Carbonell vs. CA [G.R. No. L-29972. January 26, 1976.

] Facts: Prior to 27 January 1955, Jose Poncio, a native of the Batanes Islands, was the owner of the parcel of land with improvements situated at 179 V. Agan St., San Juan, Rizal, having an area of some 195 square meters, more or less, covered by TCT 5040 and subject to a mortgage in favor of the Republic Savings Bank for the sum of P1,500.00. Rosario Carbonell, a cousin and adjacent neighbor of Poncio, and also from the Batanes Islands, lived in the adjoining lot at 177 V. Agan Street. Both Rosario Carbonell and Emma Infante offered to buy the said lot from Poncio. Poncio, unable to keep up with the installments due on the mortgage, approached Carbonell one day and offered to sell to the latter the said lot, excluding the house wherein he lived. Carbonell accepted the offer and proposed the price of P9.50 per square meter. Poncio, after having secured the consent of his wife and parents, accepted the price proposed by Carbonell, on the condition that from the purchase price would come the money to be paid to the bank. Carbonell and Poncio went to the bank and secured the consent of the President thereof for her to pay the arrears on the mortgage and to continue the payment of the installments as they fall due. The amount in arrears reached a total sum of P247.26. But because Poncio had previously told her that the money needed was only P200, only the latter amount was brought by Carbonell constraining respondent Poncio to withdraw the sum of P47 from his bank deposit with Republic Savings Bank. The next day, Carbonell refunded to Poncio the sum of P47. On 27 January 1955, Carbonell and Poncio, in the presence of a witness, made and executed a document in the Batanes dialect, allowing Poncio to occupy the land sold within one year, and may continue occupying the site with rent thereafter if could not find any place to move his house. Thereafter, Carbonell asked Atty. Salvador Reyes, also from the Batanes Islands, to prepare the formal deed of sale, which she brought to Poncio together with the amount of some P400, the balance she still had to pay in addition to her assuming the mortgage obligation to Republic Savings Bank. Upon arriving at Poncios house, however, the latter told Carbonell that he could not proceed any more with the sale, because he had already given the lot to Emma Infante (and Ramon Infante); and that he could not withdraw from his deal with Infante, even if he were to go to jail. Carbonell then sought to contact Infante, but the latter refused to see her. On 5 February 1955, Carbonell saw Infante erecting a wall around the lot with a gate. Carbonell then consulted Atty. Jose Garcia, who advised her to present and adverse claim over the land in question with the Office of the Register of Deeds Rizal. Atty. Garcia actually sent a letter of inquiry to the Register of Deeds and demand letters to Jose Poncio and Emma Infante. In his answer to the complaint, Poncio admitted that on 30 January 1955, Infante improved her offer and he agreed to sell the land and its improvements to her for P3,535.00. In a private memorandum agreement dated 31 January 1955, Poncio indeed bound himself to sell to Infante, the property for the sum of P2,357.52, with Infante still assuming the existing mortgage debt in favor of Republic Savings Bank in the amount of P1,177.48. Infante lives just behind the houses of Poncio and Carbonell. On 2 February 1955, Poncio executed the formal deed of sale in favor of Infante in the total sum of P3,554.00 and on the same date, the latter paid Republic Savings Bank the mortgage indebtedness of P1,500.00. The mortgage on the lot was eventually discharged. Informed that the sale in favor of Infante had not yet been registered, Atty. Garcia prepared an adverse claim for Carbonell, who signed and swore to and registered the same on 8 February 1955. The deed of sale in favor of Infante was registered only on 12 February 1955. As a consequence thereof, a TCT was issued to her but with the annotation of the adverse claim of Carbonell. Infante took immediate possession of the lot involved, covered the same with 500 cubic meters of garden soil and built therein a wall and gate, spending the sum of P1,500. She further contracted the services of an architect to build a house; but the construction of the same started only in 1959, years after the litigation actually began and during its pendency. Infante spent for the house the total amount of P11,929. On 1 June 1955, Carbonell, thru counsel, filed a second amended complaint against Poncio and Infante, praying that she be declared the lawful owner of the questioned parcel of land; that the subsequent sale to Infante be declared null and void, and that Poncio be ordered to execute the corresponding deed of conveyance of said land in her favor and for damages and attorneys fees. Poncio and Infante first moved to dismiss the complaint on the ground, among others, that Carbonells claim is unenforceable under the Statute of Frauds, the alleged sale in her favor not being evidenced by a written document; and when said motion was denied without prejudice to passing on the question raised therein when the case would be tried on the merits, Poncio and Infante filed separate answers, reiterating the grounds of their motion to dismiss. In its order of 26 April 1966, the trial court sustained the objection and dismissed the complaint on the ground that the memorandum presented by Carbonell to prove said sale does not satisfy the requirements of the law. From the above order of dismissal, Carbonnel appealed to the Supreme Court (GR L-11231) which ruled in a

decision dated 12 May 1958, that the Statute of Frauds, being applicable only to executory contracts, does not apply to the alleged sale between Carbonell and Poncio, which Carbonell claimed to have been partially performed, so that Carbonell is entitled to establish by parol evidence the truth of this allegation, as well as the contract itself. The order appealed from was thus reversed, and the case remanded to the court a quo for further proceedings. After trial in the court a quo, a decision was rendered on 5 December 1962, declaring the second sale by Poncio to Infante of the land in question null and void and ordering Poncio to execute the proper deed of conveyance of said land in favor of Carbonell after compliance by the latter of her covenants under her agreement with Poncio. On 23 January 1963, Infante, through another counsel, filed a motion for re-trial to adduce evidence for the proper implementation of the courts decision in case it would be affirmed on appeal which motion was opposed by Carbonell for being premature. Before their motion for re-trial could be resolved, Infante, this time through their former counsel, filed another motion for new trial, claiming that the decision of the trial court is contrary to the evidence and the law, which motion was also opposed by Carbonell. The trial court granted a new trial, at which re-hearing only Infante introduced additional evidence consisting principally of the cost of improvements they introduced on the land in question. After the rehearing, the trial court rendered a decision, reversing its decision of 5 December 1962 on the ground that the claim of Infante was superior to the claim of Carbonell, and dismissing the complaint\. From this decision, Carbonell appealed to the Court of Appeals. On 2 November 1967, the Court of Appeals (Fifth Division composed of Justices Magno Gatmaitan, Salvador V. Esguerra and Angel H. Mojica, speaking through Justice Magno Gatmaitan), rendered judgment reversing the decision of the trial court, declaring Carbonell to have a superior right to the land in question, and condemning Infante to reconvey to Carbonell, after her reimbursement to them of the sum of P3,000 plus legal interest, the land in question and all its improvements. Infante sought reconsideration of said decision and acting on the motion for reconsideration, the Appellate Court, three Justices (Villamor, Esguerra and Nolasco), of Special Division of Five, granted said motion, annulled and set aside its decision of 2 November 1967, and entered another judgment affirming in toto the decision of the court a quo, with Justices Gatmaitan and Rodriguez dissenting. Carbonell moved to reconsider the Resolution of the Special Division of Five, which motion was denied by Minute Resolution of 6 December 1968 (but with Justices Rodriguez and Gatmaitan voting for reconsideration). Hence, this appeal by certiorari. The Supreme Court reversed the decision of the special division of five of the court of appeals of 30 October 1968; declared Carbonell to have the superior right to the land in question and directed Carbonell to reimburse to Infante the sum of P1,500 within 3 months from the finality of the decision; directed the Register of Deeds of Rizal to cancel TCT 37842 issued in favor of Infante covering the disputed lot, which cancelled TCT 5040 in the name of Poncio, and to issue a new TCT in favor of Carbonell upon presentation of proof of payment by her to Infante of the aforesaid amount. Infante may remove their useful improvements from the lot within 3 months from the finality of this decision, unless Carbonell elects to acquire the same and pay Infante the amount of P13,429 within 3 months from the finality of the decision. Should Carbonell fail to pay the said amount within the period of 3 months from the finality of the decision, the period of 3 months within which Infante may remove their useful improvements shall commence from the expiration of the 3 months given Carbonell to pay for the said useful improvements; with costs against Poncio and Infante.

1.

Double sale; Article 1544 Article 1544, New Civil Code, which is decisive of this case, recites If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. 2. Good faith essential in registering deed of sale It is essential that the buyer of realty must act in good faith in registering his deed of sale to merit the protection of the second paragraph of said Article 1544. Unlike the first and third paragraphs of said Article 1544, which accord preference to the one who first takes possession in good faith of personal or real property, the second paragraph directs that ownership of immovable property should be recognized in favor of one who in good faith first recorded his right. Under the first and third paragraphs, good faith must characterize the prior possession. Under the second paragraph, good faith must characterize the act of anterior registration (DBP vs. Mangawang, et al., 11 SCRA 405; Soriano, et al. vs. Magale, et al., 8 SCRA 489). 3. Decisive fact if there is no inscription, or if there is inscription If there is no inscription, what is decisive is prior possession in good faith. If there is inscription, as in the present case, prior registration in good faith is a pre-condition to superior title. Carbonells prior purchase and registration in good faith When Carbonell bought the lot from Poncio on 27 January 1955, she was the only buyer thereof and the title of Poncio was still in his name solely encumbered by bank mortgage duly annotated thereon. Carbonell was not aware of any sale to Infante as there was no such sale to Infante then. Hence, Carbonells prior purchase of the land was made in good faith. Her good faith subsisted and continued to exist when she recorded her adverse claim 4 days prior to the registration of Infantes deed of sale. Carbonells good faith did not cease after Poncio told her on 31 January 1955 of his second sale of the same lot to Infante. Because of that information, Carbonell wanted an audience with Infante, which desire underscores Carbonells good faith. Infante refused to see her. Carbonell did the next best thing to protect her right, she registered her adverse claim on 8 February 1955. Under the circumstances, this recording of her adverse claim should be deemed to have been done in good faith and should emphasize Infantes bad faith when she registered her deed of sale 4 days later on 12 February 1955. 4. 5. Bad faith of Infante; Facts showing bad faith Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is shown by the following facts: (1) Infante refused to see Carbonell, who wanted to see Infante after she was informed by Poncio that he sold the lot to Infante but several days before Infante registered her deed of sale. Ordinarily, one will not refuse to see a neighbor. Her refusal to talk to Carbonell could only mean that she did not want to listen to Carbonells story that the latter had previously bought the lot from Poncio. (2) Carbonell was already in possession of the mortgage passbook [not Poncios savings deposit passbook: Infantes] and Poncios copy of the mortgage contract, when Poncio sold the lot to Infante. This shows that the lot was already sold to Carbonell who, after paying the arrearages of Poncio, assumed the balance of his mortgage indebtedness to the bank, which in the normal course of business must have necessarily informed Infante about the said assumption by Carbonell of the mortgage indebtedness of Poncio. Before or upon paying in full the mortgage indebtedness of Poncio to the bank, Infante naturally must have demanded from Poncio the delivery to her of his mortgage passbook as well as Poncios mortgage contract so that the fact of full payment of his bank mortgage will be entered therein; and Poncio, as well as the bank, must have inevitably informed her that said mortgage passbook could not be given to her because it was already delivered to Carbonell; (3) The fact that Poncio was no longer in possession of his mortgage passbook and that the said mortgage passbook was already in possession of Carbonell, should have compelled Infante to inquire from Poncio why he was no longer in possession of the mortgage passbook and from Carbonell why she was in possession of the same (Paglago, et al., vs. Jarabe, et al., 22 SCRA 1247, 1252-1253); (4) Carbonell registered on 8 February 1955 her adverse claim, which was accordingly annotated on Poncios title 4 days before Infante registered on 12 February 1955 her deed of sale executed on 2 February 1955. Infante was again on notice of the prior sale to Carbonell. Such registration of adverse

claim is valid and effective (Jovellanos vs. Dimalanta, L-11736-37, January 30, 1959, 105 Phil. 1250-51); (5) In his answer to the complaint filed by Poncio, as defendant in the CFI, he alleged that both Infante and Carbonell offered to buy the lot at P15 per sq.m., which offers he rejected as he believed that his lot is worth at least P20 per sq.m. Knowledge of this should have put Infante on her guard and should have compelled her to inquire from Poncio whether or not he had already sold the property to Carbonell (See Carbonell vs. Poncio, L-11231, 12 May 1958). 6. Contract for lot not in the purview of Statute of Frauds; not a contract of sale; indicates sale as an accomplished act The private document executed by Poncio and Carbonell and witnessed by Constancio Meonada captioned Contract for One-half Lot which I Bought from Jose Poncio, was not such a memorandum in writing within the purview of the Statute of Frauds. The memorandum in question merely states that Poncio is allowed to stay in the property which he had sold to Carbonell. There is no mention of the consideration, a description of the property and such other essential elements of the contract of sale. There is nothing in the memorandum which would tend to show even in the slightest manner that it was intended to be an evidence of contract of sale. On the contrary, from the terms of the memorandum, it tends to show that the sale of the property in favor of Carbonell is already an accomplished act. By the very contents of the memorandum itself, it cannot therefore, be considered to be the memorandum which would show that a sale has been made by Poncio in favor of Carbonell. 7. Contract of Sale not in the purview of Statute of Frauds as it is allegedly partially performed Because the complaint alleges and the Carbonell claims that the contract of sale was partly performed, the same is removed from the application of the Statute of Frauds and Carbonell should be allowed to establish by parol evidence the truth of her allegation of partial performance of the contract of sale. There was a partial performance of the verbal sale executed by Poncio in favor of the Carbonell, when the latter paid P247.26 to the Republic Savings Bank on account of Poncios mortgage indebtedness. 8. Language (Dialect) used of memorandum indicates lack of intent on the part of Carbonell to mislead Poncio The document signed by Poncio is in the Batanes dialect, which, according to Carbonells uncontradicted evidence, is the one spoken by Poncio, he being a native of said region. The allegation in Poncios answer to the effect that he signed the document under the belief that it was a permit for him to remain in the premises in the event that he decided to sell the property to Carbonell at P20 a sq. m. is, on its face, difficult to believe. If he had not decided as yet to sell the land to Carbonell, who had never increased her offer of P15 a sq,m., there was no reason for Poncio to get said permit from her. Upon the other hand, if Carbonell intended to mislead Poncio, she would have caused the document to be drafted, probably, in English, instead of taking the trouble of seeing to it that it was written precisely in his native dialect, the Batanes. Moreover, Poncios signature on the document suggests that he is neither illiterate nor so ignorant as to sign a document without reading its contents, apart from the fact that Meonada had read the document to him and given him a copy thereof , before he signed thereon, according to Meonadas uncontradicted testimony. 9. Carbonell entitled to introduce parol evidence The Court would not know why Poncios bank deposit book is in Carbonells possession, or whether there is any relation between the P247.26 entry therein and the partial payment of P247.26 allegedly made by Carbonell to Poncio on account of the price of his land, if the Court does not allow Carbonell to explain it on the witness stand. She is entitled, legally as well as from the viewpoint of equity, to an opportunity to introduce parol evidence in support of the allegations of her second amended complaint. 10. One-half lot clearly the parcel of land occupied by Poncio and where he has his improvements erected The one half lot was mentioned in the document because the original description carried in the title states that it was formerly part of a bigger lot and only segregated later. Such explanation is tenable, in considering the time value of the contents of the document, there is a sufficient description of the lot referred to as none other than the parcel of land occupied by Poncio and where he has his improvements erected. The identity of the parcel of land involved is sufficiently established by the contents of the note. 11. Existence of a contract of sale

There had been celebrated a sale of the property excluding the house for the price of P9.50 per square meter, so much so that on faith of that, Rosario had advanced the sum of P247.26 and binding herself to pay unto Jose the balance of the purchase price after deducting the indebtedness to the Bank. Since the wording of the private document goes so far as to describe their transaction as one of sale, already consummated between them, as can be noted with the past tense used in the phrase, the lot sold by him to me and going so far even as to state that from that day onwards, vendor would continue to live therein, for one year, during which time he will not pay anything this can only mean that between Rosario and Jose, there had been a true contract of sale, consummated by delivery constitutum possessorium (Art.1500, New Civil Code); vendor s possession having become converted from then on, as a mere tenant of vendee, with the special privilege of not paying rental for one year. 12. Contract is consensual; Oral contract does not invalidate sale but merely incapable of proof Even if the document was not registered at all, it was a valid contract nonetheless. Under the law, a contract sale is consensual, perfected by mere consent (Couto vs. Cortes, 8 Phil. 459). Under the New Civil Code, while a sale of an immovable is ordered to be reduced to a public document (Art. 1358), that mandate does not render an oral sale of realty invalid, but merely incapable of proof. Where still executory and action is brought and resisted for its performance (1403, par. 2, 3); but where already wholly or partly executed or where even if not yet, it is evidenced by a memorandum, in any case where evidence to further demonstrate is presented and admitted, then the oral sale becomes perfectly good, and becomes a good cause of action not only to reduce it to the form of a public document, but even to enforce the contract in its entirety (Art. 1357). 13. Perfected sale; Justice Gatmaitan correct In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his decision of 2 November 1967 as well as his findings of facts therein, and reiterated that the private memorandum is a perfected sale, as a sale is consensual and consummated by mere consent, and is binding on and effective between the parties. This statement of the principle is correct. 14. Mortgage of lot about to be foreclosed when Poncio agreed to sell the lot to Carbonell; Ample consideration in the sale The mortgage on the lot was about to be foreclosed by the bank for failure on the part of Poncio to pay the amortizations thereon. To forestall the foreclosure and at the same time to realize some money from his mortgaged lot, Poncio agreed to sell the same to Carbonell at P9.50 per square meter, on condition that Carbonell [1] should pay (a) the amount of P400.00 to Poncio and (b) the arrears in the amount of P247.26 to the bank; and [2] should assume his mortgage indebtedness. The bank president agreed to the said sale with assumption of mortgage in favor of Carbonell and Carbonell accordingly paid the arrears of P247.26. On January 27, 1955, she paid the amount of P200.00 to the bank because that was the amount that Poncio told her as his arrearages and Poncio advanced the sum of P47.26 which amount was refunded to him by Carbonell the following day. This conveyance was confirmed that same day, January 27, 1955, by the private document which was prepared in the Batanes dialect by the witness Constancio Meonada, who is also from Batanes like Poncio and Carbonell. The sale did not include Poncios house on the lot. Poncio was given the right to continue staying on the land without paying any rental for one year, after which he should pay rent if he could not still find a place to transfer his house. All these terms are part of the consideration of the sale to Carbonell. There was ample consideration, and not merely the sum of P200.00, for the sale of Poncio to Carbonell of the lot in question. 15. Carbonell, not Infante, victim of injustice and outrage Poncio, induced by the higher price offered to him by Infante, reneged on his commitment to Carbonell and told Carbonell, who confronted him about it, that he would not withdraw from his deal with Infante even if he is sent to jail. The victim, therefore, of injustice and outrage is the widow Carbonell and not the Infantes, who without moral compunction exploited the greed and treacherous nature of Poncio, who, for love of money and without remorse of conscience, dishonored his own plighted word to Carbonell, his own cousin. 16. Infante not entitled to recover value of improvements introduced in the lot The bad faith of Emma Infante from the time she enticed Poncio to dishonor his contract with Carbonell, and instead to sell the lot to her (Infante) by offering Poncio a much hinger price than the price for which he sold the same to Carbonell is clear. Being guilty of bad faith, both in taking physical possession of the lot

and in recording their deed of sale, the Infantes cannot recover the value of the improvements they introduced in the lot. And after the filing by Carbonell of the complaint in June 1955, the Infantes had less justification to erect a building thereon since their title to said lot is seriously disputed by Carbonell on the basis of a prior sale to her. 17. Poncio did not remain owner by possessing the lot Being a valid consensual contract, the document effectively transferred the possession of the lot to the vendee Carbonell by constitutum possessorium (Article 1500, New Civil Code); because thereunder the vendor Poncio continued to retain physical possession of the lot as tenant of the vendee and no longer as owner thereof. More than just the signing of the document by Poncio and Carbonell with Constancio Meonada as witness to perfect the contract of sale, the transaction was further confirmed when Poncio agreed to the actual payment by Carbonell of his mortgage arrearages to the bank on 27 January 1955 and by his consequent delivery of his own mortgage passbook to Carbonell. If he remained owner and mortgagor, Poncio would not have surrendered his mortgage passbook to Carbonell. 18. Poncio does not own another parcel of land with the same area adjacent to Carbonell It is not shown that Poncio owns another parcel with the same area, adjacent to the lot of his cousin Carbonell and likewise mortgaged by him to the Republic Savings Bank. The transaction therefore between Poncio and Carbonell can only refer and does refer to the lot involved. If Poncio had another lot to remove his house, the document would not have stipulated to allow him to stay in the sold lot without paying any rent for one year and thereafter to pay rental in case he cannot find another place to transfer his house. 19. Carbonell liable to efund amount Infante paid the bank to redeem the mortgage While Carbonell has the superior title to the lot, she must however refund to Infante the amount of P1,500, which Infante paid to the Republic Savings Bank to redeem the mortgage. 20. Article 546 and 547 The Infante spouses being possessors in bad faith, their rights to the improvements they introduced on the disputed lot are governed by Articles 546 and 547 of the New Civil Code. Infantes expenses Their expenses consisting of P1,500 for draining the property, filling it with 500 cubic meters of garden soil, building a wall around it and installing a gate and P11,929for erecting a bungalow thereon, are useful expenditures; for they add to the value of the property (Aringo vs. Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia vs. Ayala de Roxas, 13 Phil. 45). 21. 21. Article 546 and 547; Possessor in good faith entitled to right of retention of useful improvement and right to a refund for useful expenses; Implies contrary to possessor in bad faith Under the second paragraph of Article 546, the possessor in good faith can retain the useful improvements unless the person who defeated him in his possession refunds him the amount of such useful expenses or pay him the increased value the land may have acquired by reason thereof. Under Article 547, the possessor in good faith has also the right to remove the useful improvements if such removal can be done without damage to the land, unless the person with the superior right elects to pay for the useful improvements or reimburse the expenses therefor under paragraph 2 of Article 546. These provisions seem to imply that the possessor in bad faith has neither the right of retention of useful improvements nor the right to a refund for useful expenses. 22. Equity; Infantes right of remotion or the value of the improvements (not current value) if Carbonell appropriates for herself the improvements If the lawful possessor can retain the improvements introduced by the possessor in bad faith for pure luxury or mere pleasure only by paying the value thereof at the time he enters into possession (Article 549NCC), as a matter of equity, the Infantes, although possessors in bad faith, should be allowed to remove the improvements, unless Carbonell chooses to pay for their value at the time Infante introduced said useful improvements in 1955 and 1959. Infante cannot claim reimbursement for the current value of the said useful improvements; because they have been enjoying such improvements for about 2 decades without paying any rent on the land and during which period Carbonell was deprived of its possession and use.

Quimson v. Rosete [G.R. No. L-2397. August 9, 1950.] Facts: The property, i.e. the land, originally belonged to the late Dionisio Quimson, who, on 7 June 1932, executed a deed Exhibit A transferring the same in favor of his daughter Tomasa Quimson, but remaining in continuous possession and enjoyment. It was sold to the spouses Magno Agustin and Paulina Manzano on 3 May 1935, with right to repurchase within the term of six years; and two years after, on 5 April 1937, again was sold to Francisco Rosete, also with pacto de retro within five years, thereafter having verified its repurchase of Agustin and Manzano, with money furnished to him by Rosete, executing in the end the deed Exhibit 1. Since then, Rosete was the one in possession and who enjoys, in a peaceful manner even after the death of Dionisio Quimson, which occurred on 6 June 1939, until January 1943, when Tomasa Quimson filed with the Justice of Peace of San Marcelino, Zambales, intervening in the agreement with Rosete over the said property, whose failure was the reason for the race toward Iba, the capital of Zambales, to acquire priority in the registration and inscription of the deeds of sale Exhibits A and 1 which Dionisio Quimson executed in favor of Tomasa Quimson and Francisco Rosete, respectively, the former arriving one hour earlier, at 9:30 a.m. of 17 February 1943, whereas the latter arrived at 10:30 a.m. of the same day. The Court of First instance of Zambales ruled in favor of Tomasa Quimson and Marcos Santos; the decision being reversed later by the Court of Appeals. Hence, the appeal by certiorari. The Supreme Court set aside the decision of the Court of Appeals, and accepted the trial courts appraisal of the damages (assessed damages of P180 for the occupation of the land for the agricultural years 1943-44, 1944-45 and 1945-46, and P60 a year thereafter until the possession of the property was restituted); with costs against Rosete. 1. Article 1462 and 1473 of the Civil Code Articles 1462 of the Civil Code provides that The thing sold shall be deemed delivered, when it is placed in the control and possession of the vendee. When the sale is made by means of a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the said instrument the contrary does not appear or may not be clearly inferred. Article 1473 provides, on the other hand, that If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who first recorded it in the registry. Should there be no inscription, the ownership shall belong to the person who in good faith was first in the possession; and, in the absence of this, to the person who presents the oldest title, provided there is good faith. 2. Buencamino vs. Viceo; Execution of notarial document of sale sufficient delivery In the case of Buencamino vs. Viceo (13 Phil., 97), Article 1462 was cited. The provision provides that Upon a sale of real estate the execution of a notarial document of sale is a sufficient delivery of the property sold. 3. Florendo vs. Foz: Execution of sale thru public instrument tantamount to conveyance In the case of Florendo vs. Foz (20 Phil., 388), it was ruled that W hen the sale is made by means of a public instrument, the execution thereof is tantamount to conveyance of the subject matter, unless the contrary clearly follows or be deduced from such instrument itself, and in the absence of this condition such execution by the vendor is per se a formal or symbolical conveyance of the property sold, that is, the vendor in the instrument itself authorizes the purchaser to use the title of ownership as proof that the latter is thenceforth the owner of the property. 4. Sanchez vs. Ramos almost on all fours In the case of Sanchez vs. Ramos (40 Phil., 614), it appeared that one Fernandez sold a piece of land to Marcelino Gomez and Narcisa Sanchez under pacto de retro in a public instrument. The purchasers neither recorded their deed in the registry of property nor ever took material possession of the land. Later, Fernandez sold the same property by means of a private document to Ramos who immediately entered upon the possession of it. It was held that, according to article 1473 of the Civil Code, Gomez and Sanchez were the first in possession and, consequently, that the sale in their favor was superior. 5. Interpretation of Article 1473; Material and symbolic possession

Possession is acquired by the material occupancy of the thing or right possessed, or by the fact that the latter is subjected to the action of our will, or by the appropriate acts and legal formalities established for acquiring possession (art. 438, Civil Code). By a simple reasoning, it appears that, because the law does not mention to which of these kinds of possession the article (1473) refers, it must be understood that it refers to all of these kinds. The possession mentioned in article 1473 (for determining who has better right when the same piece of land has been sold several times by the vendor) includes not only the material but also the symbolic possession, which is acquired by the execution of a public instrument. 6. Interpretation of Article 1473: in consonance with the principles of justice The Courts interpretation of article 1473 is more in consonance with the principles of justice. The execution of a public instrument is equivalent to the delivery of the realty sold (art.1462, Civil Code) and its possession by the vendee (art. 438). Under these conditions the sale is considered consummated and completely transfers to the vendee all of the vendor s rights of ownership including his real right over the thing. The vendee by virtue of this sale has acquired everything and nothing, absolutely nothing, is left to the vendor. From this moment the vendor is a stranger to the thing sold like any other who has never been its owner. As the thing is considered delivered, the vendor has no longer the obligation of even delivering it. If he continues taking material possession of it, is simply on account of vendees tolerance and, in this sense, his possession is vendor s possession. And if the latter should have to ask him for the delivery of this material possession, it would not be by virtue of the sale, because this has been already consummated and has produced all its effects, but by virtue of the vendees ownership, in the same way as said vendee could require of another person although same were not the vendor. This means that after the sale of a realty by means of a public instrument, the vendor, who resells it to another, does not transmit anything to the second vendee and if the latter, by virtue of this second sale, takes material possession of the thing, he does it as mere detainer, and it would be unjust to protect this detention against the rights to the thing lawfully acquired by the first vendee. 7. Spirit or intent of law prevails over its letter The statement of Sr. Manresa (pp. 157, 158, Vol. X, of his treatise on the Spanish Civil Code) expresses the literal meaning of article 1473, for the decision of 24 November 1894 reflects, according to the learned author, the intention of the lawmaker and is in conformity with the principles of justice. Now, under both the Spanish and the Philippine rules of interpretation, the spirit, the intent, of the law prevails over its letter. 8. Deed of conveyance means land was sold, in absence of any qualifying statement The finding that a deed of conveyance was made by Dionisio Quimson in favor of his daughter could have no other meaning, in the absence of any qualifying statement, than that the land was sold by the father to his daughter. The trial courts explicit finding which was not reversed by the Court of Appeals and stands as the fact of the case. Looking into the document itself, Exhibit A states categorically that the vendor received from the vendee the consideration of sale, P250, and acknowledged before the notary public having executed the instrument of his own free will. 9. Cruzado vs. Escaler, obiter dictum; Prescription The expression in thedecision in the case of Cruzado vs. Escaler (34 Phil., 17), apparently to the effect that physical possession by the purchaser is essential to the consummation of a sale of real estate, is at best obiter dictum; for the court distinctly found that the sale to Cruzados father was a sham, executed with the sole purpose of enabling the senior Cruzado to mortgage the property and become procurador. And with reference to the failure of the second vendee, Escaler, to register his purchase, the court disregarded the omission as well as the entry of the first sale in the registry because that entry was made by the son and heir of the first supposed vendee, more than a score years after the alleged transaction, when Cruzado was no longer or had any right therein (in the land), because it already belonged to the Escaler, its lawful owner. W hen Escaler, the second purchaser was sued, he had become the owner of the land by prescription. In the present case, Rosetes possession fell far short of having ripened into title by prescription when the Quimson commenced her action.

Cheng vs. Genato [G.R. No. 129760. December 29, 1998.] Facts: Ramon B. Genato is the owner of two parcels of land located at Paradise Farms, San Jose del Monte, Bulacan covered by TCTs T-76.196 (M) and T-76.197 (M) with an aggregate area of 35,821 square meters, more or less. On 6 September 1989, Genato entered into an agreement with spouses Ernesto R. Da Jose and Socorro B. Da Jose (Da Jose spouses) over the two parcels of land. The agreement culminated in the execution of a contract to sell for which the purchase price was P80 per sq. m. The contract was in a public instrument and was duly annotated at the back of the two certificates of title on the same day. On October 4, 1989, the Da Jose spouses, not having finished verifying the titles (to confirm 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), asked for and was granted by Genato an extension of another 30 days, or until 5 November 1989. However, according to Genato, the extension was granted on condition that a new set of documents is made 7 days from 4 October 1989, which 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 on 13 October 1989. Moreover, no annotation of the said affidavit at the back of his titles was made right away. The affidavit contained the stipulation that the parties agreed that the downpayment of P950,000 shall be paid 30 days from the execution of the Contract (thus, on 6 October 1989), that the vendees failed to pay the downpayment (thus, a breach of contract), and that the affidavit was executed to annul the contract to sell. On 24 October 1989, Ricardo Cheng went to Genatos residence and expressed interest in buying the subject properties. On that occasion, Genato showed Cheng copies of his TCTs and the annotations at the back thereof of his contract to sell with the Da Jose spouses. Genato also showed him the 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. On 25 October 1989, Genato deposited Chengs check. On the same day, Cheng called up Genato reminding him to register the affidavit to annul the contract to sell. The following day, acting on Chengs request, Genato caused the registration of the Affidavit to Annul the Contract to Sell in the Registry of Deeds, Meycauayan, Bulacan as primary entry 262702. While the Da Jose spouses were at the Office of the Registry of Deeds of Meycauayan, Bulacan on 27 October 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 Genato had given the 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 27 October 1989. Thereafter, Genato advised Cheng of his decision to continue his contract with the Da Jose spouses and the return of Chengs P50,000.00 check. Consequently, on 30 October 1989, Chengs lawyer sent a letter to Genato demanding compliance with their agreement to sell the property to him stating that the contract to sell between him and Genato was already perfected and threatening legal action. On 2 November 1989, Genato sent a letter to Cheng enclosing a BPI Cashier s Check for P50,000 and expressed regret for his inability to consummate his transaction with him. After having received the letter of Genato on 4 November 1989, Cheng, however, returned the said check to the former via RCPI telegram dated 6 November 1989, reiterating that our contract to sell your property had already been perfected. Meanwhile, also on 2 November 1989, Cheng executed an affidavit of adverse claim and had it annotated on the subject TCTs. On the same day, consistent with the decision of Genato and the Da Jose spouses to continue with their Contract to Sell, the Da Jose spouses paid Genato the complete down payment of P950,000 and delivered to him 3 postdated checks (all dated 6 May 1990, the stipulated due date) in the total amount of P1,865,680 to cover full payment of the balance of the agreed purchase price. On 8 December 1989, Cheng instituted a complaint for specific performance with the RTC Quezon City (Branch 96) to compel Genato to execute a deed of sale to him of the subject properties plus damages and prayer for preliminary attachment. After trial on the merits, and on 18 January 1994, 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 of the Civil Code. The right of Genato to unilaterally rescind

the contract is said to be under Article 1191 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 Da Jose spouses in the purchase of the subject properties. The trial court rendered its decision declaring the contract to sell dated 6 September 1989 executed between Genato, as vendor, and Spouses Da Jose, as vendees, resolved and rescinded in accordance with Article 1191, Civil Code, by virtue of Genatos affidavit to annul contract to sell dated 13 October 1989 and as the consequence of the spouses failure to execute within 7 days from 4 October 1989 another contract to sell pursuant to their mutual agreement with Genato; ordering Genato to return to the spouses the sum of P1 million plus interest at the legal rate from 2 November 1989 until full payment; directing Genato to return to the spouses the 3 postdated checks immediately upon finality of this judgment; commanding Genato to execute with and in favor of Cheng, as vendee, a deed of conveyance and sale of the real properties described and covered in TCTs T-76- 196 (M) and T-76.197 (M) of the Registry of Deeds of Bulacan, Meycauayan Branch, at the rate o P70/square meter, less the amount of P50,000.00 already paid to Genato, which is considered as part of the purchase price, with the Cheng being liable for payment of the capital gains taxes and other expenses of the transfer pursuant to the agreement to sell dated 24 October 1989; and ordering Genato to pay Cheng and the spouses P50,000.00, as nominal damages, to Cheng; P50,000.00, as nominal damages, to the spouses; P20,000.00, as and for attorneys fees, to Cheng; P20,000.00 as and for attorneys fees, to the spouses; and the cost of the suit. Not satisfied with the decision, Genato and Da Jose spouses appealed to the appellate court (in CA-GR 44706) which, on 7 July 1997, 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 Genato and the spouses herein being found to be in bad faith. The Court of Appeals reversed and set aside the appealed decision ordering the dismissal of the complaint; the cancellation of the annotations of the Genatos Affidavit to Annul Contract to Sell and Chengs Notice of Adverse Claim in the subject TCTs namely, TCT No. T-76.196 (M) and TCT No. T-76.197 (M); payment by the spouses of the remaining balance of the purchase price pursuant to their agreement with the Genato to suspend encashment of the three post-dated checks issued since 1989; execution by the Genato of the Deed of Absolute Sale over the subject two lots in favor of the spouses; return by Genato of the P50,000.00 paid to him by Cheng; and payment by Cheng of moral damages to the spouses of P100,000, exemplary damages of P50,000, attorneys fees of P50,000, and costs of suit; and to Genato, of P100,000 in exemplary damages, P50,000 in attorneys fees. The amounts payable to Genato may be compensated by Cheng with the amount of the check Genato has to pay Cheng. Hence, the petition for review on certiorari. The Supreme Court denied the instant petition for review and affirmed the assailed decision en toto. 1. Contract to sell; non-payment of purchase price not a breach 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. 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. 2. Breach contemplated in Article 1191 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. 3. No default can be ascribed to the spouses 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 7 October 1989 in connection with a clause of their contract to sell dated 6 September 1989 should be upheld: 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 13 October 1989 and not only on 26 October 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. 4. Affidavit to annul contract uncalled for; Conditional obligation does not exist if suspensive condition does not take place Even assuming in gratia argumenti that the Da Jose spouses defaulted, 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 affidavit their non-payment to complete the full downpayment of the purchase price ipso facto avoids their contract to sell, it being subjected to a suspensive condition. When a contract is subject to a suspensive condition, its birth or effectivity can take place only if and when the event which constitutes the condition happens or is fulfilled. If the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. 5. Notice to other party required to cancel contract; Act always provisional 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, even though the validity of a stipulation in a contract to sell authorizing automatic rescission for a violation of its terms and conditions is upheld, 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. 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. 6. Extrajudicial steps to protect interest an exercise of due diligence to minimize damages In University of the Philippines vs. De Los Angeles , it was held that 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). 7. Notice required to prevent defaulting party from assuming offer still in effect The rule validates, both in equity and justice, contracts, in order to avoid and prevent the defaulting party from assuming the offer as still in effect due to the obligees tolerance for such non-fulfillment. Resultantly, litigations shall be prevented and the relations among would-be parties may be preserved. 8. Issue not raised during trial cannot be raised for the first time on appeal An issue which was not raised during the trial in the court below cannot be raised for the first time on appeal. 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. In the present case, Cheng alleged that the P50,000 was earnest money, but in his testimony, offered to prove the transaction was actually a perfected contract to sell. Both courts correctly held that the receipt which was the result of their agreement is a contract to sell. This was, in fact Chengs contention in his pleadings before said courts. The patent twist only operates against Chengs posture which is indicative of the weakness of his claim. 9. Receipt, even if a conditional contract of sale does not have any obligatory force Even if it is assumed that the receipt 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. 10. Receipt does not contain requisites of a valid contract of sale A careful reading of the receipt 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 enforceable. 11. Coronel vs. CA not foursquare The factual milieu in Coronel is not on all fours with those in the present case. In Coronel, the 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 present case, even by a careful perusal of the receipt alone, such kind of circumstances cannot be ascertained without however resorting to the exceptions of the Rule on Parol Evidence. 12. Double sale; Article 1544 Article 1544 provides that If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and in the absence thereof, to the person who presents the oldest title, provided there is good faith 13. Article 1544 is not apropos to present case, according to Court of Appeals A meticulous reading of the Article 1544 shows that said law is not apropos to the present 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. 15. Article 1544 applies in the present case, according to Supreme Court: First in time, stronger in right The governing principle of Article 1544, Civil Code, applies in the present situation. Jurisprudence teaches us that the governing principle is PRIMUS TEMPORE, PORTIOR JURE (first in time, stronger in right). For not only was the contract between Genato and the spouses first in time; it was also registered long before Chengs intrusion as a second buyer. This principle only applies when the special rules provided in Article 1544 of the Civil Code do not apply or fit the specific circumstances mandated under said law or by jurisprudence interpreting the article. 16. Article 1544, How second buyer can displace first buyer 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; (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. In the present case, 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. 17. Knowledge of first buyer of the second transaction does not defeat his rights 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. 18. Registration defined

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. 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. 19. Inscription of Deed of Sale in registry of property on original document a registration of sale 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 the present case, there is no reason why the annotation made by the Da Jose spouses with respect to their Contract to Sell dated 6 September 1989 should not be given priority in right. 20. Good faith in registration for right to be enforceable Good faith must concur with registration for such prior right to be enforceable. In the present 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 Genatos agreement with Cheng such is unavailing. For even before the receipt 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. 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 TCTs of Genato, it becomes unnecessary to further elaborate in detail the fact that he is indeed in bad faith in entering into such agreement. 21. Knowledge of defect in tile cannot claim good faith against another interest In Leung Yee vs. F . L . Strong Machinery Co., it was stated that 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) 22. Bad faith basis for damages Damages were awarded by the appellate court on the basis of its finding that Cheng was in bad faith when he filed the suit for specific performance knowing fully well that his agreement with Genato did not push through. 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 Genato and the spouses describes as a prolonged and economically unhealthy gridlock on both the land itself and their rights provides ample basis for the damages awarded. Based on these overwhelming evidence of bad faith on the part of Cheng, the award of damages made by the appellate court is in order.

Coronel v. CA [G.R. No. 103577. October 7, 1996.] Facts: On 19 January 1985, Romulo Coronel, et al. executed a document entitled Receipt of Down Payment in favor of Ramona Patricia Alcaraz for P50,000 downpayment of the total amount of P1.24M as purchase price for an inherited house and lot (TCT 119627, Registry of Deeds of Quezon City), promising to execute a deed of absolute sale of said property as soon as such has been transferred in their name. The balance of P1.19M is due upon the execution of said deed. On the same date, Concepcion D. Alcaraz, mother of Ramona, paid the down payment of P50,000.00. On 6 February 1985, the property originally registered in the name of the Coronels father was transferred in their names (TCT 327043). However, on 18 February 1985, the Coronels sold the property to Catalina B. Mabanag for P1,580,000.00 after the latter has paid P300,000.00. For this reason, Coronels canceled and rescinded the contract with Alcaraz by depositing the down payment in the bank in trust for Alcaraz. On 22 February 1985, Alcaraz filed a complaint for specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of TCT 327403. On 2 April 1985, Mabanag caused the annotation of a notice of adverse claim covering the same property with the Registry of Deeds of Quezon City. On 25 April 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Mabanag. On 5 June 1985, a new title over the subject property was issued in the name of Mabanag under TCT 351582. In the course of the proceedings, the parties agreed to submit the case for decision solely on the basis of documentary exhibits. Upon submission of their respective memoranda and the corresponding comment or reply thereto, and on 1 March 1989, judgment was handed down in favor of the plaintiffs, ordering the defendant to execute a deed of absolute sale of the land covered by TCT 327403 and canceling TCT 331582 and declaring the latter without force and effect. Claims for damages by plaintiffs and counterclaims by the defendants and intervenors were dismissed. A motion for reconsideration was thereafter filed, which was denied. Petitioners interposed an appeal, but on 16 December 1991, the CA rendered its decision fully agreeing with the trial court. Hence, the instant petition. The Supreme Court dismissed the petition and affirmed the appealed judgment. 1. Receipt of downpayment a binding contract; Meeting of the minds The document embodied the binding contract between Ramona Patricia Alcaraz and the heirs of Constancio P. Coronel, pertaining to a particular house and lot covered by TCT 119627, as defined in Article 1305 of the Civil Code of the Philippines. 2. Definition of contract of sale The Civil Code defines a contract of sale, in Article 1458, as 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, thus, by its very nature a consensual contract because it is perfected by mere consent. 3. Elements of contract of sale; Contract to sell not contract of sale due to the lack of first element; Distinction necessary when property is sold to a third person The essential elements of a contract of sale are (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. A Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. 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.

4. Contract to sell: Seller agrees to sell property when purchase price is delivered to him; seller reserves transfer of title until fulfillment of suspensive condition (payment) In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes taken to be the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer. 5. Contract to sell: failure to deliver payment is not a breach but event preventing vendor to convey title; obligation demandable upon full payment of price; promise binding if supported by payment distinct from the price When a contract is 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 (Roque v. Lapuz). 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 (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. 6. Contract to sell defined A contract to sell 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. 7. Contract to sell not a conditional contract of sale (existence of first element) A contract to sell 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. 8. Conditional contract of sale: if suspensive condition not fulfilled, pefection abated; if fulfilled, contract of sale perfected and ownership automatically transfers to buyer 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. 9. Contract to sell: if suspensive condition fulfilled, seller has still to convey title even if property is previously delivered 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. 10. Contract to sell: there is no double sale; if property sold to another, the seller may be sued for damages 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 owner-seller s title per se, but the latter, of course, may be sued for damages by the intending buyer. 11. Conditional contract of sale: sale becomes absolute upon fulfillment of condition; if property sold to another, first buyer may seek reconveyance In a conditional contract of sale, 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. 12. Interpretation of contracts, natural and meaning of words unless technical meaning was intended 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]). 13. Document entitled Receipt of Down Payment indicates Conditional Contract of Sale and not contract to sell The agreement could not have been a contract to sell because the sellers 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 an circumstances of the case, had the certificate of title been in the names of petitionerssellers 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 did not merely promise to sell the property 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. 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, 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 to their names. The suspensive condition was fulfilled on 6 February 1985 and thus, the conditional contract of sale between the parties became obligatory, the only act required for the consummation thereof 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. 14. Article 1475 and 1181 applies to present case; Perfection of a contract of sale and Conditional obligation based on the happening of the event Article 1475 of the New Civil Code provides that 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 that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. Article 1181 of the same code provides that 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. In the present case, since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners names was fulfilled on 6 February 1985, the respective obligations of the parties under the contract of sale became mutually demandable, i.e. the sellers were obliged to present the TCT already in their names to he 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. 15. Condition deemed fulfilled when obligor voluntary prevents its fulfillment; Condition fulfilled, such fact controlling over hypothetical arguments Article 1186 provides that the condition shall be deemed fulfilled when the obligor voluntarily

prevents its fulfillment. Thus, in the present case, the petitioners having recognized that they entered into a contract of sale subject to a suspensive condition, as evidenced in the first paragraph in page 9 of their petition, cannot now contend that there could have been no perfected contract of sale had the petitioners not complied with the condition of first transferring the title of the property under their names. It should be stressed and emphasized that the condition was fulfilled on 6 February 1985, when TCT 327403 was issued in petitioners name, and such fact is more controlling than mere hypothetical arguments. 16. Retroactivity of conditional obligation to day of constitution of obligation Article 1187 provides that 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 obligations to do or not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been complied with. In the present case, 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 6 February 1985. As of that point in time, reciprocal obligations of both seller and buyer arose. 17. Succession as a mode of transferring ownership Article 774 of the Civil Code defines Succession as a mode of transferring ownership, providing succession is a mode of acquisition by virtue of which the property, rights and obligations to the 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. In the present case, petitioners-sellers 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 instance of their father s death, 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]). 18. Estoppel, as to lack of capacity Article 1431 provides that 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. In the present case, the petitioners, having represented themselves as the true owners of the subject property at the time of sale, cannot claim now that they were not yet the absolute owners thereof at the time they entered into agreement. 19. Mere allegation is not evidence The 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]). 20. No stipulation to authorize extrajudicial rescission of contract of sale Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on 6 February 1985, petitioners-sellers act of unilaterally and extrajudicially rescinding the contract of sale cannot be justified as there was no express stipulation authorizing the sellers to extrajudicially rescind the contract of sale. (cf Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984]). 21. Estoppel, acceptance of check from buyers mother; buyers absence not a ground for rescission 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, Ramonas 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 Concepcions 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.

22. Buyer not in default as there is no proof that seller presented the TCT and signify their readiness to execute the deed of absolute sale Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in default. Said article provides that 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 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. In the present case, there is no proof offered whatsoever to show that the seller 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. Ramonas 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. 23. Double sale; Article 1544, paragraph 2 applies in the present case

Article 1544 of the Civil Code provides that If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should if 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. In the present case, the record of the case shows that the Deed of Absolute Sale dated 25 April 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 5 June 1985. Thus, the second paragraph of Article 1544 shall apply. 24. Double sale presumes title to pass to first buyer, exceptions Article 1544, the 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. 25. Prius tempore, potior jure (first in time, stronger in right); First to register in good faith 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). It was further held that it is essential, to merit the protection of Article 1544, second paragraph, that the second realty buyer must act in good faith in registering his deed of sale (Cruz v. Cabana, 129 SCRA 656, citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992). 26. Double sale; good faith in recording of second sale, not in buying 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. In the present case, Mabanag could not have in good faith registered the sale entered into on 18 February 1985 because as early as 22 February 1985, a notice of lis pendens had been annotated on the TCT in the names of petitioners, whereas Mabanag registered the said sale sometime in April 1985. At the time of registration, therefore, petitioner knew that the same property had already been previously sold to Coronel, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property. Mabanag thus cannot close her eyes to the defect in petitioners title to the property at the time of the registration of the property. 27. Double sale; Bad faith in registration does not confer registrant any right If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale of the same property to a third party or that another person claims said property in a previous sale, the registration will constitute a registration in bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1981];citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs.

Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.) 28. Agency; The issue whether Concepcion, mother of Ramona, is an agent or a co-buyer is undisturbed 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. The Court did not touch this issue and did not disturb the lower courts ruling on this point.