1.

INDUSTRIAL TEXTILE MANUFACTURING COMPANY OF THE PHILIPPINES,

INC., Petitioner, vs. LPJ ENTERPRISES, INC., Respondent.

FACTS: Respondent LPJ Enterprises, Inc. had a contract to supply 300,000
bags of cement per year to Atlas Consolidated Mining and Development
Corporation (Atlas for short), a member of the Soriano Group of Companies.
The cement was delivered packed in kraft paper bags. Sometime in October,
1970, Cesar Campos, a Vice-President of petitioner Industrial Textile
Manufacturing Company of the Philippines (or Itemcop, for brevity), asked
Lauro Panganiban, Jr., President of respondent corporation, if he would like
to cooperate in an experiment to develop plastic cement bags. Panganiban
agreed because Itemcop is a sister corporation of Atlas, respondent's major
client. A few weeks later, Panganiban accompanied Paulino Ugarte, another
Vice-President of Itemcop, to the factory of respondent's supplier, Luzon
Cement Corporation in Norzagaray, Bulacan, to test fifty (50) pieces of
plastic cement bags. The experiment, however, was unsuccessful. Cement
dust oozed out under pressure through the small holes of the woven plastic
bags and the loading platform was filled with dust. The second batch of
plastic bags subjected to trial was likewise a failure. Although the weaving of
the plastic bags was already tightened, cement dust still spilled through the
gaps. Finally, with three hundred (300) "improved bags", the seepage was
substantially reduced. Ugarte then asked Panganiban to send 180 bags of
cement to Atlas via commercial shipping. Campos, Ugarte, and two other
officials of petitioner company followed the 180 bags to the plant of Atlas in
Cebu where they professed satisfaction at the performance of their own
plastic bags. Campos sent Panganiban a letter proclaiming dramatic results
in the experiment. Consequently, Panganiban agreed to use the plastic
cement bags. Four purchase orders were thereafter issued.
Petitioner delivered the orders consecutively on January 12, February 17,
March 19, and April 17, 1971. Respondent, on the other hand, remitted the
amounts of P1,640.00, P2,480.00. and P13,230.00 on March 31, April 31,
and May 3, 1971 respectively, thereby leaving a balance of P84,123.80. No
other payments were made, thus prompting A. Soriano y Cia of petitioner's
Legal Department to send demand letters to respondent corporation.
Reiterations thereof were later sent by petitioner's counsel. A collection suit
was filed on April 11, 1973 when the demands remained unheeded.
At the trial on the merits, respondent admitted its liability for the
53,800 polypropylene lime bags covered by the first purchase order. With
respect to the second, third, and fourth purchase orders, respondent,
however, denied full responsibility therefor. Respondent said that it will
pay, as it did pay for, only the 15,000 plastic bags it actually used in packing
cement. As for the remaining 47,000 bags, the workers of Luzon Cement
strongly objected to the use thereof due to the serious health hazards
posed by the continued seepage of cement dust.
The trial court rendered its decision sentencing the defendant to
pay the sum of P84,123.80 with l2% interest per annum from May, 1971
plus 15% of the total obligation as attorney's fees, and the costs.
Respondent corporation's appeal was upheld by the appellate court when it
reversed the trial court's decision and dismissed the case with costs against
petitioner.
ISSUE: whether or not respondent may be held liable for the 47,000 plastic
bags which were not actually used for packing cement as originally
intended.
HELD: The conditions which allegedly govern the transaction according to
respondent may not be considered. The trial court correctly observed that
such conditions should have been distinctly specified in the purchase orders
and respondent's failure to do so is fatal to its cause. The Court found that
Article 1502 of the Civil Code, invoked by both parties herein, has no
application at all to this case. The provision in the Uniform Sales Act and the
Uniform Commercial Code from which Article 1502 was taken, clearly
requires an express written agreement to make a sales contract either a
"sale or return" or a "sale on approval". Parol or extrinsic testimony could
not be admitted for the purpose of showing that an invoice or bill of sale
that was complete in every aspect and purporting to embody a sale without
condition or restriction constituted a contract of sale or return. If the
purchaser desired to incorporate a stipulation securing to him the right of
return, he should have done so at the time the contract was made. On the
other hand, the buyer cannot accept part and reject the rest of the goods
since this falls outside the normal intent of the parties in the "on approval"
situation.
Therefore, the transaction between respondent and petitioner
constituted an absolute sale. Accordingly, respondent is liable for the plastic
bags delivered to it by petitioner.


2. SEN PO EK MARKETING CORPORATION, petitioner, vs. TEODORA PRICE
MARTINEZ, JUANITO TIU UYPING, JR., NELSON TIU UYPING LEONCIO TIU
UYPING, respondents.

D E C I S I O N

DE LEON, JR., J.:

Before us is a petition for review on certiorari assailing the Decision[1] and
Resolution[2] dated October 13, 1997 and May 18, 1998, respectively, of the
Court of Appeals[3] which reversed and set aside the Decision[4] of the
Regional Trial Court (RTC) of Palo, Leyte, Branch 8, rescinding the Deed of
Absolute Sale over two (2) parcels of land executed by private respondent
Teodora P. Martinez in favor of private respondent brothers Juanito, Nelson
and Leoncio, all surnamed Tiu Uyping and declaring that petitioner Sen Po
Ek Marketing Corporation (hereafter Sen Po Ek) has the first preference to
buy said land.

The pertinent facts are:

Sofia P. Martinez was the registered owner of two (2) parcels of land, known
as Lot Nos. 50 and 106 of the Tacloban City Cadastre, located at No. 84
Justice Romualdez St., formerly Gran Capitan, Tacloban City. The said
parcels of land are covered and described by Transfer Certificate of Title
(TCT) No. 2915.[5]

On October 25, 1961, Sofia leased the lots to Yu Siong, father of the
president and stockholders of petitioner Sen Po Ek for a period of ten (10)
years.[6] The lease contract required the lessee to construct a commercial
building on the leased property which shall become the property of Sofia
upon the expiration of the lease. The building which was constructed
sometime in 1963 was declared, for taxation purposes, in the name of
petitioner Sen Po Ek under Tax Declaration No. 19487.

On October 25, 1971, the contract of lease expired.

On September 20, 1973, the lease contract[7] was renewed between Sofia
and Yu Siongs wife, Lim Hua, who succeeded him, as lessee, upon his death.
Said contract explicitly states that "as of October 1, 1973, the lessor shall be
the absolute owner of a building located at Lot Nos. 50 and 106 of the
Tacloban Cadastre."[8] The lease underwent several renewals. The last
written contract of lease was executed on March 24, 1982 for a term of five
(5) years expiring on January 1, 1987.[9]

Meantime, Sofia sold the lots and the building to her daughter, private
respondent Teodora P. Martinez. The deed of sale was executed sometime
in 1979 but was notarized only on November 5, 1985.[10]

After the lease contract expired in January 1987, it was no longer renewed
by the parties. Petitioner Sen Po Ek, however, continued to possess and
occupy the leased properties, and regularly paid the monthly rentals to
Sofia until her death in August 1989. After the latters death, the rentals
were paid to the heirs of Sofia through private respondent Teodora P.
Martinez.

On November 11, 1989, Teodora sent a letter to petitioner Sen Po Ek
informing it of her intention to sell the leased premises and authorizing Mrs.
Remedios Petilla to negotiate the sale "with any and all interested
parties."[11] The letter reads, viz.:

"Quezon City

November 11, 1989

SIN [sic] PO EK COMMERCIAL

Tacloban City

Gentlemen:

Please take notice that we are selling the two (2) lots, including the building
hereon, covered by Transfer Certificate of Title No. T-2915, with a total area
of Three Hundred Thirteen (313) square meters, situated at Tacloban City
and presently occupied by your establishment.

Please contact Mrs. REMEDIOS L. PETILLA who is authorized to negotiate the
sale with any and all interested parties.

Cordially yours,

(sgd.) TEODORA P. MARTINEZ"

But petitioner Sen Po Ek received the letter only on December 12, 1989.[12]
It sought to purchase the properties at six thousand pesos (P6,000.00) per
square meter, and the Yu Siongs were able to contact private respondent
Teodora P. Martinez who advised them to formalize the offer of petitioner
Sen Po Ek in writing. This was done in a letter dated December 27, 1989 by
Consorcio Yu Siong.[13]

Meantime, sometime in December 1989, private respondent Juanito Tiu
Uyping, Jr. was informed by a certain Mr. Militante that the subject leased
premises were for sale and that the sale was being brokered by Mrs.
Remedios Petilla.[14] Juanito contacted his two (2) other brothers, and
together, they went to the office of Governor Leopoldo Petilla, the husband
of Remedios Petilla, and inquired about the property.[15]

On January 9, 1990, petitioner Sen Po Ek filed a verified complaint against
Teodora in the RTC of Palo, Leyte, for the annulment of the Deed of Sale
executed by her mother, Sofia, in her favor and notarized on November 5,
1985. Petitioner invoked its alleged right of first refusal or preferential right
to buy the leased premises based on Republic Act (R.A.) No. 1162,[16] as
amended, in relation to Presidential Decree (P.D.) No. 1517.[17]

On January 12, 1990, Teodora sold the property to the respondent Tiu
Uyping brothers.[18] As a result, TCT No. T-32239[19] was issued in the
names of Juanito Tiu Uyping, Nelson Tiu Uyping and Leoncio Tiu Uyping. On
March 5, 1990, an amended complaint[20] was filed to include the
respondents Tiu Uyping brothers and also praying for the nullity of the
second sale transaction.

On February 27, 1992, the trial court rendered a decision in favor of
petitioner Sen Po Ek, the dispositive portion of which reads, viz.:

"WHEREFORE, upon the preponderance of evidence this Court renders
judgment in favor of the plaintiffs [sic] SEN PO EK MARKETING
CORPORATION represented by Consorcio Yusiong, and against the
defendants

1. Declaring, as ordering the rescission of the Deed of Absolute Sale
executed by defendant Teodora P. Martinez on 12 January 1990 in favor of
the brother defendants Juanito Tiu Uyping Jr., Nelson Tiu Uyping and
Leoncio Tiu Uyping, Exhibit 2;

2. Declaring that the plaintiffs [sic] have a first preference to buy Lot Nos. 50
and 106 of the Tacloban Cadastre as well as the building erected thereon as
of December, 1989, hence, commanding defendant Teodora P. Martinez
and her brothers and sisters to sell the aforementioned properties to the
plaintiff corporation at the price of Six Thousand (P6,000.00) Pesos per
square meter as offered in the letter dated 11 November 1989 and as
appearing to have been quoted by Teodora P. Martinez agent, Mrs.
Remedios L. Petilla;

3. Ordering the defendant Teodora P. Martinez to return to his [sic] co-
defendants Tiu Uyping brothers the sum of EIGHT HUNDRED THOUSAND
(P800,000.00) Pesos, appearing to be the total selling price of the property
in question;

4. Ordering defendant Teodora P. Martinez to pay the plaintiff corporation
the sum of TEN THOUSAND PESOS (P10,000.00) in the concept of attorneys
fees and THREE THOUSAND PESOS (P 3,000.00) in that of litigation
expenses.

Costs of this suit jointly and severally against all defendants.

SO ORDERED."[21]

Private respondents appealed from the said decision to the Court of
Appeals.

On October 13, 1997, the Court of Appeals rendered a decision reversing
the trial court. It held:

"It is noteworthy that although the CORPORATION included the sale by Sofia
of the subject property to her daughter, Teodora, as one of the deeds it
prayed to be declared void or annulled the trial court did not nullify the
deed. It, therefore, remains valid and binding. And, indeed, the trial court
could not have granted what was prayed for, notwithstanding the late
notarization of the deed and its other perceived defects, not only because
neither Sofia nor her heirs complained, and on the contrary, the said heirs
acknowledged its validity, but more importantly, a contract is valid in
whatever form it may have been entered into unless form is essential for its
validity, which is not so in this case. The Corporations protestation that the
sale is invalid since it was not informed of it, has no basis in law.

"Being the owner of the property in suit, Teodora had the right to exercise
all the attributes of ownership, to wit: jus possidendi, jus utendi, jus fruendi,
jus abutendi, jus disponendi and jus vindicandi. With respect to jus
disponendi, she may dispose of the property to whomsoever and in
whatsoever manner and for whatever consideration she wishes, although at
a loss or even for free and no one can complain, except as may otherwise be
provided by law, like the limitations on donation and in the case of sale, the
right of pre-emption of an adjoining owner and the right of first refusal
under the Urban Land Reform Law (P.D. No. 1517) when the area is
proclaimed as an urban land reform zone.

"In the case on hand, the appellee Corporation is neither an adjoining owner
of the property in suit nor a qualified tenant of a residential land in a duly
proclaimed urban land reform zone, there being no proof of such
proclamation in Tacloban City. Its claim to first priority to buy the disputed
property is merely derived from the following postulation:

`We believe that in this particular case, plaintiff-appellee should be
accorded the first priority to buy the questioned properties, being its actual
possessor and occupant. Even under equal circumstances, plaintiff-appellee
should have been given the preference to purchase the property over third
persons. More so, in this case for the plaintiff-appellee accepted the offer to
buy for an amount more than double the price for which defendants-
appellant Uyping brothers paid the same properties for.

"The claim is, however, utterly bereft of any foundation in law. It is
noteworthy that the Corporation does not cite any specific piece of
legislation or even any decisional law that is supportive of its stance. This is
simply because there is none. Deserving of some examination, if at all, is
only the last part of the Corporations formulation, to wit: that it accepted
Teodoras offer to sell.

"Teodora, however, made no offer to sell the property, much less to the
Corporation in particular. She merely gave notice to the Corporation of her
intention to sell. x x x x x x x x x

"Clearly, no offer to sell was made. If ever there was any semblance of an
offer, it was merely for the Corporation to contact Mrs. Remedios Petilla
who was authorized to negotiate the sale `with any and all interested
parties. But the Corporation did not promptly react. On the contrary, the
Uypings, upon learning somehow that the property was up for sale, were
the ones who immediately made inquiries from Governor Leopoldo Petilla,
the husband of Remedios, and, thereupon, made an offer to buy. Still, to be
considerate to the Corporation, which was a long-time lessee of the
property, the Governor called up its representative, Alfredo Yu Siong, to find
out if they were interested in buying the property but after mulling over the
matter for sometime, Alfredo informed the Governor that they were not
interested. So, on December 23, 1989, Teodora accepted the offer of the
Uypings and executed in their favor the Option to Purchase after the latter
had paid her one-half of the agreed purchase price of P800,000.00. Then on
January 12, 1990, upon payment of the balance of P400,000.00, she
executed the corresponding deed of absolute sale.

"The Corporation discredits the testimony of Governor Petilla in this regard
and, not without malediction asks, `Is it because Gov. Petilla is a lawyer, and
consequently is more eloquent in narrating defendants-appellants distorted
version of the facts? For being a lawyer and, hence, an officer of the court,
we readily give full faith and credence to the testimony of Governor Petilla
as against Alfredo Yu Siongs whom we found to be lying through his teeth
for, in his testimony on April 26, 1991, he declared that upon receiving
Teodoras notice of intention to sell, he and his brother, Consorico Yu Siong,
went to see Mrs. Petilla at Palo, Leyte, because they know that the Petillas
reside there.

"x x x x x x x x x

"But on December 6, 1991, in rebutting Governor Petillas testimony, he
perjuriously executed a turn about and declared that he did not go to the
Governors residence in Palo as he did not know that they reside there.

"x x x x x x x x x

"In any event, even if Teodoras letter of November 11, 1989, were
construed as an offer or promise to sell the property to the Corporation, the
latter did not thereby acquire any enforceable or actionable right for the
simple reason that the letter did not quote any price and is, therefore, not
the offer contemplated by law. In this regard, Article 1479 of the Civil Code
provides:

`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.

"Thus, although the Yu Siong brothers and sisters, who own the
Corporation, allegedly decided among themselves to buy the property upon
receipt of Teodoras letter on December 12, 1989, still Consorcio and
Alfredo Yu Siong had to seek out Mrs. Remedios Petilla, about three (3) to
four (4) days thereafter, to find out the selling price.

"x x x x x x x x x

"But Consorcio and Alfredo Yu Siong could not make any decision on the
price without first consulting their brothers and sisters. After the
consultation, they sent Alfredo to Manila to see Teodora, who was residing
there, to clarify if she was really selling the property.

"x x x x x x x x x

"Alfredo allegedly met with Teodora on December 26, 1989, who told him
to reduce into writing their offer to buy.

"x x x x x x x x x

"On December 27, 1989, Consorcio Yu Siong wrote their letter of
acceptance and on December 28, sent it by registered mail to Teodora in
Quezon City with a copy furnished Remedios Petilla in Palo, Leyte. Teodora
received the letter on January 12, 1990 while Remedios got her copy on
January 2, 1990.

"But the letter of acceptance was too late since, as aforestated, on
December 23, 1989, Teodora already executed an option to purchase in
favor of the Uypings upon her receipt of their initial payment of
P400,000.00. It bears stressing in this connection that Teodoras notice of
intention to sell became an offer to sell to the Corporation only on
December 15 or 16, 1989, (three or four days after it received the notice on
December 12, 1989) when Mrs. Remedios Petilla quoted the price of
P6,000.00 per square meter to Consorcio and Alfredo Yu Siong. However,
the latter did not then signify their acceptance and, instead, according to
Consorcio himself, they took their time to make up their minds. In the
interim, Teodora committed to sell to the Uypings on December 23, 1989.
At that point in time, there could not have been any perfected contract
between Teodora and the Corporation since there was no meeting of the
minds between them on the consideration. As Article 1475 of the Civil Code
provides:

`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.

"At most, there was only an offer or promise to sell which was not binding
on Teodora as it was not then accepted, and even if accepted, the
acceptance was not supported by a consideration distinct from the promise.
Teodora was, therefore, at complete liberty to convey the property to the
Uypings.

"And when Alfredo Yu Siong went to see her on December 26, 1989,
pleading that they be allowed to buy the property, she refused, telling him
that she had already committed it to other people. Thus, she was surprised
to receive in January 1990, a letter from the Corporation offering to buy the
property for P6,000.00 per square meter.

"Understandably, Alfredo Yu Siong gave the lie to Teodoras testimony.

x x x x x x x x x

"He even went further to flatly contradict and make a liar out of his own
brother, Consorcio Yu Siong, by asserting that in their meeting with Mrs.
Remedios Petilla on December 15 or 16, 1989, they already agreed on the
latters price quotation of P6,000.00 per square meter.

x x x x x x x x x

"Alfredo Yu Siong, however, is hopelessly wanting in credibility. As we
pointed out earlier, he caught himself in irretrievable inconsistency in his
attempt to discredit Governor Petilla. Now, he can not even spare his own
brother from his penchant for prevarication for the sake of advancing their
cause.

"From our viewpoint, the Corporation, upon the instigation of Alfredo Yu
Siong, conceived of the plot of belatedly offering to buy the property in suit
at P6,000.00 per square meter, or the total price of P1,878,000.00 in order
to make the accepted offer of the Uypings in the amount of P800,000.00
appear a pittance, in a calculated move to start a lawsuit and thereby
prolong their stay on the premises. So far, they have succeeded. But to us, it
is downright unthinkable that Teodora could have agreed to back out from
her commitment to the Uypings. That is too foolhardy an adventure to go
into and too farfetched to merit belief.

"To repeat, under the facts, no contractual or juridical relation whatsoever
has been established between Teodora and the Corporation as seller and
buyer, respectively, of the property in dispute. Even the trial court
conspicuously failed to point out any. Nonetheless, it inscrutably ordered
the `rescission of the deed of absolute sale between Teodora and the
Uypings, and `commanded Teodora and her brothers and sisters to sell the
property to the Corporation on the basis of Article 19 of the Civil Code.

x x x x x x x x x

"We are at a loss as to why the court below decreed the rescission of the
deed of sale between Teodora and the Uypings when the Corporation
prayed for the declaration of its nullity and/or annulment. There is a whale
of a difference between rescission and declaration of nullity or annulment
of contracts. The grounds for the first are those enumerated in Article 1381
of the Civil Code while those for the second are found in Article 1409 while
the grounds for annulment are stated in Article 1390. In any case violation
of Article 19 of the same Code is not a ground for rescission, declaration of
nullity or annulment. The appealed judgment has, therefore, no leg both in
fact and in law to stand on."[22]

The dispositive portion of the foregoing decision reads, thus:

"WHEREFORE, the appealed decision is REVERSED and SET ASIDE, and
another is rendered DISMISSING the complaint of plaintiff-appellee
CORPORATION, with costs against the latter."[23]

Petitioner Sen Po Ek moved for reconsideration of the decision of the Court
of Appeals, but the latter denied the motion.[24]

Hence, this petition.

Petitioner Sen Po Ek raises the following issues:

"I

WHETHER OR NOT THE COURT OF APPEALS HAS DECIDED IN A WAY NOT IN
ACCORD WITH LAW AND JURISPRUDENCE, DISREGARDING CLEAR EVIDENCE
ON RECORD, WHEN IT HELD THAT THE SALE OF THE PROPERTY IN QUESTION
BY THE LATE SOFIA MARTINEZ TO HER DAUGHTER TEODORA WAS VALID,
AND NOT VOID AS FOUND BY THE TRIAL COURT.

"II

WHETHER OR NOT THE COURT OF APPEALS HAS DECIDED ARBITRARILY AND
CAPRICIOUSLY, IN A WAY NOT IN ACCORD WITH JUSTICE AND EQUITY,
WHEN IT HELD THAT THE PETITIONER HAS NO LEGAL AND EQUITABLE RIGHT
TO PURCHASE THE PROPERTY IN QUESTION, AS AGAINST THE TIU UYPINGS.

"III

WHETHER OR NOT THE COURT OF APPEALS HAS DECIDED ARBITRARILY AND
CAPRICIOUSLY IN A WAY NOT IN ACCORD WITH LAW AND JURISPRUDENCE,
IN UPHOLDING THE VALIDITY OF THE DEED OF SALE BETWEEN TEODORA
AND THE TIU UYPINGS.

"IV

WHETHER OR NOT THE COURT OF APPEALS HAS ACTED ARBITRARILY AND
CAPRICIOUSLY IN GIVING TOO MUCH WEIGHT TO THE TESTIMONY OF
RESPONDENTS WITNESS LEOPOLD PETILLA AND DISCREDITING THAT OF
PETITIONERS ALFREDO YU SIONG, CONSIDERING THAT THE FORMER DID
NOT EVEN HAD [sic] THE LEGAL AUTHORITY TO SELL OR NEGOTIATE THE
SALE OF THE PROPERTY IN QUESTION."[25]

We deny the petition.

First. Private respondent Teodora P. Martinez had the right, as lawful owner
of the leased premises, to sell the same to private respondent Tiu Uyping
brothers.

The first sale between mother and daughter, Sofia and Teodora, was void
for being fictitious. Under Art. 1409 (2) of the New Civil Code, one type of
contract which can be declared void and inexistent is that which is
absolutely simulated or fictitious, and this was established by several
badges of simulation proving that the sale between Sofia and Teodora was
not intended to have any legal effect between them.[26]

Immediately suspect is the Contract of Sale itself which was executed
sometime in 1979 but was notarized only on November 5, 1985, six (6) years
later. Said sale all the more inspires doubt when upon close reading of the
lease contracts executed thereafter, Teodora signed not as owner but
merely as an instrumental witness.

If Teodora was really the owner of the leased premises as transferee-
vendee under the 1979 Deed of Sale, she should have signed in that
capacity and not in any other. Moreover, this clearly indicates that Sofia
retained enjoyment and control of the leased premises as lessor-owner
thereof so much so that Teodora never asserted her alleged right of
ownership over the leased premises. Indeed the most protuberant index of
simulation is the absence of an attempt in any manner in the past of the
alleged vendee-owner to exercise his rights as such over the subject
property.[27]

Finally, Sofia continued receiving the rentals until her demise in August
1989. This was admitted by Teodora herself during the trial:

Q So, the rentals were actually intended and received by Sofia P.
Martinez?

A Yes, sir.

Q And it was at this happening that Sofia Martinez have been receiving the
rentals in the year 1979 when you were already allegedly the owner up to
her death in August, 1989? Is that correct?

A Yes, sir, it was Sofia Martinez.[28]

The combination of all of these events leads one to the inescapable
conclusion that the first sale transaction was absolutely simulated, hence
void.

Nonetheless, the sale between private respondents Teodora P. Martinez
and the Tiu Uyping brothers, is valid.

Teodora, as only one of the co-heirs of Sofia, had no authority to sell the
entire lot to the Tiu Uyping brothers. She can only sell her undivided portion
of the property. Thus, when she sold the leased premises to private
respondent brothers Tiu Uyping, the sale is unenforceable having been
entered into by Teodora in behalf of her co-heirs who, however, gave no
authority or legal representation. However, such a contract is susceptible of
ratification.[29] In this case, the ratification came in the form of
"Confirmation of Sale of Land and Improvements"[30] executed by the
other heirs of Sofia.[31] Since the sale by private respondent Teodora
Martinez of the leased premises to private respondents Tiu Uyping brothers
was ratified by her co-heirs, then the sale is considered valid and binding.

Second. Petitioner Sen Po Ek does not have a right of first refusal to assert
against private respondents. Neither any law nor any contract grants it
preference in the purchase of the leased premises.

Petitioner cites P.D. No. 1517, R.A. No. 1162 and Article 1622 of the New
Civil Code, but they are not applicable to the case at bar. P.D. No. 1517,
otherwise known as "The Urban Land Reform Act", pertains to areas
proclaimed as urban land reform zones. Lot Nos. 50 and 106 are both
located in Tacloban City, which has not been declared as an urban land
reform zone. R.A. No. 1162, on the other hand, only deals with
expropriation of parcels of land located in the City of Manila, which the
leased premises are not. Finally, Article 1622 of the New Civil Code, which
provides that:

"Whenever a piece of urban land which is so small and so situated that a
major portion thereof cannot be used for any practical purpose within a
reasonable time, having been bought merely for speculation, is about to be
re-sold, the owner of the adjoining land shall have the right of redemption,
also at a reasonable price.

When two or more owners of adjoining lands wish to exercise the right of
pre-emption or redemption, the owner whose intended use of the land in
question appears best justified shall be preferred,"

only deals with small urban lands that are bought for speculation where
only adjoining lot owners can exercise the right of pre-emption or
redemption. Petitioner Sen Po Ek is not an adjoining lot owner, but a lessee
trying to buy the land that it was leasing.

Indeed the right of first refusal may be provided for in a lease contract.[32]
However in this case, such right was never stipulated in any of the several
lease contracts between petitioner and Sofia. Petitioner claims that it was
Teodora herself who assured them that they can have the first priority to
buy the subject parcels of land, but there is absolutely no proof of this. Such
grant of the right of first refusal must be clearly embodied in a written
contract, but there is none in the present case.

WHEREFORE, the petition is hereby DENIED. No costs.

SO ORDERED.

3. Loyola v. CA

Facts:

In dispute is a parcel of land in Binan, originally owned in common by
siblings Mariano and Gaudencia Zarraga. Mariano predeceased her sister,
who died without offspring on August 5, 1983, at the age of 97. Victorina
and Cecilia, sisters of Mariano and Gaudencia, are the original plaintiffs in
this case, and when they died, they were substituted by the petitioners who
are heirs of Victorina. Cecilia died childless. Private respondents, some are
children of Mariano and some are heirs of Jose Zarraga, are first cousins of
petitioners. Repondents allege that they are the lawful owners of the land,
the one-half share inherited by their father, and the other half purchased
from their aunt Gaudencia.

On August 24, 1980, Gaudencia allegedly sold her share to private
respondents, evidenced by a notarised document entitled Bilihang Tuluyan
ng Kalahati ng Isang Lagay na Lupa. A TCT was eventually issued. On
January 31, 1985, Victorina and Cecilia filed a complaint for the purpose of
annulling the sale and the TCT. The trial court rendered judgment in their
favor, but such was reversed by the Court of Appeals.

Issue:

Whether the alleged sale between Gaudencia and respondents is valid

Held:

Petitioners vigorously assail the validity of the execution of the deed of
absolute sale suggesting that since the notary public who prepared and
acknowledged the questioned Bilihan did not personally know Gaudencia,
the execution of the deed was suspect. The rule is that a notarized
document carries the evidentiary weight conferred upon it with respect to
its due execution, and documents acknowledged before a notary public
have in their favor the presumption of regularity. By their failure to
overcome this presumption, with clear and convincing evidence, petitioners
are estopped from questioning the regularity of the execution of the deed.

Petitioners suggest that all the circumstances lead to the conclusion that the
deed of sale was simulated. Simulation is "the declaration of a fictitious will,
deliberately made by agreement of the parties, in order to produce, for the
purposes of deception, the appearances of a juridical act which does not
exist or is different what that which was really executed." Characteristic of
simulation is that the apparent contract is not really desired or intended to
produce legal effect or in any way alter the juridical situation of the parties.
Perusal of the questioned deed will show that the sale of the property
would convert the co-owners to vendors and vendees, a clear alteration of
the juridical relationships. This is contrary to the requisite of simulation that
the apparent contract was not really meant to produce any legal effect. Also
in a simulated contract, the parties have no intention to be bound by the
contract. But in this case, the parties clearly intended to be bound by the
contract of sale, an intention they did not deny.The requisites for simulation
are: (a) an outward declaration of will different from the will of the parties;
(b) the false appearance must have been intended by mutual agreement;
and (c) the purpose is to deceive third persons. None of these are present in
the assailed transaction.

Petitioners fault the Court of Appeals for not considering that at the time of
the sale in 1980, Gaudencia was already 94 years old; that she was already
weak; that she was living with private respondent Romana; and was
dependent upon the latter for her daily needs, such that under these
circumstances, fraud or undue influence was exercised by Romana to obtain
Gaudencia's consent to the sale. The rule on fraud is that it is never
presumed, but must be both alleged and proved. For a contract to be
annulled on the ground of fraud, it must be shown that the vendor never
gave consent to its execution. If a competent person has assented to a
contract freely and fairly, said person is bound. There also is a disputable
presumption, that private transactions have been fair and regular. Applied
to contracts, the presumption is in favor of validity and regularity. In this
case, the allegation of fraud was unsupported, and the presumption stands
that the contract Gaudencia entered into was fair and regular.

Petitioners also claim that since Gaudencia was old and senile, she was
incapable of independent and clear judgment. However, a person is not
incapacitated to contract merely because of advanced years or by reason of
physical infirmities. Only when such age or infirmities impair his mental
faculties to such extent as to prevent him from properly, intelligently, and
fairly protecting his property rights, is he considered incapacitated.
Petitioners show no proof that Gaudencia had lost control of her mental
faculties at the time of the sale. The notary public who interviewed her,
testified that when he talked to Gaudencia before preparing the deed of
sale, she answered correctly and he was convinced that Gaudencia was
mentally fit and knew what she was doing.

4. EQUATORIAL vs. MAYFAIR
G.R. No. 106063
November 21, 1996

FACTS:
- Petitioners are Carmelo & Bauermann, Inc
(owner/seller/lessor) Equatorial Realty Development, Inc
(buyer)
- Respondent is Mayfair Theater, Inc (lessee)
- Carmelo owned a parcel of land with two 2-storey buildings
(covered by 4 land titles) at Recto
- In 1967, 2 portions of the property (covered by 2 titles) was
leased to Mayfair for 20 years
- In 1978, Carmelo sold the entire Recto property to
Equatorial for P11,300,000
- Mayfair petitioned for annulment of the sale on the ground
that it was violative of Paragraph 8 of the Contract of lease
between respondent and Carmelo, which reads:
That if the LESSOR should desire to sell the leased
premises, the LESSEE shall be given 30-days exclusive
option to purchase the same.
- The Trial court ruled in favor of herein petitioners on the
ground that Paragraph 8 was interpreted as an option
contract
- Mayfair appealed and the CA reversed the decision of the
Trial court saying that Paragraph 8 should be interpreted as
a right of first refusal and not an option contract
ISSUES:
1. Whether Paragraph 8 constitutes an option contract clause
or a right of first refusal
2. WON sale of property to Equatorial is valid

HELD:
SC ruled in favor of Mayfair ordering recission of the deed of sale
and granting him right of first refusal to buy the property at
P11,300,000. The issues were held as follows:
1. RIGHT OF FIRST REFUSAL. The SC agreed with the CAs
ruling that Paragraph 8 cannot constitute an option clause
(covered in Article 1324 & 1479 of the Civil Code) for the
lack of definite purchasing price in the agreement.
Furthermore, the SC ruled that the stipulation in question
was created to manifest a reciprocal obligation to guard
the interest of Mayfair in case of sale of the property: (1)to
give him the option to purchase the property or (2)to
ensure that purchaser of the property shall recognize the
lease agreement earlier made. As such, Paragraph 8 is
considered a right of first refusal.
2. NO. Both Carmelo and Equatorial acted in bad faith for
entering into Contract of Sale knowing that Paragraph 8
(right of first refusal) was agreed upon in the Contract of
Lease and that Mayfair (another party) was interested in
the property in question

5. POWER COMMERCIAL V. CA (June 20,
1997)
FACTS:
Petitioner asbestos manufacturer Power
Commercial and industrial corporation bought the
property of spouses Reynaldo and Angelita
Quiambao located in Makati City.

Since there are lessees occupying the subject land,
part of the deed of sale is a warranty of respondents
that will defend its title and peaceful possession in
favor of the petitioners.

The property is mortgage to PNP and as such,
petitioners filed a request to assume responsibility of
the mortgage. Because of petitioners failure to
produce the required papers, their petition was
denied.

Petitioners allege that the contract should be
rescinded because of failure of delivery.

ISSUE:
WON the contract is recissible due to breach of
contract.

HELD:
There is no breach of contact in this case since
there is no provision in the contract that imposes the
obligation to the respondents to eject the people
occupying the property.

There was also a constructive delivery because the
deed of sale was made in a public document. The
contention of the petitioners that there could be no
constructive delivery because the respondents is not
in possession of the property is of no merit. What
matters in a constructive delivery is control and not
possession. Control was placed in the hands of the
petitioners that is why they were able to file an
ejectment case. Prior physical delivery or
possession is not legally required and the execution
of the deed of sale is deemed equivalent to delivery.


6. PHILIPPINE SUBURBAN DEVELOPMENT CORPORATION vs Auditor General
Facts:
On June 8, 1960, at a meeting with the Cabinet, the President of the
Philippines, acting on the reports of the Committee created to survey
suitable lots for relocating squatters in Manila and suburbs, approved in
principle the acquisition by the People's Homesite and Housing Corporation
of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan
and of another area either in Las Pias or Paraaque, Rizal, or Bacoor, Cavite
for those who desire to settle south of Manila. On June 10, 1960, the Board
of Directors of the PHHC passed Resolution No. 700 (Annex "C") authorizing
the purchase of the unoccupied portion of the Sapang Palay Estate at P0.45
per square meter "subject to the following conditions precedent:
3. That the President of the Philippines shall first provide the PHHC with the
necessary funds to effect the purchase and development of this property
from the proposed P4.5 million bond issue to be absorbed by the GSIS.
4. That the contract of sale shall first be approved by the Auditor General
pursuant to Executive Order dated February 3, 1959.
On July 13, 1960, the President authorized the floating of bonds under
Republic Act Nos. 1000 and 1322 in the amount of P7,500,000.00 to be
absorbed by the GSIS, in order to finance the acquisition by the PHHC of the
entire Sapang Palay Estate at a price not to exceed P0.45 per sq. meter.
On December 29,1960, Petitioner Philippine Suburban Development
Corporation, as owner of the unoccupied portion of the Sapang Palay Estate
and the People's Homesite and Housing Corporation, entered into a
contract embodied in a public instrument entitled "Deed of Absolute Sale"
whereby the former conveyed unto the latter the two parcels of land
abovementioned. This was not registered in the Office of the Register of
Deeds until March 14, 1961, due to the fact, petitioner claims, that the
PHHC could not at once advance the money needed for registration
expenses.
In the meantime, the Auditor General, to whom a copy of the contract had
been submitted for approval in conformity with Executive Order No. 290,
expressed objections thereto and requested a re-examination of the
contract, in view of the fact that from 1948 to December 20, 1960, the
entire hacienda was assessed at P131,590.00, and reassessed beginning
December 21, 1960 in the greatly increased amount of P4,898,110.00.
It appears that as early as the first week of June, 1960, prior to the signing
of the deed by the parties, the PHHC acquired possession of the property,
with the consent of petitioner, to enable the said PHHC to proceed
immediately with the construction of roads in the new settlement and to
resettle the squatters and flood victims in Manila who were rendered
homeless by the floods or ejected from the lots which they were then
occupying.
On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC
to withhold the amount of P30,099.79 from the purchase price to be paid by
it to the Philippine Suburban Development Corporation. Said amount
represented the realty tax due on the property involved for the calendar
year 1961. Petitioner, through the PHHC, paid under protest the
abovementioned amount to the Provincial Treasurer of Bulacan and
thereafter, or on June 13, 1961, by letter, requested then Secretary of
Finance Dominador Aytona to order a refund of the amount so paid. Upon
recommendation of the Provincial Treasurer of Bulacan, said request was
denied by the Secretary of Finance in a letter-decision dated August 22,
1961.
**Petitioner claimed that it ceased to be the owner of the land in question
upon the execution of the Deed of Absolute Sale on December 29, 1960. It is
now claimed in this appeal that the Auditor General erred in disallowing the
refund of the real estate tax in the amount of P30,460.90 because aside
from the presumptive delivery of the property by the execution of the deed
of sale on December 29, 1960, the possession of the property was actually
delivered to the vendee prior to the sale, and, therefore, by the
transmission of ownership to the vendee, petitioner has ceased to be the
owner of the property involved, and, consequently, under no obligation to
pay the real property tax for the year 1961.
**Respondent, however, argues that the presumptive delivery of the
property under Article 1498 of the Civil Code does not apply because of the
requirement in the contract that the sale shall first be approved by the
Auditor General, pursuant to the Executive Order.
ISSUE: WON there was already a valid transfer of ownership between the
parties.
HELD:
Considering the aforementioned approval and authorization by the
President of the Philippines of the specific transaction in question, the prior
approval by the Auditor General envisioned by Administrative Order would
therefore, not be necessary.
Under the civil law, delivery (tradition) as a mode of transmission of
ownership maybe actual (real tradition) or constructive (constructive
tradition). 2 When the sale of real property is made in a public instrument,
the execution thereof is equivalent to the delivery of the thing object of the
contract, if from the deed the contrary does not appear or cannot clearly be
inferred. 3
In other words, there is symbolic delivery of the property subject of the sale
by the execution of the public instrument, unless from the express terms of
the instrument, or by clear inference therefrom, this was not the intention
of the parties. Such would be the case, for instance, when a certain date is
fixed for the purchaser to take possession of the property subject of the
conveyance, or where, in case of sale by installments, it is stipulated that
until the last installment is made, the title to the property should remain
with the vendor, or when the vendor reserves the right to use and enjoy the
properties until the gathering of the pending crops, or where the vendor has
no control over the thing sold at the moment of the sale, and, therefore, its
material delivery could not have been made.
In the case at bar, there is no question that the vendor had actually placed
the vendee in possession and control over the thing sold, even before the
date of the sale. The condition that petitioner should first register the deed
of sale and secure a new title in the name of the vendee before the latter
shall pay the balance of the purchase price, did not preclude the
transmission of ownership. In the absence of an express stipulation to the
contrary, the payment of the purchase price of the good is not a condition,
precedent to the transfer of title to the buyer, but title passes by the
delivery of the goods.
WHEREFORE, the appealed decision is hereby reversed, and the real
property tax paid under protest to the Provincial Treasurer of Bulacan by
petitioner Philippine Suburban Development Corporation, in the amount of
P30,460,90, is hereby ordered refunded. Without any pronouncement as to
costs.

7. JOSE LAGONv. HOOVEN COMALCO INDUSTRIES
G.R. No. 135657 January 17, 2001


FACTS:

Petitioner is the owner of a commercial building while respondent
is a domestic corporation known to be the biggest manufacturer and
installer of aluminum materials in the country. Parties entered into 2
contracts whereby for a total consideration of P104,870. Hooven agreed to
sell and install various aluminum materials in Lagons building. Upon
execution of contracts, Lagon paid Hooven P48,000 in advance. On February
24, 1987, Hooven commenced an action for sum of money. It was alleged
that materials were delvered and installed but P69,329 remained unpaid
even after the completion of the project and despite repeated demands.
RTC held partly on the basis of the ocular inspection finding that the total
actual deliveries cost P87,140 deducting therefrom P48,000. CA set aside
the decision and held in favor of Hooven.


ISSUE:

Whether all the materials specified in the contracts had been
delivered and installed by respondent in petitioners commercial building

RULING:

Essentially, respondent has the burden of establishing its
affirmative allegations of complete delivery and installation of the materials
and petitioners failure to pay therefor. The evidence on its discharge is
grossly anemic. The CA decision is modified. Lagon is ordered to pay
respondent P6,377.66 representing the value unpaid. On the other hand,
respondent is ordered to pay petitioner P50,000 as moral damages, P30,000
attorneys fees and P46,554.50 as actual damages.

JOSE V. LAGON vs. HOOVEN COMALCO INDUSTRIES, INC
G.R. No. 135657
JANUARY 17, 2001


FACTS:

Sometime in April 1981 Lagon, a businessman and HOOVEN entered into
two (2) contracts, denominated Proposal, whereby for a total consideration
of P104,870.00 HOOVEN agreed to sell and install various aluminum
materials in Lagons commercial building in Tacurong, Sultan Kudarat.
HOOVEN filed an action against Lagon claiming that the latter failed to pay
his due despite HOOVENs performance of its obligation. Lagon, in his
answer, denied liability and averred that HOOVEN was the party guilty of
breach of contract by failing to deliver and install some of the materials
specified in the proposals; that as a consequence he was compelled to
procure the undelivered materials from other sources; that as regards the
materials duly delivered and installed by HOOVEN, they were fully paid.


ISSUE:
Who among the parties is entitled to damages?


RULING:


HOOVEN's bad faith lies not so much on its breach of contract - as there was
no showing that its failure to comply with its part of the bargain was
motivated by ill will or done with fraudulent intent - but rather on its
appalling temerity to sue petitioner for payment of an alleged unpaid
balance of the purchase price notwithstanding knowledge of its failure to
make complete delivery and installation of all the materials under their
contracts. Although petitioner was found to be liable to respondent to the
extent of P6,377.66, petitioner's right to withhold full payment of the
purchase price prior to the delivery and installation of all the merchandise
cannot be denied since under the contracts the balance of the purchase
price became due and demandable only upon the completion of the project.
Consequently, the resulting social humiliation and damage to petitioner's
reputation as a respected businessman in the community, occasioned by
the filing of this suit provide sufficient grounds for the award of P50,000.00
as moral damages. On the part of Lagon, he is ordered by the court to pay
HOOVEN the amount corresponding to the value of the materials
admittedly delivered to him.


8. VILLARTA V. CA (May 29, 1987)
FACTS:
Respondent Rosalinda Cruz entrusted to petitioner Victoria Villarta seven
pieces of jewelry on November 1968. On December of the same year,
Villarta exchanges one jewelry to another and issued a post-dated check in
favor of Cruz. Cruz deposited the check but it was dishonored for lack of
funds.

An estafa case was filed against Villarta but she argued that she can only be
civilly liable because even though the check bounced, she only gave it for a
pre-existing obligation. She contends a person cannot be imprisoned for
non-payment of debt.

ISSUE:
WON the transaction is a sale or return

HELD:
The transaction is not a sale or return but a sale on approval or sale on
acceptance.

When Cruz gave the jewelry to Villarta on November, the clear intention is
to make the latter choose which item she wanted to buy. There was no
meeting of the minds yet at this point and hence, it cannot be considered as
delivery.

If ownership over the jewelry was not transmitted on that date, then it
could have been transmitted only in December 1968, the date when the
check was issued. In which case, it was a "sale on approval" since ownership
passed to the buyer. Vallarta, only when she signified her approval or
acceptance to the seller, Cruz, and the price was agreed upon.

It is still criminal fraud or deceit in the issuance of a check which is made
punishable under the Revised Penal Code, and not the non-payment of the
debt.

9. G.R. No. 108515 October 16, 1995

LUIS BALANTAKBO, AMADEO BALANTAKBO and HEIRS OF SANCHO
BALANTAKBO, petitioners,
vs.
COURT OF APPEALS and LAGUNA AGRO-INDUSTRIAL, COCONUT
COOPERATIVE, INC., respondents.



NARVASA, C.J.:

Private respondent Laguna Agro-Industrial Coconut Cooperative, Inc.
(hereafter simply LAGUNA), a family corporation organized by the heirs of
the deceased spouses Honorio Sumaya and Crispina Orlanda, was the
plaintiff in an action to quiet title over a parcel of unregistered coconut land
in Bo. Dita. Liliw, Laguna, filed in the Regional Trial Court, Br. XXVII, Laguna
against herein private respondents and docketed as Civil Case No. SC-1367

The complaint in said action alleged basically that the land in question had
been purchased by the Sumaya spouses (LAGUNA's predecessors) for
P800.00 from Consuelo Vda. de Balantakbo (mother of petitioner Luis
Balantakbo and Sancho Balantakbo), the sale being evidenced by a deed 1
executed by Consuelo on December 13, 1955; and that some twenty (20)
years later, or on March 8, 1975, the seller's heirs, intruded into the land
and harvested the coconuts found therein.

In their answer the Balantakbos denied knowledge of the sale and alleged
that the land claimed sued for was different from that owned and held by
them.

In the course of the trial the parties, stipulated upon the following facts and
circumstances, to wit:

1) on October 8, 1975: the genuineness and due execution of (a) the
Deed of Extrajudicial Partition executed on December 10, 1945 by the heirs
of the deceased Jose Balantakbo, Sr., and of (b) the affidavit of Consuelo J.
Vda. de Balantakbo executed November 3, 1952, adjudicating to herself
ownership of the property left by the deceased Raul Balantakbo;

2) on July 21, 1981: (a) the description of the land subject of the suit, i.e.,
as having an area of 2,000 square meters, and as being bounded by the
property of named individuals, and (b) the substance of their respective
contentions, viz:

1) LAGUNA's theory that what had been sold to its predecessors, the
Sumaya Spouses, was the land within the identified boundaries, regardless
of the area; and

2) the Balantakbos' countervailing theory that the land within said
boundaries had an area of 6,870 square meters, more or less, only a portion
thereof measuring 2,000 square meters, having been sold by their mother
to the Sumayas: and they are therefore the owners of the remaining area of
4,870 square meters which they had in fact long possessed.

The Regional Trial Court rendered judgment (per Judge Francisco C.
Manabat, Branch 27, Sta. Cruz, Laguna) in favor of the Balantakbos,
dismissing LAGUNA's complaint, upholding the former's theory of the case
and ruling that what was contemplated in the descriptive words "more or
less" immediately following the stated area of 2,000 square meters in the
description of the land was construable as referring only to a "slight
difference" in said area, 2 not to a difference as large as 4,870 square
meters, or more than double the 2,000 square meters actually stated and
intended to be sold.

The judgment was appealed to the Court of Appeals which after due
proceedings reversed it by decision promulgated on July 9, 1992. The
Appellate Court declared LAGUNA the owner of the entire land, not only of
a 2,000-square meter portion thereof, ruling that the area embraced within
the stated boundaries prevails over the area set forth in the descriptions
which must have been based on mere estimates, and that the buyer was
entitled to receive all that was included within the boundaries thus stated in
the deed of sale. 3

The Court finds no reversible error in said judgment now on appeal by
certiorari by the Balantakbos.

The issue here may be stated simply, thus: In case of conflict between the
area described and the actual boundaries of the land, which should prevail?

And it is by no means a novel question. On the contrary, the rule is quite
well-settled that what really defines a piece of land is not the area,
calculated with more or less certainty mentioned in the description, but the
boundaries therein laid down, as enclosing the land and indicating its limits.
4

In Dichoso, supra, this Court held:

. . . In a contract of sale of land in 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 that its extent is objectively
indicated with sufficient precision to enable one to identify it. An error as to
the superficial area is immaterial. 5

The case at bar is on all fours with this Court's ruling in the recent case of
Miguel Semira vs. Court of Appeals and Buenaventura An, G.R. No. 76031,
promulgated on March 2, 1994 6 There, private respondent purchased a
parcel of land designated as Lot 4221 in Sto. Nio, Taysan, Batangas for
P850.00 from one Juana Rodriguez. The sale was evidenced by a "Kasulatan
ng Bilihan ng Lupa" executed on January 4, 1961 on which appeared the
estimated area of the property as 822.5 square meters with its boundaries
defined. On October 18, 1972, the private respondent sold the lot to his
nephew, Cipriano Ramirez, with the same area and boundaries, the eastern
side of which had now reflected private respondent's subsequent
acquisition of an adjoining property from Pascual Hornilla. On March 12,
1979, Ramirez in turn sold the lot to the petitioner for P20,000,00 but this
time, the area stated in the document of sale was 2,200 sq. m. as actually
delimited by its boundaries and confirmed by the cadastral survey
conducted in 1974. When the petitioner occupied the premises and began
construction of a rice-mill thereon, private respondent filed a complaint for
forcible entry in the MCTC, claiming that Lot 4221 belonging to petitioner
should only be 822.5 sq. m. and that the excess of 1,377 sq. m. allegedly
forcibly occupied formed part of his Lot 4215 acquired in 1964 from P.
Hornilla over which was subsequently issued OCT No. P-12694 in his name
covering said lot and another lot which he (respondent) had also acquired,
both having a combined area of 19,606 sq. m. The MCTC adjudged
petitioner the rightful and lawful owner and possessor of the area in
question and threw out the ejectment suit. On appeal, the RTC reversed and
was thereafter sustained by the Court of Appeals. This Court in turn
reversed the CA judgment and reinstated the MCTC decision, holding:

We have repeatedly ruled that where land is sold for a lump sum and not so
much per unit of measure or number, the boundaries of the land stated in
the contract determine the effects and scope of the sale, not the area
thereof. 7 Hence, the vendors are obligated to deliver all the 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
where the area is described as "humigit kumulang," that is, more or less. 8
These conclusions are drawn from Art. 1542 of the Civil Code which states

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 area or number
than that stated in the contract.

The same rule shall be applied when two or more immovables are sold for a
single price; but if, besides mentioning the boundaries, which is
indispensable in every conveyance of real estate, its area or number should
be designated in the contract, the vendor shall be bound to deliver all that is
included within said boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to do so, he shall suffer
a reduction in the price, in proportion to what is lacking in the area or
number, unless the contract is rescinded because the vendee does not
accede to the failure to deliver what has been stipulated. 9

In the present case, it is clear that the disputed parcel of unregistered land
was sufficiently identified and described. The Second Partial Stipulation of
Facts submitted by the Parties sufficiently demonstrates that the parties lay
claim to one and the same parcel of land, that descended to Raul
Balantakbo from his father Jose Balantakbo, Sr. 10 later inherited by
Consuelo Joaquin Vda. de Balantakbo from the same Raul, her son 11 and
then sold by Consuelo to the Spouses Honorio Sumaya and Crispina
Orlanda. Uniform descriptions of the subject lot were made in the Deed of
Sale executed by Consuelo Joaquin Vda. de Balantakbo in favor of herein
private respondent in 1955, in the Affidavit of Self-Adjudication executed by
Consuelo on November 3, 1952, and in the Extrajudicial Partition of
December 10, 1945, to wit:

A parcel of land with the improvements thereon, with fence of madre-cacao
trees, situated in Barrio Dita, Municipality of Lilio. Bounded on the N., by
Jose Balantakbo; on the E., by Jose Balantakbo; on the S., by Venancio
Villarica; and on the W., by Cornelio Napil and Prudencio Ardeza. Containing
an area of 2,000 square meters, more or less.

It appears, too, that after the 1970 survey of the property when the true
area of the lot was determined to be 6,870 square meters, more or less, Luis
Balantakbo was able to secure in 1975 a new Tax Declaration No. 9397 in
the name of the Heirs of Jose Balantakbo, Sr., covering a 4,873 square-
meter parcel of land located at Dita, Liliw, Laguna. Tax Declaration No. 9397
was supposedly a revival of Tax Declaration No. 42, which, as mentioned in
the first paragraph of the Second Partial Stipulation of Facts, covered the
property then described as containing an area of 2,000 square meters, more
or less. This shows that the Tax Declaration No. 9397, obtained by Luis
Balantakbo, covers the same lot, which contains an area equivalent to the
difference between the actual area of the subject land and the area
mentioned in the deed of sale, sold to the Sumayas and not another
separate parcel of land.

Moreover, in his testimony, petitioner Luis Balantakbo admitted that the
supposed separate parcel of land for which he obtained a tax declaration is
part and parcel of the land inherited by his brother Raul, then by his mother
Consuelo, and thereafter sold by the latter to the Sumayas, Thus:

COURT:

So when your mother sold the land even under Exhibit A, Deed of Sale in
1955, she sold unsurveyed land of 2,000 square meters which when
surveyed in 1970 it turns out to be 6,000 plus square meters?

WITNESS:

Yes, your Honor. 12

Since it was only in 1970 that the true area of the disputed property was
determined after a survey, Consuelo Joaquin Vda. de Balantakbo could not
have sold in 1955 only a portion of the lot which then was known (or
believed) to have an area of only 2,000 square meters, more or less, as
mentioned in all the documents covering the land.

And apart from the Tax Declaration secured by Luis Balantakbo after the
survey of the subject property, petitioners failed to present other proof in
support of their argument that the land claimed by them is different from
that sold by their mother Consuelo Joaquin Vda. de Balantakbo to the
Sumayas.

Clearly, therefore, the position taken by petitioners that there are two
different parcels of land involved is untenable. Only one parcel of land is
involved and the respondent Appellate Court correctly formulated and
resolved affirmatively in favor of private respondent the issue of whether
the actual boundaries should prevail over the area described.

Petitioners' reliance on the Asiain case 13 is misplaced. Following the
arguments advanced by the trial court, petitioners contend that the
descriptive words "more or less" after the area which is 2,000 square
meters refer only to a slight or inconsiderable difference or a reasonable
excess or deficiency, hence could not have included the 4,870 square
meters claimed by petitioners, which is more than double the area of the lot
sold by petitioners' mother to the Sumayas in 1955. In Asiain, the main
consideration of the transaction between the seller Asiain and the buyer
Jalandoni was the size or the area of the land. To convince Jalandoni to buy
the land, Asiain even guaranteed that the land would produce so much
sugar in piculs, hence the relevance of the phrase "more or less" which
followed the statement if area in hectares which Asiain assured his land
contains. It developed, however that the area was much less than what was
thus represented by the seller. The Court therein ruled that the mistake
with reference to the subject matter of the contract was such as to render it
rescindable, at the buyer's option.

The case at bar is clearly quite different, the stated area being only an
additional description of the land already sufficiently identified and
described as being fenced by madre cacao trees and bounded on all sides by
properties with identified owners or holders.

As correctly held by the respondent Appellate Court, this is a case where the
land was sold a cuerpo cierto for a lump sum of P800.00 and not at the rate
of a certain sum per unit of measure or number, with boundaries clearly
delimited, hence the area embraced within said boundaries must be held to
prevail over the area indicated in the documents.

WHEREFORE, the petition is DENIED for lack of merit. The appealed decision
of the respondent Court of Appeals is AFFIRMED in toto.

SO ORDERED.

DOUBLE SALE
1.
Spouses ABRIGO vs. DE VERA Leave a comment

Spouses ABRIGO vs. DE VERA

G.R. No. 154409

June 21, 2004

FACTS: Villafania sold a house and lot located Pangasinan and Tigno-Salazar
and Cave-Go covered by a tax declaration. Unknown, however to Tigno-
Salazar and a Cave-Go, Villafania obtained a free patent over the parcel of
land involved.The said free patent was later on cancelled by a TCT.

On Oct 16, 1997, Tigno-Salazar and Cave-Go, sold the house and lot to the
Spouses Abrigo.

On Oct 23, 1997, Villafania sold the same house and lot to de Vera. De Vera
registered the sale and as a consequence a TCT was issued in her name.

De Vera filed an action for Forcible Entry and Damages against Spouses
Abrigo before the MTC.

Spouses Abrigo filed a case with the RTC for the annulment of documents,
injunction, preliminary injunction, restraining order and damages Villafania.

The parties submitted a Motion for Dismissal in view of their agreement in
the instant (RTC) case that neither of them can physically take possession of
the property in question until the instant case is terminated. Hence the
ejectment case was dismissed.

The RTC rendered judgment approving the Compromise Agreement
submitted by the parties. In the said Decision, Villafania was given one year
from the date of the Compromise Agreement to buy back the house and lot,
and failure to do so would mean that the previous sale in favor of Tigno-
Salazar and Cave-Go shall remain valid and binding and the plaintiff shall
voluntarily vacate the premises without need of any demand. Villafania
failed to buy back the house and lot, so the [vendees] declared the lot in
their name

The RTC rendered the assailed Decision awarding the properties to Spouses
Abrigo as well as damages. Moreover, Villafania was ordered to pay
*petitioners and private respondent+ damages and attorneys fees.

Not contented with the assailed Decision, both parties [appealed to the CA].

In its original Decision, the CA held that a void title could not give rise to a
valid one and hence dismissed the appeal of Private Respondent de Vera.
Since Villafania had already transferred ownership to Rosenda Tigno-
Salazar and Rosita Cave-Go, the subsequent sale to De Vera was deemed
void.The CA also dismissed the appeal of Petitioner-Spouses Abrigo and
found no sufficient basis to award them moral and exemplary damages and
attorneys fees.

On reconsideration found Respondent De Vera to be a purchaser in good
faith and for value. The appellate court ruled that she had relied in good
faith on the Torrens title of her vendor and must thus be protected.

Hence, this Petition.9

ISSUE: Who between petitioner-spouses and respondent has a better right
to the property.

HELD: DE VERA

The petition is denied, and the assailed decision affirmed.The present case
involves what in legal contemplation was a double sale. Gloria Villafania first
sold the disputed property to Tigno-Salazar and Cave-Go, from whom
petitioners, in turn, derived their right. Subsequently a second sale was
executed by Villafania with Respondent de Vera.

Article 1544 of the Civil Code states the law on double sale thus:

Art. 1544. If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person
who in good faith was first in the possession; and, in the absence thereof, to
the person who presents the oldest title, provided there is good faith.

There is no ambiguity in the application of this law with respect to lands
registered under the Torrens system.

In the instant case, both Petitioners Abrigo and respondent registered the
sale of the property. Since neither petitioners nor their predecessors (Tigno-
Salazar and Cave-Go) knew that the property was covered by the Torrens
system, they registered their respective sales under Act 3344 For her part,
respondent registered the transaction under the Torrens system because,
during the sale, Villafania had presented the transfer certificate of title (TCT)
covering the property.

Soriano v. Heirs of Magali23 held that registration must be done in the
proper registry in order to bind the land. Since the property in dispute in the
present case was already registered under the Torrens system, petitioners
registration of the sale under Act 3344 was not effective for purposes of
Article 1544 of the Civil Code.

More recently, in Naawan Community Rural Bank v. Court of Appeals,24 the
Court upheld the right of a party who had registered the sale of land under
the Property Registration Decree, as opposed to another who had
registered a deed of final conveyance under Act 3344. In that case, the
priority in time principle was not applied, because the land was already
covered by the Torrens system at the time the conveyance was registered
under Act 3344. For the same reason, inasmuch as the registration of the
sale to Respondent De Vera under the Torrens system was done in good
faith, this sale must be upheld over the sale registered under Act 3344 to
Petitioner-Spouses Abrigo.

NOTES:

The principle in Article 1544 of the Civil Code is in full accord with Section
51 of PD 1529 which provides that:

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 until its registration. Thus, if the sale is not
registered, it is binding only between the seller and the buyer but it does
not affect innocent third persons.

2. Radiowealth Finance Co. v. Palileo25 explained the difference in the rules
of registration under Act 3344 and those under the Torrens system in this
wise:

Under Act No. 3344, registration of instruments affecting unregistered
lands is without prejudice to a third party with a better right. The
aforequoted phrase has been held by this Court to mean that the mere
registration of a sale in ones favor does not give him any right over the land
if the vendor was not anymore the owner of the land having previously sold
the same to somebody else even if the earlier sale was unrecorded.

The case of Carumba vs. Court of Appeals is a case in point. It was held
therein that Article 1544 of the Civil Code has no application to land not
registered under Act No. 496. Like in the case at bar, Carumba dealt with a
double sale of the same unregistered land. The first sale was made by the
original owners and was unrecorded while the second was an execution sale
that resulted from a complaint for a sum of money filed against the said
original owners. Applying [Section 33], Rule 39 of the Revised Rules of Court,
this Court held that Article 1544 of the Civil Code cannot be invoked to
benefit the purchaser at the execution sale though the latter was a buyer in
good faith and even if this second sale was registered. It was explained that
this is because the purchaser of unregistered land at a sheriffs execution
sale only steps into the shoes of the judgment debtor, and merely acquires
the latters interest in the property sold as of the time the property was
levied upon.

Applying this principle, x x x the execution sale of unregistered land in favor
of petitioner is of no effect because the land no longer belonged to the
judgment debtor as of the time of the said execution sale.

3. Good-Faith Requirement

We have consistently held that Article 1544 requires the second buyer to
acquire the immovable in good faith and to register it in good faith. Mere
registration of title is not enough; good faith must concur with the
registration.We explained the rationale in Uraca v. Court of Appeals, which
we quote:

Under the foregoing, the prior registration of the disputed property by the
second buyer does not by itself confer ownership or a better right over the
property. Article 1544 requires that such registration must be coupled with
good faith. Jurisprudence teaches us that (t)he governing principle is primus
tempore, potior jure (first in time, stronger in right). Knowledge gained by
the first buyer of the second sale cannot defeat the first buyers 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 buyers rights) - from the time of acquisition until
the title is transferred to him by registration, or failing registration, by
delivery of possession.34 (Italics supplied)

Equally important, under Section 44 of PD 1529, every registered owner
receiving a certificate of title pursuant to a decree of registration, and every
subsequent purchaser of registered land taking such certificate for value
and in good faith shall hold the same free from all encumbrances, except
those noted and enumerated in the certificate. Thus, a person dealing with
registered land is not required to go behind the registry to determine the
condition of the property, since such condition is noted on the face of the
register or certificate of title.Following this principle, this Court has
consistently held as regards registered land that a purchaser in good faith
acquires a good title as against all the transferees thereof whose rights are
not recorded in the Registry of Deeds at the time of the sale.

2. LIAO vs CA
Petitioner Jesus P. Liao seeks to annul the decisions of the Court of Appeals
which annulled an order of the Regional Trial Court, Quezon City, Branch 99
directing the Register of Deeds to issue transfer titles to Estrella Mapa over
certain lots in Piedad Estate, Quezon City.
On March 5, 1986, Estrella Mapa filed with the Regional Trial
Court a petition for reconstitution of documents and issuance of
certificates of title over certain parcels of land.
Estrella Mapa claimed that on June 16, 1913, the Director of Lands
issued certificates of sales to her predecessor-in-interest, Vicente
Salgado, over the same parcels of land in accordance with Act. No.
1120, otherwise known as the Friar Lands Act.
After hearing, RTC ordered the issuance of certificate of titles in
favor of Estrella Mapa.
Estrella Mapa assigned the parcels of land covered by T.C.T. No.
348291 and T.C.T. No. 348292 in favor of Palmera Agricultural
Realty Development Corporation, which is a family corporation
headed by Lourdes Angeles, Estrella Mapas daughter.
Re: G. R. Nos. 102961-62
On March 28, 1990, I.C. Cruz Construction, Inc. (ICC) filed with the
Court of Appeals a petition for the annulment of the Order of the
Regional Trial Court. I.C. Cruz alleged that the title issued by the
Register of Deeds of Quezon City pursuant to said order
encompassed property which had been registered and titled in its
name.
On July 3, 1990, Arle Realty Development Corporation (hereafter
Arle) filed a similar petition with the Court of Appeals praying for
the annulment of the same order of the Regional Trial Court. Arle
claimed ownership of six (6) lots which had overlapped the
property claimed by Estrella.
After consolidation of the two cases, the Court of Appeals set the
cases for preliminary conference on March 21, 1991. At this
conference, Jesus P. Liao appeared with his counsel and claimed
that he purchased the parcels of land from Palmera by virtue of a
Deed of Omnibus Assignment dated August 23, 1990.
CA declared the RTC order as null and void. Motion for
reconsideration was likewise denied.
Re: G. R. No. 107625
Respondents alleged that Lot 777 ceased to be part of Friar Land
as early as May 1922 when the Director of Lands executed Deed of
Sale No. 10570 conveying ownership of Lot 777 to one Carlos
Sarmiento, not to Vicente Salgado. The lot could not have been
validly assigned to defendant Estrella Mapa on April 12, 1930 by
Vicente Salgado, who was not the rightful owner of the property.
TCT 348292 was procured only in 1986 while the titles of plaintiffs
were issued in 1967 and one was issued in 1958.
It was found out that the land was fraudulently and irregularly
issued, being a duplication of previously issued titles and
recommending the filing of an action for the annulment of TCT
Nos. 348156, 348291 and 348292 all in the name of Estrella Mapa.
On July 24, 1990, the trial court rendered decision ruling, citing de
Villa vs. Trinidad, 22 SCRA 1167, 1174 [1968], that "where two
certificates of title are issued to different persons covering the
same land in whole or in part, the earlier in date must prevail as
between the original parties and in case of successive registrations
where more than one certificate is issued over the land, the
person holding under prior certificate is entitled to the land as
against the persons who rely on the second certificate."
CA affirmed.
Hence, this petition.
Re: G. R. No. 108759
On February 9, 1988, Edmund Ruiz, Romeo Gomez, and Rosalinda
Villapa filed with the Regional Trial Court, Quezon City, Branch 105
a complaint for annulment of title, reconveyance of real property,
damages, and injunction against Estrella Mapa.
RTC declared the title of Estrella Mapa null and void.
CA affirmed.
Hence, this petition.
whether or not the Court of Appeals erred in upholding
the annulment of the order of the trial court in issuing certificates
of title to Estrella Mapa.
Petitioner not owner of land
The subject lots are part of the Piedad Estate, Quezon City, a Friar
Land acquired by the Philippine Government as indicated in Public
Act No. 1120 (Friar Lands Act). By virtue of Act No. 1120, the
Piedad Estate was placed under the administration of the Director
of Lands.
Petitioner Liao claims that his predecessor in interest acquired the
property through sale certificates Nos. 780, 781, 783, issued by
the Director of Lands in 1913. It is shown, however, that the sale
certificates were signed by the Director of Lands and approved by
the Secretary of the Interior. These sales were void. This is
because the sales were not approved by the Secretary of
Agriculture and Natural Resources.
In view of the invalidity of the sales, there can be no valid titles
issued on the basis of such sales.
Double Sale
the law provides that as between two purchasers, the one who
registered the sale in his favor has a preferred right over the other
who has not registered his title, even if the latter is in actual
possession of the immovable property.
"when two certificates of title are issued to different persons
covering the same land in whole or in part, the earlier in date
must prevail, and, in case of successive registrations where more
than one certificate is issued over the same land, the person
holding a prior certificate is entitled to the land as against a
person who relies on a subsequent certificate.
Title not tantamount to ownership
private respondents title must be respected. They have in their
favor the law that protects holders of title under the torrens
system of land registration.

Although title does not vest
ownership, time and again we have ruled that a torrens certificate
is evidence of an indefeasible title to property in favor of the
person whose name appears thereon.
PETITION DISMISSED.

3.
13. NAAWAN COMMUNITY RURAL BANK INC v CA

FACTS: Comayas offered to sell to the Lumo Spouses a
house and lot. The property was already registered
under the Torrens System that time and they made
appropriate inquiries with the RD; they found out that it
was mortgaged for P8,000, paid Comayas to settle the
mortgage, and the release of the adverse claim was
annotated in the title. Thereafter, they executed an
Absolute Deed of Sale over the subject property and
registered the same. However, it turns out that it was
already previously sold to Naawan Community Rural
Bank; it was then unregistered. The Bank foreclosed on
the property, purchased the same, and registered it
under Act 3344. Thus, the Bank sought to eject the
spouses. However, the latter countered with an action
for quieting of title.

ISSUE: Who has a better title, Naawan or Lumo spouses?

HELD: LUMO SPOUSES. Where a person claims to have
superior property rights by virtue of a sheriffs sale, the
benefit of Art. 1544 applies favorably only if the
property is registered under the Torrens Systemnot
under Act 3344. Registration under the Torrens System
is the operative act that gives validity to the transfer
and creates lien upon the land. The spouses acquired
their titles under the Torrens System and they acted in
good faith by exercising due diligence; thus, they have a
better right to the said property.

4. AMADO CARUMBA, petitioner,
vs.
THE COURT OF APPEALS, SANTIAGO BALBUENA and ANGELES BOAQUIA as
Deputy Provincial Sheriff, respondents.

Luis N. de Leon for petitioner.

Reno R. Gonzales for respondents.



REYES, J.B.L., J.:

Amado Carumba petitions this Supreme Court for a certiorari to review a
decision of the Court of Appeals, rendered in its Case No. 36094-R, that
reversed the judgment in his favor rendered by the Court of First Instance of
Camarines Sur (Civil Case 4646).

The factual background and history of these proceedings is thus stated by
the Court of Appeals (pages 1-2):

On April 12, 1955, the spouses Amado Canuto and Nemesia Ibasco, by virtue
of a "Deed of Sale of Unregistered Land with Covenants of Warranty" (Exh.
A), sold a parcel of land, partly residential and partly coconut land with a
periphery (area) of 359.09 square meters, more or less, located in the barrio
of Santo Domingo, Iriga, Camarines Sur, to the spouses Amado Carumba and
Benita Canuto, for the sum of P350.00. The referred deed of sale was never
registered in the Office of the Register of Deeds of Camarines Sur, and the
Notary, Mr. Vicente Malaya, was not then an authorized notary public in the
place, as shown by Exh. 5. Besides, it has been expressly admitted by
appellee that he is the brother-in-law of Amado Canuto, the alleged vendor
of the property sold to him. Amado Canuto is the older brother of the wife
of the herein appellee, Amado Carumba.

On January 21, 1957, a complaint (Exh. B) for a sum or money was filed by
Santiago Balbuena against Amado Canuto and Nemesia Ibasco before the
Justice of the Peace Court of Iriga, Camarines Sur, known as Civil Case No.
139 and on April 15, 1967, a decision (Exh. C) was rendered in favor of the
plaintiff and against the defendants. On October 1, 1968, the ex-officio
Sheriff, Justo V. Imperial, of Camarines Sur, issued a "Definite Deed of Sale
(Exh. D) of the property now in question in favor of Santiago Balbuena,
which instrument of sale was registered before the Office of the Register of
Deeds of Camarines Sur, on October 3, 1958. The aforesaid property was
declared for taxation purposes (Exh. 1) in the name of Santiago Balbuena in
1958.

The Court of First instance, finding that after execution of the document
Carumba had taken possession of the land, planting bananas, coffee and
other vegetables thereon, declared him to be the owner of the property
under a consummated sale; held void the execution levy made by the
sheriff, pursuant to a judgment against Carumba's vendor, Amado Canuto;
and nullified the sale in favor of the judgment creditor, Santiago Balbuena.
The Court, therefore, declared Carumba the owner of the litigated property
and ordered Balbuena to pay P30.00, as damages, plus the costs.

The Court of Appeals, without altering the findings of fact made by the court
of origin, declared that there having been a double sale of the land subject
of the suit Balbuena's title was superior to that of his adversary under
Article 1544 of the Civil Code of the Philippines, since the execution sale had
been properly registered in good faith and the sale to Carumba was not
recorded.

We disagree. While under the invoked Article 1544 registration in good faith
prevails over possession in the event of a double sale by the vendor of the
same piece of land to different vendees, said article is of no application to
the case at bar, even if Balbuena, the later vendee, was ignorant of the prior
sale made by his judgment debtor in favor of petitioner Carumba. The
reason is that the purchaser of unregistered land at a sheriff's execution sale
only steps into the shoes of the judgment debtor, and merely acquires the
latter's interest in the property sold as of the time the property was levied
upon. This is specifically provided by section 35 of Rule 39 of the Revised
Rules of Court, the second paragraph of said section specifically providing
that:

Upon the execution and delivery of said (final) deed the purchaser,
redemptioner, or his assignee shall be substituted to and acquire all the
right, title, interest, and claim of the judgment debtor to the property as of
the time of the levy, except as against the judgment debtor in possession, in
which case the substitution shall be effective as of the time of the deed ...
(Emphasis supplied)

While the time of the levy does not clearly appear, it could not have been
made prior to 15 April 1957, when the decision against the former owners
of the land was rendered in favor of Balbuena. But the deed of sale in favor
of Canuto had been executed two years before, on 12 April 1955, and while
only embodied in a private document, the same, coupled with the fact that
the buyer (petitioner Carumba) had taken possession of the unregistered
land sold, sufficed to vest ownership on the said buyer. When the levy was
made by the Sheriff, therefore, the judgment debtor no longer had
dominical interest nor any real right over the land that could pass to the
purchaser at the execution sale.1 Hence, the latter must yield the land to
petitioner Carumba. The rule is different in case of lands covered by Torrens
titles, where the prior sale is neither recorded nor known to the execution
purchaser prior to the levy;2 but the land here in question is admittedly not
registered under Act No. 496.

WHEREFORE, the decision of the Court of Appeals is reversed and that of
the Court of First Instance affirmed. Costs against respondent Santiago
Balbuena.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando,
Teehankee, Barredo and Villamor, JJ., concur.

5. RADIOWEALTH; GABRIEL; DE LEONcase digest of Julianne Dominique
Alpuerto
Double Sale
G.R. No. 83432 May 20, 1991
RADIOWEALTH FINANCE COMPANY, petitioner,
vs.
MANUELITO S. PALILEO, respondent.
FACTS:
In April 1970, defendant spouses Enrique Castro and Herminio R. Castro
(spouse Castro) sold to herein respondent Manuelito Palileo a parcel of
unregistered coconut land in Surigao del Norte. The sale is evidenced by a
notarized Deed of Absolute Sale, but the deed was not registered in the
Registry of Property for unregistered lands in the province of Surigao del
Norte. Since the execution of the deed of sale, Palileo who was then
employed in Lianga, Surigao del Sur, exercised acts of ownership over the
land through his mother Rafaela Palileo, as administratrix or overseer.
Manuelito Palileo has continuously paid the real estate taxes on said land
from 1971 until the present.
In November 1976, the CFI of Manila rendered a judgment was rendered
against defendant Enrique T. Castro to pay herein petitioner Radiowealth
Finance Company (Radiowealth), the sum of P22,350.35 with interest rate
of 16% per annum from November 2, 1975 until fully paid, and upon the
finality of the judgment, a writ of execution was issued. The Provincial
Sheriff Marietta E. Eviota, through defendant Deputy Provincial Sheriff
Leopoldo Risma, levied upon and finally sold at public auction the subject
land that defendant Enrique Castro had sold to Palileo in 1970. The said
Provincial Sheriff executed a certificate of sale was by the in favor of
Radiowealth as the only bidder, and upon expiration of the redemption
period, she also executed a deed of final sale. Both documents were
registered with the Registry of Deeds.
Learning of what happened to the land, Palileo filed an action for recovery
of the subject property. The court a quo rendered a decision in favor of
Palileo, which the Court of Appeals affirmed.
ISSUE:
Who is the rightful owner of the subject property?
COURT RULING:
The Supreme Court likewise affirmed the appellate courts decision on this
case. There is no doubt that had the subject property been a registered
land, this case would have been decided in favor of Radiowealth since it was
the company that had its claim first recorded in the Registry of Deeds for it
is the act of registration that operates to convey and affect registered land.
Therefore, a bonafide purchaser of a registered land at an execution sale
acquires a good title as against a prior transferee, if such transfer was
unrecorded.
However, a different set of rules applies in the case at bar which deals with
a parcel of unregistered land. Under Act No. 3344, registration of
instruments affecting unregistered lands is "without prejudice to a third
party with a better right." The afore quoted phrase has been held by the
Supreme Court to mean that the mere registration of a sale in one's favor
does not give him any right over the land if the vendor was not anymore the
owner of the land having previously sold the same to somebody else even if
the earlier sale was unrecorded. Applying this principle, the Court of
Appeals correctly held that the execution sale of the unregistered land in
favor of petitioner is of no effect because the land no longer belonged to
the judgment debtor as of the time of the said execution sale.

6. Caram vs. Laureta
G.R. No. L-28740 February 24, 1981
FERNANDEZ, J.:
FACTS:
On June 10, 1945, Marcos Mata conveyed a large tract of
agricultural land covered by OCT No. 3019 in favor of Claro Laureta, plaintiff,
the respondent herein. The deed of absolute sale in favor of the plaintiff
was not registered because it was not acknowledged before a notary public
or any other authorized officer. Since June 10, 1945, the plaintiff Laureta
had been and is in continuous, adverse and notorious occupation of said
land, without being molested, disturbed or stopped by any of the
defendants or their representatives. In fact, Laureta had been paying realty
taxes due thereon and had introduced improvements worth not less than
P20,000.00 at the time of the filing of the complaint. On May 5, 1947, the
same land covered by OCT No. 3019 was sold by Marcos Mata to defendant
Fermin Z. Caram, Jr., petitioner herein. The deed of sale in favor of Caram
was acknowledged before Atty. Abelardo Aportadera. On December 9,
1947, the second sale between Marcos Mata and Fermin Caram, Jr. was
registered with the Register of Deeds. On the same date, Transfer
Certificate of Title No. 140 was issued in favor of Fermin Caram Jr.The
defendant Fermin Caram Jr. claimed that he has no knowledge or
information about the previous encumbrances, transactions, and alienations
in favor of plaintiff until the filing of the complaints.
ISSUE: Whether or not the knowledge petitioner of a prior unregistered sale
of a titled property attributable to petitioner and equivalent in law of
registration of sale.
HELD: Yes. There is no doubt then that Irespe and Aportadera, acting as
agents of Caram, purchased the property of Mata in bad faith. Applying the
principle of agency, Caram as principal, should also be deemed to have
acted in bad faith.Since Caram was a registrant in bad faith, the situation is
as if there was no registration at all. A possessor in good faith is one who is
not aware that there exists in his title or mode of acquisition any flaw which
invalidates it. Laureta was first in possession of the property. He is also a
possessor in good faith. It is true that Mata had alleged that the deed of sale
in favor of Laureta was procured by force. Such defect, however, was cured
when, after the lapse of four years from the time the intimidation ceased,
Marcos Mata lost both his rights to file an action for annulment or to set up
nullity of the contract as a defense in an action to enforce the same.

7. print on pdf
8. EMILIA 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.

D E C I S I O N

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 attorneys fees.

SO ORDERED.

The Antecedent Facts

The facts narrated by the Court of Appeals are as follows:[4]

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 managers 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 the 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 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 Groups registration of their deeds of sale
taking into account Art. 1544, 2nd paragraph, of the Civil Code.*12+

The Courts Ruling

The petition is meritorious.

First Issue: No Extinctive Novation

The lynchpin of the assailed Decision is the public respondents 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, x x x. 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 respondents 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 buyers
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 buyers 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 Groups 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
Uracas 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 propertys 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 courts
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.

9. SPOUSES TOMAS OCCEA and SILVINA OCCEA, petitioners, vs. LYDIA
MORALES OBSIANA ESPONILLA, ELSA MORALES OBSIANA SALAZAR and
DARFROSA OBSIANA SALAZAR ESPONILLA, respondents.

D E C I S I O N

PUNO, J.:

The case at bar involves a portion of the 1,198-square meter residential lot
(lot no. 265) situated in Sibalom, Antique, originally owned by spouses
Nicolas and Irene Tordesillas under OCT No. 1130. The Tordesillas spouses
had three (3) children, namely: Harod, Angela and Rosario, the latter having
been survived by her two (2) children, Arnold and Lilia de la Flor.

After the death of the Tordesillas spouses, the lot was inherited by their
children Harod and Angela, and grandchildren Arnold and Lilia. In 1951, the
heirs executed a Deed of Pacto de Retro Sale[1] in favor of Alberta Morales
covering the southwestern portion of the lot with an area of 748 square
meters.

Three (3) years later, in 1954, Arnold and Lilia executed a Deed of Definite
Sale of Shares, Rights, Interests and Participations[2] over the same 748 sq.
m. lot in favor of Alberta Morales. The notarized deed also attested that the
lot sold by vendors Arnold and Lilia to Alberta were their share in the estate
of their deceased parents.

Alberta possessed the lot as owner, constructed a house on it and
appointed a caretaker to oversee her property. Thereafter, in July 1956,
vendor Arnold de la Flor borrowed the OCT from Alberta covering the lot.
He executed an Affidavit[3] acknowledging receipt of the OCT in trust and
undertook to return said title free from changes, modifications or
cancellations.

In 1966, Arnold and Angela, nephew and daughter respectively of the
Tordesillas spouses, without the knowledge of Alberta, executed a Deed of
Extrajudicial Settlement[4] declaring the two of them as the only co-owners
of the undivided 1,198 sq. m. lot no. 265, without acknowledging their
previous sale of 748 sq. m. thereof to Alberta. A number of times,
thereafter, Alberta and her nieces asked Arnold for the OCT of the land but
Arnold just kept on promising to return it.

In 1983, Arnold executed an Affidavit of Settlement of the Estate[5] of
Angela who died in 1978 without issue, declaring himself as the sole heir of
Angela and thus consolidating the title of the entire lot in his name.

In 1985, vendee Alberta Morales died. Her nieces-heirs, Lydia, Elsa and
Dafrosa, succeeded in the ownership of the lot. Months later, as the heirs
were about to leave for the United States, they asked Arnold to deliver to
them the title to the land so they can register it in their name. Arnold
repeatedly promised to do so but failed to deliver the title to them.

On December 4, 1986, after Albertas heirs left for the States, Arnold used
the OCT he borrowed from the deceased vendee Alberta Morales,
subdivided the entire lot no. 265 into three sublots, and registered them all
under his name, viz: lot no. 265-A (with TCT No. 16895), lot no. 265-B (with
TCT No. 16896) and lot no. 265-C (with TCT No. 16897). He then paid the
real estate taxes on the property.

On August 13, 1990, Arnold sold lot nos. 265-B & C to spouses Tomas and
Sylvina Occea, which included the 748 sq. m. portion previously sold to
Alberta Morales. A Deed of Absolute Sale[6] over said lots was executed to
the Occea spouses and titles were transferred to their names.

In 1993, after the death of Arnold, the three (3) nieces-heirs of Alberta
Morales learned about the second sale of their lot to the Occea spouses
when they were notified by caretaker Abas that they were being ejected
from the land. In 1994, the heirs filed a case[7] for annulment of sale and
cancellation of titles, with damages, against the second vendees Occea
spouses. In their complaint, they alleged that the Occeas purchased the
land in bad faith as they were aware that the lots sold to them had already
been sold to Alberta Morales in 1954. They averred that before the sale,
when Tomas Occea conducted an ocular inspection of the lots, Morito
Abas, the caretaker appointed by Alberta Morales to oversee her property,
warned them not to push through with the sale as the land was no longer
owned by vendor Arnold as the latter had previously sold the lot to Alberta
Morales who had a house constructed thereon.

For their part, the Occea spouses claimed that the OCT in the name of the
original owners of the lots, the Tordesillas spouses, was cancelled after it
was subdivided between Angela and Arnold in 1969; that new TCTs had
been issued in the latters names; that they were unaware that the subject
lots were already previously sold to Morales as they denied that Tomas had
a talk with caretaker Abas on the matter; that as of December 4, 1987, the
TCTs covering the lots were in the name of Arnold and his wife, without any
adverse claim annotated thereon; that vendor Arnold represented to them
that the occupants they saw on the land were squatters and that he merely
tolerated their presence; that they did not personally investigate the
alleged squatters on the land and merely relied on the representation of
vendor Arnold; that sometime in 1966-1967, Arnold and his co-heir Angela
caused the survey of the original lot and subdivided it into 3 lots, without
opposition from Morales or her heirs. Thus, three (3) TCTs were issued in
1969 to Arnold and Angela and, two of the lots were then sold to the
Occea spouses, again without objection from Alberta Morales.

The Occea spouses alleged that they were buyers in good faith as the titles
to the subject lots were free from liens or encumbrances when they
purchased them. They claimed that in 1989, Arnold offered to sell the
subject lots to them. On August 13, 1990, after they verified with the
Antique Registry of Deeds that Arnolds TCTs were clean and
unencumbered, Arnold signed the instrument of sale over the subject lots in
favor of the Occeas for P100,000.00 and new titles were issued in their
names.

The Occeas likewise set up the defenses of laches and prescription. They
argue that Alberta and plaintiffs-heirs were barred from prosecuting their
action as they failed to assert their right for forty (40) years. Firstly, they
point out that vendor Arnold and Angela subdivided the entire lot in 1966
and declared themselves as the only co-owners thereof in the deed of
extrajudicial settlement. Alberta Morales failed to oppose the inclusion of
her 748 sq. m. lot in the deed. Thus, the title to the entire lot no. 256 was
transferred to the names of Arnold and Angela. Secondly, preparatory to
the division of the lots, vendor Arnold had the land surveyed but Alberta
again failed to oppose the same. Finally, Alberta and her heirs who are
claiming adverse rights over the land based on the 1951 Deed of Pacto de
Retro Sale and the 1954 Deed of Definite Sale of Shares failed for 40 years
to annotate their adverse claims on the new titles issued to Arnold and
Angela, enabling the latter to possess a clean title and transfer them to the
Occea spouses.

After trial, the lower court rendered a decision declaring the Occea
spouses as buyers in good faith and ruled that the action of the heirs was
time-barred.

On appeal by Albertas heirs, the Court of Appeals reversed the decision of
the trial court. It found that the Occeas purchased the land in bad faith
and that the action filed by Albertas heirs was not barred by prescription or
laches. The dispositive portion reads:

WHEREFORE, the instant appeal is hereby GRANTED. Accordingly, the
assailed decision is hereby REVERSED and SET ASIDE and a new one is
rendered declaring the Deed of Absolute Sale dated August 13, 1990
executed between Arnold de la Flor in favor of defendants-appellees null
and void and ordering the cancellation of Transfer Certificate of Title Nos.
16896, 16897, T-18241 and T-18242.

SO ORDERED. [8]

Hence this appeal where petitioner-spouses Occea raise the following
issues:

I

WHETHER OR NOT A VERBAL INFORMATION COULD BE MADE TO PREVAIL
OVER A CLEAN CERTIFICATE OF TITLE OF A REGISTERED LAND WHICH IS
FREE OF ANY LIEN OR ENCUMBRANCE ANNOTATED ON ITS CERTIFICATE OF
TITLE OR ANY ADVERSE CLAIM RECORDED WITH THE REGISTER OF DEEDS.

II

WHETHER OR NOT A BUYER OF A REGISTERED LAND IS OBLIGATED TO MAKE
INQUIRIES OF ANY POSSIBLE DEFECT OR ADVERSE CLAIM AFFECTING ITS
OWNERSHIP WHICH DOES NOT APPEAR ON THE CERTIFICATE OF TITLE.

III

WHETHER OR NOT THE PERIOD OF MORE THAN FORTY (40) YEARS
WITHOUT POSITIVE ACTION TAKEN BY RESPONDENTS, AS WELL AS BY
ALBERTA MORALES, TO PROTECT THEIR INTEREST CAN BE CONSIDERED
LACHES AND THUS THEIR PRESENT ACTION HAS PRESCRIBED.

On the first two issues, petitioner-spouses claim that they were purchasers
of the land in good faith as the law does not obligate them to go beyond a
clean certificate of title to determine the condition of the property. They
argue that a person dealing with registered land is only charged with notice
of the burden on the property annotated on the title. When there is
nothing on the title to indicate any cloud or vice in the ownership of the
property or any encumbrance thereon, the purchaser is not required to
explore further than the title in quest of any hidden defect or inchoate right
that may subsequently defeat his right thereto. They claim they had every
right to purchase the land despite the verbal warning made by caretaker
Abas as the information was mere hearsay and cannot prevail over the title
of the land which was free from any encumbrance.

Their arguments do not persuade.

The petition at bar presents a case of double sale of an immovable property.
Article 1544 of the New Civil Code provides that in case an immovable
property is sold to different vendees, the ownership shall belong: (1) to the
person acquiring it who in good faith first recorded it in the Registry of
Property; (2) should there be no inscription, the ownership shall pertain to
the person who in good faith was first in possession; and, (3) in the absence
thereof, to the person who presents the oldest title, provided there is good
faith.

In all cases, good faith is essential. It is the basic premise of the preferential
rights granted to the one claiming ownership over an immovable.[9] What is
material is whether the second buyer first registers the second sale in good
faith, i.e., without knowledge of any defect in the title of the property
sold.[10] The defense of indefeasibility of a Torrens title does not extend to
a transferee who takes the certificate of title in bad faith, with notice of a
flaw.[11]

The governing principle of prius tempore, potior jure (first in time, stronger
in right) enunciated under Art. 1544 has been clarified, thus:

x x x Knowledge by the first buyer of the second sale cannot defeat the first
buyers 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 such knowledge taints his registration with bad faith
(see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984).
In Cruz vs. Cabaa (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was 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 and Crisostomo vs.
CA, G.R. No. 95843, 02 September 1992).[12]

In the case at bar, we find that petitioner-spouses failed to prove good faith
in their purchase and registration of the land. A purchaser in good faith and
for value is one who buys property without notice that some other person
has a right to or interest in such property and pays its fair price before he
has notice of the adverse claims and interest of another person in the same
property. So it is that the honesty of intention which constitutes good
faith implies a freedom from knowledge of circumstances which ought to
put a person on inquiry. At the trial, Tomas Occea admitted that he found
houses built on the land during its ocular inspection prior to his purchase.
He relied on the representation of vendor Arnold that these houses were
owned by squatters and that he was merely tolerating their presence on the
land. Tomas should have verified from the occupants of the land the nature
and authority of their possession instead of merely relying on the
representation of the vendor that they were squatters, having seen for
himself that the land was occupied by persons other than the vendor who
was not in possession of the land at that time. The settled rule is that a
buyer of real property in the possession of persons other than the seller
must be wary and should investigate the rights of those in possession.
Without such inquiry, the buyer can hardly be regarded as a buyer in good
faith and cannot have any right over the property.[13] A purchaser cannot
simply close his eyes to facts which should put a reasonable man on his
guard and then claim that he acted in good faith under the belief that there
was no defect in the title of his vendor.[14] His mere refusal to believe that
such defect exists or his willful closing of his eyes to the possibility of the
existence of a defect in his vendors title will not make him an innocent
purchaser for value if it later develops that the title was in fact defective,
and it appears that he would have notice of the defect had he acted with
that measure of precaution which may reasonably be required of a prudent
man in a similar situation.

Indeed, the general rule is that one who deals with property registered
under the Torrens system need not go beyond the same, but only has to
rely on the title. He is charged with notice only of such burdens and claims
as are annotated on the title. However, this principle does not apply when
the party has actual knowledge of facts and circumstances that would impel
a reasonably cautious man to make such inquiry or when the purchaser has
knowledge of a defect or the lack of title in his vendor or of sufficient facts
to induce a reasonably prudent man to inquire into the status of the title of
the property in litigation. One who falls within the exception can neither be
denominated an innocent purchaser for value nor a purchaser in good
faith.[15]

The evidence of the private respondents show that when Tomas Occea
conducted an ocular inspection of the land prior to the second sale, Abas,
the caretaker of the house which Alberta Morales built on the land,
personally informed Tomas that the lot had been previously sold by the
same vendor Arnold to Alberta Morales. With this information, the Occeas
were obliged to look beyond the title of their vendor and make further
inquiries from the occupants of the land as to their authority and right to
possess it. However, despite this information about a prior sale, the
Occeas proceeded with the purchase in haste. They did not inquire from
Abas how they could get in touch with the heirs or representatives of
Alberta to verify the ownership of the land. Neither do the records reveal
that they exerted effort to examine the documents pertaining to the first
sale. Having discovered that the land they intended to buy was occupied by
a person other than the vendor not in actual possession thereof, it was
incumbent upon the petitioners to verify the extent of the occupants
possessory rights.[16] The Occeas did nothing and chose to ignore and
disbelieve Abas statement.

On the third issue, we hold that the action to annul title filed by
respondents-heirs is not barred by laches and prescription. Firstly, laches is
a creation of equity and its application is controlled by equitable
considerations. Laches cannot be used to defeat justice or perpetuate fraud
and injustice. Neither should its application be used to prevent the rightful
owners of a property from recovering what has been fraudulently registered
in the name of another.[17] Secondly, prescription does not apply when the
person seeking annulment of title or reconveyance is in possession of the lot
because the action partakes of a suit to quiet title which is
imprescriptible.[18] In this case, Morales had actual possession of the land
when she had a house built thereon and had appointed a caretaker to
oversee her property. Her undisturbed possession of the land for a period
of fifty (50) long years gave her and her heirs a continuing right to seek the
aid of a court of equity to determine the nature of the claim of ownership of
petitioner-spouses.[19] As held by this Court in Faja vs. Court of
Appeals:[20]

x x x There is settled jurisprudence that one who is in actual possession of
a piece of land claiming to be owner thereof may wait until his possession is
disturbed or his title attacked before taking steps to vindicate his right, the
reason for the rule being, that his undisturbed possession gives him a
continuing right to seek the aid of a court of equity to ascertain and
determine the nature of the adverse claim and its effect on his own title,
which right can be claimed only by one who is in possession. x x x The right
to quiet title to the property, seek its reconveyance and annul any
certificate of title covering it accrued only from the time the one in
possession was made aware of a claim adverse to his own, and it is only
then that the statutory period of prescription commences to run against
such possessor.

In the case at bar, Morales caretaker became aware of the second sale to
petitioner-spouses only in 1991 when he received from the latter a notice to
vacate the land. Respondents-heirs did not sleep on their rights for in 1994,
they filed their action to annul petitioners title over the land. It likewise
bears to stress that when vendor Arnold reacquired title to the subject
property by means of fraud and concealment after he has sold it to Alberta
Morales, a constructive trust was created in favor of Morales and her heirs.
As the defrauded parties who were in actual possession of the property, an
action of the respondents-heirs to enforce the trust and recover the
property cannot prescribe. They may vindicate their right over the property
regardless of the lapse of time.[21] Hence, the rule that registration of the
property has the effect of constructive notice to the whole world cannot be
availed of by petitioners and the defense of prescription cannot be
successfully raised against respondents.

In sum, the general rule is that registration under the Torrens system is the
operative act which gives validity to the transfer of title on the land.
However, it does not create or vest title especially where a party has actual
knowledge of the claimants actual, open and notorious possession of the
property at the time of his registration.[22] A buyer in bad faith has no right
over the land. As petitioner-spouses failed to register the subject land in
good faith, ownership of the land pertains to respondent-heirs who first
possessed it in good faith.

IN VIEW WHEREOF, the petition is DISMISSED. No costs.

SO ORDERED.

10. Balatbat v. CA

Facts:

A parcel of land was acquired by plaintiff Aurelio Roque and Maria Mesina
during their conjugal union. Maria died on August 28, 1966. On June 15,
1977, Aurelio filed a case for partition. The trial court held that Aurelio is
entitled to the portion at his share in the conjugal property, and 1/5 of
the other half which formed part of Marias estate, divided equally among
him at his 4 children. The decision having become final and executory, the
Register of Deeds of Manila issued a transfer certificate of title on October
5, 1979 according to the ruling of the court. On April 1, 1980, Aurelio sold
his 6/10 share to spouses Aurora Tuazon-Repuyan and Jose Repuyan, as
evidenced by a deed of absolute sale. On June 21, 1980, Aurora caused the
annotation of her affidavit of adverse claim. On August 20, 1980, Aurelio
filed a complaint for rescission of contract grounded on the buyers failure
to pay the balance of the purchase price. On February 4, 1982, another deed
of absolute sale was executed between Aurelio and his children, and herein
petitioner Clara Balatbat, involving the entire lot. Balatbat filed a motion for
the issuance of writ of possession, which was granted by the court on
September 20, 1982, subject to valid rights and interests of third persons.
Balatbat filed a motion to intervene in the rescission case, but did not file
her complaint in intervention. The court ruled that the sale between Aurelio
and Aurora is valid.

Issues:

(1) Whether the alleged sale to private respondents was merely executory

(2) Whether there was double sale

(3) Whether petitioner is a buyer in good faith and for value

Held:

(1) Contrary to petitioner's contention that the sale dated April 1, 1980 in
favor of private respondents Repuyan was merely executory for the reason
that there was no delivery of the subject property and that
consideration/price was not fully paid, we find the sale as consummated,
hence, valid and enforceable. The Court dismissed vendor's Aurelio Roque
complaint for rescission of the deed of sale and declared that the Sale dated
April 1, 1980, as valid and enforceable. No appeal having been made, the
decision became final and executory.

The execution of the public instrument, without actual delivery of the thing,
transfers the ownership from the vendor to the vendee, who may thereafter
exercise the rights of an owner over the same. In the instant case, vendor
Roque delivered the owner's certificate of title to herein private
respondent. The provision of Article 1358 on the necessity of a public
document is only for convenience, not for validity or enforceability. It is not
a requirement for the validity of a contract of sale of a parcel of land that
this be embodied in a public instrument. A contract of sale being
consensual, it is perfected by the mere consent of the parties. Delivery of
the thing bought or payment of the price is not necessary for the perfection
of the contract; and failure of the vendee to pay the price after the
execution of the contract does not make the sale null and void for lack of
consideration but results at most in default on the part of the vendee, for
which the vendor may exercise his legal remedies.

(2) Article 1544 of the Civil Code provides that in case of double sale of an
immovable property, ownership shall be transferred (1) to the person
acquiring it who in good faith first recorded it in the Registry of Property; (2)
in default thereof, to the person who in good faith was first in possession;
and (3) in default thereof, to the person who presents the oldest title,
provided there is good faith. In the case at bar, vendor Aurelio Roque sold
6/10 portion of his share to private respondents Repuyan on April 1, 1980.
Subsequently, the same lot was sold again by vendor Aurelio Roque (6/10)
and his children (4/10), represented by the Clerk of Court pursuant to
Section 10, Rule 39 of the Rules of Court, on February 4, 1982. Undoubtedly,
this is a case of double sale contemplated under Article 1544 of the New
Civil Code.

Evidently, private respondents Repuyan's caused the annotation of an
adverse claim on the title of the subject property on July 21, 1980. The
annotation of the adverse claim in the Registry of Property is sufficient
compliance as mandated by law and serves notice to the whole world. On
the other hand, petitioner filed a notice of lis pendens only on February 2,
1982. Accordingly, private respondents who first caused the annotation of
the adverse claim in good faith shall have a better right over herein
petitioner. As between two purchasers, the one who has registered the sale
in his favor, has a preferred right over the other who has not registered his
title even if the latter is in actual possession of the immovable property.
Further, even in default of the first registrant or first in possession, private
respondents have presented the oldest title. Thus, private respondents who
acquired the subject property in good faith and for valuable consideration
established a superior right as against the petitioner.

(3) Petitioner cannot be considered as a buyer in good faith. If petitioner did
investigate before buying the land on February 4, 1982, she should have
known that there was a pending case and an annotation of adverse claim
was made in the title of the property before the Register of Deeds and she
could have discovered that the subject property was already sold to the
private respondents. It is incumbent upon the vendee of the property to ask
for the delivery of the owner's duplicate copy of the title from the vendor.
One who purchases real estate with knowledge of a defect or lack of title in
his vendor cannot claim that he has acquired title thereto in good faith as
against the true owner of the land or of an interest therein; and the same
rule must be applied to one who has knowledge of facts which should have
put him upon such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor. Good faith, or the
want of it is not a visible, tangible fact that can be seen or touched, but
rather a state or condition of mind which can only be judged of by actual or
fancied tokens or signs.

11. Limketkai Sons Milling Inc. vs. CA
Facts: On June 23, 1988, Pedro Revilla, Jr., a licensed real estate broker was
given formal authority by BPI to sell the lot for P1,000.00 per square meter.
The owners of the Philippine Remnants concurred this arrangement. Broker
Revilla contacted Alfonso Lim of petitioner company who agreed to buy the
land. On July 9, 1988, Revilla formally informed BPI that he had procured a
buyer, herein petitioner. On July 11, 1988, petitioner's officials, Alfonso Lim
and Albino Limketkai, went to BPI to confirm the sale. Vice-President Merlin
Albano and Asst. Vice-President Aromin entertained them. The parties
agreed that the lot would be sold at P1,000.00 per square meter to be paid
in cash. The authority to sell was on a first come, first served and non-
exclusive basis; there is no dispute over petitioner's being the first comer
and the buyer to be first served. Alfonso Lim then asked if it was possible to
pay on terms. The bank officials stated that there was no harm in trying to
ask for payment on terms because in previous transactions, the same had
been allowed. It was the understanding, however, that should the term
payment be disapproved, then the price shall be paid in cash. Two or three
days later, petitioner learned that its offer to pay on terms had been frozen.
Alfonso Lim went to BPI on July 18, 1988 and tendered the full payment of
P33,056,000.00 to Albano. The payment was refused because Albano stated
that the authority to sell that particular piece of property in Pasig had been
withdrawn from his unit. The same check was tendered to BPI Vice-
President Nelson Bona who also refused to receive payment. An action for
specific performance with damages was thereupon filed on August 25, 1988
by petitioner against BPI. In the course of the trial, BPI informed the trial
court that it had sold the property under litigation to NBS on July 14, 1989.

Issue: Whether or not such contract is covered by the statute of frauds.

Held: In the case at bench, the allegation that there was no concurrence of
the offer and the acceptance upon the cause of the contract is belied by the
testimony of the very BPI official with whom the contract was perfected.
Aromin and Albano concluded the sale for BPI. The fact that the deed of sale
still had to be signed and notarized does not mean that no contract had
already been perfected. A sale of land is valid regardless of the form it may
have been entered into. The requisite form under Article 1458 of the Civil
Code is merely for greater efficacy or convenience and the failure to comply
does not affect the validity and binding effect of the act between parties.
Therefore, such contract that was made constituted fraud and is covered by
the statute of frauds. BPI should be held liable and can be sued for
damages.

12. G.R. No. 156055 March 5, 2007

R.R. PAREDES, W.S. TIFFANY, T.R. KOTZE, H. MUSSAIN, FRANCISCO A. CRUZ, EDGARDO
C. CATAGUIS, E.M. LAPUZ, ATTY. JOSELIA POBLADOR, JOSE DE LUSONG, EDUARDO A.
RICARDO, ATTY. ARIEL F. ABONAL, and ADOLFO GARCIA, Petitioners,
vs.
TARCISIO S. CALILUNG, Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of
Court seeking the reversal and setting aside of the Decision,2 dated 29 January 2001,
and Resolution,3 dated 14 November 2002, of the Court of Appeals in CA-G.R. SP No.
54862. In its assailed Decision, the Court of Appeals reversed the Resolution,4 dated
27 July 1998, of the Department of Justice (DOJ), which affirmed the Resolution,5
dated 7 October 1997, of the Makati City Prosecution Office, finding no probable
cause and dismissing the herein respondents complaint, docketed as I.S. No. 97-
22188-191; and, instead, disposed as follows

WHEREFORE, the resolution of the Department of Justice dated November 26, 1997,
is hereby set aside. The Prosecutor of Makati, is hereby Ordered to file an information
of Estafa against the respondents.

During the time material to the Petition at bar, petitioners Francisco A. Cruz (Cruz),
Edgardo C. Cataguis (Cataguis), Atty. Joselia J. Poblador (Atty. Poblador), Jose De
Lusong (De Lusong), Eduardo A. Ricardo (Ricardo), and Atty. Ariel F. Abonal (Atty.
Abonal) were serving, in various capacities, as officials of Caltex Philippines, Inc. (CPI).
Petitioner Cruz was the Vice President for Corporate Planning and a member of the
Board of Directors of CPI; petitioner Cataguis was the General Manager for Marketing
and also a member of the Board of Directors of CPI; petitioner Atty. Poblador was the
Corporate Secretary and General Manager for Legal and Tax of CPI; petitioner De
Lusong was the General Manager for Marketing Retail of CPI; petitioner Ricardo was
the General Manager for Marketing of CPI for the years 1990-1996; and petitioner
Atty. Abonal was the internal Legal Counsel of CPI.

On 3 May 1997, respondent Tarcisio S. Calilung (Atty. Calilung), a lawyer and a
businessman, instituted a Complaint, docketed as I.S. No. 97-22188-191, against the
aforementioned petitioners and several others. Respondent included in his complaint
R.R. Paredes, W.S. Tiffany, T.R. Kotze, H. Mussain, and E.M. Lapuz, who had likewise
served as officials of CPI but are no longer connected with the company and whose
whereabouts as of present time are unknown. They did not participate in any
proceedings. Respondent also included in his complaint Adolfo B. Garcia (Garcia), the
Deputy Sheriff of the Manila Regional Trial Court (RTC), Branch 31, who participated
in the proceedings before the Makati City Prosecution Office and the DOJ, but no
longer participated in the instant petition.

In his complaint before the Makati City Prosecution Office, respondent charged
petitioners, et al., with several counts of estafa. Respondents Original Complaint was
summarized in the Resolution,6 dated 7 October 1997, of the Makati City Prosecution
Office, to wit

[Herein respondent] Tarcisio S. Calilung alleged that [herein petitioner] Atty. Joselia
Poblador, Chief Legal Counsel of Caltex Philippines (Caltex for brevity) negotiated to
him the sale of several parcels of land consisting of 228.9 hectares, more or less[,]
situated at Barrio Alibagu, Ilagan, Isabela. Atty. Poblador represented to [respondent]
that Caltex is the absolute owner of all the parcels [of] land as it acquired the same at
a Sheriffs Auction Sale, a copy of a Sheriffs Certificate of Final Sale was shown to
[respondent]. Likewise, Atty. Poblador represented and assured complainant that
subject property is not covered by the Agrarian Reform Program and that the adverse
occupants thereof are mere squatters. Consequently, [respondent] paid the total
amount of P3.5 Million for all the said parcels of land in two payments. Thereupon, a
Deed of Assignment with Consolidation of Title dated June 22, 1995 was executed
between Caltex Philippines and Tarcisio S. Calilung. Later, [respondent] discovered
that none of the representations made to him by [petitioner] Atty. Poblador is true.
Contrary to Atty. Pobladors representation, Caltex Philippines is not the absolute
owner of the several parcels of land sold to him. Accordingly, the several parcels of
land are owned by the heirs of Antonia Medina (sic). Caltex Philippines is the owner
of only one share of the co-heirs which it acquired at the Sheriffs Auction. Further,
[respondent] learned that on August 3, 1993, Caltex thru E.A. Ricardo, manager for
Marketing, has already sold the subject parcels of land to the Department of Agrarian
Reform under Voluntary Offer To Sell program of the Government. Also, complainant
averred that the Sheriffs Certificate of Final Sale executed by Deputy Sheriff Adolfo
Garcia shown to him was falsified as it showed that Caltexs bid of P2.7 Million was
successful and it is the absolute owner of all the parcels of land. The truth however, is
that Caltex is the owner of only one share of one of the co-heirs. Lastly, Caltex
through E.A. Ricardo misrepresented to the Department of Agrarian Reform that the
subject property is agricultural inorder (sic) that it will qualify and be sold under the
Agrarian Reform Program. The truth of the matter is the said parcels of land are
pasturelands thus, exempt from the coverage of the Agrarian Reform Program.
Hence, [respondent] filed this complaint for Estafa against R.H. Paredes, W.S. Tiffany,
T.R. Kotze, H. Mussain, F.A. Cruz, E.C. Cataguis, E.M. Lauz who are members of the
Board of Caltex Philippines, Atty. Joselia Poblador, Chief Legal Counsel, Jose De
Lusong, signatory of the Deed of Assignment and E.A. Ricardo, manager for Marketing
and Atty. Ariel F. Abonal, assistant Secretary to the Board of Caltex Philippines who
according to him acted in concert in perpetrating the crime charged. Likewise, a
complaint for Falsification is instituted against Adolfo Garcia who connived with the
above-mentioned officers/members of the Board of Caltex Philippines for
falsification.

To answer the respondents accusations against them, petitioners Atty. Poblador,
Cruz, Cataguis, De Lusong, and Ricardo, submitted their Joint Counter-Affidavit,7
averring that the respondents complaint was without basis in fact and in law, and
that they could not be held liable for estafa. The contents of their Joint Counter-
Affidavit were concisely recounted by the Makati City Prosecutor in her Resolution,8
dated 7 October 1997

Jose de Lusong and Atty. Poblador claimed that they did not at any time represent
that Caltex Philippines is the absolute owner of the entire subject parcels of land.

*Herein petitioners+ narrated that Caltexs rights and interests on subject parcels of
land arose from Civil Case No. 84-22434 entitled Caltex Philippines vs. Antonia Vda.
de Medina at Branch 31, RTC-Manila. Antonia Vda. de Medina is Caltexs judgment
debtor and is *respondents+ mother-in-law. During the pendency of the case, or on
February 7, 1984, 5 Notices of Levy on Attachment were issued against the rights,
titles and interest of *respondents+ mother-in-law. The undivided shares of the other
heirs, two (2) children of Antonia Vda. de Medina were never levied. On September
17, 1984, a decision was rendered in favor of Caltex Philippines and the same became
final and executory. On July 24, 1989, a Writ of Execution was issued. On July 24,
1989, Deputy Sheriff Adolfo B. Garcia issued a Notice of Levy Execution [sic] where
only the shares, rights and interests of *respondents+ mother-in-law over subject
parcels of land were levied upon. Likewise, a notice of Sheriffs Sale was issued. On
August 23, 1989, Caltex, through Atty. Rafael Durian bidded P4.5 Million for the
purchase of the rights, shares of *respondents+ mother-in-law in subject parcels of
land. Consequently, the subject parcels of land (shares and interests of Antonia Vda.
de Medina which is 66.67% of the entire property) were sold to Caltex Philippines in
the amount of P2,785,620.00. After the execution of the sale, *respondents+ mother-
in-law was given one (1) year within which to redeem her interest over the subject
land.

After the lapse of the one (1) year redemption period given to Antonia Vda. de
Medina, [respondent] went to Caltex office and propose [sic] to reacquire the interest
of Antonia Vda. de Medina and to pay the defficiency (sic) judgment obligation of his
mother-in-law. Caltex Philippines, through its office accepted the proposal of
[respondent] to buy the parcels of land. Complainant further requested that all cases
against his mother-in-law be withdrawn. Caltex Philippines agreed and the sale of the
said subject parcels of land to [respondent] in the amount of P3.5 Million
materialized. On the first payment made by the [respondent], Caltex Philippines
executed a Deed of Waiver and Quitclaim in all cases filed against *respondents+
mother-in-law. Thereupon, a Deed of Assignment with Consolidation of Title was
executed by herein parties after the balance [thereof] was tendered by [respondent].

On the alleged sale by Caltex Philippines of subject parcels of land to the Department
of Agrarian Reform, [petitioners] denied having sold the same to DAR. According to
[petitioners], it was Antonia Vda. de Medina through her attorney-in-fact Carlito
Baluang who transacted the voluntary Officer (sic) To Sell with the Department of
Agrarian Reform sometime in 1988 and 1989. Subsequently, by virtue of the Deed of
Assignment (With Special Power of Attorney Couple (sic) With Interest) executed by
Antonia Vda. de Medina ceded in favor of Caltex Philippines, wherein Antonia Vda. de
Medina "all her rights, interests, claims and participation from the proceeds of land
compensation for all the property that she has voluntarily offered to sell" to Caltex
Philippines and constituted the latter as its (sic) exclusive attorney-in-fact to follow-
up with the Department of Agrarian Reform. Accordingly, this matter is make (sic)
known to *respondent+. It was on the strength of *respondents+ relation to Antonia
Vda. de Medina and his assurance that he has connections with DAR that CPI decided
to sell subject property to [respondent].

[Petitioners] denied the allegation of [respondent] that Caltex officers and directors
conspire (sic) with Deputy Sheriff Adolfo B. Garcia and notary Public Atty. Ariel Abonal
in the falsification of the Sheriffs Certificate of Final Sale by representing that Caltex
bidded for the entirety of all the parcels of land subject of the sale and using the said
falsified documents to convince *respondent+ of Caltexs absolute title over the
subject parcels of land.

Lastly, the declaration [of] Mr. Eduardo A. Ricardo that subject parcels of land is (sic)
agricultural in nature in the Voluntary Officer (sic) To Sell to the DAR can hardly be
considered a crime moreso that there is no other proof presented than the mere self-
serving statement of Mr. Ricardo. Besides, in the Deed of Assignment with
Consolidation of Title, there is not (sic) warranty as to the properties*+ classification
or primary use given.

Deputy Sheriff Garcia submitted his own Counter-Affidavit with a Counter-Complaint
for Perjury.9 He essentially affirmed the narration made in the petitioners Joint
Counter-Affidavit, particularly, the events arising from Civil Case No. 84-22434,
instituted by CPI against respondents mother-in-law, Antonia Vda. de Medina, before
the Manila RTC. After the Decision, dated 17 September 1984, rendered by the
Manila RTC against Antonia Vda. de Medina, became final and executory, and upon
failure of Antonia Vda. de Medina to pay her judgment debt to CPI, Deputy Sheriff
Garcia proceeded to implement the Writ of Execution which levied upon Antonia Vda.
de Medinas rights, interests, title and participation in the subject real properties. At
the execution sale held on 24 August 1989, CPI won the bidding. It bought Antonia
Vda. de Medinas limited interests over the subject real properties in the total
amount of P4.5 Million. CPIs winning bid was broken down10 as follows
P2,785,620.00

For the parcels of land covered by TCT Nos. T-132694, T-133034, T-94234, T-124684,
T-139590, T-138153, T-138154, T-138155, T-133033, T-133021, T-133022, T-133023,
T-133024, T-133025, T-133026, T-133027, T-133028, T-133029, T-133030, T-133031,
T-133032, T-133033 and T-133034; and,

P1,714,380.00
For the parcels of land covered by Tax Declaration Nos. 01-262, 01-265,
01-25080, 01-29376 and 01-23470
P4,500,000.00 Total

When Antonia Vda. de Medina failed to redeem her interest in the subject real
properties within a year from the execution sale, ownership over the said interest
was consolidated in CPI. Deputy Sheriff Garcia explained that he prepared the Final
Certification of Sale on 24 October 1990, although it was notarized only on 1 February
1994. He denied that he ever conspired with CPI, through its officers and directors, to
make false representations to respondent that CPI was the absolute owner of the
subject real properties; to maliciously conceal from respondent that CPI already sold
the subject real properties to the Department of Agrarian Reform (DAR); or to falsify
the Sheriffs Certificate of Final Sale so as to convince respondent that CPI had
absolute title over the subject real properties. He averred that he conducted the
execution sale as part of his official duties and in accordance with the Rules of Court
and the judgment issued by the Manila RTC in Civil Case No. 84-22434. He also
maintained that only the rights and interests of Antonia Vda. de Medina over the
subject real properties were covered by the execution.

Respondent submitted a Reply-Affidavit in which he insisted that the concealment of
a prior sale, the falsification of the Sheriffs Certificate of Final Sale and the conspiracy
among the petitioners, et al., and the others can be readily seen. Once again,
reference is herein made to the Resolution, dated 7 October 1997 of the Makati City
Prosecution Office which related11 thus

[Herein respondent] alleged that he married the daughter of Antonia Vda. de Medina
on November 22, 1994. In early November of 1994, Atty. Villacorta, *respondents+
counsel, inquired from Caltex about the redemption of subject parcels of land. Caltex
refused their offer to redeem the property because the period for redemptions (sic)
has long expired. However, Caltex proposed that if they are interested in the
remaining subject properties, they can purchase the same, Caltex demanded for P9
Million for the fourteen (14) parcels of land consisting of 228.9 hectares. Caltex never
informed [respondent] or his counsel that the entire properties were sold to DAR for
[P]1 Million. On November 1994, [respondent] formally offered to buy the entire
fourteen (14) parcels of land [pay for] P3.5 Million as earnest money which was
accepted by Atty. Poblador. Even if the titles over the subject parcels of land was (sic)
still in the name of Antonia Medina (sic), he believed Atty. Pobladors representation
that Caltex is the absolute owner by virtue of the Sheriffs Certificate of Final Sale
handed to him. Nowhere in the Sheriffs Certificate of Final Sale that only undivided
share of Antonia Medina was auctioned.

The certificate of Final Sale was dated October 24, 1990 but notarized only on
November 15, 1994, which is more than a week before he paid the earnest money on
November 29, 1994. Lastly, the declared sale price of P2,785,620.00 does not
correspond to the written winning bid by Caltex for P4.5 Million.

To support his foregoing allegations, respondent also submitted the Affidavit12 of his
counsel, Atty. Rolando A. Villacorta (Atty. Villacorta), who supposedly represented
and assisted him during the negotiations with CPI for the purchase of the subject real
properties. Atty. Villacorta attested that he met with both petitioners Attys. Poblador
and Abonal of CPI regarding respondents offer to purchase the subject real
properties; that Atty. Poblador, in response to a direct query by respondent, expressly
denied that the subject real properties were covered by the Comprehensive Agrarian
Reform Program (CARP) of the Government; and that respondent was never informed
that what he was purchasing was not the whole of the subject real properties,
consisting of 229 hectares, but only an undivided share therein.

In their Joint Rejoinder,13 petitioners Cruz, Cataguis, De Lusong, Ricardo and Attys.
Poblador and Abonal denied meeting and talking to Atty. Villacorta. According to
petitioners Attys. Poblador and Abonal, at the beginning of their negotiations for the
purchase by respondent of the subject real properties from CPI, the latter was
accompanied, not by Atty. Villacorta, but an Atty. Karl Miranda from the Office of the
Solicitor General (OSG), acting as a broker. During their meeting, they discussed about
the redemption of the rights, interests, and title of Antonia Vda. de Medina over the
subject real properties. In their succeeding meetings, petitioners stressed that
respondent was informed that CPI was selling and assigning only the limited rights,
interests, and title of Antonia Vda. de Medina over the subject real properties, and
that the subject real properties were under the coverage of CARP and were subject of
a Voluntary Offer to Sell (VOS). Petitioners pointed out that respondent himself
admitted that he was purchasing only the limited interest of Antonia Vda. de Medina
in the subject real properties when he stated in his letter,14 dated 29 November
1994, addressed to CPI, that, "We are pleased to inform you that we accept your offer
to sell to us for P3.5 Million your interest in the foreclosed Medina properties."

Moreover, to belie the attestations of respondent and Atty. Villacorta in their
affidavits, petitioners presented the Affidavits of Attys. Rodrigo B. Libunao, Jr.15 and
Catherine T. Manahan,16 Legal Counsel and Tax Counsel, respectively, of CPI, who
were also present during the meetings of petitioner Atty. Poblador with respondent.
They both alleged that they were called to join the meeting in October 1994 wherein
respondent was accompanied, not by Atty. Villacorta, but Atty. Miranda of the OSG;
that respondent claimed to be married to Ma. Luisa Victoria Medina, the daughter of
Antonia Vda. de Medina, and he was interested in acquiring CPIs rights, interests,
and title to the subject real properties in exchange for CPIs execution of a waiver or
quitclaim to secure the release of Antonia Vda. de Medina who was in prison by
reason of the criminal cases filed by CPI against her; and that Atty. Poblador made full
disclosure to respondent that CPI had, and was assigning to respondent, only the
limited rights, interests, and title of Antonia Vda. de Medina over the subject real
properties, and that the subject real properties were under the coverage of CARP and
the subject of the VOS initiated by Antonia Vda. de Medina herself, through her
attorney-in-fact Carlito Balauag.

Atty. Libunao further claimed that on 1 December 1994, when respondent came
unaccompanied to the CPI Office to pay the P1 Million earnest money, Atty. Libunao
again explained to him in detail the following

a. That CPI was merely a co-owner of the said properties as there were other heirs to
the estate, one of whom was his wife, and that only the undivided share pertaining to
Antonia Vda. de Medina which we acquired in an execution sale in Civil Case No. 84-
22434 could be transferred to him.

b. That photocopies of the TCTs to the subject parcels of land were furnished, and
exhibited to, him and he carefully noted that the subject parcels of land were in the
name of "Heirs of Antonio Medina."

c. That the subject parcels of land were covered by the Comprehensive Agrarian
Reform Program (CARP) by virtue of a Voluntary Offer to Sell signed by Antonia Vda.
de Medina, through her attoreney-in-fact, Mr. Carlito Balauag. A copy of this
document was also furnished Atty. Calilung.

d. That out of the sixteen (16) parcels of land under process by the DAR, two (2) lots
are ready for compensation and that the money has already been deposited by the
DAR in a trust account in the Landbank branch in Tuguegarao, Cagayan.

e. That the fourteen (14) subject parcels of land are still under process by the MARO
in Ilagan, Isabela and that the latter has started to identify the actual occupants and
proposed beneficiaries of the same.

f. That payment of compensation under the CARP was being delayed by the fact that
the heirs of Antonio Medina have not initiated any estate settlement proceeding and
that none of the heirs has ever participated in the DAR conferences, despite notice.17

When Atty. Libunao again asked him if he really understood the complexities of the
CARP issues affecting the subject real properties, respondent allegedly "confidently
replied that he had been successful in preserving his and his familys landholdings in
Pampanga and that he will do the same for the subject parcels of land."18

On 7 October 1997, the Makati City Prosecution Office wrapped up its preliminary
investigation and issued its Resolution, in which it made the following findings and
recommendations19

After a careful examination of the evidence obtaining in this case the undersigned
finds that: (1) there appears no conceivable fraudulent representations committed by
[herein petitioners, et al.] (Caltex Officers) in the negotiation and sale of subject
parcels of land, (2) there is no sufficient proof to show that the Sheriffs Certificate of
Final Sale was falsified by [Deputy Sheriff Garcia] in connivance with [petitioners, et
al.] Caltex Officers; and (3) that there is insufficient evidence to substantiate
*respondents+ claim that *petitioners, et al.+ (Caltex Officers) made false declaration
that subject parcels of land are productive agricultural land so these parcels of land
may be covered and sold under the Agrarian Reform Program of the Government.

x x x x

Seemingly, [respondent] would want to extricate himself from a bad bargain and
annul the effects of an unwise act. If the [respondent] failed to apprise himself of the
consequence of his purchase of subject parcels of land from Caltex[,] he was simply
unfortunate. As it would appear all documents and informations (sic) about the
parcels of land subject matter of the sale transactions entered by the parties are in
*respondents+ hands for his scrutiny. *Respondent+ is a lawyer and as such it can be
presumed that he knows the complexities/controversies attached to the interests and
rights of his mother-in-law (Antonia Vda. de Medina) over the parcels of land he
wants to purchase from [petitioners, et al.] Caltex Officers. Clearly, there was no
misrepresentation and/or concealment regarding the ownership of Caltex over
subject parcels of land. Neither was there falsification committed on the Sheriffs
Certificate of Title.

x x x x

WHEREFORE, premises considered, it is respectfully recommended that complainant
(sic) against [petitioners, et al.] Caltex Officers and Adolfo Garcia be dismissed, as it is
hereby upon, approval, dismissed.

Likewise, it is recommended that the counter-charge of perjury against [respondent]
be dismissed.

Aggrieved, respondent filed with the DOJ a Petition for Review of the Resolution,
dated 7 October 1997, of the Makati City Prosecution Office. However, on 27 July
1998, the DOJ resolved20 to dismiss his Petition for Review, ratiocinating thus

The record clearly shows that the subject parcels of land were previously owned by
the late Antonio Medina. Upon the latters death, the said properties were inherited
by Antonia Vda. de Medina and her children through intestate succession. When
Caltex filed a civil case against Antonia Vda. de Medina, who is *herein respondents+
mother-in-law, the latters rights, title and interests over the subject properties were
levied on attachment during the pendency of the said case. Thereafter, upon
judgment in favor of Caltex in the said civil case; and, pursuant to the writ of
execution issued therein, the rights, title and interests of Antonia Vda. de Medina
over the said parcels of land were levied on execution and, consequently, sold at
public auction with Caltex eventually winning the bid. Finally, a certificate of sheriffs
sale was issued and based thereon Caltex became the owner of the undivided interest
of Antonia Vda. de Medina over the subject parcels of land.

We find it incredible for [respondent] not to have known the foregoing
circumstances. It must be stressed that [respondent is] a member of the family of
Antonia Vda. de Medina. It taxes ones credulity that *respondent+ would have had no
personal knowledge about the familys properties which were the subject of the sale
transaction [respondent] had with Caltex. Besides, [respondent is] a lawyer [himself].
As such, not only [was respondent] expected to know the intricacies and complexities
of the sale transaction [he] entered with Caltex but also [respondent] had all the
means and resources to check and counter-check the veracity of [herein petitioners,
et al.s+ representations. Indeed, it is hard to believe that *respondent+ chose to just
take the word of [petitioners, et al.] that Caltex is the owner of all the subject
properties rather than examine the documents pertaining thereto before parting with
a substantial amount of money. We take with a grain of salt *respondents+ allegation
that during the sale negotiations [respondent was] unaware of the extent of the
ownership of Caltex over the properties in question not only because of
*respondents+ stature as a lawyer-businessman but also because of [his] personal
knowledge thereon by reason of [his] being a member of the family of Antonia Vda.
de Medina from whom Caltex acquired the subject properties. Under this milieu, no
amount of fraudulent misrepresentations from [petitioners, et al.] could have misled
[him] into executing with Caltex the Deed of Assignment with Consolidation of Title
over the properties in question.

The foregoing circumstances not only create suspicion as to *respondents+ actual
motive in filing the instant complaint but also strengthen *petitioners+ claim that
there is, indeed, reasonable ground to believe that [respondent] entered into the
transaction in question knowing fully well that what was being sold by Caltex was only
the undivided interest of [his] mother-in-law who is one (1) of the co-heirs in (sic) the
subject parcels of land.

Besides, no clearer acknowledgment by [respondent] of [his] knowledge on (sic) the
circumstances surrounding the subject properties than as stated in par. 3, p. 5, of the
Deed of Assignment with Consolidation of Title can be made, which states thus

x x x x

"4. ASSIGNEE [respondent] further acknowledges that he is fully aware of the
circumstances under which these Properties were acquired by ASSIGNOR [CPI] and
that he has examined the title and inspected the said properties and has verified their
location together with their boundaries." x x x

As regards the findings of the City Prosecutor on *respondents+ other charges for
estafa under Article 315, par. (3) of the Revised Penal Code and falsification/use of
falsified documents, we can find no cogent reason to alter, modify much less reverse
the same.

WHEREFORE, *respondents] instant petition for review is hereby dismissed.

Respondents Motion for Reconsideration was denied by the DOJ in another
Resolution dated 30 June 1999.

This prompted respondent to file with the Court of Appeals a Petition for Certiorari
under Rule 65 of the Rules of Court, contending that the DOJ and the Makati City
Prosecution Office committed grave abuse of discretion amounting to lack or excess
of jurisdiction in dismissing respondents complaint in I.S. No. 97-22188-191. The
Court of Appeals, in its Decision,21 dated 29 January 2001, reversed the findings of
the DOJ and the Makati City Prosecution Office, and ordered the filing of an
information for estafa against the petitioners, based on the following raison d'tre

The Court after a perusal over (sic) the ruling of the Department of Justice believes
that said resolution deserves scant consideration. This is so because the issue on
double sale was just taken in passing by the Department of Justice, when that issue is
paramount in the case.

It appears on record that E.A. Ricardo, General Manager Marketing commercial of
Caltex offered for sell (sic) to DAR the subject property.

x x x x

It should be noted that the sale to DAR is unlike the ordinary contract to sell
transactions wherein one could determine when a sale is consummated. But at this
instance, where voluntary offer to sell has been made, where process has been
undergoing at that time, We opine that there is already sale considering the unique
circumstance of selling the subject landholding to the DAR.

This is so because under Administrative Order No. 5 series of 1992, it provides that
landowners who entered into Voluntary Offer to sell can no longer back out, except
under the exceptional circumstances as earlier illustrated. The present case is one
that is not of the exception. Hence, if a landowner can no longer back out since he
entered into that kind of transaction and by entering into another sale such as in this
case, fully knowing of the circumstances but without divulging the same to the
petitioner, would that not tantamount to misrepresentation, fraud and deceit.

A careful perusal on (sic) the comments and arguments of the [herein petitioners]
that it (sic) did not refute in whatever manner that there was a sale that took place
between the Department of Agrarian Reform and the CPI. As a matter of fact, a
reading of the foregoing, in consonance with the VOS would connote that the sale has
indeed been entered into because Caltex knew that a process has been undertaken
by the DAR (p. 175 *petitioners+ Comment) x x x.

These are an admission (sic) so far, that there was indeed a previous transfer of the
subject parcels of land to the DAR as they never disputed that there was a sale
between CPI and DAR. The words of CALTEX are simple and explicit, there was an
"offer" and "transfer" and that there was already an ongoing process of the VOS.
Hence, there was a sale by virtue of the voluntary offer to sell under the
Comprehensive Agrarian Reform Program. The only thing is that, Caltex denies
responsibility that it was the one who offered the sale to DAR, but it claim (sic)
instead that it was Antonia Vda. de Medina. But this argument bears no weight.
Regardless of whether or not Antonia Vda. de Medina was the one who offered to sell
the property to DAR, CALTEX cant absolve itself from any responsibility.

x x x x

So whether or not the first voluntary offer to sell to the Department of Agrarian
Reform was made by Antonia Vda. de Medina and the second offer was made by
CALTEX to DAR, to our mind is, of no moment. One thing is thus, clear, CALTEX who
duly executed the necessary documents. There is nothing on record which would
reveal that [petitioners] was (sic) able to prove that [herein respondent] was fully
informed of the first sale made to DAR.

Further, [petitioners] claimed that being a son-in-law,it (sic) would be impossible for
[respondent] not to know it. This is not sufficient reason to conclude that
[respondent] was aware of the attending circumstances. And we cannot therefore,
agree with the conclusion of the DOJ.

Clearly then, the evidence points out that what appears to have been sold were the
properties described in the 14 TCTs without any qualification thereon. And that the
existence of a double sale cant be contested, there being an admission by the
[petitioners] that there was a sale made to DAR prior to herein [respondent].

x x x x

With the acts of CALTEX in the case at bar it can be gleaned therefrom that there was
no clear transactions [sic] that took place, thus, there was an evident
misrepresentation to the damage and prejudice of the [respondent]. As supported by
the Deed of Assignment itself, the assurances given by the assignor CALTEX to
[respondent] is a grave misrepresentation to the [respondent] who is the buyer of the
properties in question. That where there was no divulgement made by the CALTEX to
petitioner of the sale to DAR, there is no question that deceit is present. The presence
of damage and deceit are (sic) apparent in the present case, hence, the very elements
of Estafa exist.

Even granting that the sale was only with respect to the individual share or interest of
CALTEX, it cant be denied that deceit was committed by *petitioners, et al.+ in not
being fair, honest in not revealing the real status of the subject lot. x x x Had it not
been of such misrepresentation, the Court believes that [respondent] would not have
parted substantial amount of money.

From the foregoing premises, a prima facie case of ESTAFA was herein committed by
the [petitioners, et al.] on the ground of double sale. And the only way to determine
whether [petitioners, et al.] herein are guilty or not is in a full blown trial before a
Court. However, we do not find any participation of the Deputy Sheriff Adolfo Garcia
on the issue of double sale, it appearing that he has nothing to do with the
transaction between CALTEX and Department of Agrarian Reform. This Court is
convinced that the Deputy Sheriff had just performed a ministerial duty imposed
upon him by law.

After their Motion for Reconsideration was denied by the Court of Appeals, in its
Resolution,22 dated 14 November 2002, petitioners come before this Court via a
Petition for Review on Certiorari under Rule 45 of the Rules of Court. Petitioners posit
that the Court of Appeals erred in finding that there exists a prima facie case against
them considering that: (1) Petitioners never deceived respondent with regard to the
background circumstances of the subject real properties; (2) There was no "double
sale" made by CPI of its rights and interests in the subject real properties; and (3)
There exists no proof of specific overt acts or omission of each of the petitioners
which would constitute conspiracy in committing the alleged crime of estafa.

This Court finds the Petition at bar meritorious.

In his complaint, respondent charges petitioners, together with other persons no
longer part of the present Petition, of two counts of estafa by means of deceit: (1)
estafa by means of false pretenses, under Article 315(2)(a) of the Revised Penal Code;
and (2) estafa by means of concealment, under Article 315(3)(c) of the same Code.
Relevant provisions of the Revised Penal Code expressly read thus

ART. 315. Swindling (estafa). Any person who shall defraud another by any of the
means mentioned hereinbelow shall be punished by:

x x x x

[P]rovided that in the four cases mentioned, the fraud be committed by any of the
following means:

x x x x

(2) By means of any of the following false pretenses or fraudulent acts executed prior
to or simultaneous with the commission of the fraud:

(a) By using a fictitious name, or falsely pretending to possess power, influence,
qualifications, property, credit, agency, business or imaginary transactions, or by
means of other similar deceits;

x x x x

(3) Through any of the following fraudulent means:

x x x x

(c) By removing, concealing or destroying, in whole or in part, any court record, office
files, document or any other paper.

The elements of estafa by means of deceit,23 whether committed by false pretenses
or concealment, are the following

a. That there must be a false pretense, fraudulent act or fraudulent means.

b. That such false pretense, fraudulent act or fraudulent means must be made or
executed prior to or simultaneously with the commission of the fraud.

c. That the offended party must have relied on the false pretense, fraudulent act, or
fraudulent means, that is, he was induced to part with his money or property because
of the false pretense, fraudulent act, or fraudulent means.

d. That as a result thereof, the offended party suffered damage.

Now the question is whether there exists probable cause that petitioners committed
the crime of estafa by means of deceit which would warrant the filing of an
information against them before the trial court.

Probable cause has been defined as the existence of such facts and circumstances as
would excite the belief, in a reasonable mind, acting on the facts within the
knowledge of the prosecutor, that the person charged was guilty of the crime for
which he was prosecuted. Probable cause is a reasonable ground of presumption that
a matter is, or may be, well-founded, such a state of facts in the mind of the
prosecutor as would lead a person of ordinary caution and prudence to believe, or
entertain an honest or strong suspicion, that a thing is so. The term does not mean
"actual and positive cause" nor does it import absolute certainty. It is merely based
on opinion and reasonable belief. Thus, a finding of probable cause does not require
an inquiry into whether there is sufficient evidence to procure a conviction. It is
enough that it is believed that the act or omission complained of constitutes the
offense charged. Precisely, there is a trial for the reception of evidence of the
prosecution in support of the charge.24 While probable cause demands more than
"bare suspicion," it requires "less than evidence which would justify conviction." A
finding of probable cause merely binds over the suspect to stand trial. It is not a
pronouncement of guilt.25

The conduct of preliminary investigation for the purpose of determining the existence
of probable cause is executive in nature.26 The prosecution of crimes appertains to
the executive department of the government whose principal power and
responsibility is to see that the laws of the land are faithfully executed. A necessary
component of this power to execute the laws is the right to prosecute their violators.
The right to prosecute vests the prosecutor with a wide range of discretion, the
discretion of whether, what and whom to charge, the exercise of which depends on a
smorgasbord of factors which are best appreciated by prosecutors.27

The main function of a government prosecutor during his conduct of preliminary
investigation is to determine the existence of probable cause and to file the
corresponding information should he find it to be so.28 The purpose of a preliminary
investigation is to secure the innocent against hasty, malicious and oppressive
prosecution, and to protect him from an open and public accusation of crime, from
the trouble, expense and anxiety of a public trial, and also to protect the state from
useless and expensive trials. A preliminary investigation serves not only the purposes
of the State. More important, it is a part of the guarantees of freedom and fair play
which are birthrights of all who live in this country. It is, therefore, imperative upon
the fiscal to relieve the accused from the pain of going through a trial once it is
ascertained that no probable cause exists to form a sufficient belief as to the guilt of
the accused.29

A prosecutor, by the nature of his office, is under no compulsion to file a particular
criminal information where he is not convinced that he has evidence to prop up the
averments thereof, or that the evidence at hand points to a different conclusion. This
is not to discount the possibility of the commission of abuses on the part of the
prosecutor. But this Court must have to recognize that a prosecutor should not be
unduly compelled to work against his conviction.30 Although the power and
prerogative of the prosecutor, to determine whether or not the evidence at hand is
sufficient to form a reasonable belief that a person committed an offense, is not
absolute but subject to judicial review, it would be embarrassing for him to be
compelled to prosecute a case when he is in no position to do so, because in his
opinion he does not have the necessary evidence to secure a conviction, or he is not
convinced of the merits of the case.31

Hence, this Court consistently adheres to its policy of non-interference in the conduct
of preliminary investigations, and to leave to the investigating prosecutor sufficient
latitude of discretion in the determination of what constitutes sufficient evidence as
will establish probable cause for the filing of an information against a supposed
offender.32

In the present case, the Makati City Prosecution Office, as well as the DOJ, found no
probable cause that petitioners committed estafa by deceit to the damage of
respondent. There was no factual or legal basis for the Court of Appeals to reverse
the findings of the prosecutor who conducted the preliminary investigation in I.S. No.
97-22188-191.

It should do well for the Court of Appeals to remember that the DOJ Resolutions,
dated 27 July 1998 and 30 June 1999, affirming the dismissal by the Makati City
Prosecution Office of respondents complaint against petitioners, were brought
before it via a Petition on Certiorari under Rule 65 of the Rules of Court. Its duty is
confined to determining whether the executive determination of probable cause was
done without or in excess of jurisdiction or with grave abuse of discretion. Thus,
although it is entirely possible that the investigating prosecutor may erroneously
exercise the discretion lodged in him by law, this does not render his act amenable to
correction and annulment by the extraordinary remedy of certiorari, absent any
showing of grave abuse of discretion amounting to excess of jurisdiction.33

For the courts to grant the extraordinary writ of certiorari, so as to justify the reversal
of the investigating prosecutors finding on the existence or absence of probable
cause to file an information, the one seeking the writ must be able to establish the
following

For grave abuse of discretion to prosper as a ground for certiorari, it must first be
demonstrated that the lower court or tribunal has exercised its power in an arbitrary
and despotic manner, by reason of passion or personal hostility, and it must be
patent and gross as would amount to an evasion or to a unilateral refusal to perform
the duty enjoined or to act in contemplation of law. Grave abuse of discretion is not
enough. Excess of jurisdiction signifies that the court, board or office, has jurisdiction
over the case but has transcended the same or acted without authority. 34

Try as we might, this Court cannot find grave abuse of discretion on the part of the
DOJ, when it affirmed the finding of the Makati City Prosecution Office, that there
was no probable cause to file an information for estafa by means of deceit against
petitioners and resolved to dismiss respondents complaint. There is absolutely no
showing that the DOJ, in the exercise of its power to review on appeal the findings of
the Makati City Prosecution Office, acted in an arbitrary and despotic manner, so
patent or gross as to amount to an evasion or unilateral refusal to perform its legally-
mandated duty. On the contrary, this Court finds the Resolutions of the DOJ, as well
as that of the Makati City Prosecution Office, to be more in accordance with the
evidence on record and relevant laws and jurisprudence than the assailed Decision of
the Court of Appeals.

Respondent charges petitioners with the crime of estafa because they allegedly
employed deceit to induce respondent to enter into a contract of sale with CPI by (1)
falsely misrepresenting that CPI was the owner of and, thus, could assign to
respondent the entire subject real properties, when in truth, CPI only acquired and
could assign to respondent the limited interest of Antonia Vda. de Medina in the
subject real properties; and (2) fraudulently concealing the fact that the subject real
properties were covered by CARP and were actually the subject of a pending VOS
with the DAR.

It is worth stressing that it was respondent who initiated the complaint before the
Makati City Prosecution Office. Thus, upon him rests the burden of supporting his
charges with affidavits and any other evidence, for it is upon these evidence thus
adduced, that the investigating prosecutor determines the existence, or in this case,
the absence, of probable cause to hold the petitioners for trial for the crimes charged.
Respondent must have necessarily tendered evidence, independent of and in support
of the allegations in his affidavit-complaint, of such quality as to engender belief in an
ordinarily prudent and cautious man that the offense charged therein has been
committed by the petitioners. Indeed, probable cause need not be based on clear and
convincing evidence of guilt, neither on evidence establishing guilt beyond reasonable
doubt and definitely, not on evidence establishing absolute certainty of guilt, but it
certainly demands more than bare suspicion and can never be left to presupposition,
conjecture, or even convincing logic.35

Respondent, however, miserably failed to present sufficient evidence to establish
probable cause for the filing of an information against petitioners for estafa by means
of deceit.1awphi1.nt The only evidence presented by respondent that would directly
establish the deceit allegedly perpetrated by the petitioners consists of his very own
affidavits and that of his alleged counsel, Atty. Villacorta. These had been sufficiently
rebutted by the evidence of the petitioners. The affidavits of petitioners, Deputy
Sheriff Garcia, and witnesses Attys. Libunao and Manahan, all presented a consistent,
coherent, and credible version of events, adequately supported by other
documentary evidence. Even respondents own documentary evidence was
satisfactorily explained or was even consistent with the version of events as
presented by petitioners and their witnesses. The sale of CPIs interest in the subject
real properties to respondent was a legitimate business transaction, done in the
course of CPIs business, and petitioners did nothing more than to carry out their
respective functions as officers of CPI to perfect and execute the sale.

Moreover, as between the mere denial constituting self-serving negative assertions of
respondent that he did not fully know of the circumstances and the current status of
the subject real properties he acquired from CPI, and the positive and categorical
declarations of petitioners and their witnesses that respondent was duly informed
thereof, the choice is not hard to make, for the jurisprudence on the matter is that
positive statement is stronger and attains greater evidentiary weight than negative
evidence.36

Also, this Court seriously doubts that, given the particular circumstances of this case,
respondent was indeed clueless or ignorant of the true state of affairs of the subject
real properties.

First, Antonia Vda. de Medina, from whom CPI acquired its interest in the subject real
properties, is the respondents mother-in-law. He is married to Ma. Luisa Victoria
Medina, one of the co-heirs and co-owners of the subject real properties. The Court
of Appeals brushed aside the relations between Antonia Vda. de Medina and
respondent as insufficient to conclude that respondent knew of the circumstances
and status of the subject real properties. Although it may not constitute as conclusive
evidence, the relations between Antonia Vda. de Medina and respondent casts
serious doubts on respondents assertions. Given the close-knit relations among
Filipino family members, it is almost impossible that his mother-in-law Antonia Vda.
de Medina, his wife Ma. Luisa Victoria Medina, and respondent, never talked about
the subject real properties; more so, if we consider that respondent is a lawyer who
can freely and readily give legal advice to his mother-in-law and his wife to protect
their remaining rights and interests in the subject real properties.

Neither can this Court give credence to respondents contention that his wife Ma.
Luisa Victoria Medina, born 30 January 1972, was only a minor when CPI instituted
Civil Case No. 84-22434 against her mother Antonia Vda. de Medina, before the
Manila RTC on 18 February 1984; when judgment was rendered therein against her
mother on 17 September 1984; and when the subject real properties were sold in
favor of CPI at the execution sale on 24 August 1989. Respondent avers that his wife
then still failed to grasp the significance of the events taking place as regards CPI, her
mother, and the subject real properties. Respondent seems to ignore the fact that his
wife grew up, and the likelihood that she eventually came to understand the history
and legal problems besetting the subject real properties. In fact, respondent does not
deny that on 26 September 1996, his wife Ma. Luisa Victoria Medina, together with
the other heirs of her deceased father Antonio Medina, filed a civil complaint with the
RTC of Ilagan, Isabela, docketed as Civil Case No. 948, in which they questioned and,
thus, admitted knowledge of the VOS made by CPI in favor of DAR.37 And if Ma. Luisa
Victoria Medina already knew that the subject real properties were voluntarily
offered for sale by CPI to the DAR, it is highly unlikely that she would have kept such
information from respondent, her husband.

It should also be recalled that it was respondent who approached CPI first and sought
the purchase of its interest in the subject real properties. Respondent never explained
how he knew of CPIs interest in the subject real properties. Neither did respondent
allege nor prove that CPI actively offered for sale to the public its interest in the
subject real properties. The only logical deduction would be that respondent came to
know of CPIs interest in the subject real properties through his wife and/or mother-
in-law. In fact, in consideration of respondents purchase of the interest of CPI in the
subject real properties for P3.5 Million, respondent was able to secure the execution
by CPI of the Deed of Waiver and Quitclaim, dated 22 December 1994, by virtue of
which, CPI waived any further claim for sum of money and damages from
respondents mother-in-law Antonia Vda. de Medina, and discharged the latter from
any and all pending court case liabilities, whether civil or criminal, filed by CPI against
her. That respondent sought the execution by CPI of the said Deed of Waiver and
Quitclaim, which obviously benefited his mother-in-law, only supports the view that
respondent not only knew of the current status of the subject real properties, but
also the history of the legal tussle between Antonia Vda. de Medina and CPI, which
resulted in the transfer of Antonia Vda. de Medinas interest in the subject real
properties to CPI.

Respondents contention of his seeming disconnection and isolation from the affairs
of his wifes family is undoubtedly contrary to the common family life experience of
Filipinos. Reference is made herein to the quote of Vice-Chancellor Van Fleet,
reproduced in Pacheco v. Hon Court of Appeals and People of the Philippines38

Evidence to be believed must not only proceed from the mouth of a credible witness
but must be credible in itself - such as the common experience and observation of
mankind can approve as probable under the circumstances. We have no test of the
truth of human testimony, except its conformity to our knowledge, observation and
experience. Whatever is repugnant to these belongs to the miraculous, and is outside
of judicial cognizance.39

Second, there is a clear paper trail by which respondent could have traced and
uncovered the true status of the subject real properties. CPI itself provided
respondent with some of these documents, while the others are part of public
records to which respondent had access.

There is scant evidence on record that CPI or any of its officers, including herein
petitioners, had willfully and maliciously made false misrepresentations to
respondent that CPI owned the subject real properties in its entirety. Again, only the
affidavits of respondent and Atty. Villacorta directly and positively describe how the
alleged false misrepresentations were made, and, even therein, they could only
attribute the same to petitioner Atty. Poblador, and no other. Thus, it behooves this
Court how, from respondents self-serving and unsubstantiated allegations, it can
jump off to conclude that all the petitioners, in conspiracy and with criminal intent,
made false misrepresentations on behalf of CPI to the damage of respondent.

Instead, the documentary evidence on record establishes that CPI laid claim on and
actually acquired only the limited interest of Antonia Vda. de Medina in the subject
real properties and nothing more. 1vvphi1.nt

The Notice of Levy on Attachment40 issued on 7 February 1984 by Deputy Sheriff
Garcia to the Register of Deeds of Ilagan, Isabela, during the pendency of Civil Case
No. 84-22434 before the Manila RTC, clearly stated that what was being levied upon
was limited to "the rights, interest, title and participation" which Antonia Vda. de
Medina may have in the real properties enumerated therein.

In its letter,41 dated 23 August 1989, addressed to Deputy Sheriff Garcia, CPI
presented its bid of P4.5 Million at the auction sale of the properties of Antonia Vda.
de Medina, held to satisfy the latters judgment debt to CPI in Civil Case No. 84-
22434. CPIs bid was conditioned on the following

[2] With respect to property under the exclusive name of Antonia Caragayan Vda. de
Medina, the Certificate of Sale shall indicate that the said property together with
improvements thereon, is sold to the successful bidder.

[3] With respect to property registered in the name of Heirs of Antonio Medicna
and/or Antonia Vda. de Medina representing or as Administration [sic] of Estate of
Antonio of Antonio Medina the Certificate of Sale shall refer only [to] the rights,
interests, claims and participation of Antonia Vda. de Medina in the covered property
and improvements since she has co-heirs, a son and a daughter. In the computation
of the undivided interest of Antonia Vda. de Medina and the two heirs, since the
property appear to be conjugal, two thirds [66.67%] of the property pertains to
Antonia Vda. de Medina while the remaining one-third [33.34%] pertains to the heirs,
son and daughter. (Emphasis supplied.)

Respondent himself, in his letter,42 dated 29 November 1994, addressed to CPI,
wrote in the first paragraph that, "We are pleased to inform you that we accept your
offer to sell to us for P3.5 Million your interest in the foreclosed Medina properties."
CPIs interest in the subject real properties, as referred to in respondents letter,
could be nothing more than the same interest therein of Antonia Vda. de Medina.

Thus, although the Deed of Assignment with Consolidation of Title43 executed
between CPI and respondent on 22 June 1995, provides that

1. For and in consideration of the sum of THREE MILLION FIVE HUNDRED THOUSAND
PERSOS (P3,500,000.00), Philippine Currency, receipt of which is acknowledged, [CPI]
hereby assigns, transfers and conveys unto and in favor of [respondent], his heirs,
executors and assigns, the Properties aforedescribed.

it should not be taken to mean that what CPI was assigning to respondent was the
entirety of the subject real properties, instead of merely the limited interest therein
acquired by CPI from Antonia Vda. de Medina. The reference in the said paragraph, as
well as in any other part of the Deed, to "Properties" without particularly limiting or
qualifying the same to the undivided interest of CPI in the subject real properties,
could be more of a problem of imprecise use of terms rather than a criminal intent to
defraud and mislead respondent. Even so, the afore-quoted paragraph should be
read in conjunction with the rest of the Deed, especially the succeeding paragraphs,
to wit

3. [Respondent] acknowledges that he is fully aware of the circumstances under
which these Properties were acquired by [CPI] and that he examined the title and
inspected the properties and verified their location together with their boundaries.
[CPI] shall therefore be no longer obliged to submit to [respondent] a location survey
plan of the Properties nor pinpoint the same to [respondent].

4. [Respondent] further acknowledges that the Properties are presently occupied by
squatters and other adverse occupants and that [CPI] makes no warranty that
possession can be immediately delivered to [respondent] free and clear of these
squatters and other adverse occupants. All the expenses for the eviction of these
persons shall be borne by [respondent].

5. [CPI] warrants the genuineness of its interest over said Properties and that it shall,
if necessary, execute any additional documents to complete the title of [respondent]
to above-described Properties. No warranty, however, as to the Properties
classification or primary use is hereby given.

Respondent, by virtue of paragraphs 3 and 4 of the Deed of Assignment with
Consolidation of Title, explicitly acknowledges that he is fully aware of the
circumstances by which CPI acquired its interest in the subject real properties; that he
has examined the title; that he has inspected the properties; and that he
acknowledges that the subject real properties are occupied by squatters and other
adverse occupants. The said acknowledgments made by respondent dispute any
claim on his part that he was misled to believe that when he entered into the contract
of sale with CPI, he was acquiring the entirety of the subject real properties.

Respondent had every opportunity to verify what he was actually purchasing from
CPI. He already admits knowing the circumstances by which CPI acquired its interest
in the subject real properties. If this is truly so, respondent should have known that
the subject real properties were inherited, intestate, by Antonia Vda. de Medina and
her co-heirs, from Antonias deceased husband, Antonio; that Antonia Vda. de
Medina is just one of the heirs of the late Antonio Medina, so she co-owns with the
other heirs, in undivided shares or interests, the subject real properties; that Antonia
Vda. de Medinas undivided interest in the subject real properties was sold at an
auction sale held to satisfy her judgment debt to CPI in Civil Case No. 84-22434; that
CPI gave the highest bid at the auction sale and was thus awarded Antonia Vda. de
Medinas limited interest in the subject real properties; that when Antonia Vda. de
Medina failed to redeem her interest in the subject real properties within a year, title
was thereby consolidated in CPI; and that even before CPI acquired Antonia Vda. de
Medinas interest in the subject real properties, she, together with all the other heirs
of her late husband Antonio Medina, had already voluntarily offered to sell the
subject real properties to DAR. With respondents knowledge of the foregoing
circumstances, coupled with his extensive legal knowledge as a lawyer, then
respondent should have realized that what he was acquiring from CPI shall be nothing
more than the same limited interest in the subject real properties acquired by CPI
from Antonia Vda. de Medina.

Even if the Deed of Assignment with Consolidation of Title was prepared entirely by
CPI, respondent cannot claim that the same was a contract of adhesion, in which he
had no other participation but to adhere to. There were several meetings between
CPI and respondent precisely for the purpose of negotiating the terms of their
contract. Contrary to respondents contention that the Deed contained "so many
ambiguities, subterfurge and clever craft" to allow CPI a "back-door retreat," if
necessary, this Court finds that it is actually couched in simple terms easily
understandable, and capable of no other possible and reasonable interpretation than
what this Court had already discussed in the preceding paragraphs. Respondent, as a
lawyer, is very capable of reviewing the Deed himself. He must also know that he had
a legal right to revise certain terms or provisions thereof if he found these too
ambiguous. Respondent was actually given time to review and revise the Deed, and
for some unexplained reason, his only revision was to change his status from
"married" to "single."

Furthermore, assuming that respondent had absolutely no knowledge of the
circumstances surrounding CPIs acquisition of its interest in the subject real
properties from Antonia Vda. de Medina, then his examination of the transfer
certificates of title (TCTs) should have revealed to him such circumstances or, at the
very least, led him to ask questions about the same. The court processes44 issued by
the Manila RTC in Civil Case No. 84-22434, affecting the subject real properties, and
duly served on the Register of Deeds, were clearly annotated on the TCTs covering
the subject real properties. What is more, the TCTs were all still in the name of the
Heirs of Antonio Medina, not CPI. Such a fact should have been a caveat to
respondent to proceed with the transaction with more prudence and to inquire into
CPIs title to or interest in the subject properties, as well as the circumstances
attendant to its acquisition thereof. According to a well-established rule in our
jurisdiction

The law protects to a greater degree a purchaser who buys from the registered owner
himself. Corollarily, it requires a higher degree of prudence from one who buys from a
person who is not the registered owner, although the land object of the transaction is
registered. While one who buys from the registered owner does not need to look
behind the certificate of title, one who buys from one who is not the registered
owner is expected to examine not only the certificate of title but all factual
circumstances necessary for him to determine if there are any flaws in the title of the
transferor, or in his capacity to transfer the land.45 (Emphasis supplied.)

Respondent could be reasonably assumed to be familiar with the foregoing since he is
a lawyer.1awphi1.nt

Third, respondent is a lawyer and, as such, he is presumed to know the law.46
Though respondent may not be actively practicing law as a profession, the legal rules
and principles applicable to the present Petition are so basic and fundamental, and
which respondent must have learned even while he was still studying law.
Respondent is also a businessman who must possess some degree of shrewdness in
his dealings so as to protect his business interests. With respondents qualifications as
a lawyer and a businessman, while they may not protect him absolutely, make him
less susceptible to deception as compared to an ordinary layperson.

The Court of Appeals, in its Decision, dated 29 January 2001, found that CPI
committed a double sale of the subject real properties when it sold the same first to
the DAR, then second to the respondent. It declared that a VOS is already a
consummated sale because landowners who made such an offer can no longer back
out. This declaration by the Court of Appeals has no basis in law or jurisprudence.

Respondents mother-in-law Antonia Vda. de Medina decided to avail of the VOS
under Republic Act No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law (CARL) of 1988. On 5 April 1988, she executed a Special Power of
Attorney (SPA)47 designating a certain Carlito Balauag to represent her and her
children in any and all transactions with the DAR and the Landbank of the Philippines
(Landbank) and to place the subject real properties under the voluntary coverage of
CARP. Worth noting is the fact that the SPA covers not just Antonia Vda. de Medinas
share but all of the subject real properties. Pursuant to his SPA, Carlito Balauag
submitted on 10 March 1989 the VOS Forms covering the subject real properties to
the DAR. He signed the said forms on behalf of the landowners, who he identified as
the "Heirs of Antonio Medina."

However, just a few days earlier, on 22 February 1989, Antonia Vda. de Medina
executed a Deed of Assignment (with Special Power of Attorney Coupled with
Interest),48 in which, for and in consideration of her unpaid obligations to CPI, she
assigned all of her "rights, interests, claims and participation from the proceeds of
land compensation" for the property she voluntarily offered to sell and transfer under
the CARP. She claimed in the same Deed that the VOS was already under process for
indorsement to the Landbank. Hence, she was appointing CPI as her exclusive
attorney-in-fact to follow-up the processing of the VOS papers with the DAR and the
Landbank. On 13 August 1993, CPI, pursuant to the authority granted to it by Antonia
Vda. de Medina under the same Deed, submitted new VOS Forms covering the
subject real properties.

By virtue of the foregoing, should the VOS covering the subject real properties
already be deemed a consummated sale? This Court rules in the negative.

The CARL of 1988 encourages landowners to voluntarily offer for sale their lands by
giving an additional five percent compensation to those who avail of this option.49 To
implement the VOS scheme under the CARL of 1988, the DAR issued Administrative
Order No. 3, series of 1989, subsequently revised by Administrative Order No. 9,
series of 1990, which provided for the rules and procedure governing the acquisition
by the government of land subject of a VOS. A cursory reading of these Administrative
Orders would reveal that a VOS undergoes a long process. It is initiated by the filing
by the landowner of the VOS Form and other required documents. The VOS is
reviewed, among other personalities, by the Municipal Agrarian Reform Officer
(MARO), the Provincial Agrarian Reform Officer (PARO), the DAR Regional Director,
the Bureau of Land Acquisition and Development (BLAD), and the Landbank, for
purposes of identifying the land and the qualified tenants, the valuation of the land,
and payment of just compensation to the landowner.

In the case of Government Service Insurance Systems, Inc. v. Court of Appeals,50 this
Court already ruled that

While it is true that under DAR Administrative Order No. 3, series of 1989, it is not
necessary that the voluntary offeror of the lot be the registered owner thereof,
private respondent failed to show that the DAR accepted and approved his offer to
sell. Without said approval and acceptance, private respondent cannot safely
presume that his voluntary offer to sell was accepted by the DAR. Notably, the word
"offer," is subject to acceptance. The voluntary offer to sell is in fact reviewed and
evaluated by the DAR before a corresponding notice of acceptance is sent to the
landowner. The applicable rules and procedure governing voluntary offer to sell (VOS)
at the time private respondent made his offer provides:

x x x x

Evidently, without the notice informing the landowner of the DARs conformity with
the offer to sell, private respondent cannot validly presume that his offer to sell has
been accepted by the DAR and that the latter will now assume the payment of the
loan to the GSIS. (Emphasis supplied.)

Hence, a VOS, as its name implies, is a voluntary offer to sell the land to the
government so that the latter can distribute the same to qualified tenants. While a
landowner who voluntarily offered his land for sale is precluded from withdrawing his
offer except under specified circumstances, such a condition does not make the mere
offer a consummated sale. It bears to emphasize that the offer still needs to be
accepted by the DAR on behalf of the government, and just compensation for the
land determined and paid to the landowner. The sale is deemed consummated when
the landowner has received payment or deposit by the DAR of just compensation
with an accessible bank, in cash or Landbank bonds, since only then is ownership of
the land finally transferred from the landowner to the government.51

In the present case, the VOS covering the subject real properties is still being
processed by the DAR. There has so far been no express acceptance by the DAR of the
said VOS or payment of just compensation to CPI. There being no consummated sale
of the subject real properties to DAR, CPI could not have committed a double sale of
the same. It remained a co-owner of the subject real properties, together with the
other heirs of Antonio Medina, and, thus, it could still legally sell its share or interest
therein to another person, such as respondent. Should the DAR finally approve the
VOS covering the subject real properties, then respondent, after acquiring the
interest of CPI, shall be entitled to just compensation corresponding to his interest.

After finding that petitioners did not deceive respondent into purchasing CPIs limited
interest in the subject real properties, then it necessarily follows that there can be no
conspiracy to commit such deception. This Court would still want to point out that
respondents accusation of conspiracy was so stretched that he implicated in his
complaint members of the CPI Board of Directors who did nothing more than sign a
resolution authorizing the sale of CPIs interest in the subject real properties to
respondent. Yet again, the existence of conspiracy among the CPI officers rests on no
other evidence but respondents own allegations in his affidavits. Conspiracy cannot
be established by mere inferences or conjectures.52 It is incumbent upon respondent
to prove that each of the petitioners performed an overt act in pursuance or
furtherance of the alleged complicity, so as to convince the investigating prosecutor
that there is probable cause that petitioners conspired with one another to commit
the crime.53 However, respondents general accusations against petitioners and the
other CPI officers do little to persuade.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The
Decision, dated 29 January 2001, and Resolution, dated 14 November 2002, of the
Court of Appeals in CA-G.R. SP No. 54862, are hereby REVERSED and SET ASIDE.
Respondents complaint in I.S. No. 97-22188-191 is hereby ordered DISMISSED.

SO ORDERED.

13. Ten Forty Realty vs Cruz
FACTS
- Ten Forty Realty filed a complaint of ejectment against Marina
Cruz who has allegedly occupied the residential lot in Olongapo City, which
they bought from Barbara Galino, by virtue of a Deed of Absolute Sale. It
appears that Barbara sold the same lot to Marina who immediately
occupied the land. Ten Forty is saying the occupation by Marina was merely
tolerated by them.
- Marinas defense: (1) Ten Forty, being a corporation, is not
qualified to own the property which is a public land. (2) Barbara Galino did
not sell her property to Ten Forty but merely obtained a loan. (3) Ten Forty
never occupied the property before she did. Barbara Galino was in
possession at the time of the sale, and vacated the lot in favor of Marina. (4)
She was the one who caused the cancellation of the tax declaration in the
name of Barbara and a new one was issued in her name. (5) Ten Forty only
obtained its tax declaration 7 months after she did.
- MTCC ruled in favor of Ten Forty and ordered Marina to vacate.
- RTC reversed. The RTC ruled as follows: 1) respondents entry into
the property was not by mere tolerance of petitioner, but by virtue of a
Waiver and Transfer of Possessory Rights and Deed of Sale in her favor; 2)
the execution of the Deed of Sale without actual transfer of the physical
possession did not have the effect of making petitioner the owner of the
property, because there was no delivery of the object of the sale as
provided for in Article 1428 of the Civil Code; and 3) being a corporation,
petitioner was disqualified from acquiring the property, which was public
land.
- CA affirmed: Case cannot be unlawful detainer because there has
been no prior contract between the parties. Neither can it be forcibly entry
because there is no showing that there was prior physical possession by the
petitioner.

RULING:
1. In a contract of sale, the buyer acquires the thing sold only upon
its delivery. The execution of a public instrument gives rise to a presumption
of delivery, but this presumption is destroyed when delivery is not effected
because of a legal impediment. Constructive delivery is deemed negated
upon failure of vendee to take actual possession of the land. Ten Forty was
not able to take possession and the SC found it highly unlikely that they
allowed occupation of Marina by mere tolerance.
2. In cases of double sale, the person who first recorded it in the
Registry of Property shall be considered the lawful owner. In this case,
however, petitioner was unable to establish that the Deed was recorded in
the Registry of Deeds of Olongapo. An unverified notation on the Deed is
not equivalent to a registration. In the absence of this requirement, the law
gives preferential right to the buyer who in good faith is first in possession.
3. To determine who is first in possession, the following parameters
have been established:
a. Possession includes not only material but also symbolic possession
b. Possessors in good faith are not aware of any flaw in their title or
mode of acquisition
c. Buyers of property that is in possession of persons other than the
seller must be wary they must investigate
d. Good faith is always presumed. Burden of proof rests on the one
alleging bad faith.
Property has not been delivered, hence Ten Forty did not acquire
possession either materially or symbolically. Petitioner has not proven that
respondent was aware of any defect to her title. At the time, the property
had not been registered which was why Marina relied on tax declarations.
Galino was actually occupying the property when respondent took
possession. Thus, there was no circumstance that could have required her
to investigate further.
4. Private corporations are disqualified from acquiring lands of public
domain. At the time of the sale, there is no evidence that the property had
already ceased to be of public domain.
DECI: Petition DENIED

14. CHENG V. GENATO (December 29, 1998)
FACTS:
Respondent Genato entered a contract to sell to spouses Da Jose pertaining
to his property in Bulacan. The contract made in public document states
that the spouses shall pay the down payment and 30 days after verifying the
authenticity of the documents, they shall pay the remaining purchase price.

Da Jose spouses was not able to finish verifying the documents and as such
asked for a 30 day extension. Pending the extension and without notice to
the spouses, Genato made a document for the annulment of the contract.

Petitioner Cheng expressed interest over the property and paid 50K check
with the assurance that the contract between Genato and the spouses Da
Jose will be annulled. Da Jose spouses protested with the annulment and
persuaded Genato to continue the contract. Genato returned the check to
Cheng and hence, this petition.

HELD:
The contract between Genato and spouses Da Jose was a contract to sell
which is subject to a suspensive condition. Thus, there will be no contract to
speak of, if the obligor failed to perform the suspensive condition which
enforces a juridical relation. Obviously, the foregoing jurisprudence cannot
be made to apply to the situation in the instant case because no default can
be ascribed to the Da Jose spouses since the 30-day extension period has
not yet expired.

Even assuming that the spouses defaulted, the contract also cannot be
validly rescinded because no notice was given to them. Thus, Cheng's
contention that the Contract to Sell between Genato and the Da Jose
spouses was rescinded or resolved due to Genato's unilateral rescission
finds no support in this case.

The contract between Genato and Cheng is a contract to sell not a contract
of sale. But But even assuming that it should be treated as a conditional
contract of sale, it did not acquire any obligatory force since it was subject
to a suspensive condition that the earlier contract to sell between Genato
and the Da Jose spouses should first be cancelled or rescinded.

Art.1544 should apply because for not only was the contract between
herein respondents first in time; it was also registered long before
petitioner's intrusion as a second buyer (PRIMUS TEMPORE, PORTIOR JURE).
(Spouses made annotation on the title of Genato). Since Cheng was fully
aware, or could have been if he had chosen to inquire, of the rights of the
Da Jose spouses under the Contract to Sell duly annotated on the transfer
certificates of titles of Genato, it now becomes unnecessary to further
elaborate in detail the fact that he is indeed in bad faith in entering into
such agreement.

15. SPS. Mathay vs. CA, SPS. Atangan, SPS. Poblete, SPS Tirona (GR No.
115788)


FACTS:
A. Civil Case No. TM-175 (Spouses Atangan vs. Spouses Mathay and Register
Deeds of Cavite)
- Involves two parcels of land (Lot No 2186-A and Lot No. 2186-C)
covered by Transfer Certificates of Title (TCT No. T-195350 and TCT No.
195351) issued in the name of Spouses Atangan
- Sps. Atangan alleges that they are owners of two (2) parcels of
land purchased from Spouses Tomas Lucido and Eustaquia Villanueva as
evidenced by the deed of sale and by the Transfer Certificates issued. They
immediately took possession of the same and paid the corresponding realty
taxes.
- Atagan alleges that the vendees titles were transferred to them
by virtue of a decision on the Civil case (Lucido vs Batallones and Petronilla
Quimio, Director of Lands, and Registers of Deeds of Cavite). Batallones and
Quimio, on the other hand are the vendees of the lands from the Bureau of
Lands.
- Sale of the parcel of lands in favor of the heirs of Batallones and
Quimio was evidenced by Deed of Conveyance duly issued by the Bureau of
Lands
- Sps. Atagan further alleges that Mathays (defendant) have
enclosed a portion of said property with a fence without their consent.
- The defendants (Spouses Mathay) declare that they were also
issued with a title covering the said land. Spouses Atagan asserts that the
said title issued to Mathays was a product of forgery because it was based
on an alleged transferred certificate in favor of Pedro Banayo and Pablo
Pugay who have no right whatsoever on the real estate in question. Upon
investigation, it was certified by the Bureau of Lands that the said titles
were falsified and forged.
- Atagan therefore prays that since the title of the Mathays have no
basis in law and that the same was illegally procured on the basis of forgery,
the same should be cancelled and the Mathays have no right to take
possession of the property in question. They also demand moral, irreparable
damages and attorneys fee for the same.


B. Civil Case No. TM-180 (Spouses Poblete vs. Spouses Mathay and the
Register of Deeds of Cavite)
- Involves a parcel of land registered in the name of Juana
Batallones and Gaudencio Quimio which was allegedly sold to Spouses
Poblete as per Deed of Conditional Sale.
- Spouses Poblete alleges that they are registered owners of a
parcel of land having purchased the same from Juan Battallones and
Gaudencio for themselves and on behalf of their co-heirs as evidenced by
Deed of Sale. The spouses took possession of the land and alleges that the
defendants (Spouses Mathay) have enclosed a portion of the said property
with a fence without the consent and against the will of the plaintiffs.
- The vendees whose titles were transferred in favor of the
plaintiffs have obtained the title by virtue of the decision by the court on
the civil case (Tomas Lucido vs. Juana Onate Batallones and Petronilla Q.
Quimio, Director of Lands, the Register of Deeds of Cavite). The heirs of
Onofre Batallones and Modesta Quimio are the vendees of the land from
the Bureau of Lands as evidenced by a Certification issued by the Record
Officer of the District Land Office.
- The sale of the subject parcel of land from the Bureau of Lands in
favor of the heirs of Batallones and Quimio was also evidenced by a Deed of
Conveyance duly issued by the Bureau of Lands.
- The defendants (Spouses Mathay) declare that they were also
issued with a title covering the said land. Spouses Poblete asserts that the
said title issued to Mathays was a product of forgery because it was based
on an alleged transferred certificate in favor of Pedro Banayo and Pablo
Pugay who have no right whatsoever on the real estate in question. Upon
investigation, it was certified by the Bureau of Lands that the said titles
were falsified and forged.
- Spouses Poblete therefore prays that since the title of the
Mathays have no basis in law and that the same was illegally procured on
the basis of forgery, the same should be cancelled and the Mathays have no
right to take possession of the property in question. They also demand
moral, irreparable damages and attorneys fee for the same.

B. Civil Case No. TM-206 (Spouses Tirona vs. Spouses Mathay, et. al)
- Spouses Motas bought a parcel of land (Lot 2186-B) covered by a
Transfer of Certificate of Title of the Registry of Deeds of Cavite from David
Quimio as evidenced by a Deed of Absolute Sale. They were issued by a
Transfer Certificate (TCT No. T-203730).
- Vendors David Quimio, Sr., et. al, are the previous registered
owners of the said land as evidenced by a Transfer Certificate of Title (TCT
No. T-192530). They obtained rights and interest thereon from their
predecessors who were vendees from the Bureau of Lands which was then
confirmed in a decision on a Civil case (Tomas Lucido vs. Juana Batallones
and Petonila Quimio)
- The subject land was subdivided into eight lots as evidenced by a
Subdivision Plans. The subdivided lots were bought by the Spouses from
Motas in good faith, and were therefore issued with Transfer Certificates of
Title.
- Spouses Tirona are the one paying the corresponding real
property taxes thereon and were issued with corresponding tax declaration.
They allege that the defendants (Spouses Mathay) have enclosed among
others the property in question with a fence and took physical possession
thereof without their knowledge and consent
- The defendants (Spouses Mathay) declare that they were also
issued with a title covering the said land. Spouses Tirona asserts that the
said title issued to Mathays was a product of forgery and falsification
because it was based on an alleged transferred certificate in favor of Pedro
Banayo and Pablo Pugay who have no right whatsoever on the real estate in
question. Upon investigation, it was certified by the Bureau of Lands that
the said titles were falsified and forged.
- Spouses Tirona therefore prays that since the title of the Mathays
have no basis in law and that the same was illegally procured on the basis of
forgery, the same should be cancelled and the Mathays have no right to
take possession of the property in question. They also demand moral,
irreparable damages and attorneys fee for the same.

The lower court decided for the defendant spouses Mathay and against the
plaintiffs in the three consolidated cases. On appeal, the Court of Appeals
decided in favor of the plaintiff-appellants. Thus, the appeal.

ISSUES:
1. WON Spouses Mathay can be considered buyers in good faith
2. WON Spouses-private respondents own the individual properties
in question

HELD:
1. Spouses Mathay cannot be considered as purchasers in good faith
because prior to the fencing of the subject land, neither they nor their
predecesssors-in-interest (Banayo and Pugay) ever possessed the same. At
the same time the property was sold to petitioners (Mathays), the private
respondents were not only in actual possession of the same but also built
their houses thereon, cultivated it and were in full enjoyment of the
produce and fruits gathered therefrom. Although it is a well settled principle
that the person dealing on a registered land need not go beyond the
certificate of title, there are still circumstances which would put party on
guard and prompt him to investigate or inspect the property being sold to
him. It is expected from the purchaser of a valued price of a land to inquire
first into the status or nature of possession of the occupants, in concept of
owner. Failure of a prospective buyer to take such precautionary steps
would mean negligence on his part and would thereby preclude him from
claiming or invoking the rights of a purchaser in good faith. In addition,
before the fence around subject property was erected, private respondent
communicated their objection to the fencing of the area by petitioners but
they were ignored by the Mathays, who continued enclosing the premises
under controversy in the present of armed men employed by them.
2. The Spouses-Private respondents are the valid owners of the
individual properties in question because all the subsequent certificates of
title including the petitioners titles are void for the same were forged and
falsified. It was further proved that the titles issued to Mathays are void for
the allegedly Sales Certifcate executed by Tomas Lucido in favor of Pedro
Pugay was not signed by the said Tomas Lucido. Neither does it bear the
signature of the latter. It further proved that the deeds showed by Banayo
and Pugay were not for the individual property in question. The
circumstances surrounding the execution of the Deed of Absolute Sale by
Pedro Banayo and Pablo Pugay in favor of the spouses Sonya Mathay and
Ismael Mathay further showed that it did not comply with the legal
formalities and was not duly notarized. Furthermore, the residence
certificates of vendors Banayo and Pugay appeared to be of dubious source.

The Spouses Mathay utterly failed to discharge the burden of proving the
sustainability of their posture of them being buyers in good faith.
Furthermore, the title of Pedro Banayo and Pablo Pugay relied upon by
them has been shown by preponderance of evidence to be the product of
forgery.
Petition is DISMISSED for the lack of merit, and the Decision of the Court of
Appeals is AFFIRMED in toto.