G.R. No. 133879 November 21, 2001 EQUATORIAL REALTY DEVELOPMENT, INC., petitioner, vs. MAYFAIR THEATER, INC.

, respondent. PANGANIBAN, J.: General propositions do not decide specific cases. Rather, laws are interpreted in the context of the peculiar factual situation of each proceeding. Each case has its own flesh and blood and cannot be ruled upon on the basis of isolated clinical classroom principles. While we agree with the general proposition that a contract of sale is valid until rescinded, it is equally true that ownership of the thing sold is not acquired by mere agreement, but by tradition or delivery. The peculiar facts of the present controversy as found by this Court in an earlier relevant Decision show that delivery was not actually effected; in fact, it was prevented by a legally effective impediment. Not having been the owner, petitioner cannot be entitled to the civil fruits of ownership like rentals of the thing sold. Furthermore, petitioner's bad faith, as again demonstrated by the specific factual milieu of said Decision, bars the grant of such benefits. Otherwise, bad faith would be rewarded instead of punished. The Case Filed before this Court is a Petition for Review 1 under Rule 45 of the Rules of Court, challenging the March 11, 1998 Order2 of the Regional Trial Court of Manila (RTC), Branch 8, in Civil Case No. 97-85141. The dispositive portion of the assailed Order reads as follows: "WHEREFORE, the motion to dismiss filed by defendant Mayfair is hereby GRANTED, and the complaint filed by plaintiff Equatorial is hereby DISMISSED." 3 Also questioned is the May 29, 1998 RTC Order4 denying petitioner's Motion for Reconsideration. The Facts The main factual antecedents of the present Petition are matters of record, because it arose out of an earlier case decided by this Court on November 21, 1996, entitled Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.5 (henceforth referred to as the "mother case"), docketed as G.R No. 106063. Carmelo & Bauermann, Inc. ("Camelo" ) used to own a parcel of land, together with two 2storey buildings constructed thereon, located at Claro M. Recto Avenue, Manila, and covered by TCT No. 18529 issued in its name by the Register of Deeds of Manila. On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater Inc. ("Mayfair") for a period of 20 years. The lease covered a portion of the second floor and mezzanine of a two-storey building with about 1,610 square meters of floor area, which respondent used as a movie house known as Maxim Theater. Two years later, on March 31, 1969, Mayfair entered into a second Contract of Lease with Carmelo for the lease of another portion of the latter's property namely, a part of the second floor of the two-storey building, with a floor area of about 1,064 square meters; and two store spaces on the ground floor and the mezzanine, with a combined floor area of about 300 square meters. In that space, Mayfair put up another movie house known as Miramar Theater. The Contract of Lease was likewise for a period of 20 years.

Both leases contained a provision granting Mayfair a right of first refusal to purchase the subject properties. However, on July 30, 1978 within the 20-year-lease term the subject properties were sold by Carmelo to Equatorial Realty Development, Inc. ("Equatorial") for the total sum of P11,300,000, without their first being offered to Mayfair. As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint before the Regional Trial Court of Manila (Branch 7) for (a) the annulment of the Deed of Absolute Sale between Carmelo and Equatorial, (b) specific performance, and (c) damages. After trial on the merits, the lower court rendered a Decision in favor of Carmelo and Equatorial. This case, entitled "Mayfair" Theater, Inc. v. Carmelo and Bauermann, Inc., et al.," was docketed as Civil Case No. 118019. On appeal (docketed as CA-GR CV No. 32918), the Court of Appeals (CA) completely reversed and set aside the judgment of the lower court. The controversy reached this Court via G.R No. 106063. In this mother case, it denied the Petition for Review in this wise: "WHEREFORE, the petition for review of the decision of the Court of Appeals, dated June 23, 1992, in CA-G.R. CV No. 32918, is HEREBY DENIED. The Deed of Absolute Sale between petitioners Equatorial Realty Development, Inc. and Carmelo & Bauermann, Inc. is hereby deemed rescinded; Carmelo & Bauermann is ordered to return to petitioner Equatorial Realty Development the purchase price. The latter is directed to execute the deeds and documents necessary to return ownership to Carmelo & Bauermann of the disputed lots. Carmelo & Bauermann is ordered to allow Mayfair Theater, Inc. to buy the aforesaid lots for P11,300,000.00." 6 The foregoing Decision of this Court became final and executory on March 17, 1997. On April 25, 1997, Mayfair filed a Motion for Execution, which the trial court granted. However, Carmelo could no longer be located. Thus, following the order of execution of the trial court, Mayfair deposited with the clerk of court a quo its payment to Carmelo in the sum of P11,300,000 less; P847,000 as withholding tax. The lower court issued a Deed of Reconveyance in favor of Carmelo and a Deed of Sale in favor of Mayfair. On the basis of these documents, the Registry of Deeds of Manila canceled Equatorial's titles and issued new Certificates of Title7 in the name of Mayfair. Ruling on Equatorial's Petition for Certiorari and Petition contesting the foregoing manner of execution, the CA in its Resolution of November 20, 1998, explained that Mayfair had no right to deduct the P847,000 as withholding tax. Since Carmelo could no longer be located, the appellate court ordered Mayfair to deposit the said sum with the Office of the Clerk of Court, Manila, to complete the full amount of P11,300,000 to be turned over to Equatorial. Equatorial questioned the legality of the above CA ruling before this Court in G.R No. 136221 entitled "Equatorial Realty Development, Inc. v. Mayfair Theater, Inc ." In a Decision promulgated on May 12, 2000,8 this Court directed the trial court to follow strictly the Decision in GR. No. 106063, the mother case. It explained its ruling in these words: "We agree that Carmelo and Bauermann is obliged to return the entire amount of eleven million three hundred thousand pesos (P11,300,000.00) to Equatorial. On the other hand, Mayfair may not deduct from the purchase price the amount of eight hundred forty-seven thousand pesos (P847,000.00) as withholding tax. The duty to withhold taxes due, if any, is imposed on the seller Carmelo and Bauermann, Inc."9

Meanwhile, on September 18, 1997 barely five months after Mayfair had submitted its Motion for Execution before the RTC of Manila, Branch 7 Equatorial filed with the Regional Trial Court of Manila, Branch 8, an action for the collection of a sum of money against Mayfair, claiming payment of rentals or reasonable compensation for the defendant's use of the subject premises after its lease contracts had expired. This action was the progenitor of the present case. In its Complaint, Equatorial alleged among other things that the Lease Contract covering the premises occupied by Maxim Theater expired on May 31, 1987, while the Lease Contract covering the premises occupied by Miramar Theater lapsed on March 31, 1989.10 Representing itself as the owner of the subject premises by reason of the Contract of Sale on July 30, 1978, it claimed rentals arising from Mayfair's occupation thereof. Ruling of the RTC Manila, Branch 8 As earlier stated, the trial court dismissed the Complaint via the herein assailed Order and denied the Motion for Reconsideration filed by Equatorial. 11 The lower court debunked the claim of petitioner for unpaid back rentals, holding that the rescission of the Deed of Absolute Sale in the mother case did not confer on Equatorial any vested or residual proprietary rights, even in expectancy. In granting the Motion to Dismiss, the court a quo held that the critical issue was whether Equatorial was the owner of the subject property and could thus enjoy the fruits or rentals therefrom. It declared the rescinded Deed of Absolute Sale as avoid at its inception as though it did not happen." The trial court ratiocinated as follows: "The meaning of rescind in the aforequoted decision is to set aside. In the case of Ocampo v. Court of Appeals, G.R. No. 97442, June 30, 1994, the Supreme Court held that, 'to rescind is to declare a contract void in its inception and to put an end as though it never were. It is not merely to terminate it and release parties from further obligations to each other but to abrogate it from the beginning and restore parties to relative positions which they would have occupied had no contract ever been made.' "Relative to the foregoing definition, the Deed of Absolute Sale between Equatorial and Carmelo dated July 31, 1978 is void at its inception as though it did not happen. "The argument of Equatorial that this complaint for back rentals as 'reasonable compensation for use of the subject property after expiration of the lease contracts presumes that the Deed of Absolute Sale dated July 30, 1978 from whence the fountain of Equatorial's all rights flows is still valid and existing. xxx xxx xxx

The trial court added: "The Supreme Court in the Equatorial case, G.R No. 106063, has categorically stated that the Deed of Absolute Sale dated July 31, 1978 has been rescinded subjecting the present complaint to res judicata."13 Hence, the present recourse.14 Issues Petitioner submits, for the consideration of this Court, the following issues: 15 "A The basis of the dismissal of the Complaint by the Regional Trial Court not only disregards basic concepts and principles in the law on contracts and in civil law, especially those on rescission and its corresponding legal effects, but also ignores the dispositive portion of the Decision of the Supreme Court in G.R. No. 106063 entitled 'Equatorial Realty Development, Inc. & Carmelo & Bauermann, Inc. vs. Mayfair Theater, Inc.' "B. The Regional Trial Court erred in holding that the Deed of Absolute Sale in favor of petitioner by Carmelo & Bauermann, Inc., dated July 31, 1978, over the premises used and occupied by respondent, having been 'deemed rescinded' by the Supreme Court in G.R. No. 106063, is 'void at its inception as though it did not happen.' "C. The Regional Trial Court likewise erred in holding that the aforesaid Deed of Absolute Sale, dated July 31, 1978, having been 'deemed rescinded' by the Supreme Court in G.R. No. 106063, petitioner 'is not the owner and does not have any right to demand backrentals from the subject property,' and that the rescission of the Deed of Absolute Sale by the Supreme Court does not confer to petitioner 'any vested right nor any residual proprietary rights even in expectancy.' "D. The issue upon which the Regional Trial Court dismissed the civil case, as stated in its Order of March 11, 1998, was not raised by respondent in its Motion to Dismiss. "E. The sole ground upon which the Regional Trial Court dismissed Civil Case No. 9785141 is not one of the grounds of a Motion to Dismiss under Sec. 1 of Rule 16 of the 1997 Rules of Civil Procedure." Basically, the issues can be summarized into two: (1) the substantive issue of whether Equatorial is entitled to back rentals; and (2) the procedural issue of whether the court a quo's dismissal of Civil Case No. 97-85141 was based on one of the grounds raised by respondent in its Motion to Dismiss and covered by Rule 16 of the Rules of Court. This Court's Ruling The Petition is not meritorious. First Issue: Ownership of Subject Properties We hold that under the peculiar facts and circumstances of the case at bar , as found by this Court en banc in its Decision promulgated in 1996 in the mother case, no right of ownership was transferred from Carmelo to Equatorial in view of a patent failure to deliver the property to the buyer. Rental a Civil Fruit of Ownership

"The subject Deed of Absolute Sale having been rescinded by the Supreme Court, Equatorial is not the owner and does not have any right to demand backrentals from the subject property. . .12

To better understand the peculiarity of the instant case, let us begin with some basic parameters. Rent is a civil fruit16 that belongs to the owner of the property producing it 17 by right of accession.18 Consequently and ordinarily, the rentals that fell due from the time of the perfection of the sale to petitioner until its rescission by final judgment should belong to the owner of the property during that period. By a contract of sale, "one of the contracting parties obligates himself to transfer ownership of and to deliver a determinate thing and the other to pay therefor a price certain in money or its equivalent."19 Ownership of the thing sold is a real right,20 which the buyer acquires only upon delivery of the thing 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."21 This right is transferred, not merely by contract, but also by tradition or delivery.22 Non nudis pactis sed traditione dominia rerum transferantur . And there is said to be delivery if and when the thing sold "is placed in the control and possession of the vendee."23 Thus, it has been held that while the execution of a public instrument of sale is recognized by law as equivalent to the delivery of the thing sold, 24 such constructive or symbolic delivery, being merely presumptive, is deemed negated by the failure of the vendee to take actual possession of the land sold.25 Delivery has been described as a composite act, a thing in which both parties must join and the minds of both parties concur. It is an act by which one party parts with the title to and the possession of the property, and the other acquires the right to and the possession of the same. In its natural sense, delivery means something in addition to the delivery of property or title; it means transfer of possession.26 In the Law on Sales, delivery may be either actual or constructive, but both forms of delivery contemplate "the absolute giving up of the control and custody of the property on the part of the vendor, and the assumption of the same by the vendee."27 Possession Never Acquired by Petitioner Let us now apply the foregoing discussion to the present issue. From the peculiar facts of this case, it is clear that petitioner never took actual control and possession of the property sold, in view of respondent's timely objection to the sale and the continued actual possession of the property. The objection took the form of a court action impugning the sale which, as we know, was rescinded by a judgment rendered by this Court in the mother case. It has been held that the execution of a contract of sale as a form of constructive delivery is a legal fiction. It holds true only when there is no impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. 28 When there is such impediment, "fiction yields to reality the delivery has not been effected." 29 Hence, respondent's opposition to the transfer of the property by way of sale to Equatorial was a legally sufficient impediment that effectively prevented the passing of the property into the latter's hands. This was the same impediment contemplated in Vda. de Sarmiento v. Lesaca,30 in which the Court held as follows: "The question that now arises is: Is there any stipulation in the sale in question from which we can infer that the vendor did not intend to deliver outright the possession of the lands to the vendee? We find none. On the contrary, it can be clearly seen therein that the vendor intended to place the vendee in actual possession of the lands immediately as can be inferred from the stipulation that the vendee 'takes actual possession thereof . . . with full rights to dispose, enjoy and

make use thereof in such manner and form as would be most advantageous to herself.' The possession referred to in the contract evidently refers to actual possession and not merely symbolical inferable from the mere execution of the document. "Has the vendor complied with this express commitment? she did not. As provided in Article 1462, the thing sold shall be deemed delivered when the vendee is placed in the control and possession thereof, which situation does not here obtain because from the execution of the sale up to the present the vendee was never able to take possession of the lands due to the insistent refusal of Martin Deloso to surrender them claiming ownership thereof. And although it is postulated in the same article that the execution of a public document is equivalent to delivery, this legal fiction only holds true when there is no impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. x x x." 31 The execution of a public instrument gives rise, therefore, only to a prima facie presumption of delivery. Such presumption is destroyed when the instrument itself expresses or implies that delivery was not intended; or when by other means it is shown that such delivery was not effected, because a third person was actually in possession of the thing . In the latter case, the sale cannot be considered consummated. However, the point may be raised that under Article 1164 of the Civil Code, Equatorial as buyer acquired a right to the fruits of the thing sold from the time the obligation to deliver the property to petitioner arose.32 That time arose upon the perfection of the Contract of Sale on July 30, 1978, from which moment the laws provide that the parties to a sale may reciprocally demand performance.33 Does this mean that despite the judgment rescinding the sale, the right to the fruits34 belonged to, and remained enforceable by, Equatorial? Article 1385 of the Civil Code answers this question in the negative, because "[r]escission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; x x x" Not only the land and building sold, but also the rental payments paid, if any, had to be returned by the buyer . Another point. The Decision in the mother case stated that "Equatorial x x x has received rents" from Mayfair "during all the years that this controversy has been litigated." The Separate Opinion of Justice Teodoro Padilla in the mother case also said that Equatorial was "deriving rental income" from the disputed property. Even herein ponente's Separate Concurring Opinion in the mother case recognized these rentals. The question now is: Do all these statements concede actual delivery? The answer is "No." The fact that Mayfair paid rentals to Equatorial during the litigation should not be interpreted to mean either actual delivery or ipso facto recognition of Equatorial's title. The CA Records of the mother case 35 show that Equatorial as alleged buyer of the disputed properties and as alleged successor-in-interest of Carmelo's rights as lessor submitted two ejectment suits against Mayfair. Filed in the Metropolitan Trial Court of Manila, the first was docketed as Civil Case No. 121570 on July 9, 1987; and the second, as Civil Case No. 131944 on May 28, 1990. Mayfair eventually won them both. However, to be able to maintain physical possession of the premises while awaiting the outcome of the mother case, it had no choice but to pay the rentals. The rental payments made by Mayfair should not be construed as a recognition of Equatorial as the new owner. They were made merely to avoid imminent eviction. It is in this context that one should understand the aforequoted factual statements in the ponencia in the

mother case, as well as the Separate Opinion of Mr. Justice Padilla and the Separate Concurring Opinion of the herein ponente. At bottom, it may be conceded that, theoretically, a rescissible contract is valid until rescinded. However, thisgeneral principle is not decisive to the issue of whether Equatorial ever acquired the right to collect rentals. What is decisive is the civil law rule that ownership is acquired, not by mere agreement, but by tradition or delivery. Under the factual environment of this controversy as found by this Court in the mother case, Equatorial was never put in actual and effective control or possession of the property because of Mayfair's timely objection. As pointed out by Justice Holmes, general propositions do not decide specific cases. Rather, "laws are interpreted in the context of the peculiar factual situation of each case. Each case has its own flesh and blood and cannot be decided on the basis of isolated clinical classroom principles."36 In short, the sale to Equatorial may have been valid from inception, but it was judicially rescinded before it could be consummated. Petitioner never acquired ownership, not because the sale was void, as erroneously claimed by the trial court, but because the sale was not consummated by a legally effective delivery of the property sold. Benefits Precluded by Petitioner's Bad Faith Furthermore, assuming for the sake of argument that there was valid delivery, petitioner is not entitled to any benefits from the "rescinded" Deed of Absolute Sale because of its bad faith. This being the law of the mother case decided in 1996, it may no longer be changed because it has long become final and executory. Petitioner's bad faith is set forth in the following pertinent portions of the mother case: "First and foremost is that the petitioners acted in bad faith to render Paragraph 8 'inutile.' xxx xxx xxx

"On the part of Equatorial, it cannot be a buyer in good faith because it bought the property with notice and full knowledge that Mayfair had a right to or interest in the property superior to its own. Carmelo and Equatorial took unconscientious advantage of Mayfair."37 (Italics supplied) Thus, petitioner was and still is entitled solely to he return of the purchase price it paid to Carmelo; no more, no less. This Court has firmly ruled in the mother case that neither of them is entitled to any consideration of equity, as both "took unconscientious advantage of Mayfair."38 In the mother case, this Court categorically denied the payment of interest, a fruit of ownership. By the same token, rentals, another fruit of ownership, cannot be granted without mocking this Court's en banc Decision, which has long become final . Petitioner's claim of reasonable compensation for respondent's use and occupation of the subject property from the time the lease expired cannot be countenanced. If it suffered any loss, petitioner must bear it in silence, since it had wrought that loss upon itself. Otherwise, bad faith would be rewarded instead of punished.@lawphil.net We uphold the trial court's disposition, not for the reason it gave, but for (a) the patent failure to deliver the property and (b) petitioner's bad faith, as above discussed. Second Issue:itc-alf Ground in Motion to Dismiss Procedurally, petitioner claims that the trial court deviated from the accepted and usual course of judicial proceedings when it dismissed Civil Case No. 97-85141 on a ground not raised in respondent's Motion to Dismiss. Worse, it allegedly based its dismissal on a ground not provided for in a motion to dismiss as enunciated in the Rules of Court. @lawphil.net We are not convinced A review of respondent's Motion to Dismiss Civil Case No. 97-85141 shows that there were two grounds invoked, as follows: "(A) Plaintiff is guilty of forum-shopping.itc-alf "(B) Plaintiff's cause of action, if any, is barred by prior judgment." 39 The court a quo ruled, inter alia, that the cause of action of petitioner plaintiff in the case below) had been barred by a prior judgment of this Court in G.R No. 106063, the mother case. Although it erred in its interpretation of the said Decision when it argued that the rescinded Deed of Absolute Sale was avoid," we hold, nonetheless, that petitioner's cause of action is indeed barred by a prior judgment of this Court. As already discussed, our Decision in G.R No. 106063 shows that petitioner is not entitled to back rentals, because it never became the owner of the disputed properties due to a failure of delivery. And even assuming arguendo that there was a valid delivery, petitioner's bad faith negates its entitlement to the civil fruits of ownership, like interest and rentals.

"Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in question rescissible. We agree with respondent Appellate Court that the records bear out the fact that Equatorial was aware of the lease contracts because its lawyers had, prior to the sale, studied the said contracts. As such, Equatorial cannot tenably claim to be a purchaser in good faith, and, therefore, rescission lies. xxx xxx xxx

"As also earlier emphasized, the contract of sale between Equatorial and Carmelo is characterized bybad faith, since it was knowingly entered into in violation of the rights of and to the prejudice of Mayfair. In fact, as correctly observed by the Court of Appeals, Equatorial admitted that its lawyers had studied the contract of lease prior to the sale. Equatorial's knowledge of the stipulations therein should have cautioned it to look further into the agreement to determine if it involved stipulations that would prejudice its own interests. xxx xxx xxx

Under the doctrine of res judicata or bar by prior judgment, a matter that has been adjudicated by a court of competent jurisdiction must be deemed to have been finally and conclusively settled if it arises in any subsequent litigation between the same parties and for the same cause.40 Thus, "[a] final judgment on the merits rendered by a court of competent jurisdiction is conclusive as to the rights of the parties and their privies and constitutes an absolute bar to subsequent actions involving the same claim, demand, or cause of action."41Res judicata is based on the ground that the "party to be affected, or some other with whom he is in privity, has litigated the same matter in a former action in a court of competent jurisdiction, and should not be permitted to litigate it again. 42 It frees the parties from undergoing all over again the rigors of unnecessary suits and repetitive trials. At the same time, it prevents the clogging of court dockets. Equally important, it stabilizes rights and promotes the rule of law. @lawphil.net We find no need to repeat the foregoing disquisitions on the first issue to show satisfaction of the elements of res judicata. Suffice it to say that, clearly, our ruling in the mother case bars petitioner from claiming back rentals from respondent. Although the court a quo erred when it declared "void from inception" the Deed of Absolute Sale between Carmelo and petitioner, our foregoing discussion supports the grant of the Motion to Dismiss on the ground that our prior judgment in G.R No. 106063 has already resolved the issue of back rentals. On the basis of the evidence presented during the hearing of Mayfair's Motion to Dismiss, the trial court found that the issue of ownership of the subject property has been decided by this Court in favor of Mayfair. We quote the RTC: "The Supreme Court in the Equatorial case, G.R. No. 106063 has categorically stated that the Deed of Absolute Sale dated July 31, 1978 has been rescinded subjecting the present complaint to res judicata."43 (Emphasis in the original) Hence, the trial court decided the Motion to Dismiss on the basis of res judicata, even if it erred in interpreting the meaning of "rescinded" as equivalent to "void" In short, it ruled on the ground raised; namely, bar by prior judgment. By granting the Motion, it disposed correctly, even if its legal reason for nullifying the sale was wrong. The correct reasons are given in this Decision. WHEREFORE, the Petition is hereby DENIED. Costs against petitioner. itc-alf SO ORDERED.

G.R. No. 119745 June 20, 1997 POWER COMMERCIAL AND INDUSTRIAL CORPORATION, petitioner, vs. COURT OF APPEALS, SPOUSES REYNALDO and ANGELITA R. QUIAMBAO and PHILIPPINE NATIONAL BANK, respondents.

Commercial and Industrial Development Corporation, its successors and assigns, free from all liens and encumbrances. We hereby certify that the aforesaid property is not subject to nor covered by the provisions of the Land Reform Code the same having no agricultural lessee and/or tenant. We hereby also warrant that we are the lawful and absolute owners of the above described property, free from any lien and/or encumbrance, and we hereby agree and warrant to defend its title and peaceful possession thereof in favor of the said Power Commercial and Industrial Development Corporation, its successors and assigns, against any claims whatsoever of any and all third persons; subject, however, to the provisions hereunder provided to wit: That the above described property is mortgaged to the Philippine National Bank, Cubao, Branch, Quezon City for the amount of one hundred fortyfive thousand pesos, Philippine, evidenced by document No. 163, found on page No. 34 of Book No. XV, Series of 1979 of Notary Public Herita L. Altamirano registered with the Register of Deeds of Pasig (Makati), Rizal . . . ; That the said Power Commercial and Industrial Development Corporation assumes to pay in full the entire amount of the said mortgage above described plus interest and bank charges, to the said mortgagee bank, thus holding the herein vendor free from all claims by the said bank; That both parties herein agree to seek and secure the agreement and approval of the said Philippine National Bank to the herein sale of this property, hereby agreeing to abide by any and all requirements of the said bank, agreeing that failure to do so shall give to the bank first lieu ( sic) over the herein described property. On the same date, Mrs. C.D. Constantino, then General Manager of petitioner-corporation, submitted to PNB said deed with a formal application for assumption of mortgage. 4 On February 15, 1980, PNB informed respondent spouses that, for petitioner's failure to submit the papers necessary for approval pursuant to the former's letter dated January 15, 1980, the application for assumption of mortgage was considered withdrawn; that the outstanding balance of P145,000.00 was deemed fully due and demandable; and that said loan was to be paid in full within fifteen (15) days from notice. 5 Petitioner paid PNB P41,880.45 on June 24, 1980 and P20,283.14 on December 23, 1980, payments which were to be applied to the outstanding loan. On December 23, 1980, PNB received a letter from petitioner which reads:6 With regard to the presence of the people who are currently in physical occupancy of the (l)ot . . . it is our desire as buyers and new owners of this lot to make use of this lot for our own purpose, which is why it is our desire and intention that all the people who are currently physically present and in occupation of said lot should be removed immediately. For this purpose we respectfully request that . . . our assumption of mortgage be given favorable consideration, and that the mortgage and

PANGANIBAN, J.: Is the seller's failure to eject the lessees from a lot that is the subject of a contract of sale with assumption of mortgage a ground (1) for rescission of such contract and (2) for a return by the mortgagee of the amortization payments made by the buyer who assumed such mortgage? Petitioner posits an affirmative answer to such question in this petition for review on certiorari of the March 27, 1995 Decision 1 of the Court of Appeals, Eighth Division, in CAG.R. CV Case No. 32298 upholding the validity of the contract of sale with assumption of mortgage and absolving the mortgagee from the liability of returning the mortgage payments already made. 2 The Facts Petitioner Power Commercial & Industrial Development Corporation, an industrial asbestos manufacturer, needed a bigger office space and warehouse for its products. For this purpose, on January 31, 1979, it entered into a contract of sale with the spouses Reynaldo and Angelita R. Quiambao, herein private respondents. The contract involved a 612-sq. m. parcel of land covered by Transfer Certificate of Title No. S-6686 located at the corner of Bagtican and St. Paul Streets, San Antonio Village, Makati City. The parties agreed that petitioner would pay private respondents P108,000.00 as down payment, and the balance of P295,000.00 upon the execution of the deed of transfer of the title over the property. Further, petitioner assumed, as part of the purchase price, the existing mortgage on the land. In full satisfaction thereof, he paid P79,145.77 to Respondent Philippine National Bank ("PNB" for brevity). On June 1, 1979, respondent spouses mortgaged again said land to PNB to guarantee a loan of P145,000.00, P80,000.00 of which was paid to respondent spouses. Petitioner agreed to assume payment of the loan. On June 26, 1979, the parties executed a Deed of Absolute Sale With Assumption of Mortgage which contained the following terms and conditions: 3 That for and in consideration of the sum of Two Hundred Ninety-Five Thousand Pesos (P295,000.00) Philippine Currency, to us in hand paid in cash, and which we hereby acknowledge to be payment in full and received to our entire satisfaction, by POWER COMMERCIAL AND INDUSTRIAL DEVELOPMENT CORPORATION, a 100% Filipino Corporation, organized and existing under and by virtue of Philippine Laws with offices located at 252-C Vito Cruz Extension, we hereby by these presents SELL, TRANSFER and CONVEY by way of absolute sale the above described property with all the improvements existing thereon unto the said Power

title be transferred to our name so that we may undertake the necessary procedures to make use of this lot ourselves. It was our understanding that this lot was free and clear of problems of this nature, and that the previous owner would be responsible for the removal of the people who were there. Inasmuch as the previous owner has not been able to keep his commitment, it will be necessary for us to take legal possession of this lot inorder (sic) to take physical possession. On February 19, 1982, PNB sent petitioner a letter as follows:
7

The counterclaim of both defendants spouses Quiambao and PNB are dismissed for lack of merit. No pronouncement as to costs. SO ORDERED. On appeal by respondent-spouses and PNB, Respondent Court of Appeals reversed the trial court. In the assailed Decision, it held that the deed of sale between respondent spouses and petitioner did not obligate the former to eject the lessees from the land in question as a condition of the sale, nor was the occupation thereof by said lessees a violation of the warranty against eviction. Hence, there was no substantial breach to justify the rescission of said contract or the return of the payments made. The dispositive portion of said Decision reads: 11 WHEREFORE, the Decision appealed from is hereby REVERSED and the complaint filed by Power Commercial and Industrial Development Corporation against the spouses Reynaldo and Angelita Quiambao and the Philippine National Bank is DISMISSED. No costs. Hence, the recourse to this Court. Issues Petitioner contends that: (1) there was a substantial breach of the contract between the parties warranting rescission; and (2) there was a "mistake in payment" made by petitioner, obligating PNB to return such payments. In its Memorandum, it specifically assigns the following errors of law on the part of Respondent Court: 12 A. Respondent Court of Appeals gravely erred in failing to consider in its decision that a breach of implied warranty under Article 1547 in relation to Article 1545 of the Civil Code applies in the case-at-bar. B. Respondent Court of Appeals gravely erred in failing to consider in its decision that a mistake in payment giving rise to a situation where the principle of solutio indebiti applies is obtaining in the case-at-bar. The Court's Ruling The petition is devoid of merit. It fails to appreciate the difference between a condition and a warranty and the consequences of such distinction. Conspicuous Absence of an Imposed Condition The alleged "failure" of respondent spouses to eject the lessees from the lot in question and to deliver actual and physical possession thereof cannot be considered a substantial breach of a condition for two reasons: first, such "failure" was not stipulated as a condition whether resolutory or suspensive in the contract; and second, its effects and consequences were not specified either. 13 The provision adverted to by petitioner does not impose a condition or an obligation to eject the lessees from the lot. The deed of sale provides in part: 14

(T)his refers to the loan granted to Mr. Reynaldo Quiambao which was assumed by you on June 4, 1979 for P101,500.00. It was last renewed on December 24, 1980 to mature on June 4, 1981. A review of our records show that it has been past due from last maturity with interest arrearages amounting to P25,826.08 as of February 19, 1982. The last payment received by us was on December 24, 1980 for P20,283. 14. In order to place your account in current form, we request you to remit payments to cover interest, charges, and at least part of the principal. On March 17, 1982, petitioner filed Civil Case No. 45217 against respondent spouses for rescission and damages before the Regional Trial Court of Pasig, Branch 159. Then, in its reply to PNB's letter of February 19, 1982, petitioner demanded the return of the payments it made on the ground that its assumption of mortgage was never approved. On May 31, 1983, 8 while this case was pending, the mortgage was foreclosed. The property was subsequently bought by PNB during the public auction. Thus, an amended complaint was filed impleading PNB as party defendant. On July 12, 1990, the trial court 9 ruled that the failure of respondent spouses to deliver actual possession to petitioner entitled the latter to rescind the sale, and in view of such failure and of the denial of the latter's assumption of mortgage, PNB was obliged to return the payments made by the latter. The dispositive portion of said decision states: 10 IN VIEW OF ALL THE FOREGOING, the Court hereby renders judgment in favor of plaintiff and against defendants: (1) Declaring the rescission of the Deed of Sale with Assumption of Mortgage executed between plaintiff and defendants Spouses Quiambao, dated June 26, 1979; (2) Ordering defendants Spouses Quiambao to return to plaintiff the amount of P187,144.77 (P108,000.00 plus P79,145.77) with legal interest of 12% per annum from date of filing of herein complaint, that is, March 17, 1982 until the same is fully paid; (3) Ordering defendant PNB to return to plaintiff the amount of P62,163.59 (P41,880.45 and P20,283.14) with 12% interest thereon from date of herein judgment until the same is fully paid. No award of other damages and attorney's fees, the same not being warranted under the facts and circumstances of the case.

We hereby also warrant that we are the lawful and absolute owners of the above described property, free from any lien and/or encumbrance, and we hereby agree and warrant to defend its title and peaceful possession thereof in favor of the said Power Commercial and Industrial Development Corporation, its successors and assigns, against any claims whatsoever of any and all third persons; subject, however, to the provisions hereunder provided to wit: By his own admission, Anthony Powers, General Manager of petitioner-corporation, did not ask the corporation's lawyers to stipulate in the contract that Respondent Reynaldo was guaranteeing the ejectment of the occupants, because there was already a proviso in said deed of sale that the sellers were guaranteeing the peaceful possession by the buyer of the land in question. 15 Any obscurity in a contract, if the above-quoted provision can be so described, must be construed against the party who caused it. 16 Petitioner itself caused the obscurity because it omitted this alleged condition when its lawyer drafted said contract. If the parties intended to impose on respondent spouses the obligation to eject the tenants from the lot sold, it should have included in the contract a provision similar to that referred to in Romero vs. Court of Appeals, 17where the ejectment of the occupants of the lot sold by private respondent was the operative act which set into motion the period of petitioner's compliance with his own obligation, i.e., to pay the balance of the purchase price. Failure to remove the squatters within the stipulated period gave the other party the right to either refuse to proceed with the agreement or to waive that condition of ejectment in consonance with Article 1545 of the Civil Code. In the case cited, the contract specifically stipulated that the ejectment was a condition to be fulfilled; otherwise, the obligation to pay the balance would not arise. This is not so in the case at bar. Absent a stipulation therefor, we cannot say that the parties intended to make its nonfulfillment a ground for rescission. If they did intend this, their contract should have expressly stipulated so. In Ang vs. C.A., 18rescission was sought on the ground that the petitioners had failed to fulfill their obligation "to remove and clear" the lot sold, the performance of which would have given rise to the payment of the consideration by private respondent. Rescission was not allowed, however, because the breach was not substantial and fundamental to the fulfillment by the petitioners of the obligation to sell. As stated, the provision adverted to in the contract pertains to the usual warranty against eviction, and not to a condition that was not met. The terms of the contract are so clear as to leave no room for any other interpretation.
19

transfer of property by mere consent. 21 The Civil Code provides that delivery can either be (1) actual (Article 1497) or (2) constructive (Articles 1498-1501). Symbolic delivery (Article 1498), as a species of constructive delivery, effects the transfer of ownership through the execution of a public document. Its efficacy can, however, be prevented if the vendor does not possess control over the thing sold, 22 in which case this legal fiction must yield to reality. The key word is control, not possession, of the land as petitioner would like us to believe. The Court has consistently held that: 23 . . . (I)n 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 . . . 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. Considering that the deed of sale between the parties did not stipulate or infer otherwise, delivery was effected through the execution of said deed. The lot sold had been placed under the control of petitioner; thus, the filing of the ejectment suit was subsequently done. It signified that its new owner intended to obtain for itself and to terminate said occupants' actual possession thereof. Prior physical delivery or possession is not legally required and the execution of the deed of sale is deemed equivalent to delivery. 24 This deed operates as a formal or symbolic delivery of the property sold and authorizes the buyer to use the document as proof of ownership. Nothing more is required. Requisites of Breach of Warranty Against Eviction Obvious to us in the ambivalent stance of petitioner is its failure to establish any breach of the warranty against eviction. Despite its protestation that its acquisition of the lot was to enable it to set up a warehouse for its asbestos products and that failure to deliver actual possession thereof defeated this purpose, still no breach of warranty against eviction can be appreciated because the facts of the case do not show that the requisites for such breach have been satisfied. A breach of this warranty requires the concurrence of the following circumstances: (1) The purchaser has been deprived of the whole or part of the thing sold; (2) This eviction is by a final judgment; (3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and (4) The vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee. 25 In the absence of these requisites, a breach of the warranty against eviction under Article 1547 cannot be declared.

Furthermore, petitioner was well aware of the presence of the tenants at the time it entered into the sales transaction. As testified to by Reynaldo, 20 petitioner's counsel during the sales negotiation even undertook the job of ejecting the squatters. In fact, petitioner actually filed suit to eject the occupants. Finally, petitioner in its letter to PNB of December 23, 1980 admitted that it was the "buyer(s) and new owner(s) of this lot." Effective Symbolic Delivery The Court disagrees with petitioner's allegation that the respondent spouses failed to deliver the lot sold. Petitioner asserts that the legal fiction of symbolic delivery yielded to the truth that, at the execution of the deed of sale, transfer of possession of said lot was impossible due to the presence of occupants on the lot sold. We find this misleading. Although most authorities consider transfer of ownership as the primary purpose of sale, delivery remains an indispensable requisite as our law does not admit the doctrine of

Petitioner argues in its memorandum that it has not yet ejected the occupants of said lot, and not that it has been evicted therefrom. As correctly pointed out by Respondent Court, the presence of lessees does not constitute an encumbrance of the land, 26 nor does it deprive petitioner of its control thereof. We note, however, that petitioner's deprivation of ownership and control finally occurred when it failed and/or discontinued paying the amortizations on the mortgage, causing the lot to be foreclosed and sold at public auction. But this deprivation is due to petitioner's fault, and not to any act attributable to the vendor-spouses. Because petitioner failed to impugn its integrity, the contract is presumed, under the law, to be valid and subsisting. Absence of Mistake In Payment Contrary to the contention of petitioner that a return of the payments it made to PNB is warranted under Article 2154 of the Code, solutio indebiti does not apply in this case. This doctrine applies where: (1) a payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment, and (2) the payment is made through mistake, and not through liberality or some other cause. 27 In this case, petitioner was under obligation to pay the amortizations on the mortgage under the contract of sale and the deed of real estate mortgage. Under the deed of sale (Exh. "2"), 28 both parties agreed to abide by any and all the requirements of PNB in connection with the real estate mortgage. Petitioner was aware that the deed of mortgage (Exh. "C") made it solidarily and, therefore, primarily 29 liable for the mortgage obligation: 30 (e) The Mortgagor shall neither lease the mortgaged property. . . nor sell or dispose of the same in any manner, without the written consent of the Mortgagee. However, if not withstanding this stipulation and during the existence of this mortgage, the property herein mortgaged, or any portion thereof, is . . . sold, it shall be the obligation of the Mortgagor to impose as a condition of the sale, alienation or encumbrance that the vendee, or the party in whose favor the alienation or encumbrance is to be made, should take the property subject to the obligation of this mortgage in the same terms and condition under which it is constituted, it being understood that the Mortgagor is not in any manner relieved of his obligation to the Mortgagee under this mortgage by such sale, alienation or encumbrance; on the contrary both the vendor and the vendee, or the party in whose favor the alienation or encumbrance is made shall be jointly and severally liable for said mortgage obligations. . . . Therefore, it cannot be said that it did not have a duty to pay to PNB the amortization on the mortgage. Also, petitioner insists that its payment of the amortization was a mistake because PNB disapproved its assumption of mortgage after it failed to submit the necessary papers for the approval of such assumption. But even if petitioner was a third party in regard to the mortgage of the land purchased, the payment of the loan by petitioner was a condition clearly imposed by the contract of sale. This fact alone disproves petitioner's insistence that there was a "mistake" in payment. On the contrary, such payments were necessary to protect its interest as a "the buyer(s) and new owner(s) of the lot."

The quasi-contract of solutio indebiti is one of the concrete manifestations of the ancient principle that no one shall enrich himself unjustly at the expense of another. 31 But as shown earlier, the payment of the mortgage was an obligation petitioner assumed under the contract of sale. There is no unjust enrichment where the transaction, as in this case, is quid pro quo, value for value. All told, respondent Court did not commit any reversible error which would warrant the reversal of the assailed Decision. WHEREFORE, the petition is hereby DENIED, and the assailed Decision is AFFIRMED. SO ORDERED.

G.R. No. L-12342

August 3, 1918

A. A. ADDISON, plaintiff-appellant, 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 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 possession of one Juan Villafuerte, who claimed to be the owner of the parts 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 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 theright 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 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 nonfulfillment 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.

G.R. No. 169890

March 12, 2007

FELICIANO ESGUERRA, CANUTO ESGUERRA, JUSTA ESGUERRA, ANGEL ESGUERRA, FIDELA ESGUERRA, CLARA ESGUERRA, and PEDRO ESGUERRA, Petitioners, vs. VIRGINIA TRINIDAD, PRIMITIVA TRINIDAD, and THE REGISTER OF DEEDS OF MEYCAUAYAN, BULACAN,Respondents. DECISION CARPIO MORALES, J.: Involved in the present controversy are two parcels of land located in Camalig, Meycauayan, Bulacan. Felipe Esguerra and Praxedes de Vera (Esguerra spouses) were the owners of several parcels of land in Camalig, Meycauayan, Bulacan among them a 35,284-square meter parcel of land covered by Tax Declaration No. 10374, half of which (17,642 square meters) they sold to their grandchildren, herein petitioners Feliciano, Canuto, Justa, Angel, Fidela, Clara and Pedro, all surnamed Esguerra; and a 23,989-square meter parcel of land covered by Tax Declaration No. 12080, 23,489 square meters of which they also sold to petitioners, and the remaining 500 square meters they sold to their other grandchildren, the brothers Eulalio and Julian Trinidad (Trinidad brothers). Also sold to the Trinidad brothers were a 7,048-square meter parcel of land covered by Tax Declaration No. 9059, a 4,618-square meter parcel of land covered by Tax Declaration No. 12081, and a 768-square meter parcel of land covered by Tax Declaration No. 13989. The Esguerra spouses executed the necessary Deed of Sale in favor of petitioners on August 11, 1937,1 and that in favor of the Trinidad brothers on August 17, 1937. 2 Both documents were executed before notary public Maximo Abao. Eulalio Trinidad later sold his share of the land to his daughters-respondents herein, via a notarized Kasulatan ng Bilihang Tuluyan ng Lupa3 dated October 13, 1965. A portion of the land consisting of 1,693 square meters was later assigned Lot No. 3593 during a cadastral survey conducted in the late 1960s. On respondents application for registration of title, the then Court of First Instance (CFI) of Bulacan, by Decision4 of February 20, 1967, awarded Lot No. 3593 in their favor in Land Registration Case No. N-323-V. Pursuant to the Decision, the Land Registration Commission (LRC, now the Land Registration Authority [LRA]) issued Decree No. N-114039 by virtue of which the Register of Deeds of Bulacan issued OCT No. 0-3631 5 in the name of respondents. Meanwhile, under a notarized Bilihan ng Lupa6 dated November 10, 1958, petitioners sold to respondents parents Eulalio Trinidad and Damiana Rodeadilla (Trinidad spouses) a portion of about 5,000 square meters of the 23,489-square meter of land which they previously acquired from the Esguerra spouses.7 During the same cadastral survey conducted in the late 1960s, it was discovered that the about 5,000-square meter portion of petitioners parcel of land sold to the Trinidad spouses which was assigned Lot No. 3591actually measured 6,268 square meters.

In a subsequent application for registration of title over Lot No. 3591, docketed as Land Registration Case No. N-335-V, the CFI, by Decision 8 of August 21, 1972, awarded Lot No. 3591 in favor of Eulalio Trinidad. Pursuant to the Decision, the LRC issued Decree No. N149491 by virtue of which the Register of Deeds of Bulacan issued OCT No. 0-6498 9 in the name of Trinidad. Upon the death of the Trinidad spouses, Lot No. 3591 covered by OCT No. 0-6498 was transmitted to respondents by succession. Petitioners, alleging that upon verification with the LRA they discovered the issuance of the above-stated two OCTs, filed on August 29, 1994 before the Regional Trial Court (RTC) of Malolos, Bulacan two separate complaints for their nullification on the ground that they were procured through fraud or misrepresentation. In the first complaint, docketed as Civil Case No. 737-M-94, petitioners sought the cancellation of OCT No. 0-3631. In the other complaint, docketed as Civil Case No. 738-M-94, petitioners sought the cancellation of OCT No. 0-6498. Both cases were consolidated and tried before Branch 79 of the RTC which, after trial, dismissed the cases by Joint Decision10 of May 15, 1997. Their appeal with the Court of Appeals having been dismissed by Decision of February 28, 2005, a reconsideration of which was, by Resolution of October 3, 2005, 11 denied, petitioners filed the instant petition. Petitioners fault the appellate court 1. . . . in misappreciating the fact that the act of the respondent Eulalio Trinidad in acquiring the property from Felipe Esguerra constituted fraud. 2. . . . in the [i]nterpretation and application of the provisions of Article 1542 of the New Civil Code. 3. . . . in ruling that there is prescription, res judicata, and violation of the non[forum] shopping.12 In their Comment, respondents assailed the petition as lacking verification and certification against forum shopping and failing to attach to it an affidavit of service and material portions of the record in support thereof. Petitioners counter that the procedural deficiencies have been mooted by the filing of a Compliance. A check of the rollo shows that attached to the petition are an Affidavit of Service dated November 21, 2005 and the appellate courts Decision of February 28, 2005 and Resolution of October 3, 2005; and that on January 16, 2006 or almost three months following the last day to file the petition, petitioners submitted, not at their own instance, 13 a Verification and Sworn Certification on Non-Forum Shopping signed by petitioner Pedro Esguerra who cited honest and excusable mistake behind the omission to submit the same. This Court has strictly enforced the requirement of verification and certification, obedience to which and to other procedural rules is needed if fair results are to be expected therefrom.14 While exceptional cases have been considered to correct patent injustice

concomitant to a liberal application of the rules of procedure, there should be an effort on the part of the party invoking liberality to advance a reasonable or meritorious explanation for his failure to comply with the rules.15 In petitioners case, no such explanation has been advanced. With regard to petitioners failure to attach material portions of the record in support of the petition, this requirement is not a mere technicality but an essential requisite for the determination of prima facie basis for giving due course to the petition.16 As a rule, a petition which lacks copies of essential pleadings and portions of the case record may be dismissed. Much discretion is left to the reviewing court, however, to determine the necessity for such copies as the exact nature of the pleadings and portions of the case record which must accompany a petition is not specified.17 At all events, technicality aside, the petition must be denied. It is settled that fraud is a question of fact and the circumstances constituting the same must be alleged and proved in the court below. 18 In the present cases, as did the trial court, the appellate court found no fraud in respondents acquisition and registration of the land, viz: . . . Appellant Pedro Esguerra even testified that he does not know how appellees were able to secure a title over the lot in question and that they never sold Lot No. 3593 to Virginia Trinidad since it is part of the whole lot of 23,489 square meters. The said testimony is a mere conclusion on the part of appellants. On the other hand, the evidence shows that appellees acquired title over the subject property by virtue of a deed of sale executed by their father Eulalio Trinidad in their favor. xxxx [T]hey failed to establish that appellees acquisition of the certificate of title is fraudulent. In fact, in their two complaints, appellants acknowledged that appellees observed and took the initial procedural steps in the registration of the land, thus ruling out fraud in the acquisition of the certificate of title. . . .19 Factual findings of the trial court, when affirmed by the Court of Appeals, are final, conclusive and binding on this Court,20 which is not a trier of facts,21 hence, bereft of function under Rule 45 to examine and weigh the probative value of the evidence presented, 22 its jurisdiction being limited only to the review and revision of errors of law. 23 Albeit there are exceptions24 to this rule, the cases at bar do not fall thereunder, there being no showing that the trial and appellate courts overlooked matters which, if considered, would alter their outcome. Under the Torrens System, an OCT enjoys a presumption of validity, which correlatively carries a strong presumption that the provisions of the law governing the registration of land which led to its issuance have been duly followed. 25 Fraud being a serious charge, it must be supported by clear and convincing proof.26Petitioners failed to discharge the burden of proof, however. On the questioned interpretation and application by the appellate court of Article 1542 of the Civil Code reading:

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 less areas 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. (Emphasis and underscoring supplied), while petitioners admittedly sold Lot No. 3591 to the Trinidad spouses, they contend that what they sold were only 5,000 square meters and not 6,268 square meters, and thus claim the excess of 1,268 square meters. In sales involving real estate, the parties may choose between two types of pricing agreement: a unit price contract wherein the purchase price is determined by way of reference to a stated rate per unit area ( e.g.,P1,000 per square meter), or a lump sum contract which states a full 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 ( e.g.,P1 million for 1,000 square meters, etc.). In Rudolf Lietz, Inc. v. Court of Appeals,27 the Court discussed the distinction: . . . 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. xxxx 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 of the Civil Code, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or less areas or number than that stated in the contract. . . . xxxx 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. 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. 28 (Emphasis and underscoring supplied) The courts below correctly characterized the sale of Lot No. 3591 as one involving a lump sum contract. TheBilihan ng Lupa shows that the parties agreed on the purchase price of P1,000.00 on a predetermined, albeit unsurveyed, area of 5,000 square meters and not on a particular rate per unit area. As noted by the Court of Appeals, the identity of the realty was sufficiently described as riceland: It is clear from the afore-quoted Bilihan ng Lupa that what appellants sold to Eulalio was the "bahaging palayan." Though measured as 5,000 square meters, more or less, such measurement is only an approximation, and not an exact measurement. Moreover, we take note of the fact that the said deed of sale mentioned the boundaries covering the whole area of 33,489 square meters, including the "bahaging palayan." Had appellants intended to sell only a portion of the "bahaging palayan," they could have stated the specific area in the deed of sale and not the entire "bahaging palayan" . . . .29 In fine, under Article 1542, what is controlling is the entire land included within the boundaries, regardless of whether the real area should be greater or smaller than that recited in the deed. This is particularly true since the area of the land in OCT No. 0-6498 was described in the deed as "humigit kumulang," that is, more or less.30 A caveat is in order, however. The use of "more or less" or similar words in designating quantity covers only a reasonable excess or deficiency. A vendee of land 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.31 Numerical data are not of course the sole gauge of unreasonableness of the excess or deficiency in area. Courts must consider a host of other factors. In one case, 32 the Court found substantial discrepancy in area due to contemporaneous circumstances. Citing change in the physical nature of the property, it was therein established that the excess area at the southern portion was a product of reclamation, which explained why the lands technical description in the deed of sale indicated the seashore as its southern boundary, hence, the inclusion of the reclaimed area was declared unreasonable. In OCT No. 0-6498, the increase by a fourth of a fraction of the area indicated in the deed of sale cannot be considered as an unreasonable excess. Most importantly, the circumstances attendant to the inclusion of the excess area bare nothing atypical or significant to hint at unreasonableness. It must be noted that the land was not yet technically surveyed at the time of the sale. As vendors who themselves executed the Bilihan ng Lupa, petitioners may rightly be presumed to have acquired a good estimate of the value and area of the bahaging palayan. As for the last assigned error, the appellate court, in finding that the complaints were timebarred, noted that when the complaints were filed in 1994, more than 27 years had elapsed from the issuance of OCT No. 0-3631 and more than 20 years from the issuance of OCT No. 0-6498. The prescriptive period of one (1) year had thus set in.1awphi1.nt Petitioners reliance on Agne v. Director of Lands33 is misplaced since the cancellation of title was predicated not on the ground of fraud but on want of jurisdiction. Even assuming that petitioners actions are in the nature of a suit for quieting of title, which is imprescriptible, the actions still necessarily fail since petitioners failed to establish the existence of fraud. A word on Republic Act No. 716034 which was raised by petitioners in their petition. It expressly requires the parties to undergo a conciliation process under the Katarungang

Pambarangay, as a precondition to filing a complaint in court, 35 non-compliance with this condition precedent does not prevent a court of competent jurisdiction from exercising its power of adjudication over a case unless the defendants object thereto. The objection should be seasonably made before the court first taking cognizance of the complaint, and must be raised in the Answer or in such other pleading allowed under the Rules of Court. 36 While petitioners admittedly failed to comply with the requirement of barangay conciliation, they assert that respondents waived such objection when they failed to raise it in their Answer. Contrary to petitioners claim, however, the records reveal that respondents raised their objection in their Amended Answers37 filed in both cases. IN FINE, it is a fundamental principle in land registration that a certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. Such indefeasibility commences after the lapse or expiration of one year from the date of entry of the decree of registration when all persons are considered to have a constructive notice of the title to the property. After the lapse of one year, therefore, title to the property can no longer be contested. This system was so effected in order to quiet title to land.38

WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals are AFFIRMED. Costs against petitioners. SO ORDERED.

G.R. No. 116635 July 24, 1997 CONCHITA NOOL and GAUDENCIO ALMOJERA, petitioner, vs. COURT OF APPEALS, ANACLETO NOOL and EMILIA NEBRE, respondents. PANGANIBAN, J.: A contract of repurchase arising out of a contract of sale where the seller did not have any title to the property "sold" is not valid. Since nothing was sold, then there is also nothing to repurchase. Statement of the Case This postulate is explained by this Court as it resolves this petition for review on certiorari assailing the January 20, 1993 Decision 1 of Respondent Court of Appeals 2 in CA-G.R. CV No. 36473, affirming the decision 3 of the trial court 4 which disposed as follows: 5 WHEREFORE, judgment is hereby rendered dismissing the complaint for no cause of action, and hereby: 1. Declaring the private writing, Exhibit "C", to be an option to sell, not binding and considered validly withdrawn by the defendants for want of consideration; 2. Ordering the plaintiffs to return to the defendants the sum of P30,000.00 plus interest thereon at the legal rate, from the time of filing of defendants' counterclaim until the same is fully paid; 3. Ordering the plaintiffs to deliver peaceful possession of the two hectares mentioned in paragraph 7 of the complaint and in paragraph 31 of defendants' answer (counterclaim); 4. Ordering the plaintiffs to pay reasonable rents on said two hectares at P5,000.00 per annum or at P2,500.00 per cropping from the time of judicial demand mentioned in paragraph 2 of the dispositive portion of this decision, until the said two hectares shall have been delivered to the defendants; and 5. To pay the costs. SO ORDERED. The Antecedent Facts The facts, which appear undisputed by the parties, are narrated by the Court of Appeals as follows: Two (2) parcels of land are in dispute and litigated upon here. The first has an area of 1 hectare. It was formerly owned by Victorino Nool and covered by Transfer Certificate of Title No. T-74950. With an area of 3.0880 hectares, the other parcel was previously owned by Francisco Nool under Transfer Certificate of Title No. T-100945. Both parcel's are situated in San Manuel, Isabela. The plaintiff spouses, Conchita Nool and Gaudencio Almojera, now the appellants, seek recovery of the aforementioned parcels of land from the defendants, Anacleto Nool, a younger brother of Conchita, and Emilia Nebre, now the appellees. In their complaint, plaintiff-appellants alleged inter alia that they are the owners of subject parcels of land, and they bought the same from Conchita's other brothers, Victorino Nool and Francisco Nool; that as plaintiffs were in dire need of money, they obtained a loan from the Ilagan Branch of the Development Bank of the Philippines, in Ilagan, Isabela, secured by a real estate mortgage on said parcels of land, which were still registered in the names of Victorino Nool and Francisco Nool, at the time, and for the failure of plaintiffs to pay the said loan, including interest and surcharges, totaling P56,000.00, the mortgage was foreclosed; that within the period of redemption, plaintiffs contacted defendant Anacleto Nool for the latter to redeem the foreclosed properties from DBP, which the latter

did; and as a result, the titles of the two (2) parcels of land in question were transferred to Anacleto Nool; that as part of their arrangement or understanding, Anacleto Nool agreed to buy from plaintiff Conchita Nool the two (2) parcels of land under controversy, for a total price of P100,000.00, P30,000.00 of which price was paid to Conchita, and upon payment of the balance of P14,000.00, plaintiffs were to regain possession of the two (2) hectares of land, which amounts defendants failed to pay, and the same day the said arrangement 6 was made; another covenant 7 was entered into by the parties, whereby defendants agreed to return to plaintiffs the lands in question, at anytime the latter have the necessary amount; that plaintiffs asked the defendants to return the same but despite the intervention of the Barangay Captain of their place, defendants refused to return the said parcels of land to plaintiffs; thereby impelling them (plaintiffs) to come to court for relief. In their Answer, defendants-appellees theorized that they acquired the lands in question from the Development Bank of the Philippines, through negotiated sale, and were misled by plaintiffs when defendant Anacleto Nool signed the private writing, agreeing to return subject lands when plaintiffs have the money to redeem the same; defendant Anacleto having been made to believe, then, that his sister, Conchita, still had the right to redeem the said properties. The pivot of inquiry here, as aptly observed below, is the nature and significance of the private document, marked Exhibit "D" for plaintiffs, which document has not been denied by the defendants, as defendants even averred in their Answer that they gave an advance payment of P30,000.00 therefor, and acknowledged that they had a balance of P14,000.00 to complete their payment. On this crucial issue, the lower court adjudged the said private writing (Exhibit "D") as an option to sell not binding upon and considered the same validly withdrawn by defendants for want of consideration; and decided the case in the manner above-mentioned. There is no quibble over the fact that the two (2) parcels of land in dispute were mortgaged to the Development Bank of the Philippines, to secure a loan obtained by plaintiffs from DBP (Ilagan Branch), Ilagan, Isabela. For the non-payment of said loan, the mortgage was foreclosed and in the process, ownership of the mortgaged lands was consolidated in DBP (Exhibits 3 and 4 for defendants). After DBP became the absolute owner of the two parcels of land, defendants negotiated with DBP and succeeded in buying the same. By virtue of such sale by DBP in favor of defendants, the titles of DBP were cancelled and the corresponding Transfer Certificates of Title (Annexes "C" and "D" to the Complaint) issued to the defendants. 8 It should be stressed that Manuel S. Mallorca, authorized officer of DBP, certified that the one-year redemption period was from March 16, 1982 up to March 15, 1983 and that the mortgagors' right of redemption was not exercised within this period. 9 Hence, DBP became the absolute owner of said parcels of land for which it was issued new certificates of title, both entered on May 23, 1983 by the Registry of Deeds for the Province of Isabela. 10 About two years thereafter, on April 1, 1985, DBP entered into a Deed of Conditional Sale 11 involving the same parcels of land with Private Respondent Anacleto Nool as vendee. Subsequently, the latter was issued new certificates of title on February 8, 1988. 12 The Court of Appeals ruled:
13

WHEREFORE, finding no reversible error infirming it, the appealed Judgment is hereby AFFIRMED in toto. No pronouncement as to costs. The Issues Petitioners impute to Respondent Court the following alleged "errors": 1. The Honorable Court of Appeals, Second Division has misapplied the legal import or meaning of Exhibit "C" in a way contrary to law and existing jurisprudence in stating that it has no binding effect between the parties and considered validly withdrawn by defendants-appellees for want of consideration. 2. The Honorable Court of Appeals, Second Division has miserably failed to give legal significance to the actual possession and cultivation and appropriating exclusively the palay harvest of the two (2) hectares land pending the payment of the remaining balance of fourteen thousand pesos (P14,000.00) by defendants-appellees as indicated in Exhibit "C". 3. The Honorable Court of Appeals has seriously erred in affirming the decision of the lower court by awarding the payment of rents per annum and the return of P30,000.00 and not allowing the plaintiffsappellants to re-acquire the four (4) hectares, more or less upon payment of one hundred thousand pesos (P100,000.00) as shown in Exhibit "D". 14 The Court's Ruling The petition is bereft of merit. First Issue: Are Exhibits "C" and "D" Valid and Enforceable? The petitioner-spouses plead for the enforcement of their agreement with private respondents as contained in Exhibits "C" and "D," and seek damages for the latter's alleged breach thereof. In Exhibit C, which was a private handwritten document labeled by the parties as Resibo ti Katulagan or Receipt of Agreement, the petitioners appear to have "sold" to private respondents the parcels of land in controversy covered by TCT No. T-74950 and TCT No. T-100945. On the other hand, Exhibit D, which was also a private handwritten document in Ilocano and labeled as Kasuratan, private respondents agreed that Conchita Nool "can acquire back or repurchase later on said land when she has the money." 15 In seeking to enforce her alleged right to repurchase the parcels of land, Conchita (joined by her co-petitioner-husband) invokes Article 1370 of the Civil Code which mandates that "(i)f the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control." Hence, petitioners contend that the Court of Appeals erred in affirming the trial court's finding and conclusion that said Exhibits C and D were "not merely voidable but utterly void and inexistent." We cannot sustain petitioners' view. Article 1370 of the Civil Code is applicable only to valid and enforceable contracts. The Regional Trial Court and the Court of Appeals ruled that the principal contract of sale contained in Exhibit C and the auxiliary contract of repurchase in Exhibit D are both void. This conclusion of the two lower courts appears to find support in Dignos vs. Court of Appeals, 16 where the Court held:

Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were no longer owners of the same and the sale is null and void. In the present case, it is clear that the sellers no longer had any title to the parcels of land at the time of sale. Since Exhibit D, the alleged contract of repurchase, was dependent on the validity of Exhibit C, it is itself void. A void contract cannot give rise to a valid one. 17 Verily, Article 1422 of the Civil Code provides that "(a) contract which is the direct result of a previous illegal contract, is also void and inexistent." We should however add that Dignos did not cite its basis for ruling that a "sale is null and void" where the sellers "were no longer the owners" of the property. Such a situation (where the sellers were no longer owners) does not appear to be one of the void contracts enumerated in Article 1409 of the Civil Code. 18Moreover, the Civil Code 19 itself recognizes a sale where the goods are to be "acquired . . . by the seller after the perfection of the contract of sale," clearly implying that a sale is possible even if the seller was not the owner at the time of sale, provided he acquires title to the property later on. In the present case however, it is likewise clear that the sellers can no longer deliver the object of the sale to the buyers, as the buyers themselves have already acquired title and delivery thereof from the rightful owner, the DBP. Thus, such contract may be deemed to be inoperative 20 and may thus fall, by analogy, under item no. 5 of Article 1409 of the Civil Code: "Those which contemplate an impossible service." Article 1459 of the Civil Code provides that "the vendor must have a right to transfer the ownership thereof [object of the sale] at the time it is delivered." Here, delivery of ownership is no longer possible. It has become impossible. Furthermore, Article 1505 of the Civil Code provides that "where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell." Here, there is no allegation at all that petitioners were authorized by DBP to sell the property to the private respondents. Jurisprudence, on the other hand, teaches us that "a person can sell only what he owns or is authorized to sell; the buyer can as a consequence acquire no more than what the seller can legally transfer." 21 No one can give what he does not have nono dat quod non habet. On the other hand, Exhibit D presupposes that petitioners could repurchase the property that they "sold" to private respondents. As petitioners "sold" nothing, it follows that they can also "repurchase" nothing. Nothing sold, nothing to repurchase. In this light, the contract of repurchase is also inoperative and by the same analogy, void. Contract of Repurchase Dependent on Validity of Sale As borne out by the evidence on record, the private respondents bought the two parcels of land directly from DBP on April 1, 1985 after discovering that petitioners did not own said property, the subject of Exhibits C and D executed on November 30, 1984. Petitioners, however, claim that they can exercise their alleged right to "repurchase" the property, after private respondents had acquired the same from DBP. 22 We cannot accede to this, for it clearly contravenes the intention of the parties and the nature of their agreement. Exhibit D reads: WRITING 0, 1984 That I, Anacleto Nool have bought from my sister Conchita Nool a land an area of four hectares (4 has.) in the value of One Hundred Thousand (100,000.00) Pesos. It is our

agreement as brother and sister that she can acquire back or repurchase later on said land when she has the money. [Emphasis supplied]. As proof of this agreement we sign as brother and sister this written document this day of Nov. 30, 1984, at District 4, San Manuel, Isabela. Sgd ANACLETO NOOL Anacleto Nool Sgd Emilio Paron Witness Sgd Conchita Nool Conchita Nool 2 One "repurchases" only what one has previously sold. In other words, the right to repurchase presupposes a valid contract of sale between the same parties. Undisputedly, private respondents acquired title to the property from DBP, and not from petitioners. Assuming arguendo that Exhibit D is separate and distinct from Exhibit C and is not affected by the nullity of the latter, still petitioners do not thereby acquire a right to repurchase the property. In that scenario, Exhibit D ceases to be a "right to repurchase" ancillary and incidental to the contract of sale; rather, it becomes an accepted unilateral promise to sell. Article 1479 of the Civil Code, however, provides that "an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price." In the present case, the alleged written contract of repurchase contained in Exhibit D is bereft of any consideration distinct from the price. Accordingly, as an independent contract, it cannot bind private respondents. The ruling in Diamante vs. CA 24 supports this. In that case, the Court through Mr. Justice Hilario G. Davide, Jr. explained: Article 1601 of the Civil Code provides: Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of article 1616 and other stipulations which may have been agreed upon. In Villarica, et al. Vs. Court of Appeals, et al., decided on 29 November 1968, or barely seven (7) days before the respondent Court promulgated its decisions in this case, this Court, interpreting the above Article, held: The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is executed, the vendor can not longer reserve the right to repurchase, and any right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some other right like the option to buy in the instant case. . . . In the earlier case of Ramos, et al. vs. Icasiano, et al., decided in 1927, this Court had already ruled that "an agreement to repurchase becomes a promise to sell when made after the sale, because when the sale is made without such an agreement, the purchaser acquires the thing sold absolutely, and if he afterwards grants the vendor the right to purchase, it is a new contract entered into by the purchaser, as absolute owner already of the object. In that case the vendor has nor reserved to himself the right to repurchase.
3

In Vda. De Cruzo, et al. vs. Carriaga, et al. this Court found another occasion to apply the foregoing principle. Hence, the Option to Repurchase executed by private respondent in the present case, was merely a promise to sell, which must be governed by Article 1479 of the Civil Code which reads as follows: Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. Right to Repurchase Based on Homestead or Trust Non-Existent Petitioners also base their alleged right to repurchase on (1) Sec. 119 of the Public Land Act 25 and (2) an implied trust relation as "brother and sister." 26 The Court notes that Victorino Nool and Francisco Nool mortgaged the land to DBP. The brothers, together with Conchita Nool and Anacleto Nool, were all siblings and heirs qualified to repurchase the two parcels of land under Sec. 119 of the Public Land Act which provides that "(e)very 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 years from the date of conveyance." Assuming the applicability of this statutory provision to the case at bar, it is indisputable that Private Respondent Anacleto Nool already repurchased from DBP the contested properties. Hence, there was no more right of repurchase that his sister Conchita or brothers Victorino and Francisco could exercise. The properties were already owned by an heir of the homestead grantee and the rationale of the provision to keep homestead lands within the family of the grantee was thus fulfilled. 27 The claim of a trust relation is likewise without merit. The records show that private respondents did not purchase the contested properties from DBP in trust for petitioners. The former, as previously mentioned, in fact bought the land from DBP upon realization that the latter could not validly sell the same. Obviously, petitioners bought it for themselves. There is no evidence at all in the records that they bought the land in trust for private respondents. The fact that Anacleto Nool was the younger brother of Conchita Nool and that they signed a contract of repurchase, which as discussed earlier was void, does not prove the existence of an implied trust in favor of petitioners. Second Issue: No Estoppel in Impugning the Validity of Void Contracts Petitioners argue that "when Anacleto Nool took the possession of the two hectares, more or less, and let the other two hectares to be occupied and cultivated by plaintiffs-appellant, Anacleto Nool cannot later on disclaim the terms or contions ( sic) agreed upon and his actuation is within the ambit of estoppel . . . 28 We disagree. The private respondents cannot be estopped from raising the defense of nullity of contract, specially in this case where they acted in good faith, believing that indeed petitioners could sell the two parcels of land in question. Article 1410 of the Civil Code mandates that "(t)he action or defense for the declaration of the inexistence of a contract does not prescribe." It is a well-settled doctrine that "as between parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or it is against public policy (19 Am. Jur. 802). It is not within the

competence of any citizen to barter away what public policy by law seeks to preserve." 29 Thus, it is immaterial that private respondents initially acted to implement the contract of sale, believing in good faith that the same was valid. We stress that a contract void at inception cannot be validated by ratification or prescription and certainly cannot be binding on or enforceable against private respondents. 30 Third Issue: Return of P30,000.00 with Interest and Payment of Rent Petitioners further argue that it would be a "miscarriage of justice" to order them (1) to return the sum of P30,000.00 to private respondents when allegedly it was Private Respondent Anacleto Nool who owed the former a balance of P14,000.00 and (2) to order petitioners to pay rent when they "were allowed to cultivate the said two hectares." 31 We are not persuaded. Based on the previous discussion, the balance of P14,000.00 under the void contract of sale may not be enforced. Petitioners are the ones who have an obligation to return what they unduly and improperly received by reason of the invalid contract of sale. Since they cannot legally give title to what they "sold," they cannot keep the money paid for the object of the sale. It is basic that "(e)very person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same." 32 Thus, if a void contract has already "been performed, the restoration of what has been given is in order." 33 Corollarily and as aptly ordered by respondent appellate court, interest thereon will run only from the time of private respondents' demand for the return of this amount in their counterclaim. 34 In the same vein, petitioners' possession and cultivation of the two hectares are anchored on private respondents' tolerance. Clearly, the latter's tolerance ceased upon their counterclaim and demand on the former to vacate. Hence, their right to possess and cultivate the land ipso factoceased. WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals affirming that of the trial court is hereby AFFIRMED. SO ORDERED.

G.R. No. 129760 December 29, 1998 RICARDO CHENG, petitioner, vs. RAMON B. GENATO and ERNESTO R. DA JOSE & SOCORRO DA JOSE, respondents.

Respondent Ramon B. Genato (Genato) is the owner of two parcels of land located at Paradise Farms, San Jose del Monte, Bulacan covered by TCT No. T-76.196 (M) 3 and TCT No. T-76.197 (M) 4 with an aggregate area of 35,821square meters, more or less. On September 6, 1989, respondent Genato entered into an agreement with respondentspouses Ernesto R. Da Jose and Socorro B. Da Jose (Da Jose spouses) over the abovementioned two parcels of land. The agreement culminated in the execution of a contract to sell for which the purchase price was P80.00 per square meter. The contract was in a public instrument and was duly annotated at the back of the two certificates of title on the same day. Clauses 1and 3 thereof provide: 1. That the purchase price shall be EIGHTY (P80.00) PESOS, Philippine Currency per square meter, of which the amount of FIFTY THOUSAND (P50,000.00) PESOS shall be paid by the VENDEE to the VENDOR as partial down payment at the time of execution of this Contract to Sell. xxx xxx xxx 3. That the VENDEE, Thirty (30) DAYS after the execution of this contract, and only after having satisfactorily verified and confirmed the truth and authenticity of documents, and that no restrictions, limitations, and developments imposed on and/or affecting the property subject of this contract shall be detrimental to his interest, the VENDEE shall pay to the VENDOR, NINE HUNDRED FIFTY THOUSAND (P950,00.00) PESOS. Philippine Currency, representing the full payment of the agreed Down Payment, after which complete possession of the property shall be given to the VENDEE to enable him to prepare the premises and any development therein. On October 4, 1989, the Da Jose spouses, not having finished verifying the titles mentioned in clause 3 as aforequoted, asked for and was granted by respondent Genato an extension of another 30 days or until November 5, 1989. However, according to Genato, the extension was granted on condition that a new set of documents is made seven (7) days from October 4, 1989. 6 This was denied by the Da Jose spouses. Pending the effectivity of the aforesaid extension period, and without due notice to the Da Jose spouses, Genato executed an Affidavit to Annul the Contract to Sell, 7 on October 13, 1989. Moreover, no annotation of the said affidavit at the back of his titles was made right away. The affidavit contained, inter alia, the following paragraphs; xxx xxx xxx That it was agreed between the parties that the agreed downpayment of P950,000.00 shall be paid thirty (30) days after the execution of the Contract, that is on or before October 6, 1989; The supposed VENDEES failed to pay the said full downpayment even up to this writing, a breach of contract; That this affidavit is being executed to Annul the aforesaid Contract to Sell for the vendee having committed a breach of contract for not having complied with the obligation as provided in the Contract to Sell; 8

MARTINEZ, J.: This petition for review on certiorari seeks to annul and set aside the Decision of the Court of Appeals (CA) 1dated July 7, 1997 in CA-G.R. No. CV No. 44706 entitled "Ricardo Cheng, plaintiff-appellee vs. Ramon B. Genato, defendant-appellant, Ernesto R. Da Jose & Socorro B. Da Jose, Intervenors-Appellants" which reversed the ruling of the Regional Trial Court, Branch 96 of Quezon City dated January 18, 1994. The dispositive portion of the CA Decision reads: WHEREFORE, based on the foregoing, appealed decision is hereby REVERSED and SET ASIDE and judgment is rendered ordering; 1. The dismissal of the complaint; 2. The cancellation of the annotations of the defendant-appellant's Affidavit to Annul Contract to Sell and plaintiff-appellee's Notice of Adverse Claim in the subject TCT's, namely, TCT No. T-76.196 (M) and TCT No. T76.197 (M); 3. Payment by the intervenors-appellants of the remaining balance of the purchase price pursuant to their agreement with the defendant-appellant to suspend encashment of the three post-dated checks issued since 1989. 4. Ordering the execution by the defendant-appellant Genato of the Deed of Absolute Sale over the subject two lots covered by TCT No. T-76.196 (M) and TCT No. T-76.197 (M) in favor of intervenors-appellants Spouses Da Jose; 5. The return by defendant-appellant Genato of the P50,000.00 paid to him by the plaintiff-appellee Cheng, and 6. Payment by plaintiff-appellee Cheng of moral damages to herein intervenors-appellants Da Jose of P100,000.00, exemplary damages of P50,000.00, attorney's fees of P50,000.00, and costs of suit; and to defendant-appellant, of P100,000.00 in exemplary damages, P50,000.00 in attorney's fees. The amounts payable to the defendant-appellant may be compensated by plaintiff appellee with the amount ordered under the immediately foregoing paragraph which defendant-appellant has to pay the plaintiff-appellee. SO ORDERED.
2

The antecedents of the case are as follows:

On October 24, 1989, herein petitioner Ricardo Cheng (Cheng) went to Genato's residence and expressed interest in buying the subject properties. On that occasion, Genato showed to Ricardo Cheng copies of his transfer certificates of title and the annotations at the back thereof of his contract to sell with the Da Jose spouses. Genato also showed him the aforementioned Affidavit to Annul the Contract to Sell which has not been annotated at the back of the titles. Despite these, Cheng went ahead and issued a check for P50,000.00 upon the assurance by Genato that the previous contract with the Da Jose spouses will be annulled for which Genato issued a handwritten receipt (Exh. "D"), written in this wise: 10/24/89 Received from Ricardo Cheng the Sum of Fifty Thousand Only (P50.000-) as partial for T-76196 (M) T-76197 (M) area 35.821 Sq.m. Paradise Farm, Gaya-Gaya, San Jose Del Monte P70/m2 Bulacan plus C. G. T. etc. Check # 470393 (SGD.) Ramon B. Genato 10/24/89
9

their agreement to sell the property to him stating that the contract to sell between him and Genato was already perfected and threatening legal action. On November 2, 1989, Genato sent a letter 13 to Cheng (Exh. "6") enclosing a BPI Cashier's Check for P50,000.00 and expressed regret for his inability to "consummate his transaction" with him. After having received the letter of Genato on November 4, 1989, Cheng, however, returned the said check to the former via RCPI telegram 14 dated November 6, 1989, reiterating that "our contract to sell your property had already been perfected." Meanwhile, also on November 2, 1989, Cheng executed an affidavit of adverse claim had it annotated on the subject TCT's.
15

and

On the same day, consistent with the decision of Genato and the Da Jose spouses to continue with their Contract to Sell of September 6, 1989, the Da Jose spouses paid Genato the complete down payment of P950,000.00 and delivered to him three (3) postdated checks (all dated May 6, 1990, the stipulated due date) in the total amount of P1,865,680.00 to cover full payment of the balance of the agreed purchase price. However, due to the filing of the pendency of this case, the three (3) postdated checks have not been encashed. On December 8, 1989, Cheng instituted a complaint 16 for specific performance to compel Genato to execute a deed of sale to him of the subject properties plus damages and prayer for preliminary attachment. In his complaint, Cheng averred that the P50,000.00 check he gave was a partial payment to the total agreed purchase price of the subject properties and considered as an earnest money for which Genato acceded. Thus, their contract was already perfected. In Answer 17 thereto, Genato alleged that the agreement was only a simple receipt of an option-bid deposit, and never stated that it was a partial payment, nor is it an earnest money and that it was subject to condition that the prior contract with the Da Jose spouses be first cancelled. The Da Jose spouses, in their Answer in Intervention, 18 asserted that they have a superior right to the property as first buyers. They alleged that the unilateral cancellation of the Contract to Sell was without effect and void. They also cited Cheng's bad faith as a buyer being duly informed by Genato of the existing annotated Contract to Sell on the titles. After trial on the merits, the lower court ruled that the receipt issued by Genato to Cheng unerringly meant a sale and not just a priority or an option to buy. It cannot be true that the transaction was subjected to some condition or reservation, like the priority in favor of the Da Jose spouses as first buyer because, if it were otherwise, the receipt would have provided such material condition or reservation, especially as it was Genato himself who had made the receipt in his own hand. It also opined that there was a valid rescission of the Contract to Sell by virtue of the Affidavit to Annul the Contract to Sell. Time was of the essence in the execution of the agreement between Genato and Cheng, under this circumstance demand, extrajudicial or judicial, is not necessary. It falls under the exception to the rule provided in Article 1169 19 of the Civil Code. The right of Genato to unilaterally rescind the contract is said to be under Article 1191 20 of the Civil Code. Additionally, after reference was made to the substance of the agreement between Genato and the Da Jose spouses, the lower court also concluded that Cheng should be preferred over the intervenors-Da Jose spouses in the purchase of the subject properties. Thus, on January 18, 1994 the trial court rendered its decision the decretal portion of which reads: WHEREFORE, judgment is hereby rendered:

On October 25, 1989, Genato deposited Cheng's check. On the same day, Cheng called up Genato reminding him to register the affidavit to annul the contract to sell. 10 The following day, or on October 26, 1989, acting on Cheng's request, Genato caused the registration of the Affidavit to Annul the Contract to Sell in the Registry of Deeds, Meycauayan, Bulacan as primary entry No. 262702. 11 While the Da Jose spouses were at the Office of the Registry of Deeds of Meycauayan, Bulacan on October 27, 1989, they met Genato by coincidence. It was only then that the Da Jose spouses discovered about the affidavit to annul their contract. The latter were shocked at the disclosure and protested against the rescission of their contract. After being reminded that he (Genato) had given them (Da Jose spouses) an additional 30-day period to finish their verification of his titles, that the period was still in effect, and that they were willing and able to pay the balance of the agreed down payment, later on in the day, Genato decided to continue the Contract he had with them. The agreement to continue with their contract was formalized in a conforme letter dated October 27, 1989. Thereafter, Ramon Genato advised Ricardo Cheng of his decision to continue his contract with the Da Jose spouses and the return of Cheng's P50,000.00 check. Consequently, on October 30, 1989, Cheng's lawyer sent a letter 12 to Genato demanding compliance with

1. Declaring the contract to sell dated September 6, 1989 executed between defendant Ramon Genato, as vendor, and intervenors Spouses Ernesto and Socorro Da Jose, as vendees, resolved and rescinded in accordance with Art. 1191, Civil Code, by virtue of defendant's affidavit to annul contract to sell dated October 13, 1989 and as the consequence of intervenors' failure to execute within seven (7) days from October 4, 1989 another contract to sell pursuant to their mutual agreement with defendant; 2. Ordering defendant to return to the intervenors the sum of P1,000,000.00, plus interest at the legal rate from November 2, 1989 until full payment; 3. Directing defendant to return to the intervenors the three (3) postdated checks immediately upon finality of this judgment; 4. Commanding defendant to execute with and in favor of the plaintiff Ricardo Cheng, as vendee, a deed of conveyance and sale of the real properties described and covered in Transfer Certificates of Title No. T-76196 (M) and T-76.197 (M) of the Registry of Deeds of Bulacan, Meycauayan Branch, at the rate of P70.000/square meter, less the amount of P50,000.00 alreaddy paid to defendant, which is considered as part of the purchase price, with the plaintiff being liable for payment of the capital gains taxes and other expenses of the transfer pursuant to the agreement to sell dated October 24, 1989; and 5 Ordering defendant to pay the plaintiff and the intervenors as follows: a/ P50,000.00, as nominal damages, to plaintiff; b/ P50,000.00, as nominal damages, to intervenors; c/ P20,000.00, as and for attorney's fees, to plaintiff; d/ P20,000.00, as and for attorney's fees, to intervenors; and e/ Cost of the suit. xxx xxx xxx Not satisfied with the aforesaid decision, herein respondents Ramon Genato and Da Jose spouses appealed to the court a quo which reversed such judgment and ruled that the prior contract to sell in favor of the Da Jose spouses was not validly rescinded; that the subsequent contract to sell between Genato and Cheng, embodied in the handwritten receipt, was without force and effect due to the failure to rescind the prior contract; and that Cheng should pay damages to the respondents herein being found to be in bad faith. Hence this petition. 21

This petition for review, assails the Court of Appeals' Decision on the following grounds: (1) that the Da Jose spouses' Contract to Sell has been validly rescinded or resolved; (2) that Ricardo Cheng's own contract with Genato was not just a contract to sell but one of conditional contract of sale which gave him better rights, thus precluding the application of the rule on double sales under Article 1544, Civil Code; and (3) that, in any case, it was error to hold him liable for damages. The petition must be denied for failure to show that the Court of Appeals committed a reversible error which would warrant a contrary ruling. No reversible error can be ascribed to the ruling of the Court of Appeals that there was no valid and effective rescission or resolution of the Da Jose spouses Contract to Sell, contrary to petitioner's contentions and the trial court's erroneous ruling. In a Contract to Sell, the payment of the purchase price is a positive suspensive condition, the failure of which is not a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. 22 It is one where the happening of the event gives rise to an obligation. Thus, for its non-fulfillment there will be no contract to speak of, the obligor having failed to perform the suspensive condition which enforces a juridical relation. In fact with this circumstance, there can be no rescission of an obligation that is still non-existent, the suspensive condition not having occurred as yet. 23 Emphasis should be made that the breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation. 24 Obviously, the foregoing jurisprudence cannot be made to apply to the situation in the instant case because no default can be ascribed to the Da Jose spouses since the 30-day extension period has not yet expired. The Da Jose spouses' contention that no further condition was agreed when they were granted the 30-days extension period from October 7, 1989 in connection with clause 3 of their contract to sell dated September 6, 1989 should be upheld for the following reason, to wit; firstly, If this were not true, Genato could not have been persuaded to continue his contract with them and later on agree to accept the full settlement of the purchase price knowing fully well that he himself imposed such sine qua non condition in order for the extension to be valid; secondly, Genato could have immediately annotated his affidavit to annul the contract to sell on his title when it was executed on October 13, 1989 and not only on October 26, 1989 after Cheng reminded him of the annotation; thirdly, Genato could have sent at least a notice of such fact, there being no stipulation authorizing him for automatic rescission, so as to finally clear the encumbrance on his titles and make it available to other would be buyers. It likewise settles the holding of the trial court that Genato "needed money urgently." Even assuming in gratia argumenti that the Da Jose spouses defaulted, as claimed by Genato, in their Contract to Sell, the execution by Genato of the affidavit to annul the contract is not even called for. For with or without the aforesaid affidavit their non-payment to complete the full downpayment of the purchase price ipso factoavoids their contract to sell, it being subjected to a suspensive condition. When a contract is subject to a suspensive condition, its birth or effectivity can take place only if and when the event which constitutes the condition happens or is fulfilled. 25 If the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. 26 Nevertheless, this being so Genato is not relieved from the giving of a notice, verbal or written, to the Da Jose spouses for his decision to rescind their contract. In many cases, 27 even though we upheld the validity of a stipulation in a contract to sell authorizing automatic rescission for a violation of its terms and conditions, at least a written notice must be sent to the defaulter informing him of the same. The act of a party in treating a contract as cancelled should be made known to the other. 28 For such act is always provisional. It is

always subject to scrutiny and review by the courts in case the alleged defaulter brings the matter to the proper courts. InUniversity of the Philippines vs. De Los Angeles, 29 this Court stressed and we quote: In other words, the party who deems the contract violated may consider it resolved or rescinded, and act accordingly, without previous court action, but it proceeds at its own risk. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. But the law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest. Otherwise, the party injured by the other's breach will have to passively sit and watch its damages accumulate during the pendency of the suit until the final judgment of rescission is rendered when the law itself requires that he should exercise due diligence to minimize its own damages (Civil Code, Article 2203). This rule validates, both in equity and justice, contracts such as the one at bat, in order to avoid and prevent the defaulting party from assuming the offer as still in effect due to the obligee's tolerance for such non-fulfillment. Resultantly, litigations of this sort shall be prevented and the relations among would-be parties may be preserved. Thus, Ricardo Cheng's contention that the Contract to Sell between Genato and the Da Jose spouses was rescinded or resolved due to Genato's unilateral rescission finds no support in this case. Anent the issue on the nature of the agreement between Cheng and Genato, the records of this case are replete with admissions 30 that Cheng believed it to be one of a Contract to Sell and not one of Conditional Contract of Sale which he, in a transparent turn-around, now pleads in this Petition. This ambivalent stance of Cheng is even noted by the appellate court, thus: At the outset, this Court notes that plaintiff-appellee was inconsistent in characterizing the contract he allegedly entered into. In his complaint. 31 Cheng alleged that the P50,000.00 down payment was earnest money. And next, his testimony 32 was offered to prove that the transaction between him and Genato on October 24, 1989 was actually a perfected contract to sell. 33 Settled is the rule that an issue which was not raised during the trial in the court below cannot be raised for the first time on appeal. 34 Issues of fact and arguments not adequately brought to the attention of the trial court need not be and ordinarily will not be considered by a reviewing court as they cannot be raised for the first time on appeal. 35 In fact, both courts below correctly held that the receipt which was the result of their agreement, is a contract to sell. This was, in fact Cheng's contention in his pleadings before said courts. This patent twist only operates against Cheng's posture which is indicative of the weakness of his claim. But even if we are to assume that the receipt, Exh. "D," is to be treated as a conditional contract of sale, it did not acquire any obligatory force since it was subject to suspensive condition that the earlier contract to sell between Genato and the Da Jose spouses should first be cancelled or rescinded a condition never met, as Genato, to his credit, upon realizing his error, redeemed himself by respecting and maintaining his earlier contract with the Da Jose spouses. In fact, a careful reading of the receipt, Exh. "D," alone would not even show that a conditional contract of sale has been entered by Genato and Cheng. When the requisites of a valid contract of sale are lacking in said receipt, therefore the "sale" is neither valid or enfoceable. 36

To support his now new theory that the transaction was a conditional contract of sale, petitioner invokes the case of Coronel vs. Court of Appeals 37 as the law that should govern their Petition. We do not agree. Apparently, the factual milieu in Coronel is not on all fours with those in the case at bar. In Coronel, this Court found that the petitioners therein clearly intended to transfer title to the buyer which petitioner themselves admitted in their pleading. The agreement of the parties therein was definitively outlined in the "Receipt of Down Payment" both as to property, the purchase price, the delivery of the seller of the property and the manner of the transfer of title subject to the specific condition that upon the transfer in their names of the subject property the Coronels will execute the deed of absolute sale. Whereas, in the instant case, even by a careful perusal of the receipt, Exh. "D," alone such kind of circumstances cannot be ascertained without however resorting to the exceptions of the Rule on Parol Evidence. To our mind, the trial court and the appellate court correctly held that the agreement between Genato and Cheng is a contract to sell, which was, in fact, petitioner connection in his pleadings before the said courts. Consequently, both to mind, which read: Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and in the absence thereof, to the person who presents he oldest title, provided there is good faith. However, a meticulous reading of the aforequoted provision shows that said law is not apropos to the instant case. This provision connotes that the following circumstances must concur: (a) The two (or more) sales transactions in issue must pertain to exactly the same subject matter, and must be valid sales transactions. (b) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent conflicting interests; and (c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the very same seller. These situations obviously are lacking in a contract to sell for neither a transfer of ownership nor a sales transaction has been consummated. The contract to be binding upon the obligee or the vendor depends upon the fulfillment or non-fulfillment of an event. Notwithstanding this contrary finding with the appellate court, we are of the view that the governing principle of Article 1544, Civil Code, should apply in this situation. Jurisprudence 38 teaches us that the governing principle is PRIMUS TEMPORE, PORTIOR JURE (first in time, stronger in right). For not only was the contract between herein respondents first in time; it was also registered long before petitioner's intrusion as a second buyer. This principle only applies when the special rules provided in the aforcited article of the Civil

Code do not apply or fit the specific circumstances mandated under said law or by jurisprudence interpreting the article. The rule exacted by Article 1544 of the Civil Code for the second buyer to be able to displace the first buyer are: (1) that the second buyer must show that he acted in good faith ( i.e. in ignorance of the first sale and of the first buyer's rights) from the time of acquisition until title is transferred to him by registration or failing registration, by delivery of possession; 39 (2) the second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior registration as provided by law. 40 Thus, in the case at bar, the knowledge gained by the Da Jose spouses, as first buyers, of the new agreement between Cheng and Genato will not defeat their rights as first buyers except where Cheng, as second buyer, registers or annotates his transaction or agreement on the title of the subject properties in good faith ahead of the Da Jose spouses. Moreover, although the Da Jose spouses, as first buyers, knew of the second transaction it will not bar them from availing of their rights granted by law, among them, to register first their agreement as against the second buyer. In contrast, knowledge gained by Cheng of the first transaction between the Da Jose spouses and Genato defeats his rights even if he is first to register the second transaction, since such knowledge taints his prior registration with bad faith. "Registration", as defined by Soler and Castillo, means any entry made in the books of the registry, including both registration in its ordinary and strict sense, and cancellation, annotation, and even marginal notes. 41 In its strict acceptation, it is the entry made in the registry which records solemnly and permanently the right of ownership and other real rights. 42 We have ruled 43 before that when a Deed of Sale is inscribed in the registry of property on the original document itself, what was done with respect to said entries or annotations and marginal notes amounted to a registration of the sale. In this light, we see no reason why we should not give priority in right the annotation made by the Da Jose spouses with respect to their Contract to Sell dated September 6, 1989. Moreover, registration alone in such cases without good faith is not sufficient. Good faith must concur with registration for such prior right to be enforceable. In the instant case, the annotation made by the Da Jose spouses on the titles of Genato of their "Contract To Sell" more than satisfies this requirement. Whereas in the case of Genato's agreement with Cheng such is unavailing. For even before the receipt, Exh. "D," was issued to Cheng information of such pre-existing agreement has been brought to his knowledge which did not deter him from pursuing his agreement with Genato. We give credence to the factual finding of the appellate court that "Cheng himself admitted that it was he who sought Genato in order to inquire about the property and offered to buy the same. 44 And since Cheng was fully aware, or could have been if he had chosen to inquire, of the rights of the Da Jose spouses under the Contract to Sell duly annotated on the transfer certificates of titles of Genato, it now becomes unnecessary to further elaborate in detail the fact that he is indeed in bad faith in entering into such agreement. As we have held in Leung Yee vs. F.L. Strong Machinery Co.: 45 One who purchases real estate with knowledge of a defect . . . of title in his vendor cannot claim that he has acquired title thereto in good faith as against . . . . an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects

in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's title, will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation. Good faith, or lack of it, is in its last analysis a question of intention; but in ascertaining the intention by which one is actuated on a given occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward motive may with safety, be determined. So it is that "the honesty of intention," "the honest lawful intent," which constitutes good faith implies a "freedom from knowledge and circumstances which ought to put a person on inquiry," and so it is that proof of such knowledge overcomes the presumption of good faith in which the courts always indulge in the absence of the proof to the contrary. "Good faith, or the want of it, is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judge of by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt. 504, 505; Cf. Cardenas vs. Miller, 108 Cal., 250; Breaux-Renoudet, Cypress Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromely, 119 Mich., 8, 10, 17.) (Emphasis ours) Damages were awarded by the appellate court on the basis of its finding that petitioner "was in bad faith when he filed the suit for specific performance knowing fully well that his agreement with Genato did not push through. 46 Such bad faith, coupled with his wrongful interference with the contractual relations between Genato and the Da Jose spouses, which culminated in his filing of the present suit and thereby creating what the counsel for the respondents describes as "a prolonged and economically unhealthy gridlock 47 on both the land itself and the respondents' rights provides ample basis for the damages awarded. Based on these overwhelming evidence of bad faith on the part of herein petitioner Ricardo Cheng, we find that the award of damages made by the appellate court is in order. WHEREFORE, premises considered, the instant petition for review is DENIED and the assailed decision is hereby AFFIRMED EN TOTO. SO ORDERED.

G.R. No. 103577 October 7, 1996 ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of Florida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG, petitioners, vs. THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-in-fact, respondents.

1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon execution of the document aforestated; 2. The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment; 3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos. On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. "B", Exh. "2"). On February 6, 1985, the property originally registered in the name of the Coronels' father was transferred in their names under TCT No. 327043 (Exh. "D"; Exh. "4") On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C") For this reason, Coronels canceled and rescinded the contract (Exh. "A") with Ramona by depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz. On February 22, 1985, Concepcion, et al., filed a complaint for specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. "E"; Exh. "5"). On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of Deeds of Quezon City (Exh. "F"; Exh. "6"). On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (Exh. "G"; Exh. "7"). On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No. 351582 (Exh. "H"; Exh. "8"). (Rollo, pp. 134-136)

MELO, J.:p The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of P1,240,000.00. The undisputed facts of the case were summarized by respondent court in this wise: On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter referred to as Coronels) executed a document entitled "Receipt of Down Payment" (Exh. "A") in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder: RECEIPT OF DOWN PAYMENT P1,240,000.00 Total amount 50,000 Down payment P1,190,000.00 Balance Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00. We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the down payment above-stated. On our presentation of the TCT already in or name, We will immediately execute the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of the P1,190,000.00. Clearly, the conditions appurtenant to the sale are the following:

In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private respondents) proffered their documentary evidence accordingly marked as Exhibits "A" through "J", inclusive of their corresponding submarkings. Adopting these same exhibits as their own, then defendants (now petitioners) accordingly offered and marked them as Exhibits "1" through "10", likewise inclusive of their corresponding submarkings. Upon motion of the parties, the trial court gave them thirty (30)

days within which to simultaneously submit their respective memoranda, and an additional 15 days within which to submit their corresponding comment or reply thereof, after which, the case would be deemed submitted for resolution. On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows: WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon City, together with all the improvements existing thereon free from all liens and encumbrances, and once accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and declared to be without force and effect. Defendants and intervenor and all other persons claiming under them are hereby ordered to vacate the subject property and deliver possession thereof to plaintiffs. Plaintiffs' claim for damages and attorney's fees, as well as the counterclaims of defendants and intervenors are hereby dismissed. No pronouncement as to costs. So Ordered. Macabebe, Pampanga for Quezon City, March 1, 1989. (Rollo, p. 106) A motion for reconsideration was filed by petitioner before the new presiding judge of the Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly: The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the undersigned Presiding Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of April 14, 1988 when the parties terminated the presentation of their respective documentary evidence and when the Presiding Judge at that time was Judge Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did not change the fact that the hearing of the case was terminated before Judge Roura and therefore the same should be submitted to him for decision; (2) When the defendants and intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the decision, when they met for the first time before the undersigned Presiding Judge at the hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced thereto and they are now estopped from questioning said authority of Judge Roura after they received the decision in question which happens to be adverse to them; (3) While it is true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was in all respects the Presiding Judge with

full authority to act on any pending incident submitted before this Court during his incumbency. When he returned to his Official Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve such cases submitted to him for decision or resolution because he continued as Judge of the Regional Trial Court and is of co-equal rank with the undersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge to whom a case is submitted for decision has the authority to decide the case notwithstanding his transfer to another branch or region of the same court (Sec. 9, Rule 135, Rule of Court). Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant case, resolution of which now pertains to the undersigned Presiding Judge, after a meticulous examination of the documentary evidence presented by the parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and, therefore, should not be disturbed. IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul Decision and Render Anew Decision by the Incumbent Presiding Judge" dated March 20, 1989 is hereby DENIED. SO ORDERED. Quezon City, Philippines, July 12, 1989. (Rollo, pp. 108-109) Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad Santos (P), JJ.) rendered its decision fully agreeing with the trial court. Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents' Reply Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to undersigned ponenteonly on August 28, 1996, due to the voluntary inhibition of the Justice to whom the case was last assigned. While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance of the trial court's decision, we definitely find the instant petition bereft of merit. The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the precise determination of the legal significance of the document entitled "Receipt of Down Payment" which was offered in evidence by both parties. There is no dispute as to the fact that said document embodied the binding contract between Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows: Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. While, it is the position of private respondents that the "Receipt of Down Payment" embodied a perfected contract of sale, which perforce, they seek to enforce by means of an

action for specific performance, petitioners on their part insist that what the document signified was a mere executory contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona P. Alcaraz, who left for the United States of America, said contract could not possibly ripen into a contract absolute sale. Plainly, such variance in the contending parties' contentions is brought about by the way each interprets the terms and/or conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidence may be available on record, this, Court, as were the courts below, is now called upon to adjudge what the real intent of the parties was at the time the said document was executed. The Civil Code defines a contract of sale, thus: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following: a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate subject matter; and c) Price certain in money or its equivalent. Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. In a contract to sell, the prospective seller explicity reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill is promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule: Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the prospective seller's obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states: Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price. A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite and housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale. It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the ownerseller's title per se, but the latter, of course, may be used for damages by the intending buyer. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the subject property, the seller's ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the seller's title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale. With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract entered into by petitioners and private respondents. It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said "Receipt of Down Payment" that they

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00. without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea conveyed is that they sold their property. When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of petitioner's father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after which, they promised to present said title, now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price. The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of land . Furthermore, the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price. Under the established facts and circumstances of the case, the Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale could not have been executed and consummated right there and then. Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the properly to private respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject property, they undertook to have the certificate of title changed to their names and immediately thereafter, to execute the written deed of absolute sale. Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain terms and conditions, promised to sell the property to the latter. What may be perceived from the respective undertakings of the parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father, completely willing to transfer full ownership of the subject house and lot to the buyer if the documents were then in order. It just happened, however, that the transfer certificate of title was then still in the name of their father. It was more expedient to first effect the change in the certificate of title so as to bear their names. That is why they undertook to cause the issuance of a new transfer of the certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title is issued in their names, petitioners were committed to immediately execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise. There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a buyer who intends to buy the property in installment by withholding ownership over the property until the buyer effects full payment therefor, in the contract entered into in the case at bar, the sellers were the one who were unable to enter into a contract of absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father. It was the sellers in this case who, as it were, had the impediment which prevented, so to speak, the execution of an contract of absolute sale.

What is clearly established by the plain language of the subject document is that when the said "Receipt of Down Payment" was prepared and signed by petitioners Romeo A. Coronel, et al., the parties had agreed to a conditional contract of sale, consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners' father, Constancio P. Coronel, to their names. The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. "D"; Exh. "4"). Thus, on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as evidenced by the "Receipt of Down Payment." Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus, Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From the moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition. Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners' names was fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00. It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admitted that: 3. The petitioners-sellers Coronel bound themselves "to effect the transfer in our names from our deceased father Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the downpayment abovestated". The sale was still subject to this suspensive condition . (Emphasis supplied.) (Rollo, p. 16) Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only, they contend, continuing in the same paragraph, that: . . . Had petitioners-sellers not complied with this condition of first transferring the title to the property under their names, there could be no perfected contract of sale. (Emphasis supplied.) (Ibid.)

not aware that they set their own trap for themselves, for Article 1186 of the Civil Code expressly provides that: Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Besides, it should be stressed and emphasized that what is more controlling than these mere hypothetical arguments is the fact that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985, when a new title was issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4"). The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as "Receipt of Down Payment" (Exh. "A"; Exh. "1"), the parties entered into a contract of sale subject only to the suspensive condition that the sellers shall effect the issuance of new certificate title from that of their father's name to their names and that, on February 6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4"). We, therefore, hold that, in accordance with Article 1187 which pertinently provides Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation . . . In obligation to do or not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been complied with. the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985. As of that point in time, reciprocal obligations of both seller and buyer arose. Petitioners also argue there could been no perfected contract on January 19, 1985 because they were then not yet the absolute owners of the inherited property. We cannot sustain this argument. Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows: Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to be extent and value of the inheritance of a person are transmitted through his death to another or others by his will or by operation of law. Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are compulsory heirs who were called to succession by operation of law. Thus, at the point their father drew his last breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that any rights or obligations pertaining thereto became binding and enforceable upon them. It is expressly provided that rights to the succession are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).

Be it also noted that petitioners' claim that succession may not be declared unless the creditors have been paid is rendered moot by the fact that they were able to effect the transfer of the title to the property from the decedent's name to their names on February 6, 1985. Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that time and they cannot be allowed to now take a posture contrary to that which they took when they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly states that: Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot claim now that they were not yet the absolute owners thereof at that time. Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Alcaraz, the latter breached her reciprocal obligation when she rendered impossible the consummation thereof by going to the United States of America, without leaving her address, telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in unilaterally rescinding rescinding the contract of sale. We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that these supposed grounds for petitioners' rescission, are mere allegations found only in their responsive pleadings, which by express provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any supporting evidence to substantiate petitioners' allegations. We have stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]). Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot justify petitioner-sellers' act of unilaterally and extradicially rescinding the contract of sale, there being no express stipulation authorizing the sellers to extarjudicially rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984]) Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramona's mother, who had acted for and in behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal check (Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcion's authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any objection as regards payment being effected by a third person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of sale. Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense of the physical absence of Ramona P. Alcaraz as above-explained

offered no proof whatsoever to show that they actually presented the new transfer certificate of title in their names and signified their willingness and readiness to execute the deed of absolute sale in accordance with their agreement. Ramona's corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default. Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in default, to wit: Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. xxx xxx xxx In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfill his obligation, delay by the other begins. (Emphasis supplied.) There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents. With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale where Article 1544 of the Civil Code will apply, to wit: Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should if be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof to the person who presents the oldest title, provided there is good faith. The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply. The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first buyer. In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the Court, Justice Jose C. Vitug, explains:

The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first buyer of the second sale cannot defeat the first buyer's rights except when the second buyer first registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register, since knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it has held that it is essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992). (J. Vitug Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604). Petitioner point out that the notice of lis pendens in the case at bar was annoted on the title of the subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is buyer in good faith. We are not persuaded by such argument. In a case of double sale, what finds relevance and materiality is not whether or not the second buyer 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. As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been previously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners' title to the property at the time of the registration of the property. This Court had occasions to rule that: If a vendee in a double sale registers that 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 pervious sale, the registration will constitute a registration in bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.) Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts below. Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcion, her mother, as agent insofar as the subject contract of sale is concerned, the issue of whether or not Concepcion was also acting in her own behalf as a

co-buyer is not squarely raised in the instant petition, nor in such assumption disputed between mother and daughter. Thus, We will not touch this issue and no longer disturb the lower courts' ruling on this point. WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED. SO ORDERED.

The facts narrated by the Court of Appeals are as follows: 4 G.R. No. 115158 September 5, 1997 EMILLA M. URACA, CONCORDIA D. CHING and ONG SENG, represented by ENEDINO H. FERRER,petitioners, vs. COURT OF APPEALS, JACINTO VELEZ, JR., CARMEN VELEZ TING, AVENUE MERCHANDISING, INC., FELIX TING AND ALFREDO GO, respondents. The Velezes (herein private respondents) were the owners of the lot and commercial building in question located at Progreso and M.C. Briones Streets in Cebu City. Herein (petitioners) were the lessees of said commercial building. 5 On July 8, 1985, the Velezes through Carmen Velez Ting wrote a letter to herein (petitioners) offering to sell the subject property for P1,050,000.00 and at the same time requesting (herein petitioners) to reply in three days. On July 10, 1985, (herein petitioners) through Atty. Escolastico Daitol sent a reply-letter to the Velezes accepting the aforesaid offer to sell. On July 11, 1985, (herein petitioner) Emilia Uraca went to see Carmen Ting about the offer to sell but she was told by the latter that the price was P1,400,000.00 in cash or manager's check and not P1,050,000.00 as erroneously stated in their letter-offer after some haggling. Emilia Uraca agreed to the price of P1,400,000.00 but counter-proposed that payment be paid in installments with a down payment of P1,000,000.00 and the balance of P400,000 to be paid in 30 days. Carmen Velez Ting did not accept the said counter-offer of Emilia Uraca although this fact is disputed by Uraca. No payment was made by (herein petitioners) to the Velezes on July 12, 1985 and July 13, 1985. On July 13, 1985, the Velezes sold the subject lot and commercial building to the Avenue Group (Private Respondent Avenue Merchandising Inc.) for P1,050,000.00 net of taxes, registration fees, and expenses of the sale. At the time the Avenue Group purchased subject property on July 13, 1985 from the Velezes, the certificate of title of the said property was clean and free of any annotation of adverse claims or lis pendens. On July 31, 1985 as aforestated, herein (petitioners) filed the instant complaint against the Velezes. On August 1, 1985, (herein petitioners) registered a notice of lis pendens over the property in question with the Office of the Register of Deeds. 6 On October 30, 1985, the Avenue Group filed an ejectment case against (herein petitioners) ordering the latter to vacate the commercial building standing on the lot in question. Thereafter, herein (petitioners) filed an amended complaint impleading the Avenue Group as new defendants (after about 4 years after the filing of the original complaint). The Antecedent Facts

PANGANIBAN, J.: Novation is never presumed; it must be sufficiently established that a valid new agreement or obligation has extinguished or changed an existing one. The registration of a later sale must be done in good faith to entitle the registrant to priority in ownership over the vendee in an earlier sale. Statement of the Case These doctrines are stressed by this Court as it resolves the instant petition challenging the December 28, 1993 Decision 1 of Respondent Court of Appeals 2 in CA-G.R. SP No. 33307, which reversed and set aside the judgment of the Regional Trial Court of Cebu City, Branch 19, and entered a new one dismissing the petitioners' complaint. The dispositive portion of the RTC decision reads: 3 WHEREFORE, judgment is hereby rendered: 1) declaring as null and void the three (3) deeds of sale executed by the Velezes to Felix C. Ting, Manuel Ting and Alfredo Go; 2) ordering Carmen Velez Ting and Jacinto M. Velez, Jr. to execute a deed of absolute sale in favor of Concordia D. Ching and Emilia M. Uraca for the properties in question for P1,400,000.00, which sum must be delivered by the plaintiffs to the Velezes immediately after the execution of said contract; 3) ordering Carmen Velez Ting and Jacinto M. Velez, Jr. to reimburse Felix C. Ting, Manuel C. Ting and Alfredo Go whatever amount the latter had paid to the former; 4) ordering Felix C. Ting, Manuel C. Ting and Alfredo Go to deliver the properties in question to the plaintiffs within fifteen (15) days from receipt of a copy of this decision; 5) ordering all the defendants to pay, jointly and severally, the plaintiffs the sum of P20,000.00 as attorney's fees. SO ORDERED.

The trial court found two perfected contracts of sale between the Velezes and the petitioners involving the real property in question. The first sale was for P1,050,000.00 and the second was for P1,400,000.00. In respect to the first sale, the trial court held that "[d]ue to the unqualified acceptance by the plaintiffs within the period set by the Velezes, there consequently came about a meeting of the minds of the parties not only as to the object certain but also as to the definite consideration or cause of the contract." 7 And even assuming arguendo that the second sale was not perfected, the trial court ruled that the same still constituted a mere modificatory novation which did not extinguish the first sale. Hence, the trial court held that "the Velezes were not free to sell the properties to the Avenue Group." 8 It also found that the Avenue Group purchased the property in bad faith. 9 Private respondents appealed to the Court of Appeals. As noted earlier, the CA found the appeal meritorious. Like the trial court, the public respondent held that there was a perfected contract of sale of the property for P1,050,000.00 between the Velezes and herein petitioners. It added, however, that such perfected contract of sale was subsequently novated. Thus, it ruled: "Evidence shows that that was the original contract. However, the same was mutually withdrawn, cancelled and rescinded by novation, and was therefore abandoned by the parties when Carmen Velez Ting raised the consideration of the contract [by] P350,000.00, thus making the price P1,400,000.00 instead of the original price of P1,050,000.00. Since there was no agreement as to the 'second' price offered, there was likewise no meeting of minds between the parties, hence, no contract of sale was perfected." 10 The Court of Appeals added that, assuming there was agreement as to the price and a second contract was perfected, the later contract would be unenforceable under the Statute of Frauds. It further held that such second agreement, if there was one, constituted a mere promise to sell which was not binding for lack of acceptance or a separate consideration. 11 The Issues Petitioners allege the following "errors" in the Decision of Respondent Court: I Since it ruled in its decision that there was no meeting of the minds on the "second" price offered (P1,400,000.00), hence no contract of sale was perfected, the Court of Appeals erred in not holding that the original written contract to buy and sell for P1,050,000.00 the Velezes property continued to be valid and enforceable pursuant to Art. 1279 in relation with Art. 1479, first paragraph, and Art. 1403, subparagraph 2 (e) of the Civil Code. II The Court of Appeals erred in not ruling that petitioners have better rights to buy and own the Velezes' property for registering their notice of lis pendens ahead of the Avenue Group's registration of their deeds of sale taking into account Art. 1544, 2nd paragraph, of the Civil Code. 12 The Court's Ruling The petition is meritorious. First Issue: No Extinctive Novation

The lynchpin of the assailed Decision is the public respondent's conclusion that the sale of the real property in controversy, by the Velezes to petitioners for P1,050,000.00, was extinguished by novation after the said parties negotiated to increase the price to P1,400,000.00. Since there was no agreement on the sale at the increased price, then there was no perfected contract to enforce. We disagree. The Court notes that the petitioners accepted in writing and without qualification the Velezes' written offer to sell at P1,050,000.00 within the three-day period stipulated therein. Hence, from the moment of acceptance on July 10, 1985, a contract of sale was perfected since undisputedly the contractual elements of consent, object certain and cause concurred. 13 Thus, this question is posed for our resolution: Was there a novation of this perfected contract? Article 1600 of the Civil Code provides that "(s)ales are extinguished by the same causes as all other obligations, . . . ." Article 1231 of the same Code states that novation is one of the ways to wipe out an obligation. Extinctive novation requires: (1) the existence of a previous valid obligation; (2) the agreement of all the parties to the new contract; (3) the extinguishment of the old obligation or contract; and (4) the validity of the new one. 14 The foregoing clearly show that novation is effected only when a new contract has extinguished an earlier contract between the same parties. In this light, novation is never presumed; it must be proven as a fact either by express stipulation of the parties or by implication derived from an irreconcilable incompatibility between old and new obligations or contracts. 15 After a thorough review of the records, we find this element lacking in the case at bar. As aptly found by the Court of Appeals, the petitioners and the Velezes did not reach an agreement on the new price of P1,400,000.00 demanded by the latter. In this case, the petitioners and the Velezes clearly did not perfect a new contract because the essential requisite of consent was absent, the parties having failed to agree on the terms of the payment. True, petitioners made a qualified acceptance of this offer by proposing that the payment of this higher sale price be made by installment, with P1,000,000.00 as down payment and the balance of P400,000.00 payable thirty days thereafter. Under Article 1319 of the Civil Code, 16 such qualified acceptance constitutes a counter-offer and has the ineludible effect of rejecting the Velezes' offer. 17 Indeed, petitioners' counter-offer was not accepted by the Velezes. It is well-settled that "(a)n offer must be clear and definite, while an acceptance must be unconditional and unbounded, in order that their concurrence can give rise to a perfected contract." 18 In line with this basic postulate of contract law, "a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale." 19 Since the parties failed to enter into a new contract that could have extinguished their previously perfected contract of sale, there can be no novation of the latter. Consequently, the first sale of the property in controversy, by the Velezes to petitioners for P1,050,000.00, remained valid and existing. In view of the validity and subsistence of their original contract of sale as previously discussed, it is unnecessary to discuss public respondent's theses that the second agreement is unenforceable under the Statute of Frauds and that the agreement constitutes a mere promise to sell. Second Issue: Double Sale of an Immovable The foregoing holding would have been simple and straightforward. But Respondent Velezes complicated the matter by selling the same property to the other private respondents who were referred to in the assailed Decision as the Avenue Group.

Before us therefore is a classic case of a double sale first, to the petitioner; second, to the Avenue Group. Thus, the Court is now called upon to determine which of the two groups of buyers has a better right to said property. Article 1544 of the Civil Code provides the statutory solution: xxx xxx xxx Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. Under the foregoing, the prior registration of the disputed property by the second buyer does not by itself confer ownership or a better right over the property. Article 1544 requires that such registration must be coupled with good faith. Jurisprudence teaches us that "(t)he governing principle is primus tempore, potior jure(first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights except where the second buyer registers in good faith the second sale ahead of the first, as provided by the Civil Code. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register first her purchase as against the second buyer. But in converso, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first buyer; that before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e, in ignorance of the first sale and of the first buyer's rights ) from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession." 20 (Emphasis supplied) After a thorough scrutiny of the records of the instant case, the Court finds that bad faith tainted the Avenue Group's purchase on July 13, 1985 of the Velezes' real property subject of this case, and the subsequent registration thereof on August 1, 1995. The Avenue Group had actual knowledge of the Velezes' prior sale of the same property to the petitioners, a fact antithetical to good faith. For a second buyer like the Avenue Group to successfully invoke the second paragraph, Article 1544 of the Civil Code, it must possess good faith from the time of the sale in its favor until the registration of the same. This requirement of good faith the Avenue Group sorely failed to meet. That it had knowledge of the prior sale, a fact undisputed by the Court of Appeals, is explained by the trial court thus: The Avenue Group, whose store is close to the properties in question, had known the plaintiffs to be the lessee-occupants thereof for quite a time. Felix Ting admitted to have a talk with Ong Seng in 1983 or 1984 about the properties. In the cross-examination, Manuel Ting also admitted that about a month after Ester Borromeo allegedly offered the sale of the properties Felix Ting went to see Ong Seng again. If these were so, it can be safely assumed that Ong Seng had consequently told Felix about plaintiffs' offer on January 11, 1985 to buy the properties for P1,000,000.00 and of their timely acceptance on July 10, 1985 to buy the same at P1,050,000.00. The two aforesaid admissions by the Tings, considered together with Uraca's positive assertion that Felix Ting met with her on July 11th and who was told by her that the plaintiffs had transmitted already to the

Velezes their decision to buy the properties at P1,050,000.00, clinches the proof that the Avenue Group had prior knowledge of plaintiffs' interest. Hence, the Avenue Group defendants, earlier forewarned of the plaintiffs' prior contract with the Velezes, were guilty of bad faith when they proceeded to buy the properties to the prejudice of the plaintiffs. 21 The testimony of Petitioner Emilia Uraca supports this finding of the trial court. The salient portions of her testimony follow: BY ATTY. BORROMEO: (To witness) Q According to Manuel Ting in his testimony, even if they know, referring to the Avenue Group, that you were tenants of the property in question and they were neighbors to you, he did not inquire from you whether you were interested in buying the property, what can you say about that? A It was Felix Ting who approached me and asked whether I will buy the property, both the house and the land and that was on July 10, 1985. ATTY BORROMEO: (To witness) Q What was your reply, if any? A Yes, sir, I said we are going to buy this property because we have stayed for a long time there already and we have a letter from Carmen Ting asking us whether we are going to buy the property and we have already given our answer that we are willing to buy. COURT: (To witness) Q What do you mean by that, you mean you told Felix Ting and you showed him that letter of Carmen Ting? WITNESS: A We have a letter of Carmen Ting where she offered to us for sale the house and lot and I told him that I have already agreed with Concordia Ching, Ong Seng and my self that we buy the land. We want to buy the land and the building. 22 We see no reason to disturb the factual finding of the trial court that the Avenue Group, prior to the registration of the property in the Registry of Property, already knew of the first sale to petitioners. It is hornbook doctrine that "findings of facts of the trial court, particularly when affirmed by the Court of Appeals, are binding upon this Court" 23 save for exceptional circumstances 24 which we do not find in the factual milieu of the present case. True, this doctrine does not apply where there is a variance in the factual findings of the trial court and the Court of Appeals. In the present case, the Court of Appeals did not explicitly sustain this particular holding of the trial court, but neither did it controvert the same. Therefore, because the registration by the Avenue Group was in bad faith, it amounted to no

"inscription" at all. Hence, the third and not the second paragraph of Article 1544 should be applied to this case. Under this provision, petitioners are entitled to the ownership of the property because they were first in actual possession, having been the property's lessees and possessors for decades prior to the sale. Having already ruled that petitioners' actual knowledge of the first sale tainted their registration, we find no more reason to pass upon the issue of whether the annotation of lis pendens automatically negated good faith in such registration. WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals is hereby SET ASIDE and the dispositive portion of the trial court's decision dated October 19, 1990 is REVIVED with the following MODIFICATION the consideration to be paid under par. 2 of the disposition is P1,050,000.00 and not P1,400,000.00. No Costs. SO ORDERED.

G.R. No. 171008

September 13, 2007

CARMELITA FUDOT, Petitioner, vs. CATTLEYA LAND, INC., VELASCO, JR., JJ. Respondent. DECISION TINGA, J.: For resolution is a petition that seeks to nullify the Decision 1 and Resolution2 of the Court of Appeals dated 28 April 2005 and 11 January 2006, respectively, in C.A.G.R. CV No. 73025 which declared respondent as having a better right over a parcel of land located in Doljo, Panglao, Bohol. The facts, as culled from the records, follow. Sometime in July 1992, Cattleya Land, Inc. (hereinafter referred to as respondent) asked someone to check, on its behalf, the titles of nine (9) lots, the subject land included, which it intended to buy from the spouses Troadio and Asuncion Tecson. Finding no defect on the titles, respondent purchased the nine lots through a Deed of Conditional Sale on 6 November 1992. Subsequently, on 30 August 1993, respondent and the Tecsons executed a Deed of Absolute Sale over the same properties. The Deed of Conditional Sale and the Deed of Absolute Sale were registered with the Register of Deeds on 06 November 1992 and 04 October 1993, respectively.3 The Register of Deeds, Atty. Narciso dela Serna, refused to actually annotate the deed of sale on the titles because of the existing notice of attachment in connection with Civil Case No. 3399 pending before the Regional Trial Court of Bohol. 4 The attachment was eventually cancelled by virtue of a compromise agreement between the Tecsons and their attaching creditor which was brokered by respondent. Titles to six (6) of the nine (9) lots were issued, but the Register of Deeds refused to issue titles to the remaining three (3) lots , because the titles covering the same were still unaccounted for. On 23 January 1995, petitioner presented for registration before the Register of Deeds the owners copy of the title of the subject property, together with the deed of sale purportedly executed by the Tecsons in favor of petitioner on 19 December 1986. On the following day, respondent sent a letter of protest/opposition to petitioners application. Much to its surprise, respondent learned that the Register of Deeds had already registered the deed of sale in favor of petitioner and issued a new title in her name. 5 On 5 May 1995, respondent filed its Complaint6 for Quieting Of Title &/Or Recovery Of Ownership, Cancellation Of Title With Damages before the Regional Trial Court of Tagbilaran City.7 On 26 June 1995, Asuncion filed a complaint-in-intervention, claiming that she never signed any deed of sale covering any part of their conjugal property in favor of petitioner. She averred that her signature in petitioners deed of sale was forged thus, said deed should be declared null and void.8 She also claimed that she has discovered only recently that there was an amorous relationship between her husband and petitioner. 9 Petitioner, for her part, alleged in her answer10 that the spouses Tecson had sold to her the subject property for P20,000.00 and delivered to her the owners copy of the title on 26 December 1986. She claims that she subsequently presented the said title to the Register of Deeds but the latter refused to register the same because the property was still under attachment.

On 31 October 2001, the trial court rendered its decision: 11 (i) quieting the title or ownership of the subject land in favor of respondent; (ii) declaring the deed of sale between petitioner and spouses Tecson invalid; (iii) ordering the registration of the subject land in favor of respondent; (iv) dismissing respondents claim for damages against the Register of Deeds for insufficiency of evidence; (v) dismissing Asuncions claim for damages against petitioner for lack of factual basis; and (vi) dismissing petitioners counterclaim for lack of the required preponderance of evidence.12 According to the trial court, respondent had recorded in good faith the deed of sale in its favor ahead of petitioner. Moreover, based on Asuncions convincing and unrebutted testimony, the trial court concluded that the purported signature of Asuncion in the deed of sale in favor of petitioner was forged, thereby rendering the sale void. 13 Petitioner sought recourse to the Court of Appeals, arguing in the main that the rule on double sale was applicable to the case. The appellate court, however, dismissed her appeal, holding that there was no double sale because the alleged sale to petitioner was null and void in view of the forgery of Asuncions purported signature in the deed. The appellate court noted that petitioner failed to rebut Asuncions testimony despite opportunities to do so.14 Moreover, even if there was double sale, according to the appellate court, respondents claim would still prevail since it was able to register the second sale in its favor in good faith, had made inquiries before it purchased the lots, and was informed that the titles were free from encumbrance except the attachment on the property due to Civil Case No. 3399. 15 Petitioner sought reconsideration of the decision but the Court of Appeals denied her motion for reconsideration for lack of merit.16 Petitioner thus presents before this Court the following issues for resolution: I. BETWEEN 2 BUYERS OF REGISTERED LAND, WHO HAS THE BETTER RIGHT-IS IT THE FIRST BUYER WHO WAS GIVEN THE OWNERS DUPLICATE TCT TOGETHER WITH A DEED OF SALE IN 1986, OR THE SECOND BUYER IN 1992 WITH ONLY A DEED OF SALE. II. IS A BUYER OF REGISTERED LAND WHO DID NOT DEMAND OR REQUIRE THE DELIVERY OF THE OWNERS DUPLICATE TCT A BUYER IN GOOD FAITH. III. II. IN SUBSEQUENT REGISTRATION OF REGISTERED LANDS, AS BY SALE, WHICH LAW SHALL GOVERN, ARTICLE 1455 OF CIVIL CODE OR P.D. 1529 OR TORRENS SYSTEM. 17 Petitioner avers that she was the first buyer in good faith and even had in her possession the owners copy of the title so much so that she was able to register the deed of sale in her favor and caused the issuance of a new title in her name. She argues that the presentation and surrender of the deed of sale and the owners copy carried with it the "conclusive authority of Asuncion Tecson" which cannot be overturned by the latters oral deposition. 18 Petitioner claims that respondent did not demand nor require delivery of the owners duplicate title from the spouses Tecson, neither did it investigate the circumstances surrounding the absence of the title. These indicate respondents knowledge of a defect in

the title of the spouses and, thus, petitioner concludes that respondent was not a buyer in good faith.19 Finally, petitioner insists that the applicable law in this case is P.D. No. 1529, a special law dealing precisely with the registration of registered lands or any subsequent sale thereof, and not Article 1544 of the Civil Code which deals with immovable property not covered by the Torrens System.20 Respondent points out, on one hand, that petitioners first two issues which present an inquiry on who has a better right or which one is a buyer in good faith, are questions of fact not proper in a petition for review. The third issue, on the other hand, is ostensibly a question of law which had been unsuccessfully raised below. 21 Respondent maintains that there is no room to speak of petitioner as a buyer in good faith since she was never a buyer in the first place, as her claim is based on a null and void deed of sale, so the court a quo found. Respondent also asserts that its status as a buyer in good faith was established and confirmed in the proceedings before the two courts below. 22 Lastly, respondent argues that P.D. No. 1529 finds no application in the instant case. The "production of the owners duplicate certificate x x x being conclusive authority from the registered owner" is only true as between the registration applicant and the register of deeds concerned, but never to third parties. Such conclusive authority, respondent adds, is "only for the Register of Deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument." It cannot cure the fatal defect that the instrument from which such registration was effected is null and void ab initio, respondent concludes.23 The petition is bereft of merit. Petitioners arguments, which rest on the assumption that there was a double sale, must fail. In the first place, there is no double sale to speak of. Art. 1544 of the Civil Code, 24 which provides the rule on double sale, applies only to a situation where the same property is validly sold to different vendees. In this case, there is only one sale to advert to, that between the spouses Tecson and respondent. In Remalante v. Tibe,25 this Court ruled that the Civil Law provision on double sale is not applicable where there is only one valid sale, the previous sale having been found to be fraudulent. Likewise, in Espiritu and Apostol v. Valerio, 26 where the same parcel of land was purportedly sold to two different parties, the Court held that despite the fact that one deed of sale was registered ahead of the other, Art. 1544 of the Civil Code will not apply where said deed is found to be a forgery, the result of this being that the right of the other vendee should prevail. The trial court declared that the sale between the spouses Tecson and petitioner is invalid, as it bears the forged signature of Asuncion. Said finding is based on the unrebutted testimony of Asuncion and the trial courts visual analysis and comparison of the signatures in her Complaint-in-Intervention and the purported deed of sale. This finding was upheld by the Court of Appeals, as it ruled that the purported sale in petitioners favor is null and void, taking into account Asuncions unrefuted deposition. In particular, the Court of Appeals noted petitioners failure to attend the taking of the oral deposition and to give written interrogatories. In short, she did not take the necessary steps to rebut Asuncions definitive assertion.

The congruence of the wills of the spouses is essential for the valid disposition of conjugal property.27 Thus, under Article 166 of the Civil Code28 which was still in effect on 19 December 1986 when the deed of sale was purportedly executed, the husband cannot generally alienate or encumber any real property of the conjugal partnership without the wifes consent. In this case, following Article 17329 of the Civil Code, on 26 June 1995, or eight and a half years (8 ) after the purported sale to petitioner, Asuncion filed her Complaint-inIntervention seeking the nullification thereof, and while her marriage with Troadio was still subsisting. Both the Court of Appeals and the trial court found Asuncions signature in the deed of sale to have been forged, and consequently, the deed of sale void for lack of marital consent. We find no reason to disturb the findings of the trial court and the Court of Appeals. Findings of fact of lower courts are deemed conclusive and binding upon the Supreme Court subject to certain exceptions,30 none of which are present in this case. Besides, it has long been recognized in our jurisprudence that a forged deed is a nullity and conveys no title. 31 Petitioner argues she has a better right over the property in question, as the holder of and the first one to present, the owners copy of the title for the issuance of a new TCT. The Court is not persuaded. The act of registration does not validate petitioners otherwise void contract. Registration is a mere ministerial act by which a deed, contract, or instrument is sought to be inscribed in the records of the Office of the Register of Deeds and annotated at the back of the certificate of title covering the land subject of the deed, contract, or instrument. While it operates as a notice of the deed, contract, or instrument to others, it does not add to its validity nor converts an invalid instrument into a valid one as between the parties, 32 nor amounts to a declaration by the state that the instrument is a valid and subsisting interest in the land.33 The registration of petitioners void deed is not an impediment to a declaration by the courts of its invalidity. Even assuming that there was double sale in this case, petitioner would still not prevail. The pertinent portion of Art. 1544 provides: Art. 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. x x x x. In interpreting this provision, the Court declared 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. However, 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.34 It is thus essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering his deed of sale.35 We agree with the trial court and the Court of Appeals that respondent was a buyer in good faith, having purchased the nine (9) lots, including the subject lot, without any notice of a previous sale, but only a notice of attachment relative to a pending civil case. In fact, in its

desire to finally have the title to the properties transferred in its name, it persuaded the parties in the said case to settle the same so that the notice of attachment could be cancelled. Relevant to the discussion are the following provisions of P.D. No. 1529: Sec. 51. Conveyance and other dealings by registered owner. An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, lease or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease or other voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Register of Deeds to make Registration. The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or city where the land lies. (Emphasis supplied) 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. It has been held that between two transactions concerning the same parcel of land, the registered transaction prevails over the earlier unregistered right. The act of registration operates to convey and affect the registered land so that a bona fide purchaser of such land acquires good title as against a prior transferee, if such prior transfer was unrecorded. 36 As found by the courts a quo, respondent was able to register its purchase ahead of petitioner. It will be recalled that respondent was able to register its Deed of Conditional Sale with the Register of Deeds as early as 6 November 1992, and its Deed of Absolute Sale on 14 October 1993. On the other hand, petitioner was able to present for registration her deed of sale and owners copy of the title only on 23 January 1995, or almost nine years after the purported sale. Why it took petitioner nine (9) years to present the deed and the owners copy, she had no credible explanation; but it is clear that when she finally did, she already had constructive notice of the deed of sale in respondents favor. Without a doubt, respondent had acquired a better title to the property. 1wphi1 Finally, anent petitioners claim that P.D. No. 1529 applies to registered lands or any subsequent sale thereof, while Art. 1544 of the Civil Code applies only to immovable property not covered by the Torrens System, suffice it to say that this quandary has already been answered by an eminent former member of this Court, Justice Jose Vitug, who explained that the registration contemplated under Art. 1544 has been held to refer to registration under P.D. No. 1529, thus: The registration contemplated under Art. 1544 has been held to refer to registration under Act 496 Land Registration Act (now PD 1529) which considers the act of registration as the operative act that binds the land (see Mediante v. Rosabal, 1 O.G. [12] 900, Garcia v. Rosabal, 73 Phil 694). On lands covered by the Torrens System, the purchaser acquires such rights and interest as they appear in the certificate of title, unaffected by any prior lien or encumbrance not noted therein. The purchaser is not required to explore farther than what the Torrens title, upon its face, indicates. The only exception is where the purchaser has actual knowledge of a flaw or defect in the title of the seller or of such liens or encumbrances which, as to him, is equivalent to registration (see Sec. 39, Act 496; Bernales

v. IAC, G.R. 75336, 18 October 1988; Hernandez vs. Sales, 69 Phil 744; Tajonera s. Court of Appeals, L-26677, 27 March 1981) (Emphasis supplied) 37 WHEREFORE, the petition is DENIED. The assailed decision and resolution of the Court of Appeals are affirmed. Costs against petitioner. SO ORDERED.