffice it to JUSTINA COSIPE SIGAYA,   G.R. No. 143254
say that there is no sufficient proof on the sale between Salome and ROMEO, FELY, TOMAS,    
petitioners. There is no double sale that would warrant the application of BERNARDO, LEDA,    
Article 1544 of the Civil Code. ANASTACIO, ERLINDA,   Present:
As mentioned at the outset, the evidence petitioners adduced to prove the ROSA,TERESITA,    
sale was the notarized deed executed on March 31, 1966. However, a EDWIN and HELEN,   PUNO, Chairman,
perusal of the deed would show that the sale is conditioned on the payment all surnamed SIGAYA,   AUSTRIA-MARTINEZ,
by the petitioners of Salomes obligation with the Country Bankers Insurance Petitioners,   CALLEJO, SR.,
and Surety Company under the contract of mortgage.     TINGA, and
Petitioners submitted no evidence to show that they complied with the - versus -   CHICO-NAZARIO, JJ.
condition given. Hence, there was no consummation of the contract which      
would transfer ownership of the property to thepetitioners. All that they DIOMER MAYUGA,    
presented was the self-serving testimony of petitioner Leoncio Barrera[40] to JOSE VIVA and ROSELA Promulgated:
the effect that the obligations were paid by them. Notable is Cenon Mateos VIVA, HONORATO DE LOS
testimony that he has no knowledge of any transaction entered into by SANTOS and RENATO DISTOR,
Salome on March 31, 1966.[41] Respondents.   August 18, 2005
Likewise, there is no sufficient evidence to show that the earlier transaction x------------------------------------------------x
in 1962 ever materialized. The testimony of Salome in Civil Case No. 14009  D E C I S I O N
confirming the existence of this transaction is inadmissible for lack of cross-   AUSTRIA-MARTINEZ, J.:
examination. Likewise, the Deed of Absolute Sale with Assumption of Real   The question of whether or not a person is a purchaser in good faith is a
Estate Mortgage[42] not having been notarized, its genuineness and due factual matter that will generally be not delved into by this Court especially
execution will have to be proven. In this case, the petitioners only presented when the findings of the trial court on the matter were affirmed by the Court
the testimony of petitioner Leoncio Barrera and Cenon Mateo, which are, of Appeals (CA). Settled as this rule may be, petitioners now come before
again, self-serving assertions if not corroborated by any other evidence. this Court seeking an exception to the general rule.
Notable is the counsel of petitioners own admission that the said transaction The facts are as follows:
however did not in any way materialize for the reason that the property, Dionisia Alorsabes owned a three hectare land in Dao, Capiz, denominated
subject of the transaction was mortgaged to Country Bankers and Surety as Lot 3603. In 1934, she sold a portion of the lot to Juanito Fuentes while
Company.[43] the remainder was inherited by her children Paz Dela Cruz, Rosela Dela
Cruz, and Consorcia Arroja (an adopted child), and a grandson, Francisco
41 | S a l e s & L e a s e H W # 3
Abas, in representation of his deceased mother Margarita Dela Cruz. These
four heirs executed an Extra-Judicial Settlement with Sale dated February 4,
1964 wherein Consorcia sold her share with an area of 6,694 square meters
to spouses Balleriano Mayuga. On April 1, 1977, Paz also sold her share to
Honorato de los Santos. Later, another document entitled Extra-Judicial
Partition with Deed of Sale dated November 2, 1972 was uncovered wherein
the heirs of Dionisia purportedly adjudicated Lot 3603 among themselves
and sold their shares to Francisco. On January 9, 1978, Francisco executed
a Deed of Sale over Lot 3603 in favor of Teodulfo Sigaya. Thus, the title
over Lot 3603 was cancelled and a new one was issued in the name of
Teodulfo, predecessor-in-interest of the petitioners herein.[1]
On October 14, 1986, the petitioners, who are the widow and children of
Teodulfo, filed Civil Case Nos. V-5325, V-5326, V-5327 and V-5328 for
recovery of possession and damages against Diomer Mayuga, Honorato de
los Santos, Sps. Jose Viva and Rosela Dela Cruz-Viva, and Renato Distor,
[2]
 respectively, before the Regional Trial Court (RTC) of Roxas City, Branch
16, praying that respondents be ordered to vacate Lot 3603, and turn over
the same to petitioners; that petitioners right of ownership and possession
over the property be confirmed and that respondents be ordered to pay
damages in the form of unrealized income starting 1980, plus attorneys fees
and costs.[3]
 
Respondents in their answers with counterclaim averred that: the Deed of
Sale executed by Francisco in favor of Teodulfo and the title thereon are null
and void for being based on a fictitious Extra-Judicial Settlement with Sale;
Rosela Dela Cruz-Viva and Paz Dela Cruz, who are illiterates, were
fraudulently made to sign as vendees in the Extra-Judicial Settlement with
Sale dated 1972, when Francisco represented that they were merely signing
as witnesses to the sale of Francisco of his share to Teodulfo. As
counterclaim, they asked for attorneys fees and damages. [4]
Respondent Mayuga further asserted that he possesses his portion of the
property by virtue of the sale by Consorcia Arroja of her share to his parents,
Sps. Balleriano Mayuga. Respondent de los Santos meanwhile averred that
Paz Dela Cruz sold her share to him in 1957. Respondents Rosela Dela
Cruz-Viva and her husband Jose Viva claimed that the portion of land
occupied by them pertains to Roselas share which she inherited from
Dionisia, while respondent Renato Distor claimed that his wife inherited said
property from her father Juanito Fuentes, who in turn bought the same from
Dionisia during her lifetime.[5]
 
The four cases were consolidated and on February 14, 1992, the trial court
rendered its decision, the dispositive portion of which reads:
 
WHEREFORE, judgment is hereby rendered as follows:
 
VILLAR
1. Declaring the defendants Geomer (sic) Mayuga as the real and absolute
owner of the portion of land, containing an area of Six Thousand Six
Hundred Ninety Four (6,694) square meters, more [or] less, portion of Lot
No. 3603, Dao Cadastre and subject matter in Civil Case No. 5325 indicated
in the Commissioners Report (Exh.4) as Exh. 4-B;
 
2. Declaring the defendant Honorato de los Santos as the absolute owner of
the portion of land containing an area of Six Thousand Six Hundred Ninety
Five (6,695) square meters more or less, portion of lot No. 3603 Dao
Cadastre, and subject matter in Civil Case No. 5326 indicated in the
Commissioners Report (Exh. 4) as Exh. 4-D;
3. Declaring the defendants spouses Jose Viva and Rosela dela Cruz as the
absolute owners of the portion of land containing an area of Six Thousand
Six Hundred Ninety Four (6,694) square meters, more or less, portion of Lot
No. 3603, Dao Cadastre, and subject matter in Civil Case No. 5327
indicated in the Commissioners Report (Exh. 4) as Exh. 4-C;
 
4. Declaring the defendant, Renato Distor, as the absolute owner of the
portion of land containing an area of Six Thousand Three Hundred Forty
Four (6,344) square meters, more or less, portion of Lot No. 3603, Dao
Cadastre, and subject matter in Civil Case No. 5328 indicated in the
Commissioners Report (Exh. 4) as Exh. 4-E;
 
5. Declaring the plaintiffs as the absolute owners of the portion of land
containing an area of Seven Thousand Forty-Six (7,046) square meters,
more or less, portion of Lot No. 3603, Dao Cadastre, indicated in the
Commissioners Report (Exh. 4) as Exh. 4-F;
 
6. Declaring Transfer Certificate of Title No. T-15630 of the Register of
Deeds of Capiz as null and void and should be cancelled;
7. Declaring that Deed of Sale, Exh. C as null and void except as affecting
the portion with an area of Seven Thousand Forty Six (7,046) square
[meters] of Lot 3603 which portion had been sold by Francisco Abas to the
spouses Teodulfo Sigaya and Justina Cosipe;
 
8. Declaring that Extra-Judicial Partition with Deed of Sale as having been
procured through fraud and therefore not valid in so far as the sale of the
shares of Paz de la Cruz and Priscilla de la Cruz were concerned;
 
9. Condemning the plaintiffs to severally and jointly pay the following:
 
a)       Unto Diomar Mayuga, defendant in Civil Case No. V-
5325, P10,000.00 as attorneys fees and litigation expenses;
 
b)      Unto Honorato de los [Santos], defendant, in Civil Case No. V-
5326, P10,000.00 as [attoneys] fees and litigation expenses;
42 | S a l e s & L e a s e H W # 3
c)       Unto the (sic) Jose Viva and Rosela de la Cruz, defendants in Civil
Case No. V-5327, P10,000.00 as [attorneys] fees and litigation expenses;
and
 
d)      Unto Renato Distor, defendant in Civil Case No. V-5328, P10,000.00
as [attorneys] fees and litigation expenses; and
 
e)       Dismissing Civil Case Nos. V-5325, V-5326, V-5327 and V-5328 with
costs in each case against the plaintiffs.
 
SO ORDERED.[6]
 
The trial court explained that:
 
There is no question that the deed of sale of the portion bought by Jacinto
Fuentes from Dionisia Alorsabes and now possessed by defendants Renato
Distor was a public instrument executed in 1934; and the portion occupied
by defendant Diomer Mayuga is the portion bought by spouses Florentina
Viva and Balleriano Mayuga from Consorcia Mayuga as her share in lot
3603; defendant Honorato de los Santos is in possession of the portion
which he bought from Paz de la Cruz, in 1977, although he had been
possessing this portion since May 15, 1957 by virtue of a private document
of mortgage. (citations omitted)
 
In these cases, the court believes and so holds that the evidence of actual
occupation and possession of the defendants of the portions of Lot 3603, to
each of them appertaining had been satisfactorily proven. The defendants
were not able to file any opposition to the reconstitution of title solely
because they were not notified actually. They could not also be considered
to have constructive notice because there was no publication of the Notice of
Hearing of the petition.
 
From the evidence taken together by its totality of evidence tilts more in
favor of the defendants and against the plaintiffs.[7]
 
Not satisfied with the decision, petitioners went to the CA which affirmed, in
its Decision promulgated on April 19, 2000, the ruling of the RTC except as
to the award of attorneys fees and expenses of litigation.[8] It then disposed
of the appeal as follows:
 
WHEREFORE, premises considered, the decision of the court a quo is
hereby AFFIRMED, with the modification that the awards of attorneys fees
and expenses of litigation to the defendants-appellants are hereby
eliminated.
SO ORDERED.[9]
VILLAR
The CA found:
 
Looking at the evidence presented, the trial court considered the
defendants-appellees as having proven the actual possession and validity of
the possession of the lots in question. Against that, the plaintiffs- appellants
put forward the TCT held by Teodulfo Sigaya, whose validity rests upon the
ability of Francisco Abas to sell Lot 3603, which the TCT now covers, and
that the sale to Teodulfo Sigaya was registered. Prior registration would
protect an innocent purchaser in good faith and for value. But the plaintiffs-
appellants cannot now claim the (sic) Teodulfo Sigaya was an innocent
purchaser for value. The trial court gave more credence to the testimony of
defendants-appellees and their witnesses that they had been in possession
for a longer period of time, even before the sale to Teodulfo Sigaya in 1978.
This issue of credibility requires a determination that is concededly best left
to the trial court with its unique position of having been enabled to observe
that elusive and incommunicable evidence of the deportment of witnesses
on the stand. Findings of the trial court, following that assessment, must be
given the highest degree of respect absent compelling reasons to conclude
otherwise. Teodolfo (sic) Sigaya examined the land in question, and did so
as a reasonably prudent man buying real property should. As the
defendants-appellees were in possession before him, he should have
questioned such and delved deeper into the title and right of Francisco Abas
to sell the lot. Not having done so, he is not an innocent purchaser in good
faith, and not entitled to protection under the Torrens system.
It is clear that the title of Francisco Abas was obtained through fraud, thus
further damaging the case of the plaintiffs-appellants, whose predecessor-in-
interest should have probed beyond the title after examining the lot to be
sold him. As held by the Supreme Court:
 
xxx Having bought the land registered under the Torrens system from their
vendors who procured title thereto by means of fraud, petitioners cannot
invoke the indefeasibility of a certificate of title against the private
respondent to the extent of her interest. The Torrens system of land
registration should not be used as a means to perpetuate fraud against the
rightful owner of real property. Registration to be effective, must be made in
good faith. (Palanca vs. Registry of Lands, 43 Phil. 149 [1922]). Thus, it is a
settled rule that the defense of indefeasibility of a certificate of title does not
extend to a transferee who takes it with notice of the flaws in his transferors
title. If at all, the petitioners only acquire the right which their vendors then
had. (Ramos et al. vs. Direno, et al., 50 Phil. 786 [1927]).
 
The plaintiffs-appellants contentions as to their ownership of the lot in
question must then fail in the face of the principles laid down in
jurisprudence.[10]
43 | S a l e s & L e a s e H W # 3
Petitioners now come before this Court on a petition for review under Rule
45 of the Rules of Court, raising the sole issue of: WHETHER A PERSON
DEALING WITH A REGISTERED LAND CAN SAFELY RELY ON THE
CORRECTNESS OF THE CERTIFICATE OF TITLE ISSUED THEREFOR.
[11]
 
Petitioners argue that: Teodulfo, their predecessor-in-interest, purchased the
subject property from Francisco, who was in possession of the Original
Certificate of Title (OCT) No. RO-5841 (17205), a reconstituted copy of the
original, in the name of Dionisia and of the Extra-Judicial Partition with Deed
of Sale, dated November 2, 1972; relying on these instruments and after
inspecting the land and seeing that nobody occupied the same, Teodulfo
bought the land and had the title subsequently issued in his name; the fact
that Teodulfo examined the lot does not give rise to the conclusion that he is
not an innocent purchaser in good faith as adverted to by the CA; if indeed
Abas committed fraud in acquiring said lot, Teodulfo is also a victim of
misrepresentation; there was no evidence that Teodulfo and Francisco
connived to defraud respondents; Teodulfo did not have actual knowledge of
facts and circumstances that would impel him to make further inquiry; and as
purchaser in good faith, Teodulfo enjoys the protection of the Torrens
system.[12]
Respondents in their Comment meanwhile contend that: the petition failed to
comply with the requirements of Rule 45 of the Rules of Court as
respondents were not served a copy of the motion for extension of time; the
issue in the present petition does not involve a question of law but entails
only a review of the facts which cannot be done by this Court; in any case,
Teodulfo relied on a title that is not in the name of his transferor, Francisco,
but on its registered owner, Dionisia, who was already deceased at the time
of the supposed sale to Teodulfo; since the right of the supposed transferor
was not shown in the title but merely on a Deed of Extra-Judicial Settlement
with Sale, which turned out irregular, it was incumbent upon Teodulfo to
examine further the extent of the right of the supposed transferor and why
there were a lot of occupants in the land in dispute; his failure to do so
operates against his favor and those of his successors-in-interest.[13]
 
The parties filed their respective memoranda.
 
Petitioners, in their Memorandum, further aver that: Teodulfo is a purchaser
in good faith having relied on OCT No. RO-5841 (17205) in the name of
Dionisia and the Extra-Judicial Partition with Deed of Sale dated November
2, 1972 which shows that Francisco is the absolute owner of the lot; four
years had elapsed from the date that the OCT was reconstituted and the
time Teodulfo bought the property from Francisco and yet none of the
respondents had registered their right in the property; the Extra-Judicial
Settlement of Lot 3603 of the Cadastral Survey of Dao, Capiz with Sale
dated February 4, 1964, on which respondents base their claims, was never
registered with the Registry of Deeds; not having been registered, this will
VILLAR
not affect the right of third persons who had no knowledge thereof; there was
no circumstance that would put Teodulfo on his guard and in cases of
double sales of real property, the ownership shall be awarded to the vendee
who first registers the sale in good faith; Teodulfo is a resident of Zarraga,
Capiz which is more than 50 kilometers from Dao, Capiz, thus Teodulfo
could not have actual knowledge of facts and circumstances that would
impel him to make further inquiry; the land was merely pointed to him by
Francisco and from what he had seen, there was nothing that would arouse
his suspicion.[14]
 
Meanwhile, respondents, in their Memorandum, contend that they were in
possession of the property before Teodulfo; that Teodulfo should have
probed deeper into the right of Francisco to sell said lot, and not having done
so, he cannot be considered as a purchaser in good faith; and that the issue
of credibility requires a determination that is best left to the trial court with its
unique position of being able to observe the elusive and incommunicable
evidence of the deportment of witnesses on the stand.[15]
 
Petitioners claim that they are raising before this Court the legal issue of:
Whether a person dealing with a registered land can safely rely on the
correctness of the Certificate of Title issued therefor.[16]
Contrary to what petitioners would like this Court to believe, the resolution of
the present petition hinges principally on the determination of a question of
fact and not one of law.
 
Both parties concede that a purchaser in good faith can safely rely on the
four corners of a Torrens Title. The disagreement lies, however, as to
whether or not Teodulfo should be considered as a purchaser in good faith
and thus enjoy the protection of the Torrens system. Indeed, this question is
one of fact and not one of law. There is a question of fact when the doubt or
difference arises as to the truth or the falsity of the statement of facts while a
question of law exists when there is doubt or controversy as to what the law
is on a certain state of facts.[17]
 
The determination of whether Teodulfo is a buyer in good faith is a factual
issue which is generally outside the province of this Court to determine in a
petition for review.[18] If for this matter alone, the petition should be dismissed
because the remedy of appeal by certiorari under Rule 45 of the Rules of
Court contemplates only questions of law.[19] Indeed, this Court is not a trier
of facts,[20] and the factual findings of the CA are binding and conclusive
upon this Court, unless:
 
(1) the conclusion is a finding grounded entirely on speculation, surmise and
conjecture; (2) the inference made is manifestly mistaken; (3) there is grave
abuse of discretion; (4) the judgment is based on a misapprehension of
facts; (5) the findings of fact are conflicting; (6) the Court of Appeals went
beyond the issues of the case and its findings are contrary to the admissions
44 | S a l e s & L e a s e H W # 3
of both appellant and appellees; (7) the findings of fact of the Court of
Appeals are contrary to those of the trial court; (8) said findings of fact are
conclusions without citation of specific evidence on which they are based;
(9) the facts set forth in the petition as well as in the petitioner's main and
reply briefs are not disputed by the respondents; and (10) the findings of fact
of the Court of Appeals are premised on the supposed absence of evidence
and contradicted by the evidence on record.[21]
 
The binding effect of the CAs factual findings on this Court applies with
greater force when both the trial court and the CA are in complete
agreement on their factual findings.[22] It is also settled that absent any
circumstance requiring the overturning of the factual conclusion made by the
trial court, particularly if affirmed by the CA, the Court necessarily upholds
such findings of fact.[23]
In this case, petitioners failed to show that they fall under any of the
exceptional circumstances.
 
In reaching its conclusion, the trial court gave weight to the testimonies of
Engineer Jesus Pimentel, a geodetic engineer commissioned by the court to
conduct a survey of the land, who found that respondents acquired their
respective lots through sale or inheritance;[24] of Rolly Daniel, a barangay
official who lived 50 meters from said lot, who said that respondents had
been in possession of their respective lots even before 1960 and that
Teodulfo and Francisco asked him to accompany them sometime between
1976 to 1978 as they went to the different houses of respondents because
Teodulfo was going to buy Franciscos share;[25] of Ursula Abas, wife of
Francisco, who said that Francisco committed suicide after it was discovered
that he fraudulently sold the portion belonging to his aunts to Teodulfo by
making them sign a prepared document on the pretext that they were only
signing as witnesses to the sale of his share, when in fact said document
also sold their aunts shares;[26] as well as the testimonies of Prudencio
Fuentes, son of Jacinto and brother-in-law of respondent Renato Distor;
Lourdes Distor, wife of Renato; Florentina Mayuga, mother of Diomer; and
respondents Renato Distor, Honorato de los Santos, Rosela Dela Cruz-Viva
who asserted that they have been in possession of said lots before the
purported sale to Teodulfo.[27]
 
Petitioners, meanwhile, could only present Fely Sigaya and Cesar de
los Santos. Fely testified that: the land was acquired by her father from
Francisco by virtue of a Deed of Sale dated January 9, 1978 and that
Francisco became the owner of the property by virtue of an Extra-Judicial
Partition with Deed of Sale; when her father bought the property, he showed
the documents to a lawyer who said that the same were in order; when her
father visited the property, he found no occupants thereat; her father also
filed a petition in 1974 for reconstitution of title of Lot 3603 thus a
reconstituted title was issued in the name of Dionisia Alorsabes.[28] Cesar,
petitioners caretaker meanwhile, merely corroborated Felys testimony.[29]
VILLAR
 
This Court has held that the burden of proving the status of a purchaser in
good faith lies upon one who asserts that status and this onus
probandi cannot be discharged my mere invocation of the legal presumption
of good faith.[30]
 
In this case, the Court finds that petitioners have failed to discharge such
burden.
A purchaser in good faith is one who buys property without notice that some
other person has a right to or interest in such property and pays its fair price
before he has notice of the adverse claims and interest of another person in
the same property. The honesty of intention which constitutes good faith
implies a freedom from knowledge of circumstances which ought to put a
person on inquiry.[31] As enunciated in Lim vs. Chuatoco[32]
good faith consists in the possessor's belief that the person from whom he
received the thing was the owner of the same and could convey his title.
Good faith, while it is always to be presumed in the absence of proof to the
contrary, requires a well founded belief that the person from whom title was
received was himself the owner of the land, with the right to convey it. There
is good faith where there is an honest intention to abstain from taking any
unconscientious advantage from another. Otherwise stated, good faith is the
opposite of fraud and it refers to the state of mind which is manifested by the
acts of the individual concerned.[33]
 
Indeed, it is a well-settled rule that every person dealing with registered land
may safely rely on the correctness of the certificate of title issued therefor
and the law will in no way oblige him to go beyond the certificate to
determine the condition of the property. Where there is nothing in the
certificate of title to indicate any cloud or vice in the ownership of the
property, or any encumbrance thereon, the purchaser is not required to
explore further than what the Torrens Title upon its face indicates in quest
for any hidden defects or inchoate right that may subsequently defeat his
right thereto.[34]
 
However, this rule shall not apply when the party has actual knowledge of
facts and circumstances that would impel a reasonably cautious man to
make such inquiry or when the purchaser has knowledge of a defect or the
lack of title in his vendor or of sufficient facts to induce a reasonably prudent
man to inquire into the status of the title of the property in litigation.[35]
 
In this case, preponderance of evidence shows that respondents had been
in actual possession of their respective portions even prior to 1960. Rolly
Daniel, which the trial court considered as a credible witness, testified that
not only were respondents in actual possession of their respective portions
prior to 1960, he even accompanied Francisco and Teodulfo to the different
houses of respondents sometime between 1976 to 1978 as Teodulfo was
going to buy the portion of Francisco.[36] This Court cannot give credence
45 | S a l e s & L e a s e H W # 3
therefore to the claim of petitioners that Teodulfo found no occupants in the
property.
 
There being occupants of the property, the Court cannot ascribe good faith
to Teodulfo who has not shown any diligence in protecting his rights.
As the Court has stated:
 
A purchaser cannot simply close his eyes to facts which should put a
reasonable man on his guard and then claim that he acted in good faith
under the belief that there was no defect in the title of his vendor. His mere
refusal to believe that such defect exists or his willful closing of his eyes
to the possibility of the existence of a defect in his vendors title will not
make him an innocent purchaser for value if it later develops that the
title was in fact defective, and it appears that he would have notice of
the defect had he acted with that measure of precaution which may
reasonably be required of a prudent man in a similar situation.
[37]
 (Emphasis supplied)
 
 
Petitioners also argue that the rule on double sale of real property should
apply in this case, and since they are the first to register the sale in good
faith, they are entitled to be awarded ownership thereof.
 
The Court disagrees. Apart from the fact that Teodulfo is not a purchaser in
good faith, the law on double sales as provided in Art. 1544 of the Civil
Code[38]contemplates a situation where a single vendor sold one and the
same immovable property to two or more buyers. For the rule to apply, it is
necessary that the conveyance must have been made by a party who has
an existing right in the thing and the power to dispose it. The rule cannot be
invoked where the two different contracts of sale are made by two different
persons, one of them not being the owner of the property sold.[39] In this
case, respondents derive their right over their respective portions either
through inheritance or sale from Dionisia while petitioners invoke their right
from the sale of the land from Francisco. Clearly, the law on double sales
does not apply here.
 
WHEREFORE, the petition is DENIED for lack of merit and the decision of
the Court of Appeals is AFFIRMED.
 
SO ORDERED.
 
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
VILLAR
(17) SECOND DIVISION
[G.R. No. 123547. May 21, 2001]
REV. FR. DANTE MARTINEZ, petitioner, vs. HONORABLE COURT OF
APPEALS, HONORABLE JUDGE JOHNSON BALLUTAY, PRESIDING
JUDGE, BRANCH 25, REGIONAL TRIAL COURT OF CABANATUAN CITY,
HONORABLE JUDGE ADRIANO TUAZON, JR., PRESIDING JUDGE,
BRANCH 28, REGIONAL TRIAL COURT OF CABANATUAN CITY,
SPOUSES REYNALDO VENERACION and SUSAN VENERACION,
SPOUSES MAXIMO HIPOLITO and MANUELA DE LA PAZ and
GODOFREDO DE LA PAZ, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision, dated September 7,
1995, and resolution, dated January 31, 1996, of the Court of Appeals,
which affirmed the decisions of the Regional Trial Court, Branches 25[1] and
28,[2] Cabanatuan City, finding private respondents spouses Reynaldo and
Susan Veneracion owners of the land in dispute, subject to petitioners rights
as a builder in good faith.
The facts are as follows:
Sometime in February 1981, private respondents Godofredo De la Paz and
his sister Manuela De la Paz, married to Maximo Hipolito, entered into an
oral contract with petitioner Rev. Fr. Dante Martinez, then Assistant parish
priest of Cabanatuan City, for the sale of Lot No. 1337-A-3 at the Villa Fe
Subdivision in Cabanatuan City for the sum of P15,000.00. The lot is located
along Maharlika Road near the Municipal Hall of Cabanatuan City. At the
time of the sale, the lot was still registered in the name of Claudia De la Paz,
mother of private respondents, although the latter had already sold it to
private respondent Manuela de la Paz by virtue of a Deed of Absolute Sale
dated May 26, 1976 (Exh. N/Exh. 2-Veneracion).[3] Private respondent
Manuela subsequently registered the sale in her name on October 22, 1981
and was issued TCT No. T-40496 (Exh. 9).[4] When the land was offered for
sale to petitioner, private respondents De la Paz were accompanied by their
mother, since petitioner dealt with the De la Pazes as a family and not
individually. He was assured by them that the lot belonged to Manuela De la
Paz. It was agreed that petitioner would give a downpayment of P3,000.00
to private respondents De la Paz and that the balance would be payable by
installment. After giving the P3,000.00 downpayment, petitioner started the
construction of a house on the lot after securing a building permit from the
City Engineers Office on April 23, 1981, with the written consent of the then
registered owner, Claudia de la Paz (Exh. B/Exh, 1).[5] Petitioner likewise
began paying the real estate taxes on said property (Exh. D, D-1, D-2).
[6]
 Construction on the house was completed on October 6, 1981 (Exh. V).
[7]
 Since then, petitioner and his family have maintained their residence
there.[8]
On January 31, 1983, petitioner completed payment of the lot for which
private respondents De la Paz executed two documents. The first document
(Exh. A) read:
1-31-83
46 | S a l e s & L e a s e H W # 3
Ang halaga ng Lupa sa Villa Fe Subdivision na ipinagbili kay Fr. Dante
Martinez ay P15,000.00 na pinangangako namin na ibibigay ang Deed of
Sale sa ika-25 ng Febrero 1983.
[SGD.] METRING HIPOLITO
[SGD.] JOSE GODOFREDO DE LA PAZ[9]
The second writing (Exh. O) read:
Cabanatuan City
March 19, 1986
TO WHOM IT MAY CONCERN:
This is to certify that Freddie dela Paz has agreed to sign tomorrow (March
20) the affidavit of sale of lot located at Villa Fe Subdivision sold to Fr. Dante
Martinez.
[Sgd.] Freddie dela Paz
FREDDIE DELA PAZ[10]
However, private respondents De la Paz never delivered the Deed of Sale
they promised to petitioner.
In the meantime, in a Deed of Absolute Sale with Right to Repurchase dated
October 28, 1981 (Exh. 10),[11] private respondents De la Paz sold three lots
with right to repurchase the same within one year to private respondents
spouses Reynaldo and Susan Veneracion for the sum of P150,000.00. One
of the lots sold was the lot previously sold to petitioner.[12]
Reynaldo Veneracion had been a resident of Cabanatuan City since
birth. He used to pass along Maharlika Highway in going to the Municipal
Hall or in going to and from Manila. Two of the lots subject of the sale were
located along Maharlika Highway, one of which was the lot sold earlier by
the De la Pazes to petitioner. The third lot (hereinafter referred to as the
Melencio lot) was occupied by private respondents De la Paz. Private
respondents Veneracion never took actual possession of any of these lots
during the period of redemption, but all titles to the lots were given to him.[13]
Before the expiration of the one year period, private respondent Godofredo
De la Paz informed private respondent Reynaldo Veneracion that he was
selling the three lots to another person for P200,000.00. Indeed, private
respondent Veneracion received a call from a Mr. Tecson verifying if he had
the titles to the properties, as private respondents De la Paz were offering to
sell the two lots along Maharlika Highway to him (Mr. Tecson)
for P180,000.00 The offer included the lot purchased by petitioner in
February, 1981. Private respondent Veneracion offered to purchase the
same two lots from the De la Pazes for the same amount. The offer was
accepted by private respondents De la Paz. Accordingly, on June 2, 1983, a
Deed of Absolute Sale was executed over the two lots (Exh. I/Exh. 5-
Veneracion).[14] Sometime in January, 1984, private respondent Reynaldo
Veneracion asked a certain Renato Reyes, petitioners neighbor, who the
owner of the building erected on the subject lot was.Reyes told him that it
was Feliza Martinez, petitioners mother, who was in possession of the
property. Reynaldo Veneracion told private respondent Godofredo about the
matter and was assured that Godofredo would talk to Feliza. Based on that
assurance, private respondents Veneracion registered the lots with the
VILLAR
Register of Deeds of Cabanatuan on March 5, 1984. The lot in dispute was
registered under TCT No. T-44612 (Exh. L/Exh. 4-Veneracion).[15]
Petitioner discovered that the lot he was occupying with his family had been
sold to the spouses Veneracion after receiving a letter (Exh. P/Exh. 6-
Veneracion) from private respondent Reynaldo Veneracion on March 19,
1986, claiming ownership of the land and demanding that they vacate the
property and remove their improvements thereon.[16] Petitioner, in turn,
demanded through counsel the execution of the deed of sale from private
respondents De la Paz and informed Reynaldo Veneracion that he was the
owner of the property as he had previously purchased the same from private
respondents De la Paz.[17]
The matter was then referred to the Katarungang Pambarangay of San
Juan, Cabanatuan City for conciliation, but the parties failed to reach an
agreement (Exh. M/Exh. 13).[18] As a consequence, on May 12, 1986, private
respondent Reynaldo Veneracion brought an action for ejectment in the
Municipal Trial Court, Branch III, Cabanatuan City against petitioner and his
mother (Exh. 14).[19]
On the other hand, on June 10, 1986, petitioner caused a notice of lis
pendens to be recorded on TCT No. T-44612 with the Register of Deeds of
Cabanatuan City (Exh. U).[20]
During the pre-trial conference, the parties agreed to have the case decided
under the Rules on Summary Procedure and defined the issues as follows:
1. Whether or not defendant (now petitioner) may be judicially ejected.
2. Whether or not the main issue in this case is ownership.
3. Whether or not damages may be awarded.[21]
On January 29, 1987, the trial court rendered its decision, pertinent portions
of which are quoted as follows:
With the foregoing findings of the Court, defendants [petitioner Rev. Fr.
Dante Martinez and his mother] are the rightful possessors and in good faith
and in concept of owner, thus cannot be ejected from the land in
question. Since the main issue is ownership, the better remedy of the
plaintiff [herein private respondents Veneracion] is Accion Publiciana in the
Regional Trial Court, having jurisdiction to adjudicate on ownership.
Defendants counterclaim will not be acted upon it being more
than P20,000.00 is beyond this Courts power to adjudge.
WHEREFORE, judgment is hereby rendered, dismissing plaintiffs complaint
and ordering plaintiff to pay Attorneys fee of P5,000.00 and cost of suit.
SO ORDERED.[22]
On March 3, 1987, private respondents Veneracion filed a notice of appeal
with the Regional Trial Court, but failed to pay the docket fee. On June 6,
1989, or over two years after the filing of the notice of appeal, petitioner filed
a Motion for Execution of the Judgment, alleging finality of judgment for
failure of private respondents Veneracion to perfect their appeal and failure
to prosecute the appeal for an unreasonable length of time.
Upon objection of private respondents Veneracion, the trial court denied on
June 28, 1989 the motion for execution and ordered the records of the case
to be forwarded to the appropriate Regional Trial Court. On July 11, 1989,
petitioner appealed from this order. The appeal of private respondents
47 | S a l e s & L e a s e H W # 3
Veneracion from the decision of the MTC and the appeal of petitioner from
the order denying petitioners motion for execution were forwarded to the
Regional Trial Court, Branch 28, Cabanatuan City. The cases were
thereafter consolidated under Civil Case No. 670-AF.
On February 20, 1991, the Regional Trial Court rendered its decision finding
private respondents Veneracion as the true owners of the lot in dispute by
virtue of their prior registration with the Register of Deeds, subject to
petitioners rights as builder in good faith, and ordering petitioner and his
privies to vacate the lot after receipt of the cost of the construction of the
house, as well as to pay the sum of P5,000.00 as attorneys fees and the
costs of the suit. It, however, failed to rule on petitioners appeal of the
Municipal Trial Courts order denying their Motion for Execution of Judgment.
Meanwhile, on May 30, 1986, while the ejectment case was pending before
the Municipal Trial Court, petitioner Martinez filed a complaint for annulment
of sale with damages against the Veneracions and De la Pazes with the
Regional Trial Court, Branch 25, Cabanatuan City. On March 5, 1990, the
trial court rendered its decision finding private respondents Veneracion
owners of the land in dispute, subject to the rights of petitioner as a builder in
good faith, and ordering private respondents De la Paz to pay petitioner the
sum of P50,000.00 as moral damages and P10,000.00 as attorneys fees,
and for private respondents to pay the costs of the suit.
On March 20, 1991, petitioner then filed a petition for review with the Court
of Appeals of the RTCs decision in Civil Case No. 670-AF (for
ejectment). Likewise, on April 2, 1991, petitioner appealed the trial courts
decision in Civil Case No. 44-[AF]-8642-R (for annulment of sale and
damages) to the Court of Appeals. The cases were designated as CA G.R.
SP. No. 24477 and CA G.R. CV No. 27791, respectively, and were
subsequently consolidated. The Court of Appeals affirmed the trial courts
decisions, without ruling on petitioners appeal from the Municipal Trial
Courts order denying his Motion for Execution of Judgment. It declared the
Veneracions to be owners of the lot in dispute as they were the first
registrants in good faith, in accordance with Art. 1544 of the Civil
Code. Petitioner Martinez failed to overcome the presumption of good faith
for the following reasons:
1. when private respondent Veneracion discovered the construction on the
lot, he immediately informed private respondent Godofredo about it and
relied on the latters assurance that he will take care of the matter.
2. the sale between petitioner Martinez and private respondents De la Paz
was not notarized, as required by Arts. 1357 and 1358 of the Civil Code,
thus it cannot be said that the private respondents Veneracion had
knowledge of the first sale.[23]
Petitioners motion for reconsideration was likewise denied in a resolution
dated January 31, 1996.[24] Hence this petition for review. Petitioner raises
the following assignment of errors:
I THE PUBLIC RESPONDENTS HONORABLE COURT OF APPEALS AND
REGIONAL TRIAL COURT JUDGES JOHNSON BALLUTAY AND
ADRIANO TUAZON ERRED IN HOLDING THAT PRIVATE
RESPONDENTS REYNALDO VENERACION AND WIFE ARE BUYERS
VILLAR
AND REGISTRANTS IN GOOD FAITH IN RESOLVING THE ISSUE OF
OWNERSHIP AND POSSESSION OF THE LAND IN DISPUTE.
II THAT PUBLIC RESPONDENTS ERRED IN NOT RESOLVING AND
DECIDING THE APPLICABILITY OF THE DECISION OF THIS
HONORABLE COURT IN THE CASES OF SALVORO VS. TANEGA, ET
AL., G.R. NO. L 32988 AND IN ARCENAS VS. DEL ROSARIO, 67 PHIL
238, BY TOTALLY IGNORING THE SAID DECISIONS OF THIS
HONORABLE COURT IN THE ASSAILED DECISIONS OF THE PUBLIC
RESPONDENTS.
III THAT THE HONORABLE COURT OF APPEALS ERRED IN NOT
GIVING DUE COURSE TO THE PETITION FOR REVIEW IN CA G.R. SP.
NO. 24477.
IV THAT THE HONORABLE COURT OF APPEALS IN DENYING
PETITIONERS PETITION FOR REVIEW AFORECITED INEVITABLY
SANCTIONED AND/OR WOULD ALLOW A VIOLATION OF LAW AND
DEPARTURE FROM THE USUAL COURSE OF JUDICIAL PROCEEDINGS
BY PUBLIC RESPONDENT HONORABLE JUDGE ADRIANO TUAZON
WHEN THE LATTER RENDERED A DECISION IN CIVIL CASE NO. 670-
AF [ANNEX D] REVERSING THE DECISION OF THE MUNICIPAL TRIAL
COURT JUDGE SENDON DELIZO IN CIVIL CASE NO. 9523 [ANNEX C]
AND IN NOT RESOLVING IN THE SAME CASE THE APPEAL
INTERPOSED BY DEFENDANTS ON THE ORDER OF THE SAME COURT
DENYING THE MOTION FOR EXECUTION.
V THAT THE RESOLUTION [ANNEX B] (OF THE COURT OF APPEALS)
DENYING PETITIONERS MOTION FOR RECONSIDERATION [ANNEX I]
WITHOUT STATING CLEARLY THE FACTS AND THE LAW ON WHICH
SAID RESOLUTION WAS BASED, (IS ERRONEOUS).
These assignment of errors raise the following issues:
1. Whether or not private respondents Veneracion are buyers in good faith of
the lot in dispute as to make them the absolute owners thereof in
accordance with Art. 1544 of the Civil Code on double sale of immovable
property.
2. Whether or not payment of the appellate docket fee within the period to
appeal is not necessary for the perfection of the appeal after a notice of
appeal has been filed within such period.
3. Whether or not the resolution of the Court of Appeals denying petitioners
motion for reconsideration is contrary to the constitutional requirement that a
denial of a motion for reconsideration must state the legal reasons on which
it is based.
First. It is apparent from the first and second assignment of errors that
petitioner is assailing the findings of fact and the appreciation of the
evidence made by the trial courts and later affirmed by the respondent
court. While, as a general rule, only questions of law may be raised in a
petition for review under Rule 45 of the Rules of Court, review may
nevertheless be granted under certain exceptions, namely: (a) when the
conclusion is a finding grounded entirely on speculation, surmises, or
conjectures; (b) when the inference made is manifestly mistaken, absurd, or
impossible; (c) where there is a grave abuse of discretion; (d) when the
48 | S a l e s & L e a s e H W # 3
judgment is based on a misapprehension of facts; (e) when the findings of
fact are conflicting; (f) when the Court of Appeals, in making its findings,
went beyond the issue of the case and the same is contrary to the
admissions of both appellant and appellee; (g) when the findings of the
Court of Appeals are contrary to those of the trial court; (h) when the findings
of fact are conclusions without citation of specific evidence on which they are
based; (i) when the facts set forth in the petition as well as in the petitioners
main and reply briefs are not disputed by the respondents; (j) when the
finding of fact of the Court of Appeals is premised on the supposed absence
of evidence but is contradicted by the evidence on record; and (k) when the
Court of Appeals manifestly overlooked certain relevant facts not disputed by
the parties and which, if properly considered, would justify a different
conclusion.[25]
In this case, the Court of Appeals based its ruling that private respondents
Veneracion are the owners of the disputed lot on their reliance on private
respondent Godofredo De la Pazs assurance that he would take care of the
matter concerning petitioners occupancy of the disputed lot as constituting
good faith. This case, however, involves double sale and, on this matter, Art.
1544 of the Civil Code provides that where immovable property is the
subject of a double sale, ownership shall be transferred (1) to the person
acquiring it who in good faith first recorded it to the Registry of Property; (2)
in default thereof, to the person who in good faith was first in possession;
and (3) in default thereof, to the person who presents the oldest title.[26] The
requirement of the law, where title to the property is recorded in the Register
of Deeds, is two-fold: acquisition in good faith and recording in good faith. To
be entitled to priority, the second purchaser must not only prove prior
recording of his title but that he acted in good faith, i.e., without knowledge or
notice of a prior sale to another. The presence of good faith should be
ascertained from the circumstances surrounding the purchase of the land.[27]
1. With regard to the first sale to private respondents Veneracion, private
respondent Reynaldo Veneracion testified that on October 10, 1981, 18 days
before the execution of the first Deed of Sale with Right to Repurchase, he
inspected the premises and found it vacant.[28] However, this is belied by the
testimony of Engr. Felix D. Minor, then building inspector of the Department
of Public Works and Highways, that he conducted on October 6, 1981 an
ocular inspection of the lot in dispute in the performance of his duties as a
building inspector to monitor the progress of the construction of the building
subject of the building permit issued in favor of petitioner on April 23, 1981,
and that he found it 100 % completed (Exh. V).[29] In the absence of contrary
evidence, he is to be presumed to have regularly performed his official duty.
[30]
 Thus, as early as October, 1981, private respondents Veneracion already
knew that there was construction being made on the property they
purchased.
2. The Court of Appeals failed to determine the nature of the first contract of
sale between the private respondents by considering their contemporaneous
and subsequent acts.[31] More specifically, it overlooked the fact that the first
contract of sale between the private respondents shows that it is in fact an
equitable mortgage.
VILLAR
The requisites for considering a contract of sale with a right of repurchase as
an equitable mortgage are (1) that the parties entered into a contract
denominated as a contract of sale and (2) that their intention was to secure
an existing debt by way of mortgage.[32] A contract of sale with right to
repurchase gives rise to the presumption that it is an equitable mortgage in
any of the following cases: (1) when the price of a sale with a right to
repurchase is unusually inadequate; (2) when the vendor remains in
possession as lessee or otherwise; (3) when, upon or after the expiration of
the right to repurchase, another instrument extending the period of
redemption or granting a new period is executed; (4) when the purchaser
retains for himself a part of the purchase price; (5) when the vendor binds
himself to pay the taxes on the thing sold; (6) in any other case where it may
be fairly inferred that the real intention of the parties is that the transaction
shall secure the payment of a debt or the performance of any other
obligation.[33] In case of doubt, a contract purporting to be a sale with right to
repurchase shall be construed as an equitable mortgage.[34]
In this case, the following circumstances indicate that the private
respondents intended the transaction to be an equitable mortgage and not a
contract of sale: (1) Private respondents Veneracion never took actual
possession of the three lots; (2) Private respondents De la Paz remained in
possession of the Melencio lot which was co-owned by them and where they
resided; (3) During the period between the first sale and the second sale to
private respondents Veneracion, they never made any effort to take
possession of the properties; and (4) when the period of redemption had
expired and private respondents Veneracion were informed by the De la
Pazes that they are offering the lots for sale to another person
for P200,000.00, they never objected. To the contrary, they offered to
purchase the two lots for P180,000.00 when they found that a certain Mr.
Tecson was prepared to purchase it for the same amount. Thus, it is clear
from these circumstances that both private respondents never intended the
first sale to be a contract of sale, but merely that of mortgage to secure a
debt of P150,000.00.
With regard to the second sale, which is the true contract of sale between
the parties, it should be noted that this Court in several cases,[35] has ruled
that a purchaser who is aware of facts which should put a reasonable man
upon his guard cannot turn a blind eye and later claim that he acted in good
faith. Private respondent Reynaldo himself admitted during the pre-trial
conference in the MTC in Civil Case No. 9523 (for ejectment) that petitioner
was already in possession of the property in dispute at the time the second
Deed of Sale was executed on June 1, 1983 and registered on March 4,
1984. He, therefore, knew that there were already occupants on the property
as early as 1981. The fact that there are persons, other than the vendors, in
actual possession of the disputed lot should have put private respondents on
inquiry as to the nature of petitioners right over the property. But he never
talked to petitioner to verify the nature of his right. He merely relied on the
assurance of private respondent Godofredo De la Paz, who was not even
the owner of the lot in question, that he would take care of the matter. This
does not meet the standard of good faith.
49 | S a l e s & L e a s e H W # 3
3. The appellate courts reliance on Arts. 1357 and 1358 of the Civil Code to
determine private respondents Veneracions lack of knowledge of petitioners
ownership of the disputed lot is erroneous.
Art. 1357[36] and Art. 1358,[37] in relation to Art. 1403(2)[38] of the Civil Code,
requires that the sale of real property must be in writing for it to be
enforceable. It need not be notarized. If the sale has not been put in writing,
either of the contracting parties can compel the other to observe such
requirement.[39] This is what petitioner did when he repeatedly demanded
that a Deed of Absolute Sale be executed in his favor by private respondents
De la Paz. There is nothing in the above provisions which require that a
contract of sale of realty must be executed in a public document. In any
event, it has been shown that private respondents Veneracion had
knowledge of facts which would put them on inquiry as to the nature of
petitioners occupancy of the disputed lot.
Second. Petitioner contends that the MTC in Civil Case No. 9523 (for
ejectment) erred in denying petitioners Motion for Execution of the
Judgment, which the latter filed on June 6, 1989, two years after private
respondents Veneracion filed a notice of appeal with the MTC on March 3,
1987 without paying the appellate docket fee. He avers that the trial courts
denial of his motion is contrary to this Courts ruling in the cases
of Republic v. Director of Lands,[40] and Aranas  v. Endona[41] in which it was
held that where the appellate docket fee is not paid in full within the
reglementary period, the decision of the MTC becomes final and
unappealable as the payment of docket fee is not only a mandatory but also
a jurisdictional requirement.
Petitioners contention has no merit. The case of Republic  v. Director of
Lands deals with the requirement for appeals from the Courts of First
Instance, the Social Security Commission, and the Court of Agrarian
Relations to the Court of Appeals. The case of Aranas  v. Endona, on the
other hand, was decided under the 1964 Rules of Court and prior to the
enactment of the Judiciary Reorganization Act of 1981 (B.P. Blg. 129) and
the issuance of its Interim Rules and Guidelines by this Court on January 11,
1983. Hence, these cases are not applicable to the matter at issue.
On the other hand, in Santos v. Court of Appeals,[42] it was held that although
an appeal fee is required to be paid in case of an appeal taken from the
municipal trial court to the regional trial court, it is not a prerequisite for the
perfection of an appeal under 20[43] and 23[44] of the Interim Rules and
Guidelines issued by this Court on January 11, 1983 implementing the
Judiciary Reorganization Act of 1981 (B.P. Blg. 129). Under these sections,
there are only two requirements for the perfection of an appeal, to wit: (a) the
filing of a notice of appeal within the reglementary period; and (b) the
expiration of the last day to appeal by any party. Even in the procedure for
appeal to the regional trial courts,[45] nothing is mentioned about the payment
of appellate docket fees.
Indeed, this Court has ruled that, in appealed cases, the failure to pay the
appellate docket fee does not automatically result in the dismissal of the
appeal, the dismissal being discretionary on the part of the appellate court.
VILLAR
[46]
 Thus, private respondents Veneracions failure to pay the appellate docket
fee is not fatal to their appeal.
Third. Petitioner contends that the resolution of the Court of Appeals
denying his motion for reconsideration was rendered in violation of the
Constitution because it does not state the legal basis thereof.
This contention is likewise without merit.
Art. VIII, Sec. 14 of the Constitution provides that No petition for review or
motion for reconsideration of a decision of the court shall be refused due
course or denied without stating the basis therefor. This requirement was
fully complied with when the Court of Appeals, in denying reconsideration of
its decision, stated in its resolution that it found no reason to change its
ruling because petitioner had not raised anything new.[47] Thus, its resolution
denying petitioners motion for reconsideration states:
For resolution is the Motion for Reconsideration of Our Decision filed by the
petitioners.
Evidently, the motion poses nothing new. The points and arguments raised
by the movants have been considered and passed upon in the Decision
sought to be reconsidered. Thus, We find no reason to disturb the same.
WHEREFORE, the motion is hereby DENIED.
SO ORDERED.[48]
Attorneys fees should be awarded as petitioner was compelled to litigate to
protect his interest due to private respondents act or omission.[49]
WHEREFORE, the decision of the Court of Appeals is REVERSED and a
new one is RENDERED:
(1) declaring as null and void the deed of sale executed by private
respondents Godofredo and Manuela De la Paz in favor of private
respondents spouses Reynaldo and Susan Veneracion;
(2) ordering private respondents Godofredo and Manuela De la Paz to
execute a deed of absolute sale in favor of petitioner Rev. Fr. Dante
Martinez;
(3) ordering private respondents Godofredo and Manuela De la Paz to
reimburse private respondents spouses Veneracion the amount the latter
may have paid to the former;
(4) ordering the Register of Deeds of Cabanatuan City to cancel TCT No. T-
44612 and issue a new one in the name of petitioner Rev. Fr. Dante
Martinez; and
(5) ordering private respondents to pay petitioner jointly and severally the
sum of P20,000.00 as attorneys fees and to pay the costs of the suit.
SO ORDERED.
Bellosillo, (Chairman), Buena  and De Leon, Jr., JJ., concur.
Quisumbing, J., on leave.
(18) SECOND DIVISION
50 | S a l e s & L e a s e H W # 3
G.R. No. 152627 September 16, 2005
SPOUSES AMANCIO and LUISA SARMIENTO and PEDRO
OGSINER, Petitioners,  The said petition, which was docketed as LRC Case No. T-3367, was
vs.
THE HON. COURT OF APPEALS (Special Former Fifth Division),
RODEANNA REALTY CORPORATION, THE HEIRS OF CARLOS MORAN
SISON, PROVINCIAL SHERIFF OF PASIG, M.M., MUNICIPAL (CITY)
TREASURER OF MARIKINA, JOSE F. PUZON, THE HON. EFICIO
ACOSTA, REGIONAL TRIAL COURT OF PASIG CITY, BRANCH 155 and
REGISTER OF DEEDS OF MARIKINA (CITY), RIZAL, Respondent.
DECISION
CHICO-NAZARIO, J.:
In a case for recovery of possession based on ownership (accion
reivindicatoria), is the defendant’s third-party complaint for cancellation of
plaintiff’s title a collateral attack on such title?
This is the primary issue that requires resolution in this petition for review
on certiorari of the Decision1 of the Court of Appeals dated 27 November
2001 and its Resolution2 dated 08 March 2002 affirming the Decision of the
Regional Trial Court (RTC) of Pasig, Branch 162, in Civil Case No. 54151,
finding for then plaintiff (private respondent herein) Rodeanna Realty
Corporation (RRC).
The relevant antecedents of this case have been summarized by the Court
of Appeals as follows:
The subject of the present controversy is a parcel of land situated in
Marikina covered by Transfer Certificate of Title No. N-119631 and
registered in the name of the plaintiff-appellee RODEANNA REALTY
CORPORATION.
The aforementioned land was previously owned by the Sarmiento spouses
by virtue of a deed of absolute sale executed on July 17, 1972 and as
evidenced by a Transfer Certificate of Title No. 3700807. Upon acquisition of
the land, the Sarmiento spouses appointed PEDRO OGSINER as their
overseer.
On August 15, 1972, the subject land was mortgaged by the Sarmiento
spouses to Carlos Moran Sison (Mr. Sison) as a security for a sixty-five
thousand three hundred seventy pesos and 25/100 loan obtained by the
Sarmiento spouses from Mr. Sison.
Upon failure of the Sarmiento spouses to pay the loan, Mr. Sison initiated
the extra-judicial foreclosure sale of the mortgaged property, and on October
20, 1977, the said property was foreclosed through the Office of the Sheriff
of Rizal, which accordingly, issued a certificate of sale in favor of Mr. Sison,
and which Mr. Sison caused to be annotated on the title of Sarmiento
spouses on January 31, 1978.
On August 25, 1982, JOSE PUZON (Mr. Puzon) purchased the same
property in an auction sale conducted by the Municipal Treasurer of Marikina
for non-payment of taxes. After paying P3,400.00, he was issued a
certificate of sale and caused it to be registered in the Registry of Deeds of
Marikina. No redemption having been made by the Sarmiento spouses, a
final bill of sale was issued in his (Mr. Puzon) favor. Thereafter, Mr. Puzon
VILLAR
filed a petition for consolidation of ownership and issuance of new title over
the subject property before the Regional Trial Court of Pasig, Branch 155.
granted by the court in its Order dated August 03, 1984. Thereafter, Transfer
Certificate of Title No. 102902 was issued in the name of Jose Puzon.
On August 16, 1986, Mr. Puzon sold the property in question to herein
plaintiff-appellee. By virtue of such sale, a transfer certificate of title over the
subject property was issued in favor of the plaintiff-appellee. Records show
that Mr. Puzon assured the plaintiff-appellee that he (Jose Puzon) will take
care of the squatters in the subject property by filing an ejectment case
against them. However, Mr. Puzon failed to comply with his promise.
On December 19, 1986, plaintiff-appellee filed a complaint for recovery of
possession with damages against the Sarmiento spouses and Pedro
Ogsiner, the Sarmiento spouses’ caretaker of the subject property who
refused to vacate the premises. In its complaint, plaintiff-appellee alleged
that the Sarmiento spouses lost all the rights over the property in question
when a certificate of sale was executed in favor of Mr. Sison for their failure
to pay the mortgage loan.
On January 30, 1987, the Sarmiento spouses filed a motion for leave to file a
third-party complaint against Mr. Sison, the Provincial Sheriff of Pasig, Mr.
Puzon, the Judge of Regional Trial Court of Branch 155 in LRC Case No. R-
3367 and the Register of Deeds of Marikina. On the same date the
Sarmiento spouses filed their answer to the complaint. Expectedly, plaintiff-
appellee opposed the motion.
In its order dated June 16, 1987, the trial court denied the motion of the
Sarmiento spouses. Records show that the said order of the trial court was
set aside in a petition for certiorari filed before this Court. Hence, the third-
party complaint was admitted. Consequently, Mr. Sison, the Register of
Deeds of Marikina filed their answer, while Mr. Puzon filed a motion to
dismiss the third-party complaint on the grounds of misjoinder of causes of
action and non-jurisdiction of the trial court over said third-party complaint. In
a motion to set for hearing its special and affirmative defenses, the Register
of Deeds of Marikina moved for the dismissal of the third-party complaint
against them. The motion of Mr. Puzon was held in abeyance by the trial
court ratiocinating that the issues raised in the motion still do not appear to
be indubitable.
On October 20, 1988, Mr. Puzon filed his answer.
In its order dated February 22, 1989, the trial court dismissed the third-party
complaint against the Register of Deeds of Marikina on the ground that the
case may proceed even without the Register of Deeds being impleaded.
On April 29, 1991, the trial court issued its assailed decision in favor of the
plaintiff-appellee. A timely appeal was filed by the Sarmiento spouses. In
their manifestation filed on July 17, 1989, the Heirs of Mr. Sison prayed for
substitution for their late father. Consequently, the Heirs of Mr. Sison moved
for new trial or reconsideration on the ground that they were not properly
represented in the case after the death of Mr. Sison. In its order dated
November 28, 1991, the trial court granted the motion.
51 | S a l e s & L e a s e H W # 3
On February 4, 1993, the trial court dismissed the claim of Mr. Sison as
represented by his heirs, that he is the beneficial owner of the subject
property. In its order dated May 18, 1993, the court a quo denied the motion
for reconsideration of the Heirs of Mr. Sison.3
The dispositive portion of the trial court ruling dated 29 April 1991 reads as
follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor
of plaintiff against all defendants:
1) ordering defendant Pedro Ogsiner and all persons claiming rights under
him to vacate the premises and surrender peaceful possession to the
plaintiff within fifteen (15) days from receipt of this order;
2) ordering defendant spouses Sarmiento to pay the sum of P20,000.00 as
and for attorney’s fees;
3) ordering the defendants jointly and severally to pay the sum of ₱300.00 a
month as reasonable compensation for the use of the property in question
starting June, 1986 until such time that they actually surrendered the
possession of the property to the plaintiff;
4) ordering defendant spouses Sarmiento to pay the cost of this suit.
Defendant’s third-party complaint against all third-party defendants is hereby
dismissed for lack of sufficient merit.4
On appeal by herein petitioners Amancio and Luisa Sarmiento (Sarmiento
spouses) and by the heirs of Carlos Moran Sison, the Court of Appeals
rendered the assailed Decision, dated 27 November 2001, the dispositive
portion of which reads:
WHEREFORE, for lack of merit, the instant appeal is hereby DISMISSED.
The assailed April 29, 1991 Decision of the Regional Trial Court of Pasig,
Metro Manila is hereby AFFIRMED with the modification that the award of P
20,000.00 as attorney’s fees is hereby DELETED. The February 03, 1993
Resolution and the May 18, 1993 Order of the trial court are also hereby
AFFIRMED.5
On 08 March 2002, the Court of Appeals rendered the assailed Resolution
denying petitioners’ motion for reconsideration.
The Sarmiento spouses anchor their petition on the following legal
arguments:
1) The ruling of the Court of Appeals that private respondent RRC’s
certificate of title cannot be collaterally attacked and that their right to claim
ownership over the subject property is beyond the province of the action for
recovery of possession is contrary to law and applicable decisions of the
Supreme Court;
2) The ruling of the Court of Appeals that private respondent RRC is entitled
to ownership of subject property simply by virtue of its title as evidenced by
Transfer Certificate of Title (TCT) No. N-119631 is contrary to law and
jurisprudence and is not supported by evidence; and
3) The affirmation by the Court of Appeals of the award of rentals to private
respondent RRC lacks factual and legal basis.
First Issue:
VILLAR
The Court of Appeals, in holding that the third-party complaint of the
Sarmiento spouses amounted to a collateral attack on TCT No. N-119631,
ratiocinated as follows:
In resolving the errors/issues assigned by the herein parties, We should be
guided by the nature of action filed by the plaintiff-appellee before the lower
court, and as previously shown it is an action for the recovery of possession
of the property in question with damages. Thus, from the said nature of
action, this Court believes that the focal point of the case is whether or not
the plaintiff-appellee has a better right to possess the contested real
property. Corollary, it must also be answered whether or not the Transfer
Certificate of Title No. N-119631 can be collaterally attacked in an action for
recovery of possession.
...
In their assigned errors, the Sarmiento spouses alleged that the plaintiff-
appellee is not a purchaser in good faith, as they were chargeable with the
knowledge of occupancy by Pedro Ogsiner in behalf of the Sarmiento
spouses, and that the auction sale of the property in favor of Mr. Puzon is
null and void for its failure to comply with the requirement of notice provided
by the law. The same have been argued by the Heirs of Mr. Sison.
The above assertions, We rule, amounts to a collateral attack on the
certificate of title of the plaintiff-appellee. A collateral attack is made when, in
another action to obtain a different relief, an attack on the judgment is made
as an incident in said action. This is proper only when the judgment on its
face is null and void, as where it is patent that the court, which rendered said
judgment has no jurisdiction. On the other hand, a direct attack against a
judgment is made through an action or proceeding the main object of which
is to annul, set aside, or enjoin the enforcement of such judgment, if not
carried into effect, or if the property has been disposed of, the aggrieved
party may sue for recovery.
In the present case, to rule for the nullity of the auction sale in favor of Mr.
Puzon will result in ruling for the nullity of the order of Branch 155 of the
Regional Trial Court of Pasig City, granting the petition for consolidation of
ownership over the subject property filed by Mr. Puzon. It will also result in
the nullity of title issued in the name of Mr. Puzon. Hence, the end objective
in raising the aforementioned arguments is to nullify the title in the name of
the plaintiff-appellee. In fact, a reading of the answer of the Sarmiento
spouses and the Heirs of Mr. Sison reveals that they are asking the court to
nullify all documents and proceedings which led to the issuance of title in
favor of the plaintiff-appellee. This is obviously a collateral attack which is
not allowed under the principle of indefeasibility of torrens title. The issue of
validity of plaintiff-appellee’s title can only be raised in an action expressly
instituted for that purpose. A certificate of title shall not be subject to
collateral attack. It cannot be altered, modified, or canceled except in a direct
proceeding in accordance with law. Case law on the matter shows that the
said doctrine applies not only with respect to the original certificate of title but
also to transfer certificate of title. Hence, whether or not the plaintiff-appellee
has a right to claim ownership over the subject property is beyond the
province of the present action. It does not matter whether the plaintiff-
52 | S a l e s & L e a s e H W # 3
appellee’s title is questionable because this is only a suit for recovery of
possession. It should be raised in a proper action for annulment of
questioned documents and proceedings, considering that it will not be
procedurally unsound for the affected parties to seek for such remedy. In an
action to recover possession of real property, attacking a transfer certificate
of title covering the subject property is an improper procedure. The rule is
well-settled that a torrens title as a rule, is irrevocable and indefeasible, and
the duty of the court is to see to it that this title is maintained and respected
unless challenged in a direct proceeding.6 (Emphasis and underscoring
supplied)
An action is deemed an attack on a title when the object of the action or
proceeding is to nullify the title, and thus challenge the judgment pursuant to
which the title was decreed.7 The attack is direct when the object of the
action is to annul or set aside such judgment, or enjoin its enforcement.8 On
the other hand, the attack is indirect or collateral when, in an action to obtain
a different relief, an attack on the judgment is nevertheless made as an
incident thereof.9
In its analysis of the controversy, the Court of Appeals, alas, missed one
very crucial detail which would have turned the tide in favor of the Sarmiento
spouses. What the Court of Appeals failed to consider is that Civil Case No.
54151 does not merely consist of the case for recovery of possession of
property (filed by RRC against the Sarmiento spouses) but embraces as well
the third-party complaint filed by the Sarmiento spouses against Carlos
Moran Sison, Jose F. Puzon (Mr. Puzon), the Provincial Sherriff of Pasig,
Metro Manila, the Municipal Treasurer of Marikina, Rizal, the Judge of the
RTC, Branch 155, in LRC Case No. R-3367 and the Register of Deeds of
the then Municipality of Marikina, Province of Rizal.
The rule on third-party complaints is found in Section 22, Rule 6 of the 1997
Rules of Court, which reads:
Sec. 22. Third, (fourth, etc.)–party complaint. – A third (fourth, etc.)-party
complaint is a claim that a defending party may, with leave of court, file
against a person not a party to the action, called the third-party defendant,
for contribution, indemnity, subrogation or any other relief, in respect of his
opponent’s claim.
A third-party complaint is in the nature of an original complaint. This is so
because it is "actually independent of and separate and distinct from the
plaintiff’s complaint."10 In herein case, after leave of court was secured11 to
file a third-party complaint, the third-party complainants (Sarmiento spouses)
had to pay the necessary docket fees.12 Summonses were then issued on
the third-party defendants13 who answered in due time.14
In Firestone Tire and Rubber Company of the Philippines v.
Tempongko,15 we had occasion to expound on the nature of a third-party
complaint, thus:
The third-party complaint, is therefore, a procedural device whereby a "third
party" who is neither a party nor privy to the act or deed complained of by
the plaintiff, may be brought into the case with leave of court, by the
defendant, who acts as third-party plaintiff to enforce against such third-party
defendant a right for contribution, indemnity, subrogation or any other relief,
VILLAR
in respect of the plaintiff’s claim. The third-party complaint is actually
independent of and separate and distinct from the plaintiff’s complaint. Were
it not for this provision of the Rules of Court, it would have to be filed
independently and separately from the original complaint by the defendant
against the third-party. But the Rules permit defendant to bring in a third-
party defendant or so to speak, to litigate his separate cause of action in
respect of plaintiff’s claim against a third party in the original and principal
case with the object of avoiding circuity of action and unnecessary
proliferation of lawsuits and of disposing expeditiously in one litigation the
entire subject matter arising from one particular set of facts. . . When leave
to file the third-party complaint is properly granted, the Court renders in
effect two judgments in the same case, one on the plaintiff’s complaint and
the other on the third-party complaint. (Emphasis supplied)
Prescinding from the foregoing, the appellate court grievously erred in failing
to appreciate the legal ramifications of the third-party complaint vis-à-vis the
original complaint for recovery of possession of property. The third-party
complaint for cancellation of TCT being in the nature of an original complaint
for cancellation of TCT, it therefore constitutes a direct attack of such TCT.
The situation at bar can be likened to a case for recovery of possession
wherein the defendant files a counterclaim against the plaintiff attacking the
validity of the latter’s title. Like a third-party complaint, a counterclaim is
considered an original complaint, as such, the attack on the title in a case
originally for recovery of possession cannot be considered as a collateral
attack. We thus held in Development Bank of the Philippines (DBP) v. Court
of Appeals:16
Nor is there any obstacle to the determination of the validity of TCT No.
10101. It is true that the indefeasibility of torrens titles cannot be collaterally
attacked. In the instant case, the original complaint is for recovery of
possession filed by petitioner against private respondent, not an original
action filed by the latter to question the validity of TCT No. 10101 on which
the petitioner bases its right. To rule on the issue of validity in a case for
recovery of possession is tantamount to a collateral attack. However, it
should not be overlooked that private respondent filed a counterclaim
against petitioner, claiming ownership over the land and seeking damages.
Hence, we could rule in the question of the validity of TCT No. 10101 for the
counterclaim can be considered a direct attack on the same. "A counterclaim
is considered a complaint, only this time, it is the original defendant who
becomes plaintiff … It stands on the same footing and is to be tested by the
same rules as if it were an independent action."
There being a direct attack on the TCT which was unfortunately ignored by
the appellate court, it behooves this Court to deal with and to dispose of the
said issue more so because all the facts and evidence necessary for a
complete determination of the controversy are already before us.
Again, DBP instructs:
. . . In an analogous case, we ruled on the validity of a certificate of title
despite the fact that the original action instituted before the lower court was a
case for recovery of possession. The Court reasoned that since all the facts
of the case are before it, to direct the party to institute cancellation
53 | S a l e s & L e a s e H W # 3
proceedings would be needlessly circuitous and would unnecessarily delay
the termination of the controversy which has already dragged on for 20
years.17
Second Issue:
In their third-party complaint, as amended, the Sarmiento spouses asserted
six causes of action. The second18 to sixth causes of action referred to the
proceedings leading to and resulting from the tax sale held on 28 August
1982, summarized by the trial court as follows:
. . . Third Party Plaintiffs alleged that on August 28, 1982, the Municipal
Treasurer of Marikina sold at public auction, the same property in favor of
Jose F. Puzon for tax deficiency at the price of Three Thousand Three
Hundred Eighty Four Pesos and 89/100 (P 3,383.89) which is very low
considering that the area of the property is 1,060 square meters; that they
were not notified of the public auction sale and further, the requirements,
such as posting of notices in public places, among other requirements, were
not complied with; that since the property was sold at a very low price, the
public auction sale and the Certificate of Sale issued by Municipal Treasurer
of Marikina in favor of third party defendant Jose F. Puzon are null and void;
that in August 1984, the third party defendant in order to consolidate his
ownership and title to the property filed a Petition with the Land Registration
Commission in the Regional Trial Court, Branch 155, Pasig, Metro Manila in
LRC Case No. R-3367, for consolidation of his ownership and title; that third
party plaintiffs were not notified thereof and did not have their day in Court;
hence, the order of the Judge of the Regional trial Court in LRC Case No. R-
3367 authorizing the consolidation of the ownership and title of Jose F.
Puzon is null and void, that Jose F. Puzon after having been issued a new
title in his name sold in June 1986, the property in favor of plaintiff
RODEANNA REALTY CORPORATION.19
The Sarmiento spouses thus prayed that: (a) the certificate of sale executed
by the Municipal Treasurer of the then Municipality of Marikina, Rizal, in
favor of Mr. Puzon be declared null and void and all subsequent transactions
therefrom declared null and void as well; (b) the Order of the RTC in LRC
Case No. R-3367, authorizing the consolidation of ownership of and
issuance of new TCT No. 102909 in favor of Mr. Puzon, be declared null and
void; (c) the Register of Deeds be directed to cancel the Certificate of Sale
and TCT No. 102909 issued in favor of Mr. Puzon as well as TCT No. N-
119631 issued in the name of RRC and that TCT No. 370807 in the name of
the Sarmiento spouses be restored; (d) all third-party defendants be made to
pay, jointly and severally, moral and exemplary damages such amount as to
be fixed by the court as well as attorney’s fees in the amount of ₱10,000.00;
and (e) Mr. Puzon be made to pay ₱500,000.00 – the actual value of the
property at the time of the tax sale – in the remote event that the title of RRC
is not invalidated.
The trial court held that the Sarmiento spouses were not entitled to the relief
sought by them as there was nothing irregular in the way the tax sale was
effected, thus:
Defendants Sarmiento aver that they were not notified of the auction sale of
the property by the Municipal Treasurer of Marikina. However, the Court
VILLAR
would like to point out that during the examination of Amancio Sarmiento, he
testified that in 1969 or 1970, he started residing at No. 13 19th Avenue,
Cubao, Quezon City; that his property was titled in 1972; that he transferred
his residence from Cubao to No. 76 Malumanay Street, Quezon City but he
did not inform the Municipal Treasurer of the said transfer. Hence, notice
was directed to his last known address.
...
The law requires posting of notice and publication. Personal notice to the
delinquent taxpayer is not required. In the case at bar, notice was sent to
defendants (sic) address at No. 12 13th Avenue, Cubao Quezon City. If said
notice did not reach the defendant, it is because of defendants’ fault in not
notifying the Municipal Treasurer of Marikina of their change of address.20
The above-quoted ratiocination does not sit well with this Court for two
fundamental reasons. First, the trial court erroneously declared that personal
notice to the delinquent taxpayer is not required. On the contrary, personal
notice to the delinquent taxpayer is required as a prerequisite to a valid tax
sale under the Real Property Tax Code,21 the law then prevailing at the time
of the tax sale on 28 August 1982.22
Section 73 of the Real Property Tax Code provides:
Sec. 73. Advertisement of sale of real property at public auction. – After the
expiration of the year for which the tax is due, the provincial or city treasurer
shall advertise the sale at public auction of the entire delinquent real
property, except real property mentioned in subsection (a) of Section forty
hereof, to satisfy all the taxes and penalties due and the costs of sale. Such
advertisement shall be made by posting a notice for three consecutive
weeks at the main entrance of the provincial building and of all municipal
buildings in the province, or at the main entrance of the city or municipal hall
in the case of cities, and in a public and conspicuous place in barrio or
district wherein the property is situated, in English, Spanish and the local
dialect commonly used, and by announcement at least three market days at
the market by crier, and, in the discretion of the provincial or city treasurer,
by publication once a week for three consecutive weeks in a newspaper of
general circulation published in the province or city.
The notice, publication, and announcement by crier shall state the amount of
the taxes, penalties and costs of sale; the date, hour, and place of sale, the
name of the taxpayer against whom the tax was assessed; and the kind or
nature of property and, if land, its approximate areas, lot number, and
location stating the street and block number, district or barrio, municipality
and the province or city where the property to be sold is situated.
Copy of the notice shall forthwith be sent either by registered mail or by
messenger, or through the barrio captain, to the delinquent taxpayer, at his
address as shown in the tax rolls or property tax record cards of the
municipality or city where the property is located, or at his residence, if
known to said treasurer or barrio captain: Provided, however, That a return
of the proof of service under oath shall be filed by the person making the
service with the provincial or city treasurer concerned. (Emphasis supplied)
We cannot overemphasize that strict adherence to the statutes governing
tax sales is imperative not only for the protection of the taxpayers, but also to
54 | S a l e s & L e a s e H W # 3
allay any possible suspicion of collusion between the buyer and the public
officials called upon to enforce the laws.23 Notice of sale to the delinquent
land owners and to the public in general is an essential and indispensable
requirement of law, the non-fulfillment of which vitiates the sale.24 Thus, the
holding of a tax sale despite the absence of the requisite notice is
tantamount to a violation of delinquent taxpayer’s substantial right to due
process. 25 Administrative proceedings for the sale of private lands for
nonpayment of taxes being in personam, it is essential that there be actual
notice to the delinquent taxpayer, otherwise the sale is null and void
although preceded by proper advertisement or publication.26
The consequential issue in this case, therefore, is whether or not the
registered owners – the Sarmiento spouses – were personally notified that a
tax sale was to be conducted on 28 August 1982.
The Sarmiento spouses insist that they were not notified of the tax sale. The
trial court found otherwise, as it declared that a notice was sent to the
spouses’ last known address. Such conclusion constitutes the second
fundamental error in the trial court’s disposition of the case as such
conclusion is totally bereft of factual basis. When findings of fact are
conclusions without citation of specific evidence upon which they are based,
this Court is justified in reviewing such finding.27
In herein case, the evidence does not support the conclusion that notice of
the tax sale was sent to the Sarmiento spouses’ last known address. What is
clear from the evidence is that the Sarmiento spouses were notified by
mail after the subject property was already sold, i.e., the notice that was sent
to the last known address was the "Notice of Sold Properties" and not the
notice to hold a tax sale.28 This was testified upon by third-party defendant
Natividad M. Cabalquinto, the Municipal Treasurer of Marikina, who swore
that per her records, neither notice of tax delinquency nor notice of tax sale
was sent to the Sarmiento spouses.29 Counsel for respondent RRC did not
cross-examine Ms. Cabalquinto on this on the theory that Ms. Cabalquinto
had no personal knowledge of the tax sale and the proceedings leading
thereto as she became Municipal Treasurer only in 1989.30
Notwithstanding Ms. Cabalquinto’s lack of personal knowledge, her
testimony -- that per records in her possession no notice was actually sent to
the Sarmiento spouses -- is sufficient proof of the lack of such notice in the
absence of contrary proof coming from the purchaser in the tax sale, Mr.
Puzon, and from his eventual buyer, herein private respondent RRC. Be it
noted that under Section 73 of the Real Property Tax Code, it is required
that a return of the proof of service to the registered owner be made under
oath and filed by the person making the service with the provincial or city
treasurer concerned. This implies that as far as tax sales are concerned,
there can be no presumption of the regularity of any administrative action;
hence the registered owner/delinquent taxpayer does not have the burden of
proof to show that, indeed, he was not personally notified of the sale thru
registered mail.
There can be no presumption of the regularity of any administrative action
which results in depriving a taxpayer of his property through a tax
sale.31 This is an exception to the rule that administrative proceedings are
VILLAR
presumed to be regular.32 This doctrine can be traced to the 1908 case
of Valencia v. Jimenez and Fuster33 where this Court held:
The American law does not create a presumption of the regularity of any
administrative action which results in depriving a citizen or taxpayer of his
property, but, on the contrary, the due process of law to be followed in tax
proceedings must be established by proof and the general rule is that the
purchaser of a tax title is bound to take upon himself the burden of showing
the regularity of all proceedings leading up to the sale. The difficulty of
supplying such proof has frequently lead to efforts on the part of legislatures
to avoid it by providing by statute that a tax deed shall be deemed either
conclusive or presumptive proof of such regularity.
Those statutes attributing to it a conclusive effect have been held invalid as
operating to deprive the owner of his property without due process of law.
But those creating a presumption only have been sustained as affecting a
rule of evidence, changing nothing but the burden of proof. (Turpin v.
Lemon, 187 U.S., 51.)
The tax law applicable to Manila does not attempt to give any special
probative effect to the deed of the assessor and collector, and therefore
leaves the purchaser to establish the regularity of all vital steps in the
assessment and sale.
In the fairly recent case of Requiron v. Sinaban,34  we had occasion to
reiterate the doctrine laid down in Valencia  with respect specifically to tax
sales conducted under Commonwealth Act No. 470 (Assessment Law).
Nevertheless, no substantial variance exists between Commonwealth Act
No. 470 and the Real Property Tax Code, which took effect on 01 June
1974, concerning the required procedure in the conduct of public auction
sale involving real properties with tax delinquencies.35
In sum, for failure of the purchaser in the tax sale (third-party defendant Mr.
Puzon) to prove that notice of the tax sale was sent to the Sarmiento
spouses, such sale is null and void.
As the tax sale was null and void, the title of the buyer therein (Mr. Puzon)
was also null and void, which thus leads us to the question of who between
petitioners and private respondent RRC has the right to possess the subject
property.
In its complaint for recovery of possession with damages filed before the trial
court, RRC averred that it is the present registered owner of the subject land
which it bought from Mr. Puzon, who was then the registered owner thereof,
free from liens and encumbrances. It also stated that therein defendant
Pedro Ogsiner was an illegal occupant as he was the overseer for the
Sarmiento spouses who no longer had any title to or rights over the property.
It thus prayed that Pedro Ogsiner vacate the property and that he and the
Sarmiento spouses be ordered to pay attorney’s fees and rent in the amount
of ₱500.00 monthly from 1984 until Pedro Ogsiner finally vacates the land.36
In their Answer,37 the Sarmiento spouses invoked certain affirmative
defenses, to wit:
(1) The certificate of sale issued by the Municipal Treasurer of Marikina,
Rizal, the order authorizing consolidation of ownership and the issuance of a
55 | S a l e s & L e a s e H W # 3
new title all in favor of Mr. Puzon were null and void as the Sarmiento
spouses and Pedro Ogsiner were not notified of the tax sale;
(2) Mr. Puzon, knowing that the sale of the subject property by the Municipal
Treasurer of Marikina was null and void, still sold the same to herein private
respondent RRC; and
(3) RRC purchased the property in bad faith, thus the sale to it was null and
void.
A complaint for recovery of possession based on ownership (accion
reivindicatoria or accion reivindicacion) is an action whereby the plaintiff
alleges ownership over a parcel of land and seeks recovery of its full
possession.38 As possession is sought based on ownership, we must inquire
into the title of RRC which it acquired from Mr. Puzon who, in turn, derived
his title from the void tax sale.
The void tax sale notwithstanding, RRC’s title cannot be assailed if it is a
purchaser in good faith and for value.39
In its narration of the facts, the trial court acknowledged that RRC -- through
its President, Roberto Siy, and through its representative, Lorenzo Tabilog –
conducted an ocular inspection of the subject land and found therein that its
actual occupant, Pedro Ogsiner, had a house erected thereon and that such
occupant was the overseer for the Sarmiento spouses who claimed
ownership over the subject land.40 Armed with this knowledge, RRC did only
one thing: it offered Pedro Ogsiner ₱2,000.00 to vacate the subject
property.41Relying on the fact that the TCT in Mr. Puzon’s name was free of
liens and encumbrances and that Mr. Puzon would take care of the
"squatters," RRC did not investigate whatever claim Pedro Ogsiner and the
Sarmiento spouses had over the subject land.
From the foregoing undisputed facts, the trial court held:
There is no doubt that when the plaintiff Rodeanna Realty Corporation
purchased the property, there was a title in the name of Jose Puzon, thus,
making them a purchaser (sic) in good faith and for value. Said buyers relied
on the owners (sic) title which is free and clear of all liens and
encumbrances.
...
After a careful evaluation of the facts of this case, the Court believes that
plaintiff is entitled to the relief sought for. As enunciated in the case of
Carmelita E. Reyes vs. Intermediate Appellate Court, Gregorio Galang and
Soledad Pangilinan (No. L-60941, February 28, 1985, 135 SCRA 214), a
contract of sale between a buyer from public auction of land sold for unpaid
realty taxes and subsequent innocent purchaser in good faith and for value
is valid whether or not the City Treasurer followed the prescribed procedure.
In the case at bar, assuming that the Municipal Treasurer of Marikina failed
to comply with certain procedure, it does not follow that the Rodeanna
Realty Corporation has no valid title. For as they have asserted, they are
purchaser in good faith and for value in the amount of P190, 000.00. There
is nothing in the record which would show that they were aware or they were
party to the alleged irregularities. Hence, title of Rodeanna Realty
Corporation cannot now be assailed (William vs. Barrera, 68 Phil. 656;
VILLAR
PMHC vs. Mencias, August 16, 1967, 20 SRCA 1031; Pascua vs. Capuyos,
77 SCRA 78).42
In affirming the trial court, the Court of Appeals ruled:
As proven by the plaintiff-appellee, they obtained the property in question
from Mr. Puzon, who in turn acquired it in a public auction conducted by the
Municipality of Marikina. By virtue of the sale by Mr. Puzon to plaintiff-
appellee, TCT No. N-119631 was issued in its name. The best proof of
ownership of a piece of land is the certificate of title. The certificate of title is
considered the evidence of plaintiff-appellee’s ownership over the subject
real property, and as its registered owner, it is entitled to its possession.
Hence, as compared to the Sarmiento spouses whose previous title over the
subject property has been cancelled, and to the Heirs of Mr. Sison, who had
not shown any better proof of ownership, the plaintiff-appellee, as evidenced
by its certificate of title, has superior right to possess the contested property.
Xxx43
Verily, every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way
oblige him to go behind the certificate to determine the condition of the
property.44 Thus, the general rule is that a purchaser may be considered a
purchaser in good faith when he has examined the latest certificate of
title.45 An exception to this rule is when there exist important facts that would
create suspicion in an otherwise reasonable man to go beyond the present
title and to investigate those that preceded it. Thus, it has been said that a
person who deliberately ignores a significant fact which would create
suspicion in an otherwise reasonable man is not an innocent purchaser for
value.46 A purchaser cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of the vendor.47 As we
have held:
The failure of appellees to take the ordinary precautions which a prudent
man would have taken under the circumstances, specially in buying a piece
of land in the actual, visible and public possession of another person, other
than the vendor, constitutes gross negligence amounting to bad faith.
In this connection, it has been held that where, as in this case, the land sold
is in the possession of a person other than the vendor, the purchaser is
required to go beyond the certificate of title to ma[k]e inquiries concerning
the rights of the actual possessor. Failure to do so would make him a
purchaser in bad faith. (Citations omitted).
...
One who purchases real property which is in the actual possession of
another should, at least make some inquiry concerning the right of those in
possession. The actual possession by other than the vendor should, at least
put the purchaser upon inquiry. He can scarely, in the absence of such
inquiry, be regarded as a bona fide purchaser as against such
possessors.48 (Emphasis supplied)
Prescinding from the foregoing, the fact that private respondent RRC did not
investigate the Sarmiento spouses’ claim over the subject land despite its
knowledge that Pedro Ogsiner, as their overseer, was in actual possession
56 | S a l e s & L e a s e H W # 3
thereof means that it was not an innocent purchaser for value upon said
land. Article 524 of the Civil Code directs that possession may be exercised
in one’s name or in that of another. In herein case, Pedro Ogsiner had
informed RRC that he was occupying the subject land on behalf of the
Sarmiento spouses. Being a corporation engaged in the business of buying
and selling real estate,49 it was gross negligence on its part to merely rely on
Mr. Puzon’s assurance that the occupants of the property were mere
squatters considering the invaluable information it acquired from Pedro
Ogsiner and considering further that it had the means and the opportunity to
investigate for itself the accuracy of such information.
Third Issue:
As it is the Sarmieno spouses, as exercised by their overseer Pedro
Ogsiner, who have the right of possession over the subject property, they
cannot be made to pay rent to private respondent RRC.
WHEREFORE, premises considered, the Decision of the Court of Appeals
dated 27 November 2001 and its Resolution dated 08 March 2002 are
REVERSED and SET ASIDE. The public auction sale conducted on 28
August 1982 is declared VOID for lack of notice to the registered owners
Amancio and Luisa Sarmiento. Transfer Certificate of Title No. N-119631 of
the Registry of Deeds of what was then the Municipality of Marikina,
Province of Rizal, in the name of Rodeanna Realty Corporation is hereby
ANNULLED. The Register of Deeds of Marikina City, Metro Manila, is
ordered to cancel TCT No. N-119631 and to issue, in lieu thereof, a new title
in the name of spouses Amancio and Luisa Sarmiento. Costs against private
respondent RRC.
SO ORDERED.
(19) THIRD DIVISION
 LILLIAN N. MERCADO, CYNTHIA M. FEKARIS,  
and JULIAN MERCADO, JR., represented by their
Attorney-In-Fact, ALFREDO M. PEREZ,
Petitioners,
 
 
- versus -
 
 
ALLIED BANKING CORPORATION,
Respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
  D E C I S I O N
VILLAR
  CHICO-NAZARIO, J.:
 Before this Court is a Petition for Review on Certiorari  under Rule 45 of the
Revised Rules of Court, filed by petitioners Lillian N. Mercado, Cynthia M.
Fekaris and Julian Mercado, Jr., represented by their Attorney-In-Fact,
Alfredo M. Perez, seeking to reverse and set aside the Decision[1] of the
Court of Appeals dated 12 October 2005, and its Resolution[2] dated 15
February 2006 in CA-G.R. CV No. 82636. The Court of Appeals, in its
assailed Decision and Resolution, reversed the Decision[3] of the Regional
Trial Court (RTC) of Quezon City, Branch 220 dated 23 September 2003,
declaring the deeds of real estate mortgage constituted on TCT No. RT-
18206 (106338) null and void. The dispositive portion of the assailed Court
of Appeals Decision thus reads:
 
WHEREFORE, the appealed decision is REVERSED and SET ASIDE, and
a new judgment is hereby entered dismissing the [petitioners] complaint.[4]
  
Petitioners are heirs of Perla N. Mercado (Perla). Perla, during her lifetime,
owned several pieces of real property situated in different provinces of
the Philippines.
 
Respondent, on the other hand, is a banking institution duly authorized as
such under the Philippine laws.
 
On 28 May 1992, Perla executed a Special Power of Attorney (SPA) in favor
of her husband, Julian D. Mercado (Julian) over several pieces of real
property registered under her name, authorizing the latter to perform the
following acts:
1. To act in my behalf, to sell, alienate, mortgage, lease and deal otherwise
over the different parcels of land described hereinafter, to wit:
 a)                  Calapan, Oriental Mindoro Properties covered by Transfer
Certificates of Title Nos. T-53618 - 3,522 Square Meters, T-46810 3,953
G.R. No. 171460 Square Meters, T-53140 177 Square Meters, T-21403 263 square
  Meters, T- 46807 39 Square Meters of the Registry of Deeds of Oriental
Present: Mindoro;
    b)                 Susana Heights, Muntinlupa covered by Transfer Certificates
YNARES-SANTIAGO, J., of Title Nos. T-108954 600 Square Meters and RT-106338 805 Square
Chairperson, Meters of the Registry of Deeds of Pasig (now Makati);
AUSTRIA-MARTINEZ,  c)                 Personal property 1983 Car with Vehicle Registration No. R-
CHICO-NAZARIO, and 16381; Model 1983; Make Toyota; Engine No. T- 2464
NACHURA, JJ.  
  2.                  To sign for and in my behalf any act of strict dominion or
  ownership any sale, disposition, mortgage, lease or any other transactions
Promulgated: including quit-claims, waiver and relinquishment of rights in and over the
  parcels of land situated in General Trias, Cavite, covered by Transfer
July 24, 2007 Certificates of Title Nos. T-112254 and T-112255 of the Registry of Deeds of
Cavite, in conjunction with his co-owner and in the person ATTY. AUGUSTO
F. DEL ROSARIO;
57 | S a l e s & L e a s e H W # 3
 
3.                  To exercise any or all acts of strict dominion or ownership over
the above-mentioned properties, rights and interest therein. (Emphasis
supplied.)
 
 On the strength of the aforesaid SPA, Julian, on 12 December 1996,
obtained a loan from the respondent in the amount
of P3,000,000.00, secured by real estate mortgage constituted on TCT No.
RT-18206 (106338) which covers a parcel of land with an area of 805
square meters, registered with the Registry of Deeds of Quezon City
(subject property).[5]
 
Still using the subject property as security, Julian obtained an additional loan
from the respondent in the sum of P5,000,000.00, evidenced by a
Promissory Note[6] he executed on 5 February 1997 as another real estate
mortgage (REM).
 
It appears, however, that there was no property identified in the SPA as TCT
No. RT 18206 (106338) and registered with the Registry of Deeds of
Quezon City. What was identified in the SPA instead was the property
covered by TCT No. RT-106338 registered with the Registry of Deeds of
Pasig.
 
Subsequently, Julian defaulted on the payment of his loan obligations. Thus,
respondent initiated extra-judicial foreclosure proceedings over the subject
property which was subsequently sold at public auction wherein the
respondent was declared as the highest bidder as shown in the Sheriffs
Certificate of Sale dated 15 January 1998.[7]
 
On 23 March 1999, petitioners initiated with the RTC an action for the
annulment of REM constituted over the subject property on the ground that
the same was not covered by the SPA and that the said SPA, at the time the
loan obligations were contracted, no longer had force and effect since it was
previously revoked by Perla on 10 March 1993, as evidenced by the
Revocation of SPA signed by the latter.[8]
 
Petitioners likewise alleged that together with the copy of the Revocation of
SPA, Perla, in a Letter dated 23 January 1996, notified the Registry of
Deeds of Quezon City that any attempt to mortgage or sell the subject
property must be with her full consent documented in the form of an SPA
duly authenticated before the Philippine Consulate General in New York. [9]
In the absence of authority to do so, the REM constituted by Julian over the
subject property was null and void; thus, petitioners likewise prayed that the
subsequent extra-judicial foreclosure proceedings and the auction sale of
the subject property be also nullified.
VILLAR
In its Answer with Compulsory Counterclaim,[10] respondent averred that,
contrary to petitioners allegations, the SPA in favor of Julian included the
subject property, covered by one of the titles specified in paragraph 1(b)
thereof, TCT No. RT- 106338 registered with the Registry of Deeds
of Pasig (now Makati). The subject property was purportedly registered
previously under TCT No. T-106338, and was only subsequently
reconstituted as TCT RT-18206 (106338). Moreover, TCT No. T-
106338 was actually registered with the Registry of Deeds of Quezon
City and not before the Registry of Deeds
of Pasig (now Makati). Respondent explained that the discrepancy in the
designation of the Registry of Deeds in the SPA was merely an error that
must not prevail over the clear intention of Perla to include the subject
property in the said SPA. In sum, the property referred to in the SPA Perla
executed in favor of Julian as covered by TCT No. 106338 of the Registry
of Deeds of Pasig (now Makati) and the subject property in the case at bar,
covered by RT 18206 (106338) of the Registry of Deeds of Quezon
City, are one and the same.
 
On 23 September 2003, the RTC rendered a Decision declaring the REM
constituted over the subject property null and void, for Julian was not
authorized by the terms of the SPA to mortgage the same. The court a
quo likewise ordered that the foreclosure proceedings and the auction sale
conducted pursuant to the void REM, be nullified. The dispositive portion of
the Decision reads:
 
WHEREFORE, premises considered, judgment is hereby rendered in favor
of the [herein petitioners] and against the [herein respondent] Bank:
 
1. Declaring the Real Estate Mortgages constituted and registered under
Entry Nos. PE-4543/RT-18206 and 2012/RT-18206 annotated on TCT No.
RT-18206 (106338) of the Registry of Deeds of Quezon City as NULL and
VOID;
 
2. Declaring the Sheriffs Sale and Certificate of Sale under FRE No. 2217
dated January 15, 1998 over the property covered by TCT No. RT-18206
(106338) of the Registry of Deeds of Quezon City as NULL and VOID;
 
3. Ordering the defendant Registry of Deeds of Quezon City to cancel the
annotation of Real Estate Mortgages appearing on Entry Nos. PE-4543/RT-
18206 and 2012/RT-18206 on TCT No. RT-18206 (106338) of the Registry
of Deeds of Quezon City;
4. Ordering the [respondent] Bank to deliver/return to the [petitioners]
represented by their attorney-in-fact Alfredo M. Perez, the original Owners
Duplicate Copy of TCT No. RT-18206 (106338) free from the encumbrances
referred to above; and
58 | S a l e s & L e a s e H W # 3
5. Ordering the [respondent] Bank to pay the [petitioners] the amount
of P100,000.00 as for attorneys fees plus cost of the suit.
The other claim for damages and counterclaim are hereby DENIED for lack
of merit.[11]
 
 
Aggrieved, respondent appealed the adverse Decision before the Court of
Appeals.
 
In a Decision dated 12 October 2005, the Court of Appeals reversed the
RTC Decision and upheld the validity of the REM constituted over the
subject property on the strength of the SPA. The appellate court declared
that Perla intended the subject property to be included in the SPA she
executed in favor of Julian, and that her subsequent revocation of the said
SPA, not being contained in a public instrument, cannot bind third persons.
 
The Motion for Reconsideration interposed by the petitioners was denied by
the Court of Appeals in its Resolution dated 15 February 2006.
 
Petitioners are now before us assailing the Decision and Resolution
rendered by the Court of Appeals raising several issues, which are
summarized as follows:
 
I WHETHER OR NOT THERE WAS A VALID MORTGAGE CONSTITUTED
OVER SUBJECT PROPERTY.
 
II WHETHER OR NOT THERE WAS A VALID REVOCATION OF THE SPA.
III WHETHER OR NOT THE RESPONDENT WAS A MORTGAGEE-IN-
GOOD FAITH.
 
 
For a mortgage to be valid, Article 2085 of the Civil Code enumerates the
following essential requisites:
 
Art. 2085. The following requisites are essential to the contracts of pledge
and mortgage:
 
(1) That they be constituted to secure the fulfillment of a principal obligation;
 
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged
or mortgaged;
 
(3) That the persons constituting the pledge or mortgage have the free
disposal of their property, and in the absence thereof, that they be legally
authorized for the purpose.
 
VILLAR
Third persons who are not parties to the principal obligation may secure the
latter by pledging or mortgaging their own property.
 
In the case at bar, it was Julian who obtained the loan obligations from
respondent which he secured with the mortgage of the subject property. The
property mortgaged was owned by his wife, Perla, considered a third party to
the loan obligations between Julian and respondent. It was, thus, a situation
recognized by the last paragraph of Article 2085 of the Civil Code afore-
quoted. However, since it was not Perla who personally mortgaged her own
property to secure Julians loan obligations with respondent, we proceed to
determining if she duly authorized Julian to do so on her behalf.
 
Under Article 1878 of the Civil Code, a special power of attorney is
necessary in cases where real rights over immovable property are created or
conveyed.[12] In the SPA executed by Perla in favor of Julian on 28 May
1992, the latter was conferred with the authority to sell, alienate, mortgage,
lease and deal otherwise the different pieces of real and personal property
registered in Perlas name. The SPA likewise authorized Julian [t]o exercise
any or all acts of strict dominion or ownership over the identified
properties, and rights and interest therein. The existence and due execution
of this SPA by Perla was not denied or challenged by petitioners.
 
There is no question therefore that Julian was vested with the power to
mortgage the pieces of property identified in the SPA. However, as to
whether the subject property was among those identified in the SPA, so as
to render Julians mortgage of the same valid, is a question we still must
resolve.
Petitioners insist that the subject property was not included in the SPA,
considering that it contained an exclusive enumeration of the pieces of
property over which Julian had authority, and these include only: (1) TCT
No. T-53618, with an area of 3,522 square meters, located at Calapan,
Oriental Mindoro, and registered with the Registry of Deeds of Oriental
Mindoro; (2) TCT No. T-46810, with an area of 3,953 square meters, located
at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of
Oriental Mindoro; (3) TCT No. T-53140, with an area of 177 square meters,
located at Calapan, Oriental Mindoro, and registered with the Registry of
Deeds of Oriental Mindoro; (4) TCT No. T-21403, with an area of 263 square
meters, located at Calapan, Oriental Mindoro, and registered with the
Registry of Deeds of Oriental Mindoro; (5) TCT No. T- 46807, with an area of
39 square meters, located at Calapan, Oriental Mindoro, and registered with
the Registry of Deeds of Oriental Mindoro; (6) TCT No. T-108954, with an
area of 690 square meters and located at Susana Heights,
Muntinlupa; (7) RT-106338 805 Square Meters registered with the Registry
of Deeds of Pasig (now Makati); and (8) Personal Property consisting of a
1983 Car with Vehicle Registration No. R-16381, Model 1983, Make Toyota,
and Engine No. T- 2464. Nowhere is it stated in the SPA that Julians
59 | S a l e s & L e a s e H W # 3
authority extends to the subject property covered by TCT No. RT 18206
(106338) registered with the Registry of Deeds of Quezon
City. Consequently, the act of Julian of constituting a mortgage over the
subject property is unenforceable for having been done without authority.
 
Respondent, on the other hand, mainly hinges its argument on the
declarations made by the Court of Appeals that there was no property
covered by TCT No. 106338 registered with the Registry of Deeds of
Pasig (now Makati); but there exists a property, the subject property
herein, covered by TCT No. RT-18206 (106338) registered with
the Registry of Deeds of Quezon City. Further verification would reveal
that TCT No. RT-18206 is merely a reconstitution of TCT No. 106338, and
the property covered by both certificates of title is actually situated
in Quezon City and not Pasig. From the foregoing circumstances,
respondent argues that Perla intended to include the subject property in the
SPA, and the failure of the instrument to reflect the recent TCT Number or
the exact designation of the Registry of Deeds, should not defeat Perlas
clear intention.
After an examination of the literal terms of the SPA, we find that the subject
property was not among those enumerated therein. There is no obvious
reference to the subject property covered by TCT No. RT-18206 (106338)
registered with the Registry of Deeds of Quezon City.
 
There was also nothing in the language of the SPA from which we could
deduce the intention of Perla to include the subject property therein. We
cannot attribute such alleged intention to Perla who executed the SPA when
the language of the instrument is bare of any indication suggestive of such
intention. Contrariwise, to adopt the intent theory advanced by the
respondent, in the absence of clear and convincing evidence to that effect,
would run afoul of the express tenor of the SPA and thus defeat Perlas true
intention.
 
In cases where the terms of the contract are clear as to leave no room for
interpretation, resort to circumstantial evidence to ascertain the true intent of
the parties, is not countenanced. As aptly stated in the case of JMA House,
Incorporated v. Sta. Monica Industrial and Development Corporation,
[13]
 thus:
 
[T]he law is that if the terms of a contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of its stipulation
shall control. When the language of the contract is explicit, leaving no doubt
as to the intention of the drafters, the courts may not read into it [in] any
other intention that would contradict its main import. The clear terms of the
contract should never be the subject matter of interpretation. Neither
abstract justice nor the rule on liberal interpretation justifies the creation of a
contract for the parties which they did not make themselves or the imposition
upon one party to a contract or obligation not assumed simply or merely to
VILLAR
avoid seeming hardships. The true meaning must be enforced, as it is to be
presumed that the contracting parties know their scope and effects.[14]
 
 
Equally relevant is the rule that a power of attorney must be strictly
construed and pursued. The instrument will be held to grant only those
powers which are specified therein, and the agent may neither go beyond
nor deviate from the power of attorney.[15] Where powers and duties are
specified and defined in an instrument, all such powers and duties are
limited and are confined to those which are specified and defined, and all
other powers and duties are excluded.[16] This is but in accord with the
disinclination of courts to enlarge the authority granted beyond the powers
expressly given and those which incidentally flow or derive therefrom as
being usual and reasonably necessary and proper for the performance of
such express powers.[17]
 
Even the commentaries of renowned Civilist Manresa[18] supports a strict and
limited construction of the terms of a power of attorney:
The law, which must look after the interests of all, cannot permit a man to
express himself in a vague and general way with reference to the right he
confers upon another for the purpose of alienation or hypothecation,
whereby he might be despoiled of all he possessed and be brought to ruin,
such excessive authority must be set down in the most formal and explicit
terms, and when this is not done, the law reasonably presumes that the
principal did not mean to confer it.
 
 
In this case, we are not convinced that the property covered by TCT No.
106338 registered with the Registry of Deeds of Pasig (now Makati) is the
same as the subject property covered by TCT No. RT-18206
(106338) registered with the Registry of Deeds of Quezon City. The records
of the case are stripped of supporting proofs to verify the respondents claim
that the two titles cover the same property. It failed to present any
certification from the Registries of Deeds concerned to support its
assertion. Neither did respondent take the effort of submitting and making
part of the records of this case copies of TCTs No. RT-106338 of the
Registry of Deeds of Pasig (now Makati) and RT-18206 (106338) of the
Registry of Deeds of Quezon City, and closely comparing the technical
descriptions of the properties covered by the said TCTs. The bare and
sweeping statement of respondent that the properties covered by the two
certificates of title are one and the same contains nothing but empty
imputation of a fact that could hardly be given any evidentiary weight by this
Court.
 
Having arrived at the conclusion that Julian was not conferred by Perla with
the authority to mortgage the subject property under the terms of the SPA,
60 | S a l e s & L e a s e H W # 3
the real estate mortgages Julian executed over the said property are
therefore unenforceable.
 
Assuming arguendo that the subject property was indeed included in the
SPA executed by Perla in favor of Julian, the said SPA was revoked by
virtue of a public instrument executed by Perla on 10 March 1993. To
address respondents assertion that the said revocation was unenforceable
against it as a third party to the SPA and as one who relied on the same in
good faith, we quote with approval the following ruling of the RTC on this
matter:
 
Moreover, an agency is extinguished, among others, by its revocation
(Article 1999, New Civil Code of the Philippines). The principal may revoke
the agency at will, and compel the agent to return the document evidencing
the agency. Such revocation may be express or implied (Article 1920,
supra).
 
In this case, the revocation of the agency or Special Power of Attorney is
expressed and by a public document executed on March 10, 1993.
 
The Register of Deeds of Quezon City was even notified that any attempt to
mortgage or sell the property covered by TCT No. [RT-18206] 106338
located at No. 21 Hillside Drive, Blue Ridge, Quezon City must have the full
consent documented in the form of a special power of attorney duly
authenticated at the Philippine Consulate General, New York
City, N.Y., U.S.A.
 
The non-annotation of the revocation of the Special Power of Attorney on
TCT No. RT-18206 is of no consequence as far as the revocations existence
and legal effect is concerned since actual notice is always superior to
constructive notice. The actual notice of the revocation relayed to defendant
Registry of Deeds of Quezon City is not denied by either the Registry of
Deeds of Quezon City or the defendant Bank. In which case, there appears
no reason why Section 52 of the Property Registration Decree (P.D. No.
1529) should not apply to the situation. Said Section 52 of P.D. No. 1529
provides:
 
Section 52. Constructive notice upon registration. Every conveyance,
mortgage, lease, lien, attachment, order, judgment, instrument or
entry affecting registered land shall, if registered, filed or entered in the
Office of the Register of Deeds for the province or city where the land to
which it relates lies, be constructive notice to all persons from the
time of such registering, filing or entering. (Pres. Decree No. 1529, Section
53) (emphasis ours)
 
It thus developed that at the time the first loan transaction with defendant
Bank was effected on December 12, 1996, there was on record at the Office
of the Register of Deeds of Quezon City that the special power of attorney
VILLAR
granted Julian, Sr. by Perla had been revoked. That notice, works as
constructive notice to third parties of its being filed, effectively rendering
Julian, Sr. without authority to act for and in behalf of Perla as of the date the
revocation letter was received by the Register of Deeds of Quezon City on
February 7, 1996.[19]
 
Given that Perla revoked the SPA as early as 10 March 1993, and that she
informed the Registry of Deeds of Quezon City of such revocation in a letter
dated 23 January 1996 and received by the latter on 7 February 1996, then
third parties to the SPA are constructively notified that the same had been
revoked and Julian no longer had any authority to mortgage the subject
property. Although the revocation may not be annotated on TCT No. RT-
18206 (106338), as the RTC pointed out, neither the Registry of Deeds of
Quezon City nor respondent denied that Perlas 23 January 1996 letter was
received by and filed with the Registry of Deeds of Quezon City. Respondent
would have undoubtedly come across said letter if it indeed diligently
investigated the subject property and the circumstances surrounding its
mortgage.
The final issue to be threshed out by this Court is whether the respondent is
a mortgagee-in-good faith. Respondent fervently asserts that it exercised
reasonable diligence required of a prudent man in dealing with the subject
property.
 
Elaborating, respondent claims to have carefully verified Julians authority
over the subject property which was validly contained in the SPA. It stresses
that the SPA was annotated at the back of the TCT of the subject
property. Finally, after conducting an investigation, it found that the property
covered by TCT No. 106338, registered with the Registry of Deeds of Pasig
(now Makati) referred to in the SPA, and the subject property, covered
by TCT No. 18206 (106338) registered with the Registry of Deeds of
Quezon City, are one and the same property. From the foregoing,
respondent concluded that Julian was indeed authorized to constitute a
mortgage over the subject property.
We are unconvinced. The property listed in the real estate mortgages Julian
executed in favor of PNB is the one covered by TCT#RT-18206(106338). On
the other hand, the Special Power of Attorney referred to TCT No. RT-
106338 805 Square Meters of the Registry of Deeds
of Pasig now Makati. The palpable difference between the TCT numbers
referred to in the real estate mortgages and Julians SPA, coupled with the
fact that the said TCTs are registered in the Registries of Deeds of different
cities, should have put respondent on guard. Respondents claim of
prudence is debunked by the fact that it had conveniently or otherwise
overlooked the inconsistent details appearing on the face of the documents,
which it was relying on for its rights as mortgagee, and which significantly
affected the identification of the property being mortgaged. In Arrofo v. Quio,
[20]
 we have elucidated that:
 
61 | S a l e s & L e a s e H W # 3
[Settled is the rule that] a person dealing with registered lands [is not
required] to inquire further than what the Torrens title on its face
indicates. This rule, however, is not absolute but admits of exceptions. Thus,
while its is true, x x x that a person dealing with registered lands need
not go beyond the certificate of title, it is likewise a well-settled rule
that a purchaser or mortgagee cannot close his eyes to facts which
should put a reasonable man on his guard, and then claim that he
acted in good faith under the belief that there was no defect in the title
of the vendor or mortgagor. His mere refusal to face up the fact that such
defect exists, or his willful closing of his eyes to the possibility of the
existence of a defect in the vendors or mortgagors title, will not make him an
innocent purchaser for value, if it afterwards develops that the title was in
fact defective, and it appears that he had such notice of the defect as would
have led to its discovery had he acted with the measure of precaution which
may be required of a prudent man in a like situation.
 
 
By putting blinders on its eyes, and by refusing to see the patent defect in
the scope of Julians authority, easily discernable from the plain terms of the
SPA, respondent cannot now claim to be an innocent mortgagee.
 
Further, in the case of Abad v. Guimba,[21]  we laid down the principle that
where the mortgagee does not directly deal with the registered owner of real
property, the law requires that a higher degree of prudence be exercised by
the mortgagee, thus:
 
While [the] one who buys from the registered owner does not need to look
behind the certificate of title, one who buys from [the] one who is not [the]
registered owner is expected to examine not only the certificate of title but all
factual circumstances necessary for [one] to determine if there are any flaws
in the title of the transferor, or in [the] capacity to transfer the land. Although
the instant case does not involve a sale but only a mortgage, the same rule
applies inasmuch as the law itself includes a mortgagee in the term
purchaser.[22]
 
 
This principle is applied more strenuously when the mortgagee is a bank or
a banking institution. Thus, in the case of Cruz v. Bancom
Finance Corporation,[23] we ruled:
 
Respondent, however, is not an ordinary mortgagee; it is a mortgagee-bank.
As such, unlike private individuals, it is expected to exercise greater care
and prudence in its dealings, including those involving registered lands. A
banking institution is expected to exercise due diligence before entering into
a mortgage contract. The ascertainment of the status or condition of a
property offered to it as security for a loan must be a standard and
indispensable part of its operations.[24]
VILLAR
Hence, considering that the property being mortgaged by Julian was not his,
and there are additional doubts or suspicions as to the real identity of the
same, the respondent bank should have proceeded with its transactions with
Julian only with utmost caution. As a bank, respondent must subject all its
transactions to the most rigid scrutiny, since its business is impressed with
public interest and its fiduciary character requires high standards of integrity
and performance.[25] Where respondent acted in undue haste in granting the
mortgage loans in favor of Julian and disregarding the apparent defects in
the latters authority as agent, it failed to discharge the degree of diligence
required of it as a banking corporation.
 
Thus, even granting for the sake of argument that the subject property and
the one identified in the SPA are one and the same, it would not elevate
respondents status to that of an innocent mortgagee. As a banking
institution, jurisprudence stringently requires that respondent should take
more precautions than an ordinary prudent man should, to ascertain the
status and condition of the properties offered as collateral and to verify the
scope of the authority of the agents dealing with these. Had respondent
acted with the required degree of diligence, it could have acquired
knowledge of the letter dated 23 January 1996 sent by Perla to the Registry
of Deeds of Quezon City which recorded the same. The failure of the
respondent to investigate into the circumstances surrounding the mortgage
of the subject property belies its contention of good faith.
 
On a last note, we find that the real estate mortgages constituted over the
subject property are unenforceable and not null and void, as ruled by the
RTC. It is best to reiterate that the said mortgage was entered into by Julian
on behalf of Perla without the latters authority and consequently,
unenforceable under Article 1403(1) of the Civil Code. Unenforceable
contracts are those which cannot be enforced by a proper action in court,
unless they are ratified, because either they are entered into without or in
excess of authority or they do not comply with the statute of frauds or both of
the contracting parties do not possess the required legal capacity.[26] An
unenforceable contract may be ratified, expressly or impliedly, by the person
in whose behalf it has been executed, before it is revoked by the other
contracting party.[27] Without Perlas ratification of the same, the real estate
mortgages constituted by Julian over the subject property cannot be
enforced by any action in court against Perla and/or her successors in
interest.
In sum, we rule that the contracts of real estate mortgage constituted over
the subject property covered by TCT No. RT 18206 (106338) registered with
the Registry of Deeds of Quezon City are unenforceable. Consequently, the
foreclosure proceedings and the auction sale of the subject property
conducted in pursuance of these unenforceable contracts are null and
void.  This, however, is without prejudice to the right of the respondent to
proceed against Julian, in his personal capacity, for the amount of the loans.
 
62 | S a l e s & L e a s e H W # 3
WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition
is GRANTED. The Decision dated 12 October 2005 and its Resolution
dated 15 February 2006 rendered by the Court of Appeals in CA-G.R. CV
No. 82636, are hereby REVERSED. The Decision dated 23 September
2003 of the Regional Trial Court of Quezon City, Branch 220, in Civil Case
No. Q-99-37145, is hereby REINSTATED and AFFIRMED with modification
that the real estate mortgages constituted over TCT No. RT 18206
(106338) are not null and void but UNENFORCEABLE. No costs.
 
SO ORDERED.
(20) THIRD DIVISION
[G.R. No. 142403. March 26, 2003]
ALEJANDRO GABRIEL and ALFREDO GABRIEL, petitioners, vs.
SPOUSES PABLO MABANTA AND ESCOLASTICA COLOBONG,
DEVELOPMENT BANK OF THE PHILIPPINES (Isabela Branch) and
ZENAIDA TAN-REYES, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Born of the need to protect our land registration system from being
converted into an instrument of fraud, this Court has consistently adhered to
the principle that a mere registration of title in case of double sale is not
enough, good faith must concur with the registration.
In this petition for review on certiorari, Alejandro Gabriel and Alfredo Gabriel
assailed the Decision[1] dated March 30, 1999 of the Court of Appeals in CA-
G.R. CV No. 33941 modifying the Decision[2] dated April 12, 1991 of the
Regional Trial Court, Branch 21, Santiago, Isabela in Civil Case No. 0399 for
specific performance, reconveyance and damages with application for
preliminary injunction.
The facts are as follows:
Spouses Pablo and Escolastica Mabanta were the registered owners of two
lots located in Patul and Capaltitan, Santiago, Isabela, with an area of 512
and 15,000 square meters, covered by Transfer Certificates of Title (TCT)
Nos. 72705 and 72707, respectively. On October 25, 1975, they mortgaged
both lots with the Development Bank of the Philippines (DBP) as collateral
for a loan of P14,000.00.[3]
Five years thereafter or on September 1, 1980, spouses Mabanta sold the
lots to Susana Soriano by way of a Deed of Sale of Parcels of Land With
Assumption of Mortgage.[4]Included in the Deed is an agreement that they
could repurchase the lots within a period of two (2) years.
VILLAR
Spouses Mabanta failed to repurchase the lots. But sometime in 1984, they
were able to convince Alejandro Gabriel to purchase the lots from Susana
Soriano. As consideration, Alejandro delivered to Susana a 500-square
meter residential lot with an actual value of P40,000.00 and paid spouses
Mabanta the sum of P5,000.00. On May 15, 1984, spouses Mabanta
executed a Deed of Sale with Assumption of Mortgage[5] in favor of
Alejandro. For her part, Susana executed a document entitled Cancellation
of Contract[6] whereby she transferred to Alejandro all her rights over the two
lots.
Alejandro and his son Alfredo cultivated the lots. They also caused the
restructuring of spouses Mabantas loan with the DBP.[7] However, when they
were ready to pay the entire loan, they found that spouses Benito and Pura
Tan had paid it and that the mortgage was already cancelled.[8]
On August 18, 1985, Benito Tan and Alejandro Tridanio, a barangay official,
approached Alejandro to refund to him the P5,000.00 he paid to spouses
Mabanta. Alejandro refused because Tan was unwilling to return the formers
500-square meter lot delivered to Susana as purchase price for the
lots. Thereafter, spouses Tan tried to eject Alejandro from the lot covered by
TCT No. 72707.
On September 17, 1985, Alejandro and Alfredo filed with the Regional Trial
Court, Branch 21, Santiago, Isabela a complaint (involving the lot covered by
TCT No. 72707) for specific performance, reconveyance and damages with
an application for a preliminary injunction against spouses Mabanta,
spouses Tan, the DBP and barangay officials Dominador Maylem and
Alejandro Tridanio. In due time, these defendants filed their respective
answers.
During the proceedings, it turned out that it was spouses Tans
daughter, Zenaida Tan-Reyes who bought one of the lots (covered by
TCT No. 72707) from spouses Mabanta on August 21, 1985. Not having
been impleaded as a party-defendant, she filed an answer-in-intervention
alleging that she is the registered owner of the lot covered by TCT No.
72707; that she purchased it from spouses Mabanta in good faith and for
value; that she paid their loan with the DBP in the amounts of P17,580.88
and P16,845.17 per Official Receipts Nos. 1749539 and 1749540,
respectively; that the mortgage with the DBP was cancelled and spouses
Mabanta executed a Deed of Absolute Sale[9] in her favor; and that TCT No.
T-72707 was cancelled and in lieu thereof, TCT No. T-160391 was issued in
her name.
On April 12, 1991, the trial court rendered its Decision sustaining the right of
Alejandro and Alfredo Gabriel over the lot covered by TCT No. 72707 (now
TCT No. T-160391), thus:
WHEREFORE, in the light of the foregoing considerations judgment is
hereby rendered:
1. DECLARING Exhibit A, the deed of sale with assumption of mortgage
executed by the spouses Pablo Mabanta and Escolastica Colobong (in favor
of Alejandro and Alfredo Gabriel) valid and subsisting.
2. ORDERING the plaintiff Alejandro Gabriel to pay to the spouses Pablo
Mabanta and Escolastica Colobong the sums of P5,000.00 plus P34,426.05
63 | S a l e s & L e a s e H W # 3
(representing the loan with the DBP which plaintiff assumed) within 30 days
from receipt hereof.
3. DECLARING the deed of sale executed by the spouses Pablo
Mabanta and Escolastica Colobong in favor of Zenaida Tan Reyes as
null and void.
4. ORDERING the intervenor Zenaida Tan-Reyes to reconvey the land
covered by T.C.T. No. T-160391 in favor of Alejandro Gabriel.
SO ORDERED.
In declaring null and void the Deed of Absolute Sale (or second sale) of the
lot covered by TCT No. 72707 between spouses Mabanta and Zenaida Tan-
Reyes, the trial court ratiocinated as follows:
But Zenaida (Tan) Reyes professes that she is a buyer in good faith and for
value. In her testimony she said that the spouses Mabanta offered to sell the
land to her on August 19, 1985. She was informed that the land was
mortgaged in the DBP. She readily agreed to buy the land on that same
day. She did not inquire further into the status of the land. She did not go
and see the land first. What she did was to immediately go to the DBP the
following day and paid the mortgage obligation in the amount of P16,845.17
and P17,580.88 (Exhibits 1 and 2). The following day August 21, a deed of
sale in her favor was prepared and on October 17, 1985 she secured a
certificate of title (Exhibit 5). Under the above circumstances, it cannot be
said that she is a purchaser in good faith. She should have first made a
thorough investigation of the status of the land. Had she inquired, she should
have been informed that the land was previously sold to at least two persons
Susana Soriano and Alejandro Gabriel. She should also have first visited the
land she was buying. Had she done so she should have discovered that the
land was being cultivated by the Gabriels who would have informed her that
they already bought the land from the Mabantas. The reason why she did
not do this is because she already was appraised of the status of the
land by her father Benito Tan. For reasons known only to her, she
decided to buy the land just the same.
x x x x x x
Zenaida Tan therefore is not a purchaser in good faith and she cannot
seek refuge behind her certificate of title. True, Article 1544 of the Civil
Code provides that should immovable property be sold to different
vendees, the ownership shall belong to the person who in good faith
first recorded it in the registry of property. Unfortunately, the
registration made by Zenaida (Tan) Reyes of her deed of sale was not
in good faith. For this reason in accordance with the same Article 1544,
the land shall pertain to the person who in good faith was first in
possession. There is no question that it is the Gabriels who are in
possession of the land.
Unsatisfied, spouses Mabanta and Zenaida Tan-Reyes interposed an
appeal to the Court of Appeals.
On March 30, 1999, the Court of Appeals rendered a Decision modifying the
trial courts Decision, declaring as valid the second sale of the lot covered by
TCT No. 72707 between spouses Mabanta and Zenaida Tan-Reyes on the
ground that a person dealing with registered land may simply rely on the
VILLAR
correctness of the certificate of title and, in the absence of anything to
engender suspicion, he is under no obligation to look beyond it. The
dispositive portion of the Appellate Courts Decision reads:
Wherefore the appealed judgment is AFFIRMED with the following
modification:
1. DECLARING Exhibit A, the deed of sale with assumption of mortgage
executed by the defendants-appellants spouses Pablo Mabanta and
Escolastica Colobong over lots covered by TCT Nos. T-72705 and T-72707
valid and subsisting;
2. ORDERING spouses Pablo Mabanta and Escolastica Colobong to
surrender TCT No. 72705 to plaintiff-appellee Alejandro Gabriel;
3. DECLARING the deed of sale executed over lot with TCT No. 72707
(now T-160391) by spouses Pablo Mabanta and Escolastica Colobong
in favor of intervenor-appellant Zenaida Tan Reyes as valid;
4. ORDERING plaintiffs-appellees and any all persons claiming rights under
them to vacate Lot 3651-A now covered by TCT No. T-160391 and to deliver
to intervenor-appellant Zenaida Tan-Reyes the possession thereof;
5. Dismissing the case against defendants-appellants Benito Tan and Purita
Masa;
6. No pronouncement as to costs.
SO ORDERED.
In the instant petition for review on certiorari, petitioners Alejandro and
Alfredo Gabriel raise this lone issue:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN DECLARING
THE SECOND SALE OF THE DISPUTED LOT EXECUTED BY SPOUSES
MABANTA IN FAVOR OF ZENAIDA TAN-REYES VALID UNDER
ARTICLE 1544 OF THE CIVIL CODE.
Petitioners contend that respondent Reyes is not a purchaser in good faith
since she bought the disputed lot with the knowledge that petitioner
Alejandro is claiming it in a previous sale.
In her comment on the petition, respondent Reyes maintains that the Court
of Appeals factual finding that she is a purchaser in good faith and for value
is final and conclusive.Meeting the issue head on, she claims that there is no
evidence that prior to August 21, 1985, when she purchased the lot from
respondent spouses Mabanta, she had knowledge of any previous lien or
encumbrance on the property.
For its part, respondent DBP avers that it acted in utmost good faith in
releasing the mortgaged lots to respondent spouses Mabanta who had the
loan restructured and paid the same. Also, it did not transact business with
spouses Tan.
With respect to respondent spouses Mabanta, this Courts Resolution dated
June 14, 2000 requiring them to file comment on the present petition was
returned unserved. Thus, in its Resolution dated January 22, 2001, this
Court resolved to consider the Resolution of June 14, 2000 deemed served
upon them.[10]
The petition is impressed with merit.
64 | S a l e s & L e a s e H W # 3
The issue for our resolution is whether or not respondent Zenaida Tan-
Reyes acted in good faith when she purchased the subject lot and had the
sale registered.
Settled is the principle that this Court is not a trier of facts. In the exercise of
its power of review, the findings of fact of the Court of Appeals are
conclusive and binding and consequently, it is not our function to analyze or
weigh evidence all over again.[11] This rule, however, is not an iron-clad rule.
[12]
 In Floro vs. Llenado,[13] we enumerated the various exceptions and one
which finds application to the present case is when the findings of the
Court of Appeals are contrary to those of the trial court.
We start first with the applicable law.
Article 1544 of the Civil Code provides:
ART. 1544. If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry of
Property.
Should there be no inscription, the ownership shall pertain to the person who
in good faith was first in possession; and, in the absence thereof; to the
person who presents the oldest title, provided there is good faith.
Otherwise stated, where it is an immovable property that is the subject of a
double sale, ownership shall be transferred (1) to the person acquiring it
who in good faith first recorded it in the Registry of Property; (2) in
default thereof, to the person who in good faith was first in possession;
and (3) in default thereof, to the person who presents the oldest title,
provided there is good faith.[14] The requirement of the law then is two-
fold: acquisition in good faith and registration in good faith.[15] The
rationale behind this is well-expounded in Uraca vs. Court of Appeals,
[16]
 where this Court held:
Under the foregoing, the prior registration of the disputed property by the
second buyer does not by itself confer ownership or a better right over the
property. Article 1544 requires that such registration must be coupled
with good faith. Jurisprudence teaches us that (t)he governing principle
is primus tempore, potior jure  (first in time, stronger in right). Knowledge
gained by the first buyer of the second sale cannot defeat the first buyers
right except where the second buyer registers in good faith the second sale
ahead of the first, as provided by the Civil Code. Such knowledge of the first
buyer does not bar her from availing of her rights under the law, among
them, to register first her purchase as against the second buyer. But in
converso, knowledge gained by the second buyer of the first sale defeats his
right even if he is first to register the second sale, since such knowledge
taints his prior registration with bad faith. This is the price exacted by
Article 1544 of the Civil Code for the second buyer being able to
displace the first buyer, that before the second buyer can obtain
priority over the first, he must show that he acted in good faith
throughout (i.e. in ignorance of the first sale and of the first buyers
right) from the time of acquisition until the title is transferred to him by
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registration or failing registration, by delivery of possession. (Emphasis
supplied)
In the case at bar, certain pieces of evidence, put together, would prove that
respondent Reyes is not a buyer in good faith. The records show that on
August 18, 1985, spouses Mabanta offered to her for sale the disputed
lot. They told her it was mortgaged with respondent DBP and that she had to
pay the loan if she wanted to buy it.[17] She readily agreed to such a
condition. The following day, her father Benito Tan, accompanied by
barangay official Tridanio, went to petitioner Alejandros house offering to
return to him the P5,000.00 he had paid to spouses Mabanta. Tan did not
suggest to return the 500-square meter lot petitioner delivered to Susana
Soriano.[18] For this reason, petitioner refused Tans offer and even prohibited
him from going to respondent DBP. We quote the following testimony of
petitioner who, despite his blindness as shown by the records, testified to
assert his right, thus:
ATTY. CHANGALE:
Q What can you say to that statement?
A That is their mistake, sir.
Q Why do you say that is their mistake?
A Because her husband and Tridanio went at home offering to return the
money but I did not accept, sir.
Q Who is this Benito Tan you are referring to?
A The husband of Pura Masa, sir.
Q What is the relationship with the intervenor Zenaida Tan?
A The daughter, sir.
Q When did Benito Tan together with Councilman Tridanio came?
A Before they went to the Development Bank of the Philippines they
came at home and I prohibit them, sir.
Q How did you prohibit them?
A No, I said please I am just waiting for the Bank to inspect then I will
pay my obligation.
x x x x x x
Q You stated earlier that you will just pay the payments. What are those
payments you are referring to?
A The payment I have given to Colobong and to the Bank, sir. They do not
want to return the payment I have given to Susana Soriano and that is the
beginning of our quarrel.[19]
We are thus convinced that respondent Reyes had knowledge that petitioner
previously bought the disputed lot from respondent spouses Mabanta. Why
should her father approach petitioner and offer to return to him the money he
paid spouses Mabanta? Obviously, aware of the previous sale to petitioner,
respondent Reyes informed her father about it. At this juncture, it is
reasonable to conclude that what prompted him to go to petitioners house
was his desire to facilitate his daughters acquisition of the lot, i.e., to prevent
petitioner Alejandro from contesting it. He did not foresee then that petitioner
would insist he has a prior right over the lot.
Now respondent Reyes claims that she is a purchaser in good faith. This is
preposterous. Good faith is something internal. Actually, it is a question of
65 | S a l e s & L e a s e H W # 3
intention. In ascertaining ones intention, this Court must rely on the evidence
of ones conduct and outward acts. From her actuations as specified
above, respondent Reyes cannot be considered to be in good faith when
she bought the lot.
Moreover, it bears noting that on September 16, 1985, both petitioners filed
with the trial court their complaint involving the lot in question against
respondents. After a month, or on October 17, 1985, respondent Reyes had
the Deed of Absolute Sale registered with the Registry of Property.
Evidently, she wanted to be the first one to effect its registration to the
prejudice of petitioners who, although in possession, have not registered the
same. This is another indicum of bad faith.
We have consistently held that in cases of double sale of immovables,
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.[20] In Salvoro vs. Tanega,[21] we
had the occasion to rule that:
If a vendee in a double sale registers the sale after he has acquired
knowledge that there was a previous sale of the same property to a third
party or that another person claims said property in a previous sale, the
registration will constitute a registration in bad faith and will not confer upon
him any right.
Mere registration of title is not enough, good faith must concur with the
registration. To be entitled to priority, the second purchaser must not only
establish prior recording of his deed, but must have acted in good faith,
without knowledge of the existence of another alienation by the vendor to the
other.[22] In the old case of Leung Yee vs. F. L. Strong Machinery, Co. and
Williamson, this Court ruled:
One who purchases a real estate with knowledge of a defect of title in
his vendor cannot claim that he has acquired title thereto in good faith
as against 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. A purchaser cannot
close his eyes to facts which should put a reasonable man upon his
guard, and then claim that he acted in good faith under the belief that
there was no defect in the title of the vendor. His mere refusal to
believe that such a defect exists, or his willful closing of his eyes to the
possibility of the existence of a defect in his vendors title will not make
him an innocent purchaser for value, if it afterwards develops that the
title was in fact defective, and it appears that he had such notice of the
defect as would have led to its discovery had he acted with that
measure of precaution which may reasonably be required of a prudent
man in a like situation. x x x [23]
In fine, we hold that respondent Zenaida Tan-Reyes did not act in good faith
when she bought the lot and had the sale registered.
VILLAR
WHEREFORE, the assailed Decision of the Court of Appeals
is REVERSED and SET ASIDE. The Decision of the trial court is
hereby REINSTATED.
SO ORDERED.
Puno, (Chairman), Panganiban, Corona, and Carpio-Morales, JJ., concur.
(21) THIRD DIVISION
[G.R. No. 128122. March 18, 2005]
PREMIERE DEVELOPMENT BANK, petitioner, vs. HON. COURT OF
APPEALS, LIBERATO G. YAMBAO, JESUS B. RODRIGUEZ and JESUS
D. MORALES, respondents.
[G.R. No. 128184. March 18, 2005]
LILIAN M. TOUNDJIS, petitioner, vs. HON. COURT OF APPEALS,
LIBERATO G.YAMBAO, et al., and JOSELITO GARAYGAY, ET
AL., respondents.
[G.R. No. 128229. March 18, 2005]
JOSELITO P. GARAYGAY, CENTURY REALTY and DEVELOPMENT
CORPORATION, petitioners, vs. HON. COURT OF APPEALS, LIBERATO
G. YAMBAO, JESUS B. RODRIGUEZ and JESUS D.
MORALES, respondents.
DECISION
GARCIA, J.:
Before the Court are these three (3) separate petitions for review
on certiorari under Rule 45 of the Rules of Court to nullify and set aside
the Decision[1] dated November 29, 1995 and Resolution[2] dated
February 6, 1997 of the Court of Appeals in CA-G.R. CV 42121.
The first assailed issuance affirmed an earlier decision[3] dated January 28,
1993 of the Regional Trial Court at Quezon City, Branch 88 in its Civil Case
No. Q-92-8455, declaring, inter alia, herein private respondents, as plaintiffs
therein, Liberato G. Yambao, Jesus B. Rodriquez and Jesus D. Morales
(Yambao, Rodriquez and Morales, respectively), as rightful owners of the
land subject of this case. The second assailed issuance, on the other hand,
denied reconsideration of the first.
At the core of the controversy is a 2,660-square meter parcel of land,
denominated as Lot 23 of the subdivision plan Fls-2804-D of SWO-17514,
registered under TCT No. 9780 of the Manila Registry, located as it were in
Matandang Balara, which used to be a part of the then district of Caloocan,
City of Manila. The creation of Quezon City which found Lot 23 within its
borders saw the transfer of the corresponding property records to the new
political unit and the generation of new certificates of title to reflect territorial
changes. As thus transferred, TCT No. 9780 was assigned title number TCT
No. 9780 (693).
The evidence on record disclose the following factual antecedents:
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Two (2) different persons with exactly the same name, i.e., Vicente T.
Garaygay, each claimed exclusive ownership of Lot 23 by virtue of an
owners duplicate certificate each had possession of during the period
material covering said lot. One held TCT No. 9780, supra, and the
other, TCT No. 9780 (693), supra. The technical description of the land
appearing in one copy corresponds exactly with that in the other. The
date June 14, 1944 appears on the face of both copies as a common date of
entry. One, however, contained certain features, markings, and/or entries
not found in the other and vice versa.
On April 17, 1979, one of the two Vicente T. Garaygays, a resident of Cebu
City (hereinafter referred to as Garaygay of Cebu), executed a deed of
sale[4] over the lot described in and covered by his TCT No. 9780 (693) in
favor of his nephew, Joselito P. Garaygay (Joselito, hereinafter). The sale
notwithstanding, the owners duplicate certificate remained for some time in
the sellers possession.
In another transaction, the other Vicente T. Garaygay, a resident of Rizal
(hereinafter referred to as Garaygay of Rizal), sold to Liberto G.
Yambao and Jesus B. Rodriguez the same property described in TCT
9780. YCM Compound, Angono, Rizal is set out in the February 11, 1986
conveying deed[5] as the sellers residence. Buyers Yambao and Rodriquez
would later sell a portion of their undivided interests on the land to Jesus D.
Morales.[6]
Then came the June 11, 1988 fire that gutted a portion of the Quezon City
hall and destroyed in the process the original copy of TCT No. 9780 (693) on
file with the Registry of Deeds of Quezon City. Barely a month later, a
certain Engr. Hobre filed an application, signed by Garaygay of Cebu, for
the reconstitution of the burned original on the basis of the latters owners
duplicate certificate. One Engr. Felino Cortez of the Land Registration
Authority (LRA) did the follow-up on the application. After due proceedings,
the LRA issued an order of reconstitution,[7] by virtue of
which Garaygay of Cebu acquired reconstituted TCT No. RT-1764 (9780)
(693).[8]
Meanwhile, or on May 26, 1989, the deed of sale executed by Garaygay of
Cebu in favor of his nephew Joselito was registered, paving the issuance in
the latters name of TCT No. 12183.[9] Thereafter, thru the efforts of same
Engr. Cortez,[10] Lot 23 was subdivided into three (3) lots, namely: Lot 23-A,
Lot 23-B and Lot 23-C for which TCT Nos. 14414, 14415 and 14416,
respectively,[11] were issued. Joselito posthaste sold Lot 23-A to Lilian
Toundjis who, pursuant to a Contract to Sell executed on March 23, 1990,
[12]
 undertook to pay Joselito the P.5 Million balance of the P2.5 Million
purchase price once she is placed in possession of a fenced-off property.
And, for shares of stock, Joselito assigned on February 26, 1991, the other
two (2) lots, i.e., Lot 23-B and Lot 23-C to Century Realty and
Development Corporation (Century Realty) which, after securing TCT
Nos. 34390 and 34391 therefor, mortgaged[13] the same to Premiere
Development Bank, Inc. (Premiere Bank) to secure a P2.5 Million loan.
Clashing claims of ownership first came to a head when, sometime in May
1990, Liberato G. Yambao and his agents forcibly prevented Joselitos hired
VILLAR
hands from concrete-fencing the subject property. The police and eventually
the National Bureau of Investigation (NBI) entered into the picture.
In the meantime, Yambao, Rodriquez and Morales as pro indiviso buyers
of Lot No. 23, caused the annotation on December 17, 1990, January 16,
1991 and February 15, 1991 of their respective adverse claims on Joselitos
TCT Nos. 14414, 14415 and 14416. They then filed with the Regional Trial
Court at Quezon City suit against Joselito, Century Realty and Premiere
Bank for quieting of title and annulment of said defendants fake titles with
prayer for damages.
In their amended complaint,[14] docketed as Civil Case No. Q-92-8455 and
raffled to Branch 88 of the court, Yambao, Rodriguez and Morales
alleged, inter alia, the following:
1. That Joselito, taking advantage of the 1988 burning of the Quezon City
Hall, and using an impostor, who pretended to be Vicente Garaygay, by
means of fraud, deceit, and unlawful manipulation succeeded in
administratively reconstituting the aforesaid property (sic) in 1990 on the
basis of an alleged owners copy, which on its face is patently fake and
spurious and fake title bearing [TCT] No. 9780 (693).
2. That a reconstituted title secured by means of fraud, deceit, or other
machinations is void ab initio under Section 11 of Republic Act (R.A.) 6732;
3. That after causing the reconstitution of the title, Joselito acted fast to
consummate his scheme of depriving the plaintiffs of their ownership . . . of
the [disputed] land by the following successive acts, referring to Joselitos act
of securing title in his name, subdividing Lot No. 23 and securing titles to and
disposing of the subdivided lots;
4. That they (Yambao, Rodriguez and Morales) filed their separate adverse
claims and caused the same to be annotated at the back of Joselitos TCT
Nos. 14414, 14415 and 14416; that while the adverse claim of Rodriquez
was still valid, Joselito executed on February 26, 1991 a Deed of
Assignment in favor of Century Realty, which thus made the latter
a transferee in bad faith; that on March 26, 1991, Century Realty executed a
mortgage contract in favor of Premiere Bank, a mortgagee in bad faith; and
5. That at the time the mortgage was executed, the houses of plaintiffs
caretaker and a chapel belonging to them were standing on the two lots in
question.
Answering, principal defendants Joselito and Century Realty denied
plaintiffs material allegations and asserted, by way of affirmative defense,
the validity of (a) the reconstitution of TCT No. 9780 (693); (b) the
assignment of real property in favor of Century Realty; and (c) the mortgage
made by Century Realty in favor of Premiere Bank.
In their separate answers, also with crossclaim and counterclaim, Lilian
Toundjis, who was allowed to intervene to oppose the action thus filed,
and Premiere Bank virtually adopted Joselitos position and pleaded, in
addition, their right as bona fide purchaser or mortgagee for value, as the
case may be, of the subject property.
Issues having been joined, trial ensued with plaintiffs Yambao, Rodriguez
and Morales offering in evidence several documents. Foremost of these
was Exhibit B[15] which is the owners duplicate copy of TCT No. 9780 of the
67 | S a l e s & L e a s e H W # 3
Registry of Manila once in the possession of Garaygay of Rizal. On the
other hand, the principal defendants presented no less than 38 pieces of
marked and sub-marked documentary evidence, among which was Exhibit.
1,[16] identical to Exhibit D, which is the duplicate copy of TCT No. 9780
(693) that pertained to Garaygay of Cebu and used in the reconstitution of
the burned original thereof.
In his testimony, Yambao stated having noticed, when Garaygay of
Rizal offered to sell Lot 23, that the corners and the portion of Exhibit
B containing the owners personal circumstances were torn and related the
owners explanation as to how these oddities came about. Yambao related
that owing to the physical appearance of Exhibit B, the recording of
the Garaygay of Rizal - Yambao/Rodriguez deed of sale (Exh. A) was
refused since the more crucial document, i.e., the torn owners copy was
itself not registrable unless it is first reconstituted. He also testified that, to
assure himself of the genuineness of the sellers owners duplicate certificate,
he and Garaygay of Rizal repaired to the Quezon City Registry to compare
his (Garaygay of Rizals) copy with the original copy on file with the registry,
and discovered that the only difference was that the owners duplicate bears
the title number 9780, while the original had 9780 (693) typewritten on a
straight line.[17] As told by Yambao, Garaygay of Rizals explanation for the
figure difference is that 693 was not affixed on his (Garaygay of Rizals) title
because he never, in first place, presented the same to the Quezon City
Registry for correction or affixture.
Yambao also testified that Garaygay of Rizal, when asked to show proof of
his identity, presented a voters ID with his picture,[18] a Commission of
Elections (COMELEC) certification attesting to his being a registered voter in
Precinct No. 21 in Angono, Rizal[19] and a certification of residence issued by
the barangay captain of the place.[20] Yambao added that before concluding
the sale, he, together with the prospective seller, proceeded to the land site
where the residents and/or caretakers thereat assured him that his
companion, Garaygay of Rizal, was actually the landowner.
For their part, defendants presented Garaygay of Cebu who alleged,
among other things, having acquired Lot 23 from one Macaria Lim vda.
Arambulo sometime in 1944, having paid taxes thereon for the period 1949-
1990[21] and mortgaging in 1949 the titled property with Meralco Employees
Savings & Loan Association, with the mortgage deed and later the discharge
of mortgage being annotated on his title.[22] Joselito also took the witness
stand in defense of his ownership of Lot 23 and the transactions he entered
into involving the lot.
Eventually, the trial court rendered judgment finding for the plaintiffs and
against the defendants, declaring Joselitos TCT No. 9780 (693) and all
subsequent titles traceable to it and transactions involving its derivatives as
null and void. To the trial court, plaintiffs evidence preponderated over those
of the defendants whose main witness, Garaygay of Cebu, gave
inconsistent testimony, while Joselito hedged on his answer regarding a
cousin connected with LRA. Going against the defendants cause, the trial
court further observed dubious circumstances surrounding the reconstitution
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of TCT 9780 (693), the more disturbing of which is the admitted participation
of LRA personnel in the reconstitution process.
Dated January 28, 1993, the trial courts decision[23] dispositively reads:
WHEREFORE, in view of the foregoing, the Court renders the following
judgment to wit:
1. Plaintiffs Liberato G.Yambao, Jesus B. Rodriguez and Jesus D. Morales
are hereby declared the rightful owners and possessors of the land
described in TCT No. 9780 marked as Exh. B;
2. Defendants title, TCT No. 9780 (693), marked as Exh. 1 (p. 349, Rollo,
identical to Exh. D, p. 493 Rollo); the LRA Order of Reconstitution . . .;
defendants reconstituted title No. RT-1764 (9780) (693) marked as Exh. 4 . .
.; the cancelled title TCT No. 12183 and its derivative titles, TCT Nos. 14414,
14415, and 14416, all in the name of defendant Joselito P. Garaygay and
intervenor Lilian M. Toundjis involving TCT 14414; the Deed of Assignment
and Transfer between Joselito P. Garaygay and Century Realty involving
TCT Nos. 14415 and 14416; [the derivative] titles of defendant Century
Realty . . . namely TCT Nos. 34390 . . . and 34391 . . .; and the Deed of Real
Estate Mortgage executed by Century Realty . . . in favor of defendant
Premiere Bank, Inc. are all declared null and void and without force and
effect;
3. The Register of Deeds of Quezon City to strike out the reconstituted title
[but already cancelled] No. 1764 (9780) (693) and TCT No. 12183, . . . ; to
cancel TCT 14414 . . .; to cancel the Deed of Assignment and Transfer
between Joselito P. Garaygay and Century Realty . . . covered by TCT Nos.
14415 and 14416, and necessarily cancel TCT Nos. 34390 and 34391 . . .;
to cancel the Deed of Real Estate Mortgage over TCT Nos. 34390 and
34390 . . .; and thereafter, to enter and register the Deeds of Sale, dated
February 11, 1986 (Exh. A) and July 10, 1988 (Exh. C) and forthwith issue
corresponding new title/s in the names of the plaintiffs, free from all
encumbrances, except those entered into by them, upon payment of all
taxes and fees prescribed by law;
4. Defendant Joselito P. Garaygay is sentenced to pay each of the [three]
plaintiffs . . ., the sum of P100,000. 00 as moral damages;
5. Defendants Joselito P. Garaygay, Century Realty . . . and Premiere Bank,
Inc. are sentenced to pay jointly and severally each of the two plaintiffs,
namely Liberato Yambao and Jesus Morales, the sum of P25,000.00 as
exemplary damages and to plaintiff Jesus B. Rodriquez the sum of
P25,000.00 as nominal damages The defendants are also sentenced to pay
jointly and severally the sum of P20,000.00 as attorneys fees and the cost of
suit;
6. Defendant Joselito P. Garaygay is further sentenced to reimburse Lilian
M. Toundjis the sum of P2,000,000.00 with interest thereon at 6% per
annum from the date of judgment;
7. With the annulment of the [aforementioned] Deed of Assignment and
Transfer between defendant Joselito P. Garaygay and defendant Century
Realty . . . and the Deed of Real Estate Mortgage . . . between defendant
Century Realty . . . and defendant Premiere Bank, Inc., all aforementioned
defendants who are respective parties to the named deeds are hereby
68 | S a l e s & L e a s e H W # 3
ordered to make a full return and restitution to each other of all monies,
things and objects they have received thereunder without interest within
fifteen days from finality of this judgment;
8. All other claims are dismissed.
SO ORDERED. [Words in bracket added]
In time, herein petitioners appealed to the Court of Appeals whereat their
recourse was docketed as CA- G.R. CV No. 42121.
In its Decision of November 29, 1995,[24] the Court of Appeals affirmed in
toto the appealed decision of the trial court, the affirmance being predicated
on the following main justifications:
All in all, the Court agrees with the trial court in giving low rating to both
Vicente Garaygay of Cebu and appellant JOSELITO as witnesses. The court
notes that Vicente T. Garaygay of Cebu has no explanation why the deed of
sale between him and Arambulo was not adduced in evidence x x x
In view of the foregoing questionable actuations of Vicente T. Garaygay of
Cebu and his nephew . . . and their cohorts, the trial court (sic) is
constrained to declare that the defendants mother title TCT No. 9780 (693)
marked as Exhibit 1, which served as the basis of the reconstitution is a fake
and spurious title. x x x Thus, all titles in the name of Vicente T. Garaygay of
Cebu and Joselito Garaygay are null and void. x x x .
On the other hand, the claim of appellees that their certificate of title is a
genuine title is supported with credible and sufficient evidence. The
contention of the appellants that the appellees title should not be accepted
as genuine because it is not authenticated lacks merit. The owners copy of
the title of appellees is a public document (Broce vs. Broce, 4 Phil. 611).
Unlike a private document which must be authenticated before its
admission . . ., there is no need to authenticate a public document to make it
admissible in evidence (Rule 132, Sec 24). The rule that a document must
be authenticated before it is admissible in evidence does not apply to public
documents which are admissible without further proof of their due execution
or genuineness x x x. Public documents are already authenticated by the
official signature and seal which they bear, of which this Court takes judicial
notice (Apostol, Essentials of Evidence, 1991, ed., p. 430) (Underscoring
added).
Their motion for reconsideration having been denied by the appellate court
in its Resolution of February 6, 1997,[25] petitioners have separately come
to this Court. That of petitioner Premier Bank was docketed as G.R. No.
128122; that of Toundjis as G.R. No. 128184; and that of Joselito
Garaygay and Century Realty as G.R. No. 128229.
Per this Courts Resolution dated June 18, 1997,[26] the three (3) separate
petitions were, upon private respondents motion, ordered consolidated.
The principal issue tendered in the separate petitions, albeit formulated a bit
differently, comes down to the following: whether or not the Court of Appeals
erred in holding Garaygay of Rizal, instead of Garaygay of Cebu, as the
real owner of Lot 23. Behind this issue is the corollary question of whether
or not the same court erred in finding Garaygay of Rizalsowners copy, TCT
No. 9780, instead of the Garaygay of Cebus copy, TCT No. 9780 (693), as
the authentic title covering Lot 23.
VILLAR
Petitioners urge reversal on the submission that, unlike Garaygay of
Cebu who came forward and took the witness stand, the identity
of Garaygay of Rizal - who they stressed at every turn had not been
presented to testify - has not been established. Albeit they do not say so, the
inference of their posture is that an impostor has taken the identity of Vicente
T. Garaygay. Corollarily, they also contend that the authenticity of the
impostor Garaygays adverted owners copy of TCT No. 9780 has remained
unproven.
The desired reversal cannot be granted.
Both defining documents, Exhibit 1 and Exhibit B, appear to have been
issued by the appropriate Registry of Deeds and as such would ordinarily
enjoy the guarantees flowing from the legal presumption of regularity of
issuance.[27] But how and precisely when the legal aberration occurred where
two (2) owners duplicate certificates ended up in the hands of two (2) distinct
persons, complete strangers to each other, are questions which the records
do not provide clear answer. It may not be idle to speculate, though, that
fraud or other improper manipulations had been employed along the way,
with likely the willing assistance of land registry official/s, to secure what for
the nonce may be tagged as the other title. Consistent with the presumption
of regularity of issuance, however, the authenticity of one copy has to be
recognized. And necessarily, one of the two (2) outstanding owners copies
has to be struck down as wrongly issued, if not plainly spurious, under the
governing Torrens system of land registration. For, a piece of land cannot
plausibly be covered at the same time, under the same concept of
ownership, by two (2) outstanding certificates of title, each having the same
validity, force and effect. One has to be spurious, or at least one has to
prevail over the other.[28] Else, the ideal sought to be achieved by the Torrens
system would be illusory. As it were, the Torrens system of land registration
aims to obviate possible conflicts of title by giving the public the right to rely
upon the face of the Torrens certificate and to dispense, as a rule, with the
necessity of inquiring further;[29] on the part of the registered owner, the
system gives him complete peace of mind that he would be secured in his
ownership as long as he has not voluntarily disposed of any right over the
covered property.[30]
The categorical conclusion of the Court of Appeals confirmatory of that of the
trial court is that Exhibit B is genuine and that Garaygay of Rizal is a real
person. On the other hand, Exhibit 1 was adjudged spurious. These factual
determinations as a matter of long and sound appellate practice must be
accorded great weight, and, as rule, should not be disturbed on appeal,
[31]
 save for the most compelling and cogent reasons,[32] like when such
factual findings were drawn from a vacuum, or, in fine, reached arbitrarily.[33]
To be sure, arbitrariness cannot contextually be imputed on the appellate
court. Its finding that Garaygay of Rizal is an authentic person, once
residing in and a registered voter of Angono, Rizal has adequate evidentiary
support in his voters ID, the COMELEC and barangay certifications
aforementioned and the testimony of an occupant of Lot 23. And for
whatever it is worth, Garaygay of Cebu no less testified that there are three
(3) Vicente T. Garaygay in the Philippines.[34] The reality that the private
69 | S a l e s & L e a s e H W # 3
respondents failed to put Garaygay of Rizalon the witness box to identify
his copy of the title and defend his erstwhile ownership of Lot 23 may
perhaps support petitioners claim about his being fictitious if his
whereabouts during the trial, if still alive then, was known. But, as found by
the appellate court, Yambao never heard from or about Garaygay of
Rizal after they have executed the Deed of Absolute Sale (Exh. A, supra) on
February 11, 1986.
Petitioners attribution of error on the part of the appellate courts
declaring Garaygay of Rizal as owner of the disputed parcel of land is
untenable. It cannot be overemphasized that the possessor-owner of the
authentic copy of TCT No. 9780 was necessary the real owner of Lot 23.
That possessory distinction happened to belong to Garaygay of Rizal.
Moreover, facts and reasonable inferences drawn therefrom point to Exhibit
1 as being spurious, necessarily leaving Exhibit B as the authentic duplicate
copy. For starters, there is the appearance and physical condition of the
owners copies in question which, if properly evaluated in the light of
attendant circumstances, would help in determining which is genuine and
which is sham.[35] For, the condition and physical appearance of a document
would, to borrow from Junquera, reveal, albeit silently, the naked truth,
hiding nothing, forgetting nothing and exaggerating nothing. As aptly
observed by the appellate court, rationalizing its conclusion adverted to
above, Exhibit B has no defect, except for its partly being torn.
Respondents explanation for the defective state of Exhibit B, as related to
them by Garaygay of Rizal, i.e., it was due to exposure of the document to
the elements, like rain, following his evacuation from Manila to a small nipa
hut in Angono, Rizal during the Japanese occupation,[36] merited approval
from the trial court and the Court of Appeals. Both courts, being in a better
position to pass upon the credibility of petitioners witness and appreciate his
testimony respecting the less than usual appearance of Exhibit B, their
findings command the respect of this Court.
Lest it be overlooked, what might be considered as defects in Garaygay of
Cebus copy are, at bottom, the combined effects thereon of the passage of
time and the elements. Standing alone, these defects do not, in our view,
undermine the integrity of the document.
However, unlike Exhibit B, Exhibit 1 contained entries and other uncommon
markings or features which could not have existed without human
intervention. Although any one of them may perhaps not be appreciable in
isolation, these features and/or markings, taken together, indeed put the
integrity of Exhibit 1 under heavy cloud and indeed cast doubt on its
genuineness.
The irregularities listed in the appealed decision may be summed up in the
following wise:
1. Two (2) Victory stamps issued after liberation were strangely pasted on
the seal of Garaygay of Cebus title Exhibit 1 - when such stamps were not
yet in existence when such title was entered in the Registry of Deeds of
Manila on June 14, 1944;
2. Exhibit 1 was prepared on Judicial Form No. 109-D Revised June 1945,
which came into circulation after June 14, 1944;
VILLAR
3. Exhibit 1 bears the handwritten figure 9780 in ink above the typewritten
number 693. There is no initial to suggest that the handwritten number 9780
over the typewritten title number 693 was officially authorized;
4. The first letter Y in the surname Garaygay in Exhibit 1 was inserted in ink.
In contrast, there is no such insertion in Exhibit B; and
5. Exhibit 1 carries the annotation subject to further disposition by the
government with respect to real estate transactions consummated during the
Japanese regime, and subject to the provisions of Sec. 4, Rule 74 of the
New Rules of Court.[37] Such annotation is supposed to have been
contemporaneously made on the date of the issuance of the title in 1944.
Yet, in what appears to be an anomalous instance, advertence is made
to transactions consummated during the Japanese regime and to Rule 74 of
the Rules of Court, logically implying, as aptly observed by the Court of
Appeals, that the annotation was entered after liberation and also after 1964
when the New Rules of Court came into effect.
Almost as if it were an afterthought, petitioners explained that
the Victory stamps could have been pasted, the 1945 revised judicial form
utilized, and the annotations referred to in item # (5) entered when the TCT
of Garaygay of Cebu was reissued. Anent the number 9780 appearing in
ink, the proffered explanation was that the handwritten 9780 was a mere
provisional marking.
The foregoing explanations are, at best speculative, thus correctly struck
down by the appellate court. And unfortunately, Garaygay of Cebu, the best
person to shed light on the foregoing unusual situations and help the limping
case of the petitioners, could not himself offer an explanation.
Petitioners insistence that the inscription on Garaygay of Cebus copy of the
deed of mortgage and the discharge of mortgage he constituted over Lot 23
in favor of Meralco Employees Savings and Loan Association proves the
authenticity of the latters owner duplicate is valid to a point. But, to suggest
that such inscription could not have been possible were his title spurious is
altogether a different matter. We need not cite cases memorialized in books
of jurisprudence where land dealings are annotated on reconstituted
certificates secured thru fraud or otherwise issued irregularly. Stated a little
differently, an annotation of what is otherwise a bona-fide land transaction is
not a peremptory argument against the spurious character, if that be the
case, of the document on which it is annotated.
In the same token, the payment by Garaygay of Cebu of land taxes on Lot
23 does not also necessary detract from the spurious nature of his title,
Exhibit 1. After all, any one can pay real estate taxes on a given property
without being quizzed by the local treasury whether or not the payor owns
the real property in question. This is not to say of course that tax receipts are
evidence of ownership, since they are not, albeit they are good indicia of
possession in the concept of owner, for no one would ordinarily be paying
taxes for a property not in his actual or at least constructive possession.[38]
Other than paying taxes from 1949 to 1990[39] (mistakenly stated by
respondent court as from 1949 to 1960), however, Garaygay of Cebu and
this holds true for his nephew Joselito - did not appear before the current
stand-off to have exercised dominion over Lot 23. For one, it has not been
70 | S a l e s & L e a s e H W # 3
shown that Garaygay of Cebu was at any time in possession of the property
in question, unlike his namesake from Rizal who managed to place the
property under the care of certain individuals who built semi-permanent
structure-dwelling houses thereon without so much of a protest from
Garaygay of Cebu or his nephew Joselito after the latter purportedly bought
the property. For another, neither Garaygay of Cebu nor his nephew Joselito
ever instituted any action to eject or recover possession from the occupants
of Lot 23. This passivity bespeaks strongly against their claim of ownership.
It has been said that a partys failure to raise a restraining arm or a shout of
dissent to anothers possession for an unreasonably long period is simply
contrary to his claim of ownership.[40] Not lost on this Court are
circumstances noted by the trial court which negatively reflect on Garaygay
of Cebus and his nephews claim of ownership. Some excerpts of what the
trial court wrote:
On its face, Exh. 5 [the original copy of the deed of sale between Garaygay
and his nephew] was notarized by one Armando Pulgado. However, there
are certifications by both the Bureau of National Archives that no Notarial
records of Armando Pulgado exist in Manila. (Exh. KK) or in Quezon City
(Exh. LL), and by the Clerk of Court that Atty. Armando Pulgado was not
appointed as notary public for and in the City of Manila for the year 1979
(Exh. MM)
Exh. 5 dated April 17, 1979 was registered only on May 26, 1989, over 10
years from the sale. JOSELITO could not explain how thereafter his own title
(TCT 12183) was issued in his name since it was not he who registered the
Deed of Sale, Exh. 5. In other words, someone else registered it for him.
Neither JOSELITO nor his uncle . . .followed up the petition for reconstitution
which was prepared, filed and processed by interested persons in Manila,
which scenario prompted plaintiffs counsel to observe that the reconstitution
was among the first of all applicants in Quezon City to be approved (p. 32,
TSN August 17, 1992). Of these interested persons, the most unthinkable
was Engr. Felino Cortez of the LRA who did the follow-ups on the application
in Manila. It is remarkable why Cortez, who is neither a friend nor relative,
took special interest in not only following up the application for reconstitution
but in effecting the subdivision of TCT 12183 into [3 lots], for which three
derivative titles of TCT 12183 were issued . . . . Again JOSELITO had no
knowledge of this fact of subdivision until his uncle, . . . telephoned him with
the information that the land was already subdivided.
In short, it appears to the Court that without doing anything, Vicente T.
Garaygay of Cebu has his title (Exh. 1) reconstituted. On the other hand,
without knowing anything, JOSELITO obtained TCT 12183 in his name and
had the land subdivided and sold.
These circumstances demonstrate that neither JOSELITO nor his uncle,
Vicente T. Garaygay of Cebu acted ante litem motam like the true owners
they claim to be in their respective times. xxx
Several questions confound the Courts curiosity. Why were some LRA
officials so interested in the speedy reconstitution and in the subdivision of
the land in excess of their bureaucratic duties? Where did Vicente T.
Garaygay of Cebu get his owners copy, Exh. 1. Did some conniving LRA
VILLAR
officers supply the judicial form and Victory stamps? Why was JOSELITO so
evasive about his cousin in the LRA as shown in his examination?
xxx xxx xxx
As the Court sees it, the Deed of Sale (Exh. 5 was a simulated
transaction because both JOSELITO and his uncle admit this was a joint
venture to sell the property in question. However, the facts suggest that the
joint venture was not limited to the two of them. The persons who prepared
and filed the application for reconstitution, and those officers in the LRA who
followed it up and who thereafter subdivided the land into three lots for
easier sale, those at the NBI who tried to persuade Yambao and Morales to
settle the dispute . . . are apparently part of the joint venture or stand to profit
from it
This brings us to the core of Toundjis and Premiere Banks petitions. The
first asserts the rights of a purchaser and the other, that of a mortgagee, in
good faith and for value of Lot 23, a status respectively denied them by the
appellate court.
The rule that a subsequent declaration of a title as null and void is not a
ground for nullifying the contractual right of a purchaser, rmortgagee or other
transferees in good faith, with the exceptions thereto, is well-settled. Where
the certificate of title is in the name of the seller or mortgagor, the innocent
purchaser or mortgagee for value has the right to rely on what appears on
the certificate without inquiring further.[41] In the absence of anything to excite
or arouse suspicion, or except when the party concerned had actual
knowledge of facts or circumstances that should impel a reasonably cautious
person to make such further inquiry, said purchaser or mortgagee is without
obligation to look beyond the certificate and investigate the title of the seller
or mortgagor. Thus, where innocent third persons, relying on the correctness
of the certificate, acquire rights over the property as buyer or mortgagee, the
subsequent declaration of nullity of title is not a ground for nullifying the right
of such buyer or mortgagee.[42]
Tested by the above norm, may Toundjis be considered, as she has
claimed, an innocent purchaser for value, meaning one who buys or
acquires, for valuable consideration, a piece of land of another without notice
that some other person has a right to, or interest in, such property at the time
of purchase, or before he has notice of the claim or interest of some other
persons in the property.[43]
The Court of Appeals rejected the claim of Toundjis, and rightly so.
A study of the record shows that TCT 14414 covering Lot. 23-A that
Toundjis contracted to buy from Joselito carried an annotation that it
was administratively reconstituted. Records also indicate that Toundjis
knew at the time of the sale that Joselito did not have possession of the lot
inasmuch as she agreed to pay the balance of the purchase price as soon
as the seller can fence off the property and surrender physical possession
thereof to her.
Even for these two (2) reasons alone, which should have placed Toundjis on
guard respecting Joselitos title, her claim of being a bona fide purchaser for
value must fail. The rejection, therefore, by the Court of Appeals of such
claim is correct. Likewise acceptable is the appellate courts holding,
71 | S a l e s & L e a s e H W # 3
citing Republic vs. Court of Appeals,[44] that a purchaser of a property cannot
be in good faith where the title thereof shows that it was reconstituted. Noted
with approval, too, is the appellate courts observation that the contract to sell
(Exh. 44) which is unregistered and not annotated at the back of the title of
the property [cannot adversely affect appellees] for the reason that under
Sec. 51 of PD 1529 (Property Registration Act), the act of registration shall
be the operative act to convey or affect the land in so far (sic) as third parties
are concerned.[45]
Premiere Bank cannot also be accorded the status of an innocent
mortgagee for value vis--vis the mortgage of the lots covered by TCT Nos.
34390 and 34391 constituted in its favor by Century Realty. Apart from the
annotations that said titles are only administratively reconstituted,[46] the
appellate court provided the ensuing compelling reasons:
Premiere inspected the property to be mortgaged xxx on March 6, and 11,
1991 as can be seen in its Real Estate Appraisal Report (Exhs. EE, EE-1).
The adverse claim of Jesus Rodriguez was cancelled on March 26, 1991 xxx
Hence, when Premiere inspected the property xxx, it was aware of the
existence of Rodriquez adverse claim. This is admitted by Premieres witness
xxx. The adverse claim of Rodriquez annotated at the back of TCT No.
14415 and marked as Exhibit I-3 and also at the back of TCT No. 14416
(Exh. J) marked as Exhibit J-3 declares that he is the vendee of the land
described.
There are buildings of strong material on the land in dispute xxx.
Premiere is aware of the existence of these structures as can be seen in its
real estate report (Exh. EE). Said report states that there are shanties
erected in the property in dispute.
But despite the existence of alleged shanties which are in fact and in truth
big structures, two of them being concrete buildings (Exhs. 0 to O-3),
Premiere Bank proceeded in the execution of the mortgage contract. xxx.
If the land mortgaged is in the possession of a person other than the
mortgagor, the mortgagee is required to go beyond the certificate of title and
make inquiries as to the rights of the actual possessors. Failure to do so
would make him a mortgagee in bad faith (Sunshine Finance vs. IAC, 203
SCRA 213; Conspecto vs. Fruto, 31 Phil 144).
It cannot be overemphasized that Premiere Bank, being in the business of
extending loans secured by real estate mortgage, is familiar with rules on
land registration. As such, it was, as here, expected to exercise more care
and prudence than private individuals in their dealing with registered lands.
[47]
 Accordingly, given inter alia the suspicion-provoking presence of
occupants other than the owner on the land to be mortgaged, it behooved
Premiere Bank to conduct a more exhaustive investigation on the history of
the mortgagors title. That Premiere Bank accepted in mortgage the property
in question notwithstanding the existence of structures on the property and
which were in actual, visible and public possession of a person other than
the mortgagor, constitutes gross negligence amounting to bad faith.
[48]
 Premier Bank is thus not entitled to have its lien annotated on the genuine
title.[49]
VILLAR
A final consideration: Petitioners maintain that the appellate court erred in
annulling the LRA order of reconstitution (Exh. 3), even if such relief was not
prayed for in private respondents amended complaint and notwithstanding
the fact that the LRA was not impleaded as an indispensable party in Civil
Case No. Q-92-8455.
The contention is far from tenable. An action for quieting of title, as here, is
equivalent to an action for reconveyance of title wrongfully or erroneously
registered in anothers name. The successful outcome of such action would
in most cases necessarily entail the cancellation of existing title wrongly
issued to another, which in turn requires the action of the LRA and/or the
proper Register of Deeds. As in the past, this Court, to obviate multiplicity of
suits, had ordered the LRA or the Register of Deeds, albeit not impleaded
below, to cancel such erroneously issued titles.
Before writing finis to this ponencia, two (2) peripheral matters raised need
to be addressed.
First, petitioner Toundjis has, as an alternative prayer, asked that the
appealed decision ordering Joselito to reimburse her the sum
of P2,000,000.00 be modified, such that the reimbursable amount shall bear
interest of nineteen (19%) percent (down from the 25% she sought in her
answer-in-intervention) instead of six (6%) per annum reckoned from March
23, 1990, instead of from January 28, 1993, the date of judgment of the trial
court. Absent an explanation with cogent legal support why her plea for a
modificatory ruling should be favorably considered, this Court denies the
same.
Second, petitioners have invited attention to and made much of this
Courts per curiam Decision dated April 7, 1993[50] in A.M. P-91-593,
entitled Office of the Court Administrator vs. Atty. Liberato Yambao et al.
[51]
 In it, the Court dismissed herein respondent Yambao from the service as
then Clerk of Court, RTC, Quezon City, Branch 80 for, among other things,
having in his possession a forged deed of sale executed by Vicente T.
Garaygay. It should be stressed in this regard, however, that this Court, in its
Resolution of May 18, 1994,[52]resolved to SUSPEND the implementation of
the effects of the decision of April 7, 1993 pending the judicious review by
the Court of Appeals of the decision of the Regional Trial Court, Branch 80,
Quezon City in Civil Case No. Q-92-8455.
This Court need not belabor the effects on A.M. P-91-593 of the appealed
decision of the Court of Appeals, as hereby affirmed.
WHEREFORE, the instant petitions are DENIED and the impugned Decision
of the Court of Appeals AFFIRMED.
Costs against petitioners.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona,  and  Carpio-Morales,
JJ.,  concur.
PREMIERE DEVELOPMENT BANK, vs. CA et al
G.R. No. 128122
72 | S a l e s & L e a s e H W # 3
March 18, 2005
FACTS: 2 different persons with exactly the same name, i.e., Vicente T.
Garaygay, each claimed exclusive ownership of Lot 23 by virtue of an
owner’s duplicate certificate each had possession of during the period
material covering said lot. One held TCT No. 9780, supra, and the
other, TCT No. 9780(693), supra. The technical description of the land
appearing in one copy corresponds exactly with that in the other. The
date “June 14, 1944” appears on the face of both copies as a common date
of entry. One, however, contained certain features, markings, and/or entries
not found in the other and vice versa.
On April 17, 1979, Garaygay of Cebu executed a deed of sale concerning
subject lot in favor of his nephew Joselito. The sale notwithstanding, the
owner’s duplicate certificate remained for some time in the seller’s
possession.
In another transaction, Garaygay of Rizal sold to Yambao and  Rodriguez
the same property. Buyers Yambao and Rodriquez would later sell a portion
of their undivided interests on the land to Morales.
Then came the June 11, 1988 fire that gutted a portion of the Quezon City
hall and destroyed in the process the original copy of TCT No. 9780 (693) on
file with the Registry of Deeds of Quezon City. Barely a month later, a
certain Engr. Hobre filed an application, signed by Garaygay of Cebu, for
the reconstitution of the burned original on the basis of the latter’s owner’s
duplicate certificate. One Engr. Cortez of the LRA did the follow-up on the
application. After due proceedings, the LRA issued an order of
reconstitution, by virtue of which Garaygay of Cebu acquired a
reconstituted title.
Meanwhile, or on May 26, 1989, the deed of sale executed by Garaygay of
Cebuin favor of his nephew Joselito was registered, paving the issuance in
the latter’s name. Thereafter, thru the efforts of same Engr. Cortez, Lot 23
was subdivided into three (3) lots. Joselito posthaste sold the first lot
to Toundjiswho, pursuant to a Contract to Sell undertook to pay Joselito
the P.5 Million balance of the P2.5 Million purchase price once she is placed
in possession of a fenced-off property. And, for shares of stock, Joselito
assigned the other two (2) lots  to Century Realty which, after
securing TCTs therefor, mortgaged the same to Premiere Bank to secure
a loan.
Clashing claims of ownership first came to a head when, sometime in May
1990, Yambao and his agents forcibly prevented Joselito’s hired hands from
concrete-fencing the subject property. The police and eventually the National
Bureau of Investigation (NBI) entered into the picture.
In the meantime, Yambao, Rodriquez and Morales as pro indiviso buyers
of the subject lot, caused the of their respective adverse claims on Joselito’s
TCT They then filed with the Regional Trial Court at Quezon City suit
against Joselito, Century Realty and Premiere Bank for quieting of title
and annulment of said defendants’ fake titles with prayer for damages.
Eventually, the trial court rendered judgment finding for the plaintiffs and
against the defendants, declaring Joselito’s TCT No. 9780 (693) and all
subsequent titles traceable to it and transactions involving its derivatives as
VILLAR
null and void. The trial court further observed dubious circumstances
surrounding the reconstitution of TCT 9780 (693), the more disturbing of
which is the admitted participation of LRA personnel in the reconstitution
process.
In time, herein petitioners appealed to the CA, which affirmed in toto the
appealed decision of the trial court.
Their motion for reconsideration having been denied by the appellate court
petitioners have separately come to the Supreme Court.  the three (3)
separate petitions were, upon private respondents’ motion, ordered
consolidated.
ISSUE:
1. WON the Court of Appeals erred in holding Garaygay of Rizal,
instead of Garaygay of Cebu, as the real owner of Lot 23.
2. WON the same court erred in finding Garaygay of Rizal’s owner’s
copy, TCT No. 9780, instead of the Garaygay of Cebu’s copy,
TCT No. 9780 (693), as the authentic title covering Lot 23.
3. WON Toundjis and Premiere bank are buyers in good faith
HELD: The instant petitions are DENIED and the impugned Decision of the
CA AFFIRMED.
Both defining documents, Exhibit “1”[cebu] and Exhibit “B” [rizal], appear
to have been issued by the appropriate Registry of Deeds and as such
would ordinarily enjoy the guarantees flowing from the legal presumption of
regularity of issuance. But how and precisely when the legal aberration
occurred where two (2) owner’s duplicate certificates ended up in the hands
of two (2) distinct persons, complete strangers to each other, are questions
which the records do not provide clear answer. It may not be idle to
speculate, though, that fraud or other improper manipulations had been
employed along the way, with likely the willing assistance of land registry
official/s, to secure what for the nonce may be tagged as the other title.
Consistent with the presumption of regularity of issuance, however, the
authenticity of one copy has to be recognized. And necessarily, one of the
two (2) outstanding owner’s copies has to be struck down as wrongly issued,
if not plainly spurious, under the governing Torrens system of land
registration
1. The categorical conclusion of the Court of Appeals – confirmatory of that
of the trial court – is that Exhibit “B” is genuine and that Garaygay of
Rizal is a real person. On the other hand, Exhibit “1” was adjudged
spurious. These factual determinations as a matter of long and sound
appellate practice must be accorded great weight, and, as rule, should not
be disturbed on appeal, save for the most compelling and cogent reasons.
 
The court’s finding that Garaygay of Rizal is an authentic person, once
residing in and a registered voter of Angono, Rizal has adequate evidentiary
support in his voter’s ID, the COMELEC and barangay certifications
aforementioned and the testimony of an occupant of Lot 23.
Moreover, facts and reasonable inferences drawn therefrom point to Exhibit
“1” as being spurious, necessarily leaving Exhibit “B” as the authentic
duplicate copy. For starters, there is the appearance and physical condition
73 | S a l e s & L e a s e H W # 3
of the owner’s copies in question which would help in determining which is
genuine and which is sham. As aptly observed by the appellate court,
rationalizing its conclusion adverted to above, Exhibit “B” has no defect,
except for its partly being torn. Respondents’ explanation for the defective
state of Exhibit “B”, as related to them by Garaygay of Rizal, i.e., it was due
to exposure of the document to the elements during the Japanese
occupation, merited approval from the trial court and the CA Both courts,
being in a better position to pass upon the credibility of petitioners’ witness
and appreciate his testimony respecting the less than usual appearance of
Exhibit “B”, their findings command the respect of this Court.
However, unlike Exhibit “B”, Exhibit “1” contained entries and other
uncommon markings or features which could not have existed without
human intervention. Although any one of them may perhaps not be
appreciable in isolation, these features and/or markings, taken together,
indeed put the integrity of Exhibit “1” under heavy cloud and indeed cast
doubt on its genuineness.
In the same token, the payment by Garaygay of Cebu of land taxes on Lot
23 does not also necessary detract from the spurious nature of his title. After
all, any one can pay real estate taxes on a given property without being
quizzed by the local treasury whether or not the payor owns the real property
in question.
Other than paying taxes from 1949 to 1990, however, Garaygay of Cebu –
and this holds true for his nephew Joselito – did not appear before the
current stand-off to have exercised dominion over Lot 23. For one, it has not
been shown that Garaygay of Cebu was at any time in possession of the
property in question, unlike his namesake from Rizal who managed to place
the property under the care of certain individuals who built semi-permanent
structure-dwelling houses thereon without so much of a protest from
Garaygay of Cebu or his nephew Joselito after the latter purportedly bought
the property. For another, neither Garaygay of Cebu nor his nephew Joselito
ever instituted any action to eject or recover possession from the occupants
of Lot 23. This passivity bespeaks strongly against their claim of ownership.
Not lost on this Court are circumstances noted by the trial court which
negatively reflect on Garaygay of Cebu’s and his nephew’s claim of
ownership.
In short, it appears to the Court that without doing anything, Vicente T.
Garaygay of Cebu has his title (Exh. “1”) reconstituted. On the other hand,
without knowing anything, JOSELITO obtained TCT 12183 in his name and
had the land subdivided and sold.These circumstances demonstrate that
neither JOSELITO nor his uncle, Vicente T. Garaygay of Cebu acted ante
litem motam like the true owners they claim to be in their respective times.
Several questions confound the Court’s curiosity. Why were some LRA
officials so interested in the speedy reconstitution and in the subdivision of
the land in excess of their bureaucratic duties? Where did Vicente T.
Garaygay of Cebu get his owner’s copy, Exh. “1”? Why was JOSELITO so
evasive about his cousin in the LRA as shown in his examination?
As the Court sees it, the Deed of Sale was a simulated transaction because
both JOSELITO and his uncle admit this was a ‘joint venture to sell the
VILLAR
property in question. However, the facts suggest that the ‘joint venture’ was
not limited to the two of them. The persons who prepared and filed the
application for reconstitution, and those officers in the LRA who followed it
up and who thereafter subdivided the land into three lots for easier sale,
those at the NBI who tried to persuade Yambao and Morales to settle the
dispute . . . are apparently part of the ‘joint venture’ or stand to profit from it”
NOTES:
1. Petitioners’ insistence that the inscription on Garaygay of Cebu’s copy of
the deed of mortgage and the discharge of mortgage he constituted over Lot
23 in favor of Meralco Employees Savings and Loan Association proves the
authenticity of the latter’s owner duplicate is valid to a point. But, to suggest
that such inscription could not have been possible were his title spurious is
altogether a different matter. We need not cite cases memorialized in books
of jurisprudence where land dealings are annotated on reconstituted
certificates secured thru fraud or otherwise issued irregularly. Stated a little
differently, an annotation of what is otherwise a bona-fide land transaction is
not a peremptory argument against the spurious character, if that be the
case, of the document on which it is annotated.
This brings us to the core of Toundjis’ and Premiere Bank’s petitions. The
first asserts the rights of a purchaser and the other, that of a mortgagee, in
good faith and for value of Lot 23, a status respectively denied them by the
appellate court.
The rule that a subsequent declaration of a title as null and void is not a
ground for nullifying the contractual right of a purchaser, rmortgagee or other
transferees in good faith, with the exceptions thereto, is well-settled. Tested
by the above norm, may Toundjis be considered, as she has claimed, an
innocent purchaser for value?
The Court of Appeals rejected the claim of Toundjis, and rightly so.
A study of the record shows that the TCT Lot. 23-A that Toundjis contracted
to buy from Joselito carried an annotation that it was administratively
reconstituted. Records also indicate that Toundjis knew at the time of the
sale that Joselito did not have possession of the lot inasmuch as she agreed
to pay the balance of the purchase price as soon as the seller can fence off
the property and surrender physical possession thereof to her.
Even for these two (2) reasons alone, which should have placed Toundjis on
guard respecting Joselito’s title, her claim of being a bona fide purchaser for
value must fail.
Likewise acceptable is the appellate court’s holding, citing Republic vs.
Court of Appeals, that a purchaser of a property cannot be in good faith
where the title thereof shows that it was reconstituted. Noted with
approval, too, is the appellate court’s observation that the “contract to sell”
which is unregistered and not annotated at the back of the title of the
property [cannot adversely affect appellees]” for the reason that under “Sec.
51 of PD 1529 (Property Registration Act), ‘the act of registration shall be the
operative act to convey or affect the land in so far (sic) as third parties are
concerned.’”
Premiere Bank cannot also be accorded the status of an innocent
mortgagee for value vis-à-vis the mortgage of the lots constituted in its favor
74 | S a l e s & L e a s e H W # 3 VILLAR

by CenturyRealty. Apart from the annotations that said titles are only REPOGIA-ULEP; SAMUEL ULEP is substituted by his  
administratively reconstituted, the appellate court provided the ensuing surviving spouses SUSANA REPOGIA-ULEP and his Present:
compelling reasons: children: SALLY, RENATO, RODELIO and RICHARD,  
“Premiere inspected the property to be mortgaged … The adverse claim of all surnamed ULEP, and VALENTINA ULEP, PANGANIBAN, J., Chairman
Jesus Rodriguez was cancelled on March 26, 1991 xxx Hence, when Petitioners, SANDOVAL-GUTIERREZ,
Premiere inspected the property xxx, it was aware of the existence of   CORONA,
Rodriquez’ adverse claim. …. The adverse claim of Rodriquez annotated at   CARPIO MORALES and
the back of the TCTs declares that ‘he is the vendee of the land described.’ - versus - GARCIA, JJ.
There are buildings of strong material on the land in dispute…Premiere is    
aware of the existence of these structures as can be seen in its real estate    
report …But despite the existence of alleged ‘shanties’ which are in fact and HONORABLE COURT OF APPEALS, former Eight  
in truth big structures… Premiere Bank proceeded in the execution of the Division, IGLESIA NI CRISTO, MAXIMA RODICO and  
mortgage contract. xxx. spouses WARLITO PARINGIT and ENCARNACION  
If the land mortgaged is in the possession of a person other than the PARINGIT- GANTE,  
mortgagor, the mortgagee is required to go beyond the certificate of title and Respondents. Promulgated:
make inquiries as to the rights of the actual possessors. Failure to do so  
would make him a mortgagee in bad faith.  
It cannot be overemphasized that Premiere Bank, being in the business of October 11, 2005
extending loans secured by real estate mortgage, is familiar with rules on x----------------------------------------------------------------------------------x
land registration. As such, it was, as here, expected to exercise more care  
and prudence than private individuals in their dealing with registered lands. DECISION
That Premiere Bank accepted in mortgage the property in question GARCIA, J.:
notwithstanding the existence of structures on the property and which were  
in actual, visible and public possession of a person other than the Under consideration is this petition for review under Rule 45 of the Rules of
mortgagor, constitutes gross negligence amounting to bad faith. Premier Court seeking the reversal and setting aside of the Decision[1] dated August
Bank is thus not entitled to have its lien annotated on the genuine title. 15, 1995 of the Court of Appeals (CA) in CA-G.R. CV. No. 39333, and its
2. A final consideration: Petitioners maintain that the appellate court erred in Resolution[2] dated April 25, 1996, denying petitioners motion for
annulling the LRA order of reconstitution even if such relief was not prayed reconsideration.
for in private respondents’ amended complaint and notwithstanding the fact  
that the LRA was not impleaded as an indispensable party. The assailed decision modified the June 17, 1991 decision[3] of the Regional
The contention is far from tenable. An action for quieting of title, as here, Trial Court at Urdaneta, Pangasinan, Branch 48, in its Civil Case No. U-
is equivalent to an action for reconveyance of title wrongfully or 3929, an action for Quieting of Title, Reconveyance and Declaration of
erroneously registered in another’s name. The successful outcome of Nullity of Titles and Subdivision Plan, with Damages, thereat commenced by
such action would in most cases necessarily entail the cancellation of the petitioners against the herein private respondents.
existing title wrongly issued to another, which in turn requires the action of  
the LRA and/or the proper Register of Deeds. As in the past, this Court, to The factual antecedents:
obviate multiplicity of suits, had ordered the LRA or the RD, albeit not  
impleaded below, to cancel such erroneously issued titles. Principal petitioners SAMUEL ULEP, now deceased and substituted by his
Before writing finis to this ponencia, two (2) peripheral matters raised need heirs, and VALENTINA ULEP are brother-and-sister. Together with their
to be addressed. siblings, namely, Atinedoro Ulep and Rosita Ulep, they are children of the
late Valentin Ulep.
 
During his lifetime, the father Valentin Ulep owned a parcel of land, identified
as Lot 840 with an area of 3,270 square meters, located at Asingan,
Pangasinan.
(22) THIRD DIVISION  
  Sometime in 1950, the older Ulep sold the one-half (1/2) eastern portion of
SPOUSES SAMUEL ULEP (Deceased) and SUSANA   G.R. No. 125254 Lot 840, comprising an area of 1,635 square meters, to respondent Maxima
75 | S a l e s & L e a s e H W # 3
Rodico, while the remaining one-half (1/2) western portion with the same
area, to his son Atinedoro Ulep married to Beatriz Ulep, and to his other
daughter Valentina Ulep.
 
On June 5, 1952, all the transferees of Lot 840, namely, Maxima Rodico (for
the eastern portion) and Atinedoro Ulep and Valentina Ulep (for the western
portion), were jointly issued in their names Transfer Certificate of Title No.
12525.
 
On June 18, 1971, Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep
sold the one-half (1/2) portion of the area sold to them by their father to their
brother Samuel Ulep and the latters wife, Susana Repogia-Ulep. The
portion sold to Samuel and Susana has an area of 817.5 square meters. The
document of sale was registered with the Office of the Registry of Deeds of
Pangasinan on February 20, 1973.
Later, an area of 507.5 square meters of the western portion of Lot 840
was sold by the spouses Atinedoro Ulep and Beatriz Ulep to
respondent Warlito Paringit and the latters spouse Encarnacion Gante,
who were then issued TCT No. 12688 on September 23, 1975.
 
Evidently, all the foregoing transactions were done and effected without an
actual ground partition or formal subdivision of Lot 840.
 
In June 1977, respondent Iglesia ni Cristo (INC) begun constructing its
chapel on Lot 840. In the process, INC encroached portions thereof
allegedly pertaining to petitioners and blocked their pathways.
This prompted Samuel Ulep and sister Rosita Ulep to make inquiries with
the Office of the Register of Deeds of Pangasinan. To their consternation,
they discovered from the records of said office that a deed of sale bearing
date December 21, 1954, was
purportedly executed by their brother Atinedoro Ulep his, wife Beatriz and
their sister Valentina Ulep in favor of INC over a portion of 620 square
meters, more or less, of Lot 840, and that on the basis of said deed, INC
was issued TCT No. 12689 on September 23, 1975[4] over the portion
allegedly sold to it by the three. Samuel was further shocked to find out that
on July 9, 1975, an affidavit of subdivision was executed by
respondents INC, Maxima Rodico and the spouses Warlito Paringit and
Encarnation Gante, on the basis of which affidavit Lot 840 was subdivided
into four (4) lots, namely: (1) Lot 840-A, covered by TCT No. 16205 in his
(Samuels) name that of his wife, Susana Repogia-Ulep; (2) Lot 840-B,
covered by TCT No. 12688 in the names of Warlito Paringit and the latters
wife Encarnacion Gante; (3) Lot-C 840-C, covered by TCT No. 12689 in the
name of INC; and (4) Lot 840-D, covered by TCT No. 12690[5] in the name of
Maxima Rodico.
VILLAR
 
Such was the state of things when, on March 29, 1983, in the Regional Trial
Court at Pangasinan, the spouses Samuel Ulep and Susana Repogia-
Ulep, the spouses Atinedoro Ulep and Beatriz Ulep and their sister
Valentina Ulep, filed their complaint for Quieting of Title, Reconveyance
and Declaration of Nullity of Title and Subdivision Plan with
Damages against respondents INC, Maxima Rodico and the spouses
Warlito Paringit and Encarnacion Gante. In their complaint, docketed as
Civil Case No. U-3929, the Uleps basically alleged that they and
respondents are co-owners of Lot 840 in the following proportions:
1,635 square meters to Maxima Rodico;
 
817.5 square meters to spouses Samuel Ulep and Susana Repogia-Ulep;
 
507.5 square meters to spouses Warlito Paringit and Encarnacion Gante;
210 square meters to spouses Atinedoro Ulep and Beatriz Ulep, and
Valentina Ulep;
100 square meters to Iglesia Ni Cristo.[6]
In the same complaint, the spouses Atinedoro Ulep and Beatriz Ulep and
their sister Valentina Ulep denied having executed a deed of sale in favor of
INC over a portion of 620 square meters of Lot 840, claiming that their
signatures appearing on the deed were forged. At the most, so they claimed,
what they sold to INC was only 100 square meters and not 620 square
meters. Petitioners Samuel Ulep and Valentina Ulep, along with the spouses
Atinedoro Ulep and Beatriz Ulep, likewise averred that the subject lot was
subdivided without their knowledge and consent.
In their common Answer, respondents Maxima Rodico and the spouses
Warlito Paringit and Encarnacion Gante maintained that the segregation of
their shares was known to petitioners and that it was done with the consent
of Samuel Ulep himself.
For its part, INC, in its separate Answer, asserted that it purchased from the
spouses Atinedoro Ulep and Beatriz Ulep and their sister Valentina Ulep the
portion containing 620 square meters of Lot 840 on December 21, 1954, as
evidenced by a deed of sale duly registered with the Registry of Deeds of
Pangasinan.
 
During the pendency of the proceedings in Civil Case No. U-3929, Atinedoro
Ulep died. Less than a month thereafter, or more specifically on November
16, 1987, Atinedoros widow Beatriz Ulep and their children executed a deed
of renunciation, thereunder waiving all their rights and interests over Lot 840
and relinquishing the same in favor of the spouses Samuel Ulep and Susana
Repogia-Ulep.[7]
 
Eventually, in a decision dated June 17, 1991, the trial court rendered
judgment, as follows:
76 | S a l e s & L e a s e H W # 3
There being no res adjudicata in this case as already decided by the Court
of Appeals, this Court renders judgment as borne out by the evidence
presented in favor of the [petitioners] and against the [respondents], ordering
the latter and all persons claiming title under them to vacate and surrender a
portion of 520 sq. m. of the land in question in favor of the [petitioners] in
such a way that [respondent] INC owns only 100 sq. m.; declaring and
annulling the following documents;
 
1. Deed of sale dated December 21, 1954 allegedly executed by plaintiffs-
spouses Atinedoro Ulep and Beatriz Aguilar and Valentina Ulep in favor of
[respondent] INC, (Exh. A);
2. TCT No. 12689 issued to Iglesia Ni Cristo (Exh. K-1);
3. The affidavit of confirmation of subdivision, (Exh. K and Exh. 2); and
4. TCT No. 12605 (Exh. K-4) and a new TCT No. be issued to include the
original 817.5 sq. m. in favor of Samuel Ulep and Susan Repogia;
 
Declaring Lot No. 840 to be owned by the following parties in the following
proportions:
 
(a)                                1,635 sq. m. eastern portion to [respondent] Maxima
Rodico already covered by TCT No. 12690 (Exh. K-3);
 
(b)                                817.5 sq. m. to [petitioners] Samuel Ulep and Susana
Repogia and a new TCT to be issued;
 
(c)                                of 210 sq. m. to [petitioners] Samuel Ulep and
Susana Repogia; and the other one-half or 105 sq. m. to [petitioner]
Valentina Ulep in accordance with Exh. C, a deed of renunciation executed
by the heirs of Atinedoro Ulep who died in 1987 and his surviving spouse
Beatriz Aguilar and a new Transfer Certificate of Title be issued;
(d)                                507.5 sq. m. to [respondents] Warlito Paringit and
Encarnacion Gante, already covered by TCT No. 12688 (Exh. K-2);
(e)                                100 sq. m. to [respondent] Iglesia Ni Cristo; and a
new title to be issued;
and ordering the Register of Deeds of Pangasinan, to issue new Transfer
Certificate of Title in favor of [petitioners] Samuel Ulep and Susana Repogia
covering 817.5 sq. m.; and another new Transfer Certificate of Title covering
105 sq. m. in favor of Valentina Ulep and the other of 210 sq. m. or 105 sq.
m. in favor of Samuel Ulep and Susana Repogia pursuant to Exh. C; and still
another new Transfer Certificate of Title covering 100 sq. m. in favor of
Iglesia Ni Cristo and for the latter to pay the costs.
SO ORDERED.[8] (Words in bracket ours).
Dissatisfied, respondent INC interposed an appeal to the Court of Appeals
(CA), which appellate recourse was thereat docketed as CA-G.R. CV No.
VILLAR
39333. For their part, respondents Maxima Rodico and the spouses Warlito
Paringit and Encarnacion Gante opted not to appeal.
 
As stated at the threshold hereof, the appellate court, in its Decision dated
August 15, 1995, modified that of the trial court, thus:
 
WHEREFORE, premises considered, the appealed judgment
is MODIFIED as above indicated. Accordingly, the decretal portion of said
judgment should read as follows:
 
1. The Deed of Absolute Sale dated December 21, 1954 executed by
plaintiffs-spouses Atinedoro Ulep and Beatriz Aguilar and Valentina Ulep in
favor of [respondent] INC is declared valid (Exh. K-1).
 
2. Lot No. 840 is declared as owned by the following parties in the following
proportions:
 
(f)          1,635 sq. m. eastern portion to [respondent] Maxima Rodico already
covered by TCT No. 12690 (Exh. K-3);
 
(g)        297.5 sq. m. to [petitioner]-spouses Samuel Ulep and Susana
Repogia;
 
(h)        of 210 sq. m. to [petitioner]-spouses Samuel Ulep and Susana
Repogia; and the other one-half or 105 sq. m. to Valentina Ulep in
accordance with Exh. C, a deed of renunciation executed by the heirs of
Atinedoro Ulep who died in 1987 and his surviving spouse Beatriz Aguilar;
 
(i)          507.5 sq. m. to [respondents] Warlito Paringit and Encarnacion
Gante, already covered by TCT No. 12688 (Exh. K-2);
(j)          620 sq. m. to [respondent] INC, already covered by TCT No. 12689
(Exh. K-1).
3. TCT No. 16205 registered in the names of [petitioner-spouses] Samuel
and Susan Ulep (Exh. K-4) is annulled.
The Register of Deeds of Pangasinan is ordered to issue a new TCT in favor
of [petitioner-spouses] Samuel Ulep and Susana Repogia covering only
297.5 sq. m.; and another new TCT covering 105 sq. m. in favor of Valentina
Ulep and the other of 210 sq. m. or 105 sq. m. in favor of [petitioner-
spouses] Samuel Ulep and Susana Repogia pursuant to Exh. C. No Costs.
 
SO ORDERED.[9] (Words in brackets ours).
In so ruling, the Court of Appeals explained:
 
77 | S a l e s & L e a s e H W # 3
There is no adequate evidentiary demonstration in the record that the deed
of sale (dated December 21, 1954 executed by Atinedoro Ulep, his wife
Beatriz and sister Valentina Ulep in favor of INC over the 620 square-meter
area of the western portion of Lot 840) is void and inefficacious on account
of forgery.
 
As a public instrument which enjoys the presumption of regularity, clear and
convincing evidence is necessary to contradict the terms thereof.
 
xxx xxx xxx
 
In the present case, the biased, interested testimony of [petitioners] cannot
overcome the evidentiary force of the deed of sale which was acknowledged
before a notary public, and hence, a public document.
xxx xxx xxx
 
The sale of 620 sq. m. in favor of [respondent] INC executed by vendors
Atinedoro and Valentina Ulep is dated December 21, 1954, while the sale of
817.50 sq. meters by the same vendors to [petitioners] Samuel and Susana
Ulep was made on June 18, 1971. [Respondent] INC registered its 620 sq.
meters on December 21, 1954 by reason of which TCT No. 12689 was
issued in its name. [Petitioner-spouses] Samuel and Susana Ulep registered
the land sold to them on February 9, 1977 and TCT No. 16205 was issued in
their names. Evidently, applying Article 1544, [petitioner] INCs ownership
and title over the 620 sq. meters prevail. The land consisting of 620 sq.
meters was first sold to INC and its title was registered first. Thus, the same
vendors could have sold only the remaining 297.50 sq. meters of Lot 840 to
[petitioner-spouses] Samuel and Susana Ulep and TCT No. 16205 issued in
the latters name for 817.50 sq. meters is null and void. There is no evidence
that [respondent] INC is guilty of bad faith in acquiring the 620 sq. meters
portion of Lot 840. (Words in bracket ours).
Their motion for reconsideration having been denied by the same court in its
equally challenged Resolution of April 25, 1996, petitioners are now with
us via  the present recourse, faulting the appellate court as follows:
I.
THE HONORABLE COURT OF APPEALS ERRED IN NOT AFFIRMING
THE DECISION DATED JUNE 17, 1991 (ANNEX A) OF THE TRIAL
COURT, REGIONAL TRIAL COURT, FIRST JUDICIAL REGION, BRANCH
48, URDANETA PANGASINAN IN CIVIL CASE NO. 3929.
 
II.
AND IN THE ALTERNATIVE, THE HONORABLE COURT OF APPEALS
ERRED IN NOT AWARDING PETITIONERS SAMUEL ULEP AND SUSANA
REPOGIA THE AREA OF 817.5 SQUARE METERS AND IN NOT
VILLAR
REDUCING THE SHARE OF PRIVATE RESPONDENTS, SPOUSES
WARLITO PARINGIT AND ENCARNACION GANTE FROM 507.5 SQUARE
METERS TO 197 SQUARE METERS.[10]
 
Petitioners initially submit that the factual findings of the trial court should not
have been disturbed by the appellate court, the same being entitled to great
weight and respect.
 
We have consistently held that factual findings of the Court of Appeals and
other lower courts are, as a rule, final and conclusive upon this Court,
except, inter alia, where their findings are at odd with each other,[11] as here.
 
Simply put, the issue before us is whether or not the Court of Appeals
committed reversible error in modifying the decision of the trial court.
Evidently, the issue necessitates an inquiry into the facts. While, as a rule,
factual issues are not within the province of this Court, nonetheless, in light
of the conflicting factual findings of the two (2) courts below, an examination
of the facts obtaining in this case is in order.
 
Petitioners contend that respondent INC is entitled to only 100 square
meters and not 620 square meters of the western portion of Lot 840. To
them, the deed of sale conveying 620 square meters thereof to INC was void
as the signatures of the vendors therein, namely, the spouses Atinedoro
Ulep and Beatriz Ulep and Valentina Ulep, were forged. They submit that
what should instead be upheld was the sale of 817.5 square meters in their
favor by the same vendors.
 
As the Court sees it, the present controversy is a classic case of double
sale. On December 21, 1954, Atinedoro Ulep, his wife Beatriz Ulep and
sister Valentina Ulep sold the disputed area (620 square-meter) of Lot 840 to
INC. Subsequently, on January 18, 1971, a second sale was executed by
the same vendors in favor of spouses Samuel Ulep and Susana Ulep. The
Court is, therefore, called upon to determine which of the two groups of
buyers has a better right to the area in question.
Article 1544 of the Civil Code provides the statutory solution:
Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
 
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who
in good faith was first in the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith.
78 | S a l e s & L e a s e H W # 3
 
 
Otherwise stated, the law provides that a double sale of immovable transfers
ownership to (1) the first registrant in good faith; (2) then, the first possessor
in good faith; and (3) finally, the buyer who in good faith presents the oldest
title.[12]
 
Jurisprudence teaches that the governing principle is primus tempore, potior
jure  (first in time, stronger in right). Knowledge gained by the first buyer of
the second sale cannot defeat the first buyers rights except where the
second buyer registers in good faith the second sale ahead of the first, as
provided by the aforequoted provision of the Civil Code. Such knowledge of
the first buyer does not bar him from availing of his rights under the law,
among them to register first  his purchase as against the second buyer. In
converso, knowledge gained by the second buyer of the first sale defeats his
rights even if he is first to register the second sale, since such knowledge
taints his prior registration with bad faith. This is the price exacted by the
same provision of the Civil Code for the second buyer to be able to displace
the first buyer; before the second buyer can obtain priority over the first, he
must show that he acted in good faith throughout (i.e. ignorance of the first
sale and of the first buyers rights) from the time of acquisition until the title is
transferred to him by registration, or, failing registration, by delivery of
possession.[13]
 
Per records, the sale of the disputed 620 square-meter portion of Lot 840 to
respondent INC was made on December 21, 1954 and registered with the
Registry of Deeds of Pangasinan on January 5, 1955. In fact, INC was
issued a title over the same portion on September 23, 1975. On the other
hand, the conveyance to the spouses Samuel Ulep and Susana Repogia-
Ulep happened on January 18, 1971 and the spouses registered their
document of conveyance only on February 22, 1973.[14]
 
Clearly, not only was respondent INC the first buyer of the disputed area. It
was also the first to register the sale in its favor long before petitioners
Samuels and Susanas intrusion as second buyers. Although Samuel and
Susana thereafter registered the sale made to them, they did so only
after 18 yearsfrom the time INC caused the registration of its own document
of sale.
Registration means any entry made in the books of the Registry which
records solemnly and permanently the right of ownership and other real
rights.[15] However, mere registration is not sufficient. Good faith must concur
with registration, else registration becomes an exercise in futility.[16] In the
instant case, the registration made by respondent INC of its deed of sale
more than satisfies this requirement. The same thing cannot be said of
petitioners Samuel Ulep and Susana Ulep. Said petitioners, by their own
admission, were aware that there existed an agreement between INC and
vendors Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep involving
a portion of 100 square meters of Lot 840. Knowledge of such transaction
VILLAR
should have put the spouses Samuel Ulep and Susana Ulep upon such
inquiry or investigation as might be necessary to acquaint them with the
possible defects in the title of their vendors. They should have acted with
that measure of precaution which may reasonably be required of a prudent
man in a similar situation. After all, good faith, or the lack of it, is, in the last
analysis, a question of intention. But in ascertaining the intention by which
one is actuated on a given occasion, courts are necessarily controlled by the
evidence as to the conduct and outward acts by which the inward motive
may, with safety, be determined. So it is that the honesty of intention, the
honest lawful intent, which constitutes good faith implies a freedom from
knowledge and circumstances which ought to put a person on inquiry.
[17]
 Hence, proof of such knowledge overcomes the presumption of good
faith.
 
Here, the spouses Samuel Ulep and Susana Ulep were fully aware, or could
have been, if they had chosen to inquire, of the rights of INC under the deed
of sale duly annotated on the common title of the spouses Atinedoro Ulep
and Beatriz Ulep and Valentina Ulep. Verily, the sale to INC should prevail
over the sale made to spouses Samuel and Susana because INC was the
first registrant in good faith.
Petitioners allegation of forgery relative to the deed of sale executed on
December 21, 1954 by the spouses Atinedoro Ulep, his wife Beatriz and
sister Valentina Ulep over the 620 square-meter portion of Lot 840 cannot be
sustained. As a rule, forgery cannot be presumed and must be proved by
clear, positive and convincing evidence, the burden for which lies on the
party alleging it. The fact of forgery can only be established by a comparison
between the alleged forged signature and the authentic and genuine
signature of the person whose signature is theorized to have been forged.[18]
 
Here, petitioners claim of forgery is unsupported by any substantial evidence
other than their own self-serving testimonies. As it were, they failed to
present handwriting experts and other persons familiar with the handwriting
of the spouses Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep
that would show that their signatures appearing in the questioned deed of
sale in favor of respondent INC were forged. Due to the technicality of the
procedure involved in the examination of forged documents, the expertise of
questioned document examiners is usually helpful. These handwriting
experts can help determine fundamental, significant differences in writing
characteristics between the questioned and the standard or sample
specimen signatures, as well as the movement and manner of execution
strokes.
 
Petitioners insist that the conveyance of only 100 square meters to INC was
in fact evidenced by a deed of sale notarized by a certain Atty. Benjamin
Fernandez.[19] However, they sorely failed to produce in court the said
alleged deed of sale. They could have, at the very least, presented Atty.
Fernandez to prove the existence of that deed, but they did not. The only
plausible conclusion is that no such deed exists.
79 | S a l e s & L e a s e H W # 3
 
On the other hand, to bolster its claim of ownership, respondent INC
presented the December 21, 1954 deed of sale executed in its favor by the
spouses Atinedoro and Beatriz Ulep and Valentina Ulep over a portion of
620 square meters of Lot 840. To be sure, INCs deed of sale was duly
notarized by Atty. Bernabe Salcedo Calimlim.[20] Generally, a notarized
document carries the evidentiary weight conferred upon it with respect to its
due execution, and documents acknowledged before a notary public have in
their favor the presumption of regularity.[21] Thus, the notarized deed of sale
executed on December 21, 1954 by Atinedoro Ulep, his wife Beatriz and
sister Valentina Ulep over the contested area in favor of respondent INC
deserves full credence and is valid and enforceable in the absence, as here,
of overwhelming evidence to the contrary.
In a last-ditch but futile attempt to persuade the Court, petitioners
alternatively pray that INCs portion of 620 square meters of Lot 840,
assuming that INC is entitled to it, should be taken from the western portion
of the same lot sold to respondent spouses Warlito Paringit and Encarnacion
Gante, and not from them. To petitioners, the share of the spouses Warlito
and Encarnacion should accordingly be reduced from 507.5 square meters
to only 197 square meters.
 
We note, however, that petitioners never raised before the trial court nor
before the appellate court the issue of Warlitos and Encarnacions
entitlement to 507.5 square meters. Quite the contrary, petitioners even
alleged in their complaint that the spouses Warlito Paringit and Encarnacion
Gante are owners of 507.5 square meters of Lot 840. They never questioned
the spouses ownership of said portion. This issue was only posed by
petitioners in the instant petition before this Court. It is certainly too late for
them to raise said issue for the first time at this late stage of the
proceedings.
 
Points of law, theories, issues and arguments not brought to the attention of
the lower court need not be, and ordinarily will not be, considered by a
reviewing court, as these cannot be raised for the first time on appeal. Basic
considerations of fair play, justice and due process underlie the rule. It would
be unfair to the adverse party who would have no opportunity to present
evidence in contra  to the new theory, which it could have done had it been
aware of it at the time of the hearing before the trial court.[22]
 
Of course, this rule admits of certain exceptions. For one, issues of lack of
jurisdiction, though not raised below, may be considered by the reviewing
court as they may be raised at any stage. For another, the reviewing court
may also consider an issue not properly raised during trial when there is
plain error. Likewise, it may entertain such arguments when there are
jurisprudential developments affecting the issues, or when the issues raised
present a matter of public policy.[23] Unfortunately for petitioners, however,
none of these exceptions exists in this case. It is thus too late in the day for
VILLAR
petitioners to raise in this recourse the sale made by the spouses Atinedoro
Ulep and Beatriz Ulep of the 507.5 square-meter area of Lot 840 to the
spouses Warlito Paringit and Encarnacion Gante. To allow petitioners to do
so would be utterly unfair to the latter.
 
WHEREFORE, the petition is DENIED and the assailed decision and
resolution of the Court of Appeals AFFIRMED in toto.
 
Costs against petitioners.
 
SO ORDERED.
(23) FIRST DIVISION
[G.R. No. 103476. November 18, 1999]
Fermin Caram, CODIDI MATA, CELESTINO, LUCIA, INGRACIO, PIO,
MARCELO, MELETON, RICARDA, PAGAKAN, and CARING, all surnamed
MATA, and duly represented by their attorney-in-fact ISIDRO
SEMBRANO, petitioners, vs. COURT OF APPEALS and HEIRS OF CLARO
L. LAURETA, respondents.
DECISION
KAPUNAN, J.:
The instant case is the fourth case that reached this Court involving the
same parties and property.
In this case, the heirs of Marcos Mata (petitioners) seek the reversal of the
decision, dated 31 July 1991, of the Court of Appeals in CA-G.R. SP No.
24434, permanently enjoining the Regional Trial Court, Branch 1, Tagum,
Davao City, from proceeding with Civil Case No. 2468, an action to enforce
petitioners' right to repurchase the subject lot under Section 119 of the
Public Land Act (Commonwealth Act No. 141, as amended).
The antecedent facts are as follows:
Sometime in 1940, spouses Marcos and Codidi Mata, members of a non-
christian cultural minority in Davao and predecessors-in-interest of
petitioners, were granted a homestead patent over a parcel of land situated
in Tagum, Davao del Norte containing an area of 4.5777 hectares. Original
Certificate of Title No. 3019 covering the subject lot was issued in their favor.
On 10 June 1945, Marcos Mata (Mata) executed a Deed of Absolute Sale
conveying the ownership of the subject lot in favor of Claro L. Laureta the
predecessor-in-interest of private respondents. On 10 May 1947, Mata
executed another document selling the same property to Fermin Caram, Jr.
(Caram), who caused the cancellation of OCT No. 3019. In lieu thereof,
Transfer Certificate of Title No. 140 was issued in Caram's name.
80 | S a l e s & L e a s e H W # 3
On 25 June 1956, Laureta filed before the Court of First Instance of Tagum
(now RTC) an action, docketed as Civil Case No. 3083, to declare the first
sale of the subject lot in his favor valid and the second sale thereof to Caram
void.
On 29 February 1964, the CFI of Tagum rendered judgment as follows:
"WHEREFORE, judgment is hereby rendered:
1. Declaring that the deed of sale, Exhibit A, executed by Marcos Mata in
favor of Claro L. Laureta stands and prevails over the deed of sale, Exhibit
F, in favor of Fermin Caram, Jr.;
2. Declaring as null and void the deed of sale, Exhibit F, in favor of Fermin
Caram, Jr.;
3. Directing Marcos Mata to acknowledge the deed of sale, Exhibit A, in
favor of Claro L. Laureta;
4. Directing Claro L. Laureta to secure the approval of the Secretary of
Agriculture and Natural Resources on the deed, Exhibit A, after Marcos Mata
shall have acknowledge the same before a notary public;
5. Directing Claro L. Laureta to surrender to the Register of Deeds for the
City and Province of Davao the Owner's Duplicate of Original Certificate of
Title No. 3019 and the latter to cancel the same;
6. Ordering the Register of Deeds for the City and Province of Davao to
cancel Transfer Certificate of Title No. T-140 in the name of Fermin Caram,
Jr.;
7. Directing the Register of Deeds for the City and Province of Davao to
issue a title in favor of Claro L. Laureta, Filipino, resident of Quezon City,
upon presentation of the deed executed by Marcos Mata in his favor, Exhibit
A, duly acknowledge by him and approved by the Secretary of Agriculture
and Natural Resources; and
8. Dismissing the counterclaim and crossclaim of Marcos Mata and Codidi
Mata, the counterclaim of Caram, Jr., the answer in intervention,
counterclaim and crossclaim of the Mansacas."[1]
On appeal by the spouses Mata and Caram, the CA affirmed the aforesaid
decision of the CFI. Two (2) separate petitions for review were then filed by
the Matas and Caram with this Court. The petition filed by the spouses Mata,
docketed as G.R. No. L-29147, was dismissed by the Court for lack of merit
on 20 June 1968. Said decision became final and executory on 26 July
1968. Upon the other hand, the petition filed by Caram, docketed as G.R.
No. L-28740, was dismissed by the Court on 24 February 1981.[2] Said
decision became final and executory on 12 February 1982.
Meanwhile, on 23 February 1979, spouses Mata filed with the Court of First
Instance (now RTC), Branch 1 of Tagum, Davao del Norte, Civil Case No.
1071 against the Lauretas for recovery of ownership and possession of the
subject lot. The spouses Mata alleged that the deed of sale executed
between Mata and Laureta involving the subject lot is null and void and/or
unenforceable because the same had not been approved by the Secretary
of Agriculture and Natural Resources as required by law and as directed by
the CFI of Davao in its decision of 29 February 1964 in Civil Case No. 3083,
and that said decision could no longer be executed as the same had already
prescribed.
VILLAR
On 12 February 1983, an alias writ of execution was issued by the CFI
enforcing its decision in Civil Case No. 3083. By then, Mata was already
dead while his heirs (petitioners) refused to acknowledge the deed of sale in
accordance with the said decision. In lieu of the requisite acknowledgement,
the officer-in-charge of the court (now RTC, Branch VIII, Davao City)
certified and affirmed the due execution of the deed of sale executed
between Mata and Laureta. Thereafter, on 21 February 1984, the deed of
absolute sale in favor of Laureta was duly approved by the Minister of
Natural Resources. Finally, on 9 May 1985, TCT No. T-46346 covering the
subject lot was issued in the name of Laureta.
On 20 April 1983, the RTC rendered judgment in Civil Case No. 1071
declaring, among others, that the decision in Civil Case No. 3083 in favor of
private respondents had "become stale and unenforceable due to
prescription." It ordered the return of the ownership of the subject lot to
petitioners.
On appeal by private respondents, the CA affirmed in toto the CFI decision
in Civil Case No. 1071. The case was then elevated to the Supreme Court
which reversed and set aside the decision of the CA. Speaking through
Justice Regalado, the Court, in its decision[3] in G.R. No. 72194 promulgated
on 5 April 1990, ruled that the execution of the judgment in Civil Case No.
3083 was not time-barred because the ten-year period for the execution of
the judgment in Civil Case No. 3083 commenced to run only on 12 February
1982 when the decision denying Caram's petition became final and
executory .
Upon the belief that they could still exercise their right to repurchase the
subject lot under the Public Land Act, on 22 November 1990, petitioners filed
with the RTC, Branch 1 of Tagum, Davao City, an action against private
respondents for legal redemption, reconveyance and consignation, docketed
as Civil Case No. 2468.
Maintaining that Civil Case No. 2468 would render nugatory and ineffectual
the decision of the court in G.R. No. 72194, private respondents instituted
with this Court a petition for injunction and prohibition seeking, among
others, to restrain the trial court from proceeding with said case. On 11
March 1991, this Court referred the same to the CA for resolution.
The CA ruled in favor of private respondents and permanently enjoined the
RTC from further proceeding with Civil Case No. 2468. The CA categorically
declared that petitioners' right to repurchase the subject lot under the Public
Land Act had already prescribed.[4] Petitioners filed a motion for
reconsideration but it was denied by the CA in its resolution, dated 12
November 1991.
Aggrieved, the petitioners filed the instant Petition for review alleging in the
main that respondent CA erred in holding that petitioners right to repurchase
the subject property under Section 119 of the Public Land Act had already
prescribed.
After the parties have submitted their respective pleadings, this Court issued
a resolution, dated 5 September 1994, denying the petition for review for
failure of the petitioners to sufficiently show that respondent court committed
any reversible error in rendering the assailed decision.
81 | S a l e s & L e a s e H W # 3
Upon petitioners motion for reconsideration, dated 27 September 1994,
however, this Court, in its resolution, dated 24 October 1994, reinstated the
instant petition, gave due course to the same and directed the parties to file
their respective memoranda.
In their petition, the fundamental issue raised by petitioners is whether or not
they could still exercise their right to repurchase the subject lot under the
Public Land Act. In their motion for reconsideration and memorandum,
however, petitioners question the validity of the sale of the subject lot to
Laureta. They contend that said sale was void because the document
evidencing the same was written in English, a language not understood by
the vendor, and that it was not approved by the Office for the Southern
Cultural Communities (OSCC) in violation of Section 4(n), Republic Act No.
1888, as amended, in relation to Section 120 of the Public Land Act.
Subsequently, the various pleadings separately filed by petitioners
themselves, on one hand, and Atty. Rodolfo U. Jimenez, their counsel, and
Isidro Sembrano, their purported attorney-in-fact, on the other hand, have
left this Court baffled as to petitioners real stand on the matter. Thus:
1. In a Manifestation with Motion, dated 23 November 1995, filed by
petitioners themselves without the assistance of their counsel, the informed
the Court that they have agreed to an amicable settlement of the case with
private respondents. In view thereof, they prayed that they be allowed to
withdraw their petition. Attached to the said Manifestation with Motion were
petitioners letters, dated 23 November 1995, addressed to their attorney-in-
fact (Isidro Sembrano) and to their counsel-on-record (Attys. Winston F.
Garcia and Rodolfo U. Jimenez), informing them of the termination of their
services. The amicable settlement, of even date, purportedly signed by all
the petitioners and private respondents attorney-in-fact, was also attached to
the said Manifestation with Motion.
2. On 15 January 1996, Celestino Mata and Andres Basaca filed with the
Court their respective affidavits, dated 30 December 1995. Celestino Mata,
one of petitioners, claimed that he is the same person referred to as Lucino
Mata who was made to sign the Manifestation with Motion, the letters
terminating the services of the attorney-in-fact and the lawyers, and the
amicable settlement, all dated 23 November 1995. Celestino Mata averred
that he did not understand the contents of these documents and that his
signatures thereon were obtained by fraud.
3. For his part, Alfredo Basaca assailed the authority of Arcadio Mata
Pasindo to sign the amicable settlement on behalf of the heirs of Marcos and
Codidi Mata. While Alfredo Basaca asserted that he is one of the heirs of the
spouses Mata, however, the records show that he is not named as one of
the petitioners in this case.
4. The Court, in its Resolution, dated 26 February 1996, directed the
petitioners and Atty. Jimenez to comment on and/or confirm the
Manifestation with Motion of 23 November 1995. In compliance therewith,
Atty. Jimenez filed his Comment, dated 29 March 1996, informing the Court
that he was not consulted by petitioners when they filed said Manifestation
with Motion. He urged the Court to decide the case on the merits.
VILLAR
5. Upon the other hand, most of the petitioners, namely Calrita Mata
Pasindo, Julieta Mata Abundo, Engracio Mata, Dagakan Mata vda. de
Cuanas, Marcelo Mata, Severino Antolihao, Arcadio Mata Pasindo, Lucia
Mata Antolihao and Meliton Mata, filed their Manifestation with Motion (to
Comment and/or Confirm), dated 27 March 1996. They affirmed their
respective signatures on the Manifestation with Motion of 23 November 1995
and the attachments thereto and averred that they understood the contents
thereof as these were fully explained to them in the presence of the
Provincial Officer of the OSCC in Tagum, Davao. They reiterated their
prayer that they be allowed to withdraw their petition.
6. On 5 September 1996, Isidro Sembrano submitted to this Court a Joint
Affidavit of petitioners Ceelstino Mata and Ricarda Mata, dated 21 February
1996, claiming, among others, that they were deceived into signing the
amicable settlement. On 10 January 1997, Isidro Sembrano submitted a
Joint Affidavit of Rosendo Mata-Pasindo, Carmelita Mata-Pasindo, Wlfredo
Mata and Julieta Mata-Abundio, dated 9 January 1997, again claiming that
they were deceived into signing the amicable settlement. Curiously,
however, except for Julieta Mata-Abundio, the three (3) other affiants,
namely, Rosendo Mata-Pasindo, Carmelita Mata-Pasindo and Wilfredo
Mata, were not signatories to the amicable settlement.
7. On 23 June 1997, petitioners filed with the Court their Joint Affidavit,
dated 26 May 1997, reiterating their Manifestation with Motion of 23
November 1995. They manifested in the Joint Affidavit that they voluntarily
signed the amicable settlement and reiterated their prayer that they be
allowed to withdraw their petition. In support of said Joint Affidavit,
petitioners attached thereto the report of Mr. Romero A. Maing, the
Provincial Officer of the OSCC in Tagum, Davao, dated 10 February,
regarding an investigation he conducted on 3 February 1997 attended by
petitioners. Mr. Maing attested that petitioners categorically denied having
been coerced, forced or intimidated into signing the amicable
settlement. Upon Mr. Maing's query, petitioners expressed their desire to
proceed with the amicable settlement of the case.
8. Thereafter, Atty. Jimenez filed a motion, dated 25 August 1997, urging
this Court to resolve the petition. He also filed a Motion to Require Personal
Appearance of Petitioners before the OSCC to Verify their Final Stand on
the Petition, dated 29 September 1997. In said motion, Atty. Jimenez
admitted that he had only been in contact with the attorney-in-fact of
petitioners and never with petitioners themselves.
9. Private respondents then filed a Motion to Dismiss Petition, dated 10
September 1997. Petitioners likewise filed an Opposition to Motion to
Resolve Petition Filed by attorney Rodolfo U. Jimenez as Counsel for
Petitioners, dated 1 October 1997. In said opposition, signed by all the
petitioners themselves, they reiterated that the amicable settlement of 23
November 1995 was their own free and voluntary act. They explained that
although it was written in English, the contents thereof were translated and
fully explained to them in the dialect known to and understood by them. With
regard to their relationship to Attorney Jimenez, petitioners denied that they
personally engaged him to represent them in this case. It was allegedly only
82 | S a l e s & L e a s e H W # 3
Isidro Sembrano, acting on his own, who engaged Atty. Jimenez legal
services. At any rate, having terminated the same on 23 November 1995,
petitioners claimed that Atty. Jimenez no longer had any authority to
represent them in the case. Petitioners reiterated their prayer that they be
allowed to withdraw their petition. The Provincial Officer of the OSCC in
Tagum, Davao issued a Certification, dated 3 October 1997, attesting that
the contents of said opposition were fully explained to petitioners in their
dialect.
10. In a resolution, dated 10 December 1997, the Court required Atty.
Jimenez to file his comment on said opposition. In compliance therewith,
Atty. Jimenez averred in his comment, dated 5 February 1998, that he is
merely protecting the interests of petitioners and urged this Court to resolve
the case on the merits. A few months later, said counsel filed the Motion for
Leave to File Attached Joint Affidavit of Some of the Petitioners, dated 1
June 1998. The Joint Affidavit, dated 20 March 1998, purportedly executed
by six (6) affiants, namely, Arcadio M. Pasindo, Julieta M. Abundio,
Celestino Mata, Clarita M. Pasindo, Marcelo Mata and Ricarda vda. de
Ayonan, averred that they are retracting their statements contained in the
Manifestation with Motion, dated 23 November 1995, and its attachments,
and in the Opposition to Motion to Resolve Petition Filed by Atty. Rodolfo
Jimenez as counsel for petitioners, dated 1 October 1997.
11. The affiants in said Joint Affidavit claimed that they were deceived into
signing and/or affixing their thumbmarks on the said pleadings and
documents. They stated that they are no longer withdrawing their petition
and urged the Court to resolve it on the merits. A careful perusal of the said
Joint Affidavit shows that petitioners Marcelo Mata and Ricarda vda. de
Ayonan did not personally affix their respective signatures thereon. Rather,
two (2) other persons signed above their names although it does not appear
that they had been duly authorized by petitioners Marcelo Mata and Ricarda
vda. de Ayonan to do so.
12. Petitioners thereafter filed their Opposition, dated 4 November 1998, to
Atty. Jimenez Motion to Resolve petition. Attached to the said opposition is a
Clarificatory Affidavit, dated 26 August 1998, executed by the petitioners
except Celestino Mata and Clarita Mata Pasindo, who did not affix their
respective signatures thereon. In said affidavit, affiants accused Isidro
Sembrano and Atty. Manuel Iral, Chief of the Legal Division of the Central
Office of the OSCC of having conspired with each other and deceived some
of the petitioners into signing the Joint Affidavit, dated 20 March 1998, and
retracting their statements in the Manifestation with Motion, dated 23
November 1995. Affiants affirmed that they voluntarily signed said
Manifestation with Motion and its attached documents including the amicable
settlement. They likewise maintained that Isidro Sembrano is no longer
authorized to act on their behalf and that Atty. Jimenez no longer had any
authority to represent them in this case.Petitioners once again sought this
Court's approval of their amicable settlement.
13. On 1 March 1999, Atty. Jimenez submitted to this Court an Investigation
Report, dated 14 January 1999, purportedly prepared by Atty. Iral in his
capacity as Chief of the Legal Division of the present National Commission
VILLAR
on Indigenous People. Attached to the report were the Panunumpa, both
dated 11 January 1999, of petitioners Celestino Mata and Clarita Mata-
Pasindo. These affiants affirmed the retraction of their signatures on the
Manifestation with Motion, dated 23 November 1995, claiming that they did
not understand its contents. They likewise affirmed the appointment of Isidro
Sembrano and Atty. Jimenez as their attorney-in-fact and counsel,
respectively.
Given the dizzying and seeemingly interminable equivocation in the stance
of the petitioners vis--vis the proposed amicable settlement of 23 November
1995, we are constrained to disregard the same and proceed with the
resolution of the case on the merits.
I
As stated earlier, in their Motion for Reconsideration and Memorandum,
petitioners harp on the alleged nullity of the deed of sale executed between
Mata and Laureta in 1945 on the ground that it was written in English, a
language not understood by the former, and that it was not approved by the
OSCC in violation of Section 4(n), Republic Act No. 1888, as amended, in
relation to Section 120 of the Public Land Act. The issue of the validity or
nullity of the aforesaid deed of sale, however, had already been passed
upon by this Court in the case of Caram, Jr. vs. Laureta,[5] the first case
decided at length by this Court involving the subject property. Previously,
another petition filed by Mata questioning the decision of the CA which
upheld the sale of the subject property to Laureta was dismissed by this
Court on 24 February 1981.
In the Caram case, the issue raised was which sale was valid considering
that Mata sold the same property twice: first to Laureta and later on to
Caram. We upheld therein the validity of the sale in favor of Laureta as we
affirmed the findings of the lower court to the effect that while the sale to
Laureta was voidable, as it was procured by force, the same "was cured
when, after the lapse of four years from the time the intimidation ceased,
Marcos Mata lost both his rights to file an action for annulment or set up the
nullity of the contract as a defense in an action to enforce the same."[6] We
stated therein that "the first sale in favor of Laureta prevails over the sale in
favor of Caram."[7] This pronouncement cannot be construed in any other
way but that the Court affirmed the validity of the sale of the subject property
in favor of Laureta as against the sale of the same to Caram, which we
categorically declared as void.
Then again, in the case of Heirs of Claro L. Laureta vs. Intermediate
Appellate Court,[8] this Court ordered the dismissal of Civil Case No. 1071
filed by petitioners. It must be noted that in their complaint therein,
petitioners also raised the issue of the nullity of the deed of sale executed
between Mata and Laureta on the ground that, among others, it had not
been approved by the then Secretary of Agriculture and Natural Resources
as required by law. Thus, by ordering the dismissal of Civil Case No. 1071,
we, in effect, upheld anew the validity of the sale of the subject property in
favor of Laureta.In the said decision, we likewise allowed private
respondents to proceed with the execution of the judgment in Civil Case No.
3083 as the same was not yet time-barred.
83 | S a l e s & L e a s e H W # 3
The foregoing rulings in the earlier related cases, which had long attained
finality, upholding the validity of the sale of the subject property in favor of
Laureta effectively foreclose any further inquiry as to its validity. This is in
consonance with the doctrine of res judicata as embodied in Rule 39,
Section 47 of the Rules of Court:
"Sec. 47. Effect of judgments or final orders. The effect of a judgment or final
order rendered by a court of the Philippines, having jurisdiction to pronounce
the judgment or final order, may be as follows:
(a) x x x
(b) In other cases, the judgment or final order is, with respect to the matter
directly adjudged or as to any other matter that could have been raised in
relation thereto, conclusive between the parties and their successors in
interest by title subsequent to the commencement of the action or special
proceeding, litigating for the same thing and under the same title and in the
same capacity: and
(c) In any other litigation between the same parties or their successors in
interest, that only is deemed to have been adjudged in a former judgment or
final order which appears upon its face to have been so adjudged , or which
was actually and necessarily included therein or necessary thereto."
The doctrine of res judicata actually embraces two (2) concepts: the first is
"bar by prior judgment" under paragraph (b) of Rule 39, Section 47, and the
second is "conclusiveness of judgment" under paragraph (c) thereof.[9] In the
present case, the second concept conclusiveness of judgment applies. The
said concept is explained in this manner:
"[A] fact or question which was in issue in a former suit and was there
judicially passed upon and determined by a court of competent jurisdiction,
is conclusively settled by the judgment therein as far as the parties to that
action and persons in privity with them are concerned and cannot be again
litigated in any future action between such parties or their privies, in the
same court or any other court of concurrent jurisdiction on either the same or
different cause of action, while the judgment remains unreversed by proper
authority. It has been held that in order that a judgment in one action can be
conclusion as to a particular matter in another action between the same
parties or their privies, it is essential that the issue be identical. If a particular
point or question is in issue in the second action, and the judgment will
depend on the determination of that particular point or question, a former
judgment between the same parties or their privies will be final and
conclusive in the second if that same point or question was in issue and
adjudicated in the first suit. x x x."[10]
Although the action instituted by petitioners in the lower court in this case
(action for reconveyance) is different from the actions they instituted in the
earlier cases, the concept of conclusiveness of judgment still applies
because under this principle "the identity of causes of action is not required
but merely identity of issues."[11]
Simply put, conclusiveness of judgment bars the relitigation of particular
facts or issues in another litigation between the same parties on a different
claim or cause of action. In Lopez vs. Reyes,[12]  weexpounded on the
concept of conclusiveness of judgment as follows:
VILLAR
"The general rule precluding the relitigation of material facts or
questions which were in issue and adjudicated in former action are
commonly applied to all matters essentially connected with the subject
matter of litigation. Thus it extends to questions necessarily involved
in an issue, and necessarily adjudicated, or necessarily implied in the
final judgment, although no specific finding may have been made in
reference thereto, and although such matters were directly referred to in
the pleadings and were not actually or formally presented. Under this rule, if
the record of the former trial shows that the judgment could not have
been rendered without deciding the particular matter, it will be
considered as having settled that matter as to all future actions
between the parties, and if a judgment necessarily presupposes certain
premises, they are as conclusive as the judgment itself. Reasons for the
rule are that a judgment is an adjudication on all the matters which are
essential to support it, and that every proposition assumed or decided by the
court leading up to the final conclusion and upon which such conclusion is
based is as effectually passed upon as the ultimate question which is
solved."[13]
There is no question that the issue of the validity or nullity of the sale of the
subject property in favor of Laureta had already been passed upon by this
Court in Caram, where we categorically pronounced that the sale in favor of
Laureta prevails over that of Caram, which we declared void, and in Laureta,
where we stated that private respondents may still validly proceed with the
execution of the decision in Civil Case No. 3083. Caram became final and
executory on 12 February 1982 while Laureta on 5 July 1990. Applying the
rule on conclusiveness of judgment, the matter may no longer be relitigated
in this case.
As held in Legarda vs. Savellano[14]
"It is a general rule common to all civilized system of jurisprudence, that the
solemn and deliberate sentence of the law, pronounced by its appointed
organs, upon a disputed fact or a state of facts, should be regarded as a
final and conclusive determination of the question litigated, and should
forever set the controversy at rest. Indeed, it has been well said that this
maxim is more than a mere rule of law, more than an important principle of
public policy: and that it is not too much to say that it is a fundamental
concept in the organization of the jural sytem. Public policy and sound
practice demand that, at the risk of occasional errors, judgments of courts
should become final at some definite date fixed by law. The very object for
which courts were constituted was to put an end to controversies."[15]
II
The next issue is whether or not petitioners can still validly exercise their
right to repurchase the subject property pursuant to Section 119 of the
Public Land Act:
"Sec. 119. Every conveyance of land acquired under the free patent or
homestead provisions, when proper, shall be subject to repurchase by the
applicant, his widow, or legal heirs, within a period of five (5) years from date
of conveyance,"
84 | S a l e s & L e a s e H W # 3 VILLAR

The term "conveyance" imports the transfer of legal title from one person to merits thereon would serve no other purpose and would only result in
another. It usually takes place upon the execution of the deed purporting to needless delay.
transfer the ownership of the land as the same is already valid and binding Indeed, this controversy has already dragged on for more than half a
against the parties thereto even without the act of registration. The century, it is, thus, high time that we write finis to it.
registration is intended to protect the buyer against claims of third parties "x x x (L)itigations must end and terminate sometime and somewhere, it
against subsequent alienations by the vendor, and is certainly not necessary being essential to the effective administration of justice that once judgment
to give effect, as between the parties, to their deed of sale. Thus, for the has become final, the winning party be not, through a mere subterfuge,
purpose of reckoning the five-year period to exercise the right to repurchase, deprived of the fruits of the verdict. Hence, courts must guard themselves
the date of conveyance is construed to refer to the date of the execution of against any scheme to bring about that result, for constituted a they are to
the deed transferring the ownership of the land to the buyer.[16] put an end to controversies, they should frown upon any attempt to prolong
In this case, Mata conveyed the ownership of the subject property to Laureta it. Public policy and sound practice demand that at the risk of occasional
by virtue of a Deed of Absolute Sale, dated 10 June 1945. Petitioners, as errors, judgments of courts should become final and irrevocable at some
heirs of Marcos Mata, filed the action for reconveyance (Civil Case No. definite date fixed by law. Interes rei publicae ut finis sit litium. xxx."[19]
2468) on 24 November 1990. From this date up to the time of the filing of the WHEREFORE, premises considered, the petition is hereby DENIED and the
action for reconveyance, more than forty-five (45) years had lapsed. Clearly, assailed decision of the respondent Court of Appeals is AFFIRMED.
petitioners right to redeem the subject property had already prescribed by SO ORDERED.
the time they went to court. As correctly pointed out by the CA, if the five- Davide, Jr., C.J., (Chairman), Puno, Pardo,  and  Ynares-Santiago,
year period to repurchase were to be reckoned from 12 February 1982, the JJ.,  concur.
date of finality of our decision in the Caram case[17] where we declared that
the sale in favor of Laureta prevails over that in favor of Caram, prescription
of the right to repurchase had set in.
The same conclusion would obtain even if the running of the five-year period
were to start from 9 May 1985, when Transfer Certificate of Title No. T-
46346 covering the subject property was issued in favor Laureta after the
sale in his favor was approved by the Minister of Natural Resources in
accordance with the decision in Civil Case No. 3083, petitioners action to
repurchase the subject property would still be time-barred, as more than five
(5) years had already lapsed.
Petitioners further argue that the five-year period should be reckoned from
September 1990, when the decision of this Court in Laureta[18]  allegedly
became final and executory. Petitioners maintain that prior to the said date,
they could not exercise their right to repurchase since the issue of its
ownership was still then under litigation. This contention is without merit. As
earlier discussed, the act of conveyance within the meaning of the Section
119 of the Public Land Act had already been made long before the finality of
our decision in Laureta. At any rate, said case resolved an entirely different
issue, i.e., whether or not private respondents motion for execution of the
judgment in Civil Case No. 3083 was time-barred. Accordingly, the CA
correctly ordered the dismissal of petitioners action for reconveyance on
ground of prescription.
III
With respect to the procedural issue raised by petitioners, i.e., whether the
CA erred in granting private respondents petition for injunction as it had
allegedly the effect of disposing the case without trial on the merits, suffice it
to say that since private respondents right to injunctive relief was clear, the
CA properly granted the same. The CA, likewise, correctly ordered the
dismissal of Civil Case No. 2468 as the records of the case clearly showed
that petitioners right to repurchase had already prescribed. A trial on the