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SECOND DIVISION

[G.R. No. 132161. January 17, 2005.]


CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC.,
petitioner, vs. THE HONORABLE COURT OF APPEALS and
HEIRS OF TEODORO DELA CRUZ, respondents.
D E C I S I O N
TINGA, J p:
Petitioner Consolidated Rural Bank, Inc. of Cagayan Valley filed the instant Petition for
Certiorari 1 under Rule 45 of the Revised Rules of Court, seeking the review of the
Decision 2 of the Court of Appeals Twelfth Division in CA-G.R. CV No. 33662,
promulgated on 27 May 1997, which reversed the judgment 3 of the lower court in favor
of petitioner; and the Resolution 4 of the Court of Appeals, promulgated on 5 January
1998, which reiterated its Decision insofar as respondents Heirs of Teodoro dela Cruz
(the Heirs) are concerned.
From the record, the following are the established facts:
Rizal, Anselmo, Gregorio, Filomeno and Domingo, all surnamed Madrid (hereafter the
Madrid brothers), were the registered owners of Lot No. 7036-A of plan Psd-10188,
Cadastral Survey 211, situated in San Mateo, Isabela per Transfer Certificate of Title
(TCT) No. T-8121 issued by the Register of Deeds of Isabela in September 1956. 5
On 23 and 24 October 1956, Lot No. 7036-A was subdivided into several lots under
subdivision plan Psd-50390. One of the resulting subdivision lots was Lot No. 7036-A-7
with an area of Five Thousand Nine Hundred Fifty-Eight (5,958) square meters. 6
On 15 August 1957, Rizal Madrid sold part of his share identified as Lot No. 7036-A-7,
to Aleja Gamiao (hereafter Gamiao) and Felisa Dayag (hereafter, Dayag) by virtue of a
Deed of Sale, 7 to which his brothers Anselmo, Gregorio, Filomeno and Domingo offered
no objection as evidenced by their Joint Affidavit dated 14 August 1957. 8 The deed of
sale was not registered with the Office of the Register of Deeds of Isabela. However,
Gamiao and Dayag declared the property for taxation purposes in their names on March
1964 under Tax Declaration No. 7981. 9
On 28 May 1964, Gamiao and Dayag sold the southern half of Lot No. 7036-A-7,
denominated as Lot No. 7036-A-7-B, to Teodoro dela Cruz, 10 and the northern half,
identified as Lot No. 7036-A-7-A, 11 to Restituto Hernandez. 12 Thereupon, Teodoro
dela Cruz and Restituto Hernandez took possession of and cultivated the portions of the
property respectively sold to them. 13
Later, on 28 December 1986, Restituto Hernandez donated the northern half to his
daughter, Evangeline Hernandez-del Rosario. 14 The children of Teodoro dela Cruz
continued possession of the southern half after their father's death on 7 June 1970. ISCHET
In a Deed of Sale 15 dated 15 June 1976, the Madrid brothers conveyed all their rights
and interests over Lot No. 7036-A-7 to Pacifico Marquez (hereafter, Marquez), which the
former confirmed 16 on 28 February 1983. 17 The deed of sale was registered with the
Office of the Register of Deeds of Isabela on 2 March 1982. 18
Subsequently, Marquez subdivided Lot No. 7036-A-7 into eight (8) lots, namely: Lot
Nos. 7036-A-7-A to 7036-A-7-H, for which TCT Nos. T-149375 to T-149382 were
issued to him on 29 March 1984. 19 On the same date, Marquez and his spouse,
Mercedita Mariana, mortgaged Lots Nos. 7036-A-7-A to 7036-A-7-D to the Consolidated
Rural Bank, Inc. of Cagayan Valley (hereafter, CRB) to secure a loan of One Hundred
Thousand Pesos (P100,000.00). 20 These deeds of real estate mortgage were registered
with the Office of the Register of Deeds on 2 April 1984.
On 6 February 1985, Marquez mortgaged Lot No. 7036-A-7-E likewise to the Rural
Bank of Cauayan (RBC) to secure a loan of Ten Thousand Pesos (P10,000.00). 21
As Marquez defaulted in the payment of his loan, CRB caused the foreclosure of the
mortgages in its favor and the lots were sold to it as the highest bidder on 25 April 1986.
22
On 31 October 1985, Marquez sold Lot No. 7036-A-7-G to Romeo Calixto (Calixto). 23
Claiming to be null and void the issuance of TCT Nos. T-149375 to T-149382; the
foreclosure sale of Lot Nos. 7036-A-7-A to 7036-A-7-D; the mortgage to RBC; and the
sale to Calixto, the Heirs-now respondents herein-represented by Edronel dela Cruz, filed
a case 24 for reconveyance and damages of the southern portion of Lot No. 7036-A
(hereafter, the subject property) against Marquez, Calixto, RBC and CRB in December
1986.
Evangeline del Rosario, the successor-in-interest of Restituto Hernandez, filed with leave
of court a Complaint in Intervention 25 wherein she claimed the northern portion of Lot
No. 7036-A-7.
In the Answer to the Amended Complaint, 26 Marquez, as defendant, alleged that apart
from being the first registrant, he was a buyer in good faith and for value. He also argued
that the sale executed by Rizal Madrid to Gamiao and Dayag was not binding upon him,
it being unregistered. For his part, Calixto manifested that he had no interest in the
subject property as he ceased to be the owner thereof, the same having been reacquired
by defendant Marquez. 27
CRB, as defendant, and co-defendant RBC insisted that they were mortgagees in good
faith and that they had the right to rely on the titles of Marquez which were free from any
lien or encumbrance. 28
After trial, the Regional Trial Court, Branch 19 of Cauayan, Isabela (hereafter, RTC)
handed down a decision in favor of the defendants, disposing as follows:
WHEREFORE, in view of the foregoing considerations, judgment is hereby
rendered:
1. Dismissing the amended complaint and the complaint in intervention;
2. Declaring Pacifico V. Marquez the lawful owner of Lots 7036-A-7 now Lots
7036-A-7-A to 7036-A-7-H, inclusive, covered by TCT Nos. T-149375 to T-
149382, inclusive;
3. Declaring the mortgage of Lots 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and
7036-A-7-D in favor of the defendant Consolidated Rural Bank (Cagayan
Valley) and of Lot 7036-A-7-E in favor of defendant Rural Bank of Cauayan by
Pacifico V. Marquez valid; SIcCTD
4. Dismissing the counterclaim of Pacifico V. Marquez; and
5. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the lots
covered by TCT Nos. T-33119, T-33220 and T-7583.
No pronouncement as to costs.
SO ORDERED. 29
In support of its decision, the RTC made the following findings:
With respect to issues numbers 1-3, the Court therefore holds that the sale of
Lot 7036-A-7 made by Rizal Madrid to Aleja Gamiao and Felisa Dayag and the
subsequent conveyances to the plaintiffs and intervenors are all valid and the
Madrid brothers are bound by said contracts by virtue of the confirmation made
by them on August 14, 1957 (Exh. B).
Are the defendants Pacifico V. Marquez and Romeo B. Calixto buyers in good
faith and for value of Lot 7036-A-7? jur2005cda
It must be borne in mind that good faith is always presumed and he who
imputes bad faith has the burden of proving the same (Art. 527, Civil Code).
The Court has carefully scrutinized the evidence presented but finds nothing to
show that Marquez was aware of the plaintiffs' and intervenors' claim of
ownership over this lot. TCT No. T-8121 covering said property, before the
issuance of Marquez' title, reveals nothing about the plaintiffs' and intervenors'
right thereto for it is an admitted fact that the conveyances in their favor are not
registered.
The Court is therefore confronted with two sales over the same property. Article
1544 of the Civil Code provides:
"ART. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who may have
first taken possession thereof in good faith, if it should be movable
property.
Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry of
Property. . . . " (Emphasis supplied).
From the foregoing provisions and in the absence of proof that Marquez has
actual or constructive knowledge of plaintiffs' and intervenors' claim, the Court
has to rule that as the vendee who first registered his sale, Marquez' ownership
over Lot 7036-A-7 must be upheld. 30
The Heirs interposed an appeal with the Court of Appeals. In their Appellant's Brief, 31
they ascribed the following errors to the RTC: (1) it erred in finding that Marquez was a
buyer in good faith; (2) it erred in validating the mortgage of the properties to RBC and
CRB; and (3) it erred in not reconveying Lot No. 7036-A-7-B to them. 32
Intervenor Evangeline del Rosario filed a separate appeal with the Court of Appeals. It
was, however, dismissed in a Resolution dated 20 September 1993 for her failure to pay
docket fees. Thus, she lost her standing as an appellant. 33
On 27 May 1997, the Court of Appeals rendered its assailed Decision 34 reversing the
RTC's judgment. The dispositive portion reads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET
ASIDE. Accordingly, judgment is hereby rendered as follows:
1. Declaring the heirs of Teodoro dela Cruz the lawful owners of the southern
half portion and Evangeline Hernandez-del Rosario the northern half portion of
Lot No. 7036-A-7, now covered by TCT Nos. T-149375 to T-149382, inclusive;
aTDcAH
2. Declaring null and void the deed of sale dated June 15, 1976 between
Pacifico V. Marquez and the Madrid brothers covering said Lot 7036-A-7;
3. Declaring null and void the mortgage made by defendant Pacifico V.
Marquez of Lot Nos. 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-D
in favor of the defendant Consolidated Rural Bank and of Lot 7036-A-7-E in
favor of defendant Rural Bank of Cauayan; and
4. Ordering Pacifico V. Marquez to reconvey Lot 7036-A-7 to the heirs of
Teodoro dela Cruz and Evangeline Hernandez-del Rosario.
No pronouncement as to costs.
SO ORDERED. 35
In upholding the claim of the Heirs, the Court of Appeals held that Marquez failed to
prove that he was a purchaser in good faith and for value. It noted that while Marquez
was the first registrant, there was no showing that the registration of the deed of sale in
his favor was coupled with good faith. Marquez admitted having knowledge that the
subject property was "being taken" by the Heirs at the time of the sale. 36 The Heirs were
also in possession of the land at the time. According to the Decision, these circumstances
along with the subject property's attractive location it was situated along the National
Highway and was across a gasoline station should have put Marquez on inquiry as to
its status. Instead, Marquez closed his eyes to these matters and failed to exercise the
ordinary care expected of a buyer of real estate. 37

Anent the mortgagees RBC and CRB, the Court of Appeals found that they merely relied
on the certificates of title of the mortgaged properties. They did not ascertain the status
and condition thereof according to standard banking practice. For failure to observe the
ordinary banking procedure, the Court of Appeals considered them to have acted in bad
faith and on that basis declared null and void the mortgages made by Marquez in their
favor. 38
Dissatisfied, CRB filed a Motion for Reconsideration 39 pointing out, among others, that
the Decision promulgated on 27 May 1997 failed to establish good faith on the part of the
Heirs. Absent proof of possession in good faith, CRB avers, the Heirs cannot claim
ownership over the subject property.
In a Resolution 40 dated 5 January 1998, the Court of Appeals stressed its disbelief in
CRB's allegation that it did not merely rely on the certificates of title of the properties and
that it conducted credit investigation and standard ocular inspection. But recalling that
intervenor Evangeline del Rosario had lost her standing as an appellant, the Court of
Appeals accordingly modified its previous Decision, as follows:
WHEREFORE, the decision dated May 27, 1997, is hereby MODIFIED to read
as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and SET
ASIDE insofar as plaintiffs-appellants are concerned. Accordingly, judgment is
hereby rendered as follows:
1. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the southern
half portion of Lot No. 7036-A-7;
2. Declaring null and void the deed of sale dated June 15, 1976 between
Pacifico V. Marquez and the Madrid brothers insofar as the southern half
portion of Lot NO. (sic) 7036-A-7 is concerned;
3. Declaring the mortgage made by defendant Pacifico V. Marquez in favor of
defendant Consolidated Rural Bank (Cagayan Valley) and defendant Rural
Bank of Cauayan as null and void insofar as the southern half portion of Lot No.
7036-A-7 is concerned;
4. Ordering defendant Pacifico V. Marquez to reconvey the southern portion of
Lot No. 7036-A-7 to the Heirs of Teodoro dela Cruz.
No pronouncement as to costs. EHTIcD
SO ORDERED. 41
Hence, the instant CRB petition. However, both Marquez and RBC elected not to
challenge the Decision of the appellate court.
Petitioner CRB, in essence, alleges that the Court of Appeals committed serious error of
law in upholding the Heirs' ownership claim over the subject property considering that
there was no finding that they acted in good faith in taking possession thereof nor was
there proof that the first buyers, Gamiao and Dayag, ever took possession of the subject
property. CRB also makes issue of the fact that the sale to Gamiao and Dayag was
confirmed a day ahead of the actual sale, clearly evincing bad faith, it adds. Further, CRB
asserts Marquez's right over the property being its registered owner.
The petition is devoid of merit. However, the dismissal of the petition is justified by
reasons different from those employed by the Court of Appeals.
Like the lower court, the appellate court resolved the present controversy by applying the
rule on double sale provided in Article 1544 of the Civil Code. They, however, arrived at
different conclusions. The RTC made CRB and the other defendants win, while the Court
of Appeals decided the case in favor of the Heirs.
Article 1544 of the Civil Code reads, thus:
ART. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in
good faith was first in possession; and, in the absence thereof, to the person who
presents the oldest title, provided there is good faith.
The provision is not applicable in the present case. It contemplates a case of double or
multiple sales by a single vendor. More specifically, it covers a situation where a single
vendor sold one and the same immovable property to two or more buyers. 42 According
to a noted civil law author, it is necessary that the conveyance must have been made by a
party who has an existing right in the thing and the power to dispose of it. 43 It cannot be
invoked where the two different contracts of sale are made by two different persons, one
of them not being the owner of the property sold. 44 And even if the sale was made by
the same person, if the second sale was made when such person was no longer the owner
of the property, because it had been acquired by the first purchaser in full dominion, the
second purchaser cannot acquire any right. 45
In the case at bar, the subject property was not transferred to several purchasers by a
single vendor. In the first deed of sale, the vendors were Gamiao and Dayag whose right
to the subject property originated from their acquisition thereof from Rizal Madrid with
the conformity of all the other Madrid brothers in 1957, followed by their declaration of
the property in its entirety for taxation purposes in their names. On the other hand, the
vendors in the other or later deed were the Madrid brothers but at that time they were no
longer the owners since they had long before disposed of the property in favor of Gamiao
and Dayag. cAaTED
Citing Manresa, the Court of Appeals in 1936 had occasion to explain the proper
application of Article 1473 of the Old Civil Code (now Article 1544 of the New Civil
Code) in the case of Carpio v. Exevea, 46 thus:
In order that tradition may be considered performed, it is necessary that the
requisites which it implies must have been fulfilled, and one of the
indispensable requisites, according to the most exact Roman concept, is that the
conveyor had the right and the will to convey the thing. The intention to transfer
is not sufficient; it only constitutes the will. It is, furthermore, necessary that the
conveyor could juridically perform that act; that he had the right to do so, since
a right which he did not possess could not be vested by him in the transferee.
This is what Article 1473 has failed to express: the necessity for the
preexistence of the right on the part of the conveyor. But even if the article does
not express it, it would be understood, in our opinion, that circumstance
constitutes one of the assumptions upon which the article is based.
This construction is not repugnant to the text of Article 1473, and not only is it
not contrary to it, but it explains and justifies the same. (Vol. 10, 4th ed., p. 159)
47
In that case, the property was transferred to the first purchaser in 1908 by its original
owner, Juan Millante. Thereafter, it was sold to plaintiff Carpio in June 1929. Both
conveyances were unregistered. On the same date that the property was sold to the
plaintiff, Juan Millante sold the same to defendant Exevea. This time, the sale was
registered in the Registry of Deeds. But despite the fact of registration in defendant's
favor, the Court of Appeals found for the plaintiff and refused to apply the provisions of
Art. 1473 of the Old Civil Code, reasoning that "on the date of the execution of the
document, Exhibit 1, Juan Millante did not and could not have any right whatsoever to
the parcel of land in question." 48
Citing a portion of a judgment dated 24 November 1894 of the Supreme Court of Spain,
the Court of Appeals elucidated further:
Article 1473 of the Civil Code presupposes the right of the vendor to dispose of
the thing sold, and does not limit or alter in this respect the provisions of the
Mortgage Law in force, which upholds the principle that registration does not
validate acts or contracts which are void, and that although acts and contracts
executed by persons who, in the Registry, appear to be entitled to do so are not
invalidated once recorded, even if afterwards the right of such vendor is
annulled or resolved by virtue of a previous unrecorded title, nevertheless this
refers only to third parties. 49
In a situation where not all the requisites are present which would warrant the application
of Art. 1544, the principle of prior tempore, potior jure or simply "he who is first in time
is preferred in right," 50 should apply. 51 The only essential requisite of this rule is
priority in time; in other words, the only one who can invoke this is the first vendee.
Undisputedly, he is a purchaser in good faith because at the time he bought the real
property, there was still no sale to a second vendee. 52 In the instant case, the sale to the
Heirs by Gamiao and Dayag, who first bought it from Rizal Madrid, was anterior to the
sale by the Madrid brothers to Marquez. The Heirs also had possessed the subject
property first in time. Thus, applying the principle, the Heirs, without a scintilla of doubt,
have a superior right to the subject property.
Moreover, it is an established principle that no one can give what one does not have
nemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized
to sell, and the buyer can acquire no more than what the seller can transfer legally. 53 In
this case, since the Madrid brothers were no longer the owners of the subject property at
the time of the sale to Marquez, the latter did not acquire any right to it.
In any event, assuming arguendo that Article 1544 applies to the present case, the claim
of Marquez still cannot prevail over the right of the Heirs since according to the evidence
he was not a purchaser and registrant in good faith.
Following Article 1544, in the double sale of an immovable, the rules of preference are:
(a) the first registrant in good faith;
(b) should there be no entry, the first in possession in good faith; and aDcHIS

(c) in the absence thereof, the buyer who presents the oldest title in good
faith. 54
Prior registration of the subject property does not by itself confer ownership or a better
right over the property. Article 1544 requires that before the second buyer can obtain
priority over the first, he must show that he acted in good faith throughout (i.e., in
ignorance of the first sale and of the first buyer's rights) from the time of acquisition
until the title is transferred to him by registration or failing registration, by delivery of
possession. 55
In the instant case, the actions of Marquez have not satisfied the requirement of good
faith from the time of the purchase of the subject property to the time of registration.
Found by the Court of Appeals, Marquez knew at the time of the sale that the subject
property was being claimed or "taken" by the Heirs. This was a detail which could
indicate a defect in the vendor's title which he failed to inquire into. Marquez also
admitted that he did not take possession of the property and at the time he testified he did
not even know who was in possession. Thus, he testified on direct examination in the
RTC as follows:
ATTY. CALIXTO
Q Can you tell us the circumstances to your buying the land in question?
A In 1976 the Madrid brothers confessed to me their problems about their lots
in San Mateo that they were being taken by Teodoro dela Cruz and Atty.
Teofilo A. Leonin; that they have to pay the lawyer's fee of P10,000.00
otherwise Atty. Leonin will confiscate the land. So they begged me to
buy their properties, some of it. So that on June 3, 1976, they came to
Cabagan where I was and gave them P14,000.00, I think. We have
talked that they will execute the deed of sale.
Q Why is it, doctor, that you have already this deed of sale, Exh. 14, why did
you find it necessary to have this Deed of Confirmation of a Prior Sale,
Exh. 15?
A Because as I said a while ago that the first deed of sale was submitted to the
Register of Deeds by Romeo Badua so that I said that because when I
became a Municipal Health Officer in San Mateo, Isabela, I heard so
many rumors, so many things about the land and so I requested them to
execute a deed of confirmation. 56
xxx xxx xxx
ATTY. CALIXTO
Q At present, who is in possession on the Riceland portion of the lot in
question?
A I can not say because the people working on that are changing from time to
time.
Q Why, have you not taken over the cultivation of the land in question?
A Well, the Dela Cruzes are prohibiting that we will occupy the place.
Q So, you do not have any possession?
A None, sir. 57
One who purchases real property which is in actual possession of others should, at least,
make some inquiry concerning the rights of those in possession. The actual possession by
people other than the vendor should, at least, put the purchaser upon inquiry. He can
scarcely, in the absence of such inquiry, be regarded as a bona fide purchaser as against
such possessions. 58 The rule of caveat emptor requires the purchaser to be aware of the
supposed title of the vendor and one who buys without checking the vendor's title takes
all the risks and losses consequent to such failure. 59
It is further perplexing that Marquez did not fight for the possession of the property if it
were true that he had a better right to it. In our opinion, there were circumstances at the
time of the sale, and even at the time of registration, which would reasonably require a
purchaser of real property to investigate to determine whether defects existed in his
vendor's title. Instead, Marquez willfully closed his eyes to the possibility of the existence
of these flaws. For failure to exercise the measure of precaution which may be required of
a prudent man in a like situation, he cannot be called a purchaser in good faith. 60
As this Court explained in the case of Spouses Mathay v. Court of Appeals: 61
Although it is a recognized principle that a person dealing on a registered land
need not go beyond its certificate of title, it is also a firmly settled rule that
where there are circumstances which would put a party on guard and prompt
him to investigate or inspect the property being sold to him, such as the
presence of occupants/tenants thereon, it is, of course, expected from the
purchaser of a valued piece of land to inquire first into the status or nature of
possession of the occupants, i.e., whether or not the occupants possess the land
en concepto de dueo, in concept of owner. As is the common practice in the
real estate industry, an ocular inspection of the premises involved is a safeguard
a cautious and prudent purchaser usually takes. Should he find out that the land
he intends to buy is occupied by anybody else other than the seller who, as in
this case, is not in actual possession, it would then be incumbent upon the
purchaser to verify the extent of the occupant's possessory rights. The 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." 62
This rule equally applies to mortgagees of real property. In the case of Crisostomo v.
Court of Appeals, 63 the Court held:
It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to
facts which should put a reasonable man upon his guard, and then claim that he
acted in good faith under the belief that there was no defect in the title of the
vendor or mortgagor. His mere refusal to believe that such defect exists, or his
willful closing of his eyes to the possibility of the existence of a defect in the
vendor's or mortgagor's title, will not make him an innocent purchaser or
mortgagee for value, if it afterwards develops that the title was in fact defective,
and it appears that he had such notice of the defects as would have led to its
discovery had he acted with the measure of a prudent man in a like situation. 64
Banks, their business being impressed with public interest, are expected to exercise more
care and prudence than private individuals in their dealings, even those involving
registered lands. Hence, for merely relying on the certificates of title and for its failure to
ascertain the status of the mortgaged properties as is the standard procedure in its
operations, we agree with the Court of Appeals that CRB is a mortgagee in bad faith. CDTSEI
In this connection, Marquez's obstention of title to the property and the subsequent
transfer thereof to CRB cannot help the latter's cause. In a situation where a party has
actual knowledge of the claimant's actual, open and notorious possession of the disputed
property at the time of registration, as in this case, the actual notice and knowledge are
equivalent to registration, because to hold otherwise would be to tolerate fraud and the
Torrens system cannot be used to shield fraud. 65
While certificates of title are indefeasible, unassailable and binding against the whole
world, they merely confirm or record title already existing and vested. They cannot be
used to protect a usurper from the true owner, nor can they be used for the perpetration of
fraud; neither do they permit one to enrich himself at the expense of others. 66
We also find that the Court of Appeals did not err in awarding the subject property to the
Heirs absent proof of good faith in their possession of the subject property and without
any showing of possession thereof by Gamiao and Dayag.
As correctly argued by the Heirs in their Comment, 67 the requirement of good faith in
the possession of the property finds no application in cases where there is no second sale.
68 In the case at bar, Teodoro dela Cruz took possession of the property in 1964 long
before the sale to Marquez transpired in 1976 and a considerable length of time
eighteen (18) years in fact before the Heirs had knowledge of the registration of said
sale in 1982. As Article 526 of the Civil Code aptly provides, "(H)e is deemed a
possessor in good faith who is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it." Thus, there was no need for the appellate court
to consider the issue of good faith or bad faith with regard to Teodoro dela Cruz's
possession of the subject property.
Likewise, we are of the opinion that it is not necessary that there should be any finding of
possession by Gamiao and Dayag of the subject property. It should be recalled that the
regularity of the sale to Gamiao and Dayag was never contested by Marquez. 69 In fact
the RTC upheld the validity of this sale, holding that the Madrid brothers are bound by
the sale by virtue of their confirmation thereof in the Joint Affidavit dated 14 August
1957. That this was executed a day ahead of the actual sale on 15 August 1957 does not
diminish its integrity as it was made before there was even any shadow of controversy
regarding the ownership of the subject property. CDTHSI
Moreover, as this Court declared in the case of Heirs of Simplicio Santiago v. Heirs of
Mariano E. Santiago, 70 tax declarations "are good indicia of possession in the concept
of an owner, for no one in his right mind would be paying taxes for a property that is not
in his actual or constructive possession." 71
WHEREFORE, the Petition is DENIED. The dispositive portion of the Court of Appeals'
Decision, as modified by its Resolution dated 5 January 1998, is AFFIRMED. Costs
against petitioner.
SO ORDERED.
||| (Consolidated Rural Bank (Cagayan Valley) Inc. v. Court of Appeals, G.R. No. 132161,
January 17, 2005)

SECOND DIVISION
[G.R. No. 123547. May 21, 2001.]
REV. FR. DANTE MARTINEZ, petitioner, vs. HONORABLE
COURT OF APPEALS, HONORABLE JUDGE JOHNSON
BALLUTAY, PRESIDING JUDGE, BRANCH 25, REGIONAL
TRIAL COURT OF CABANATUAN CITY, HONORABLE JUDGE
ADRIANO TUAZON, JR., PRESIDING JUDGE, BRANCH 28,
REGIONAL TRIAL COURT OF CABANATUAN CITY, SPOUSES
REYNALDO VENERACION and SUSAN VENERACION,
SPOUSES MAXIMO HIPOLITO and MANUELA DE LA PAZ and
GODOFREDO DE LA PAZ, respondents.
D E C I S I O N
MENDOZA, J p:
This is a petition for review on certiorari of the decision, dated September 7, 1995, and
resolution, dated January 31, 1996, of the Court of Appeals, which affirmed the decisions
of the Regional Trial Court, Branches 25 1 and 28, 2 Cabanatuan City, finding private
respondents spouses Reynaldo and Susan Veneracion owners of the land in dispute,
subject to petitioner's rights as a builder in good faith. CHcESa
The facts are as follows:
Sometime in February 1981, private respondents Godofredo De la Paz and his sister
Manuela De la Paz, married to Maximo Hipolito, entered into an oral contract with
petitioner Rev. Fr. Dante Martinez, then Assistant parish priest of Cabanatuan City, for
the sale of Lot No. 1337-A-3 at the Villa Fe Subdivision in Cabanatuan City for the sum
of P15,000.00. The lot is located along Maharlika Road near the Municipal Hall of
Cabanatuan City. At the time of the sale, the lot was still registered in the name of
Claudia De la Paz, mother of private respondents, although the latter had already sold it
to private respondent Manuela de la Paz by virtue of a Deed of Absolute Sale dated May
26, 1976 (Exh. N/Exh. 2-Veneracion). 3 Private respondent Manuela subsequently
registered the sale in her name on October 22, 1981 and was issued TCT No. T-40496
(Exh. 9). 4 When the land was offered for sale to petitioner, private respondents De la Paz
were accompanied by their mother, since petitioner dealt with the De la Pazes as a family
and not individually. He was assured by them that the lot belonged to Manuela De la Paz.
It was agreed that petitioner would give a downpayment of P3,000.00 to private
respondents De la Paz and that the balance would be payable by installment. After giving
the P3,000.00 downpayment, petitioner started the construction of a house on the lot after
securing a building permit from the City Engineer's Office on April 23, 1981, with the
written consent of the then registered owner, Claudia de la Paz (Exh. B/Exh, 1). 5
Petitioner likewise began paying the real estate taxes on said property (Exh. D, D-1, D-2).
6 Construction on the house was completed on October 6, 1981 (Exh. V). 7 Since then,
petitioner and his family have maintained their residence there. 8
On January 31, 1983, petitioner completed payment of the lot for which private
respondents De la Paz executed two documents. The first document (Exh. A) read:
1-31-83
Ang halaga ng Lupa sa Villa Fe Subdivision na ipinagbili kay Fr. Dante
Martinez ay P 15,000.00 na pinangangako namin na ibibigay ang Deed of Sale
sa ika-25 ng Febrero 1983.
[SGD.] METRING HIPOLITO
[SGD.] JOSE GODOFREDO DE LA PAZ 9
The second writing (Exh. O) read:
Cabanatuan City
March 19, 1986
TO WHOM IT MAY CONCERN:
This is to certify that Freddie dela Paz has agreed to sign tomorrow (March 20)
the affidavit of sale of lot located at Villa Fe Subdivision sold to Fr. Dante
Martinez.
[Sgd.] Freddie dela Paz
FREDDIE DELA PAZ 10
However, private respondents De la Paz never delivered the Deed of Sale they promised
to petitioner.
In the meantime, in a Deed of Absolute Sale with Right to Repurchase dated October 28,
1981 (Exh. 10), 11 private respondents De la Paz sold three lots with right to repurchase
the same within one year to private respondents spouses Reynaldo and Susan Veneracion
for the sum of P150,000.00. One of the lots sold was the lot previously sold to petitioner.
12
Reynaldo Veneracion had been a resident of Cabanatuan City since birth. He used to pass
along Maharlika Highway in going to the Municipal Hall or in going to and from Manila.
Two of the lots subject of the sale were located along Maharlika Highway, one of which
was the lot sold earlier by the De la Pazes to petitioner. The third lot (hereinafter referred
to as the Melencio lot) was occupied by private respondents De la Paz. Private
respondents Veneracion never took actual possession of any of these lots during the
period of redemption, but all titles to the lots were given to him. 13
Before the expiration of the one year period, private respondent Godofredo De la Paz
informed private respondent Reynaldo Veneracion that he was selling the three lots to
another person for P200,000.00. Indeed, private respondent Veneracion received a call
from a Mr. Tecson verifying if he had the titles to the properties, as private respondents
De la Paz were offering to sell the two lots along Maharlika Highway to him (Mr.
Tecson) for P180,000.00 The offer included the lot purchased by petitioner in February,
1981. Private respondent Veneracion offered to purchase the same two lots from the De
la Pazes for the same amount. The offer was accepted by private respondents De la Paz.
Accordingly, on June 2, 1983, a Deed of Absolute Sale was executed over the two lots
(Exh. I/Exh. 5-Veneracion). 14 Sometime in January, 1984, private respondent Reynaldo
Veneracion asked a certain Renato Reyes, petitioner's neighbor, who the owner of the
building erected on the subject lot was. Reyes told him that it was Feliza Martinez,
petitioner's mother, who was in possession of the property. Reynaldo Veneracion told
private respondent Godofredo about the matter and was assured that Godofredo would
talk to Feliza. Based on that assurance, private respondents Veneracion registered the lots
with the Register of Deeds of Cabanatuan on March 5, 1984. The lot in dispute was
registered under TCT No. T-44612 (Exh. L/Exh. 4-Veneracion). 15
Petitioner discovered that the lot he was occupying with his family had been sold to the
spouses Veneracion after receiving a letter (Exh. P/Exh. 6-Veneracion) from private
respondent Reynaldo Veneracion on March 19, 1986, claiming ownership of the land and
demanding that they vacate the property and remove their improvements thereon. 16
Petitioner, in turn, demanded through counsel the execution of the deed of sale from
private respondents De la Paz and informed Reynaldo Veneracion that he was the owner
of the property as he had previously purchased the same from private respondents De la
Paz. 17
The matter was then referred to the Katarungang Pambarangay of San Juan, Cabanatuan
City for conciliation, but the parties failed to reach an agreement (Exh. M/Exh. 13). 18 As
a consequence, on May 12, 1986, private respondent Reynaldo Veneracion brought an
action for ejectment in the Municipal Trial Court, Branch III, Cabanatuan City against
petitioner and his mother (Exh. 14). 19
On the other hand, on June 10, 1986, petitioner caused a notice of lis pendens to be
recorded on TCT No. T-44612 with the Register of Deeds of Cabanatuan City (Exh. U).
20
During the pre-trial conference, the parties agreed to have the case decided under the
Rules on Summary Procedure and defined the issues as follows:
1. Whether or not defendant (now petitioner) may be judicially ejected. AcSCaI
2. Whether or not the main issue in this case is ownership.
3. Whether or not damages may be awarded. 21
On January 29, 1987, the trial court rendered its decision, pertinent portions of which are
quoted as follows:
With the foregoing findings of the Court, defendants [petitioner Rev. Fr. Dante
Martinez and his mother] are the rightful possessors and in good faith and in
concept of owner, thus cannot be ejected from the land in question. Since the
main issue is ownership, the better remedy of the plaintiff [herein private
respondents Veneracion] is Accion Publiciana in the Regional Trial Court,
having jurisdiction to adjudicate on ownership.
Defendants' counterclaim will not be acted upon it being more than P20,000.00
is beyond this Court's power to adjudge.
WHEREFORE, judgment is hereby rendered, dismissing plaintiff's complaint
and ordering plaintiff to pay Attorney's fee of P5,000.00 and cost of suit.
SO ORDERED. 22
On March 3, 1987, private respondents Veneracion filed a notice of appeal with the
Regional Trial Court, but failed to pay the docket fee. On June 6, 1989, or over two years
after the filing of the notice of appeal, petitioner filed a Motion for Execution of the
Judgment, alleging finality of judgment for failure of private respondents Veneracion to
perfect their appeal and failure to prosecute the appeal for an unreasonable length of time.
Upon objection of private respondents Veneracion, the trial court denied on June 28,
1989 the motion for execution and ordered the records of the case to be forwarded to the
appropriate Regional Trial Court. On July 11, 1989, petitioner appealed from this order.
The appeal of private respondents Veneracion from the decision of the MTC and the
appeal of petitioner from the order denying petitioner's motion for execution were
forwarded to the Regional Trial Court, Branch 28, Cabanatuan City. The cases were
thereafter consolidated under Civil Case No. 670-AF.
On February 20, 1991, the Regional Trial Court rendered its decision finding private
respondents Veneracion as the true owners of the lot in dispute by virtue of their prior
registration with the Register of Deeds, subject to petitioner's rights as builder in good
faith, and ordering petitioner and his privies to vacate the lot after receipt of the cost of
the construction of the house, as well as to pay the sum of P5,000.00 as attorney's fees
and the costs of the suit. It, however, failed to rule on petitioner's appeal of the Municipal
Trial Court's order denying their Motion for Execution of Judgment.

Meanwhile, on May 30, 1986, while the ejectment case was pending before the
Municipal Trial Court, petitioner Martinez filed a complaint for annulment of sale with
damages against the Veneracions and De la Pazes with the Regional Trial Court, Branch
25, Cabanatuan City. On March 5, 1990, the trial court rendered its decision finding
private respondents Veneracion owners of the land in dispute, subject to the rights of
petitioner as a builder in good faith, and ordering private respondents De la Paz to pay
petitioner the sum of P50,000.00 as moral damages and P10,000.00 as attorney's fees,
and for private respondents to pay the costs of the suit.
On March 20, 1991, petitioner then filed a petition for review with the Court of Appeals
of the RTC's decision in Civil Case No. 670-AF (for ejectment). Likewise, on April 2,
1991, petitioner appealed the trial court's decision in Civil Case No. 44-[AF]-8642-R (for
annulment of sale and damages) to the Court of Appeals. The cases were designated as
CA G.R. SP. No. 24477 and CA G.R. CV No. 27791, respectively, and were
subsequently consolidated. The Court of Appeals affirmed the trial courts' decisions,
without ruling on petitioner's appeal from the Municipal Trial Court's order denying his
Motion for Execution of Judgment. It declared the Veneracions to be owners of the lot in
dispute as they were the first registrants in good faith, in accordance with Art. 1544 of the
Civil Code. Petitioner Martinez failed to overcome the presumption of good faith for the
following reasons:
1. when private respondent Veneracion discovered the construction on the lot,
he immediately informed private respondent Godofredo about it and
relied on the latter's assurance that he will take care of the matter.
2. the sale between petitioner Martinez and private respondents De la Paz was
not notarized, as required by Arts. 1357 and 1358 of the Civil Code, thus
it cannot be said that the private respondents Veneracion had knowledge
of the first sale. 23
Petitioner's motion for reconsideration was likewise denied in a resolution dated January
31, 1996. 24 Hence this petition for review. Petitioner raises the following assignment of
errors:
I THE PUBLIC RESPONDENTS HONORABLE COURT OF APPEALS AND
REGIONAL TRIAL COURT JUDGES JOHNSON BALLUTAY AND
ADRIANO TUAZON ERRED IN HOLDING THAT PRIVATE
RESPONDENTS REYNALDO VENERACION AND WIFE ARE
BUYERS AND REGISTRANTS IN GOOD FAITH IN RESOLVING
THE ISSUE OF OWNERSHIP AND POSSESSION OF THE LAND IN
DISPUTE. DIETcC
II THAT PUBLIC RESPONDENTS ERRED IN NOT RESOLVING AND
DECIDING THE APPLICABILITY OF THE DECISION OF THIS
HONORABLE COURT IN THE CASES OF SALVORO VS.
TANEGA, ET AL., G.R. NO. L 32988 AND IN ARCENAS VS. DEL
ROSARIO, 67 PHIL 238, BY TOTALLY IGNORING THE SAID
DECISIONS OF THIS HONORABLE COURT IN THE ASSAILED
DECISIONS OF THE PUBLIC RESPONDENTS.
III THAT THE HONORABLE COURT OF APPEALS ERRED IN NOT
GIVING DUE COURSE TO THE PETITION FOR REVIEW IN CA
G.R. SP. NO. 24477.
IV THAT THE HONORABLE COURT OF APPEALS IN DENYING
PETITIONER'S PETITION FOR REVIEW AFORECITED
INEVITABLY SANCTIONED AND/OR WOULD ALLOW A
VIOLATION OF LAW AND DEPARTURE FROM THE USUAL
COURSE OF JUDICIAL PROCEEDINGS BY PUBLIC
RESPONDENT HONORABLE JUDGE ADRIANO TUAZON WHEN
THE LATTER RENDERED A DECISION IN CIVIL CASE NO. 670-
AF [ANNEX "D"] REVERSING THE DECISION OF THE
MUNICIPAL TRIAL COURT JUDGE SENDON DELIZO IN CIVIL
CASE NO. 9523 [ANNEX "C"] AND IN NOT RESOLVING IN THE
SAME CASE THE APPEAL INTERPOSED BY DEFENDANTS ON
THE ORDER OF THE SAME COURT DENYING THE MOTION
FOR EXECUTION.
V THAT THE RESOLUTION [ANNEX "B"] (OF THE COURT OF
APPEALS) DENYING PETITIONER'S MOTION FOR
RECONSIDERATION [ANNEX "I"] WITHOUT STATING
CLEARLY THE FACTS AND THE LAW ON WHICH SAID
RESOLUTION WAS BASED, (IS ERRONEOUS).
These assignment of errors raise the following issues:
1. Whether or not private respondents Veneracion are buyers in good faith of
the lot in dispute as to make them the absolute owners thereof in accordance
with Art. 1544 of the Civil Code on double sale of immovable property.
2. Whether or not payment of the appellate docket fee within the period to
appeal is not necessary for the perfection of the appeal after a notice of appeal
has been filed within such period.
3. Whether or not the resolution of the Court of Appeals denying petitioner's
motion for reconsideration is contrary to the constitutional requirement that a
denial of a motion for reconsideration must state the legal reasons on which it is
based.
First. It is apparent from the first and second assignment of errors that petitioner is
assailing the findings of fact and the appreciation of the evidence made by the trial courts
and later affirmed by the respondent court. While, as a general rule, only questions of law
may be raised in a petition for review under Rule 45 of the Rules of Court, review may
nevertheless be granted under certain exceptions, namely: (a) when the conclusion is a
finding grounded entirely on speculation, surmises, or conjectures; (b) when the inference
made is manifestly mistaken, absurd, or impossible; (c) where there is a grave abuse of
discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the
findings of fact are conflicting; (f) when the Court of Appeals, in making its findings,
went beyond the issue of the case and the same is contrary to the admissions of both
appellant and appellee; (g) when the findings of the Court of Appeals are contrary to
those of the trial court; (h) when the findings of fact are conclusions without citation of
specific evidence on which they are based; (i) when the facts set forth in the petition as
well as in the petitioner's main and reply briefs are not disputed by the respondents; (j)
when the finding of fact of the Court of Appeals is premised on the supposed absence of
evidence but is contradicted by the evidence on record; and (k) when the Court of
Appeals manifestly overlooked certain relevant facts not disputed by the parties and
which, if properly considered, would justify a different conclusion. 25
In this case, the Court of Appeals based its ruling that private respondents Veneracion are
the owners of the disputed lot on their reliance on private respondent Godofredo De la
Paz's assurance that he would take care of the matter concerning petitioner's occupancy of
the disputed lot as constituting good faith. This case, however, involves double sale and,
on this matter, Art. 1544 of the Civil Code provides that where immovable property is the
subject of a double sale, ownership shall be transferred (1) to the person acquiring it who
in good faith first recorded it to the Registry of Property; (2) in default thereof, to the
person who in good faith was first in possession; and (3) in default thereof, to the person
who presents the oldest title. 26 The requirement of the law, where title to the property is
recorded in the Register of Deeds, is two-fold: acquisition in good faith and recording in
good faith. To be entitled to priority, the second purchaser must not only prove prior
recording of his title but that he acted in good faith, i.e., without knowledge or notice of a
prior sale to another. The presence of good faith should be ascertained from the
circumstances surrounding the purchase of the land. 27
1. With regard to the first sale to private respondents Veneracion, private respondent
Reynaldo Veneracion testified that on October 10, 1981, 18 days before the execution of
the first Deed of Sale with Right to Repurchase, he inspected the premises and found it
vacant. 28 However, this is belied by the testimony of Engr. Felix D. Minor, then building
inspector of the Department of Public Works and Highways, that he conducted on
October 6, 1981 an ocular inspection of the lot in dispute in the performance of his duties
as a building inspector to monitor the progress of the construction of the building subject
of the building permit issued in favor of petitioner on April 23, 1981, and that he found it
100 % completed (Exh. V). 29 In the absence of contrary evidence, he is to be presumed
to have regularly performed his official duty. 30 Thus, as early as October, 1981, private
respondents Veneracion already knew that there was construction being made on the
property they purchased.
2. The Court of Appeals failed to determine the nature of the first contract of sale
between the private respondents by considering their contemporaneous and subsequent
acts. 31 More specifically, it overlooked the fact that the first contract of sale between the
private respondents shows that it is in fact an equitable mortgage. CaESTA
The requisites for considering a contract of sale with a right of repurchase as an equitable
mortgage are (1) that the parties entered into a contract denominated as a contract of sale
and (2) that their intention was to secure an existing debt by way of mortgage. 32 A
contract of sale with right to repurchase gives rise to the presumption that it is an
equitable mortgage in any of the following cases: (1) when the price of a sale with a right
to repurchase is unusually inadequate; (2) when the vendor remains in possession as
lessee or otherwise; (3) when, upon or after the expiration of the right to repurchase,
another instrument extending the period of redemption or granting a new period is
executed; (4) when the purchaser retains for himself a part of the purchase price; (5)
when the vendor binds himself to pay the taxes on the thing sold; (6) in any other case
where it may be fairly inferred that the real intention of the parties is that the transaction
shall secure the payment of a debt or the performance of any other obligation. 33 In case
of doubt, a contract purporting to be a sale with right to repurchase shall be construed as
an equitable mortgage. 34
In this case, the following circumstances indicate that the private respondents intended
the transaction to be an equitable mortgage and not a contract of sale: (1) Private
respondents Veneracion never took actual possession of the three lots; (2) Private
respondents De la Paz remained in possession of the Melencio lot which was co-owned
by them and where they resided; (3) During the period between the first sale and the
second sale to private respondents Veneracion, they never made any effort to take
possession of the properties; and (4) when the period of redemption had expired and
private respondents Veneracion were informed by the De la Pazes that they are offering
the lots for sale to another person for P200,000.00, they never objected. To the contrary,
they offered to purchase the two lots for P180,000.00 when they found that a certain Mr.
Tecson was prepared to purchase it for the same amount. Thus, it is clear from these
circumstances that both private respondents never intended the first sale to be a contract
of sale, but merely that of mortgage to secure a debt of P150,000.00.

With regard to the second sale, which is the true contract of sale between the parties, it
should be noted that this Court in several cases, 35 has ruled that a purchaser who is
aware of facts which should put a reasonable man upon his guard cannot turn a blind eye
and later claim that he acted in good faith. Private respondent Reynaldo himself admitted
during the pre-trial conference in the MTC in Civil Case No. 9523 (for ejectment) that
petitioner was already in possession of the property in dispute at the time the second
Deed of Sale was executed on June 1, 1983 and registered on March 4, 1984. He,
therefore, knew that there were already occupants on the property as early as 1981. The
fact that there are persons, other than the vendors, in actual possession of the disputed lot
should have put private respondents on inquiry as to the nature of petitioner's right over
the property. But he never talked to petitioner to verify the nature of his right. He merely
relied on the assurance of private respondent Godofredo De la Paz, who was not even the
owner of the lot in question, that he would take care of the matter. This does not meet the
standard of good faith.
3. The appellate court's reliance on Arts. 1357 and 1358 of the Civil Code to determine
private respondents Veneracion's lack of knowledge of petitioner's ownership of the
disputed lot is erroneous.
Art. 1357 36 and Art. 1358, 37 in relation to Art. 1403(2) 38 of the Civil Code, requires
that the sale of real property must be in writing for it to be enforceable. It need not be
notarized. If the sale has not been put in writing, either of the contracting parties can
compel the other to observe such requirement. 39 This is what petitioner did when he
repeatedly demanded that a Deed of Absolute Sale be executed in his favor by private
respondents De la Paz. There is nothing in the above provisions which require that a
contract of sale of realty must be executed in a public document. In any event, it has been
shown that private respondents Veneracion had knowledge of facts which would put
them on inquiry as to the nature of petitioner's occupancy of the disputed lot.
Second. Petitioner contends that the MTC in Civil Case No. 9523 (for ejectment) erred in
denying petitioner's Motion for Execution of the Judgment, which the latter filed on June
6, 1989, two years after private respondents Veneracion filed a notice of appeal with the
MTC on March 3, 1987 without paying the appellate docket fee. He avers that the trial
court's denial of his motion is contrary to this Court's ruling in the cases of Republic v.
Director of Lands, 40 and Aranas v. Endona 41 in which it was held that where the
appellate docket fee is not paid in full within the reglementary period, the decision of the
MTC becomes final and unappealable as the payment of docket fee is not only a
mandatory but also a jurisdictional requirement.
Petitioner's contention has no merit. The case of Republic v. Director of Lands deals with
the requirement for appeals from the Courts of First Instance, the Social Security
Commission, and the Court of Agrarian Relations to the Court of Appeals. The case of
Aranas v. Endona, on the other hand, was decided under the 1964 Rules of Court and
prior to the enactment of the Judiciary Reorganization Act of 1981 (B.P. Blg. 129) and
the issuance of its Interim Rules and Guidelines by this Court on January 11, 1983.
Hence, these cases are not applicable to the matter at issue.
On the other hand, in Santos v. Court of Appeals, 42 it was held that although an appeal
fee is required to be paid in case of an appeal taken from the municipal trial court to the
regional trial court, it is not a prerequisite for the perfection of an appeal under 20 43
and 23 44 of the Interim Rules and Guidelines issued by this Court on January 11, 1983
implementing the Judiciary Reorganization Act of 1981 (B.P. Blg. 129). Under these
sections, there are only two requirements for the perfection of an appeal, to wit: (a) the
filing of a notice of appeal within the reglementary period; and (b) the expiration of the
last day to appeal by any party. Even in the procedure for appeal to the regional trial
courts, 45 nothing is mentioned about the payment of appellate docket fees.
Indeed, this Court has ruled that, in appealed cases, the failure to pay the appellate docket
fee does not automatically result in the dismissal of the appeal, the dismissal being
discretionary on the part of the appellate court. 46 Thus, private respondents Veneracions'
failure to pay the appellate docket fee is not fatal to their appeal.
Third. Petitioner contends that the resolution of the Court of Appeals denying his motion
for reconsideration was rendered in violation of the Constitution because it does not state
the legal basis thereof. cIaHDA
This contention is likewise without merit.
Art. VIII, Sec. 14 of the Constitution provides that "No petition for review or motion for
reconsideration of a decision of the court shall be refused due course or denied without
stating the basis therefor." This requirement was fully complied with when the Court of
Appeals, in denying reconsideration of its decision, stated in its resolution that it found no
reason to change its ruling because petitioner had not raised anything new. 47 Thus, its
resolution denying petitioner's motion for reconsideration states:
For resolution is the Motion for Reconsideration of Our Decision filed by the
petitioners.
Evidently, the motion poses nothing new. The points and arguments raised by
the movants have been considered and passed upon in the Decision sought to be
reconsidered. Thus, We find no reason to disturb the same.
WHEREFORE, the motion is hereby DENIED.
SO ORDERED. 48
Attorney's fees should be awarded as petitioner was compelled to litigate to protect his
interest due to private respondents' act or omission. 49
WHEREFORE, the decision of the Court of Appeals is REVERSED and a new one is
RENDERED:
(1) declaring as null and void the deed of sale executed by private respondents Godofredo
and Manuela De la Paz in favor of private respondents spouses Reynaldo and Susan
Veneracion;
(2) ordering private respondents Godofredo and Manuela De la Paz to execute a deed of
absolute sale in favor of petitioner Rev. Fr. Dante Martinez;
(3) ordering private respondents Godofredo and Manuela De la Paz to reimburse private
respondents spouses Veneracion the amount the latter may have paid to the former;
(4) ordering the Register of Deeds of Cabanatuan City to cancel TCT No. T-44612 and
issue a new one in the name of petitioner Rev. Fr. Dante Martinez; and
(5) ordering private respondents to pay petitioner jointly and severally the sum of
P20,000.00 as attorney's fees and to pay the costs of the suit.
SO ORDERED.
Bellosillo, Buena and De Leon, Jr., JJ., concur.
Quisumbing, J., is on leave.
||| (Martinez v. Court of Appeals, G.R. No. 123547, May 21, 2001)

SECOND DIVISION
[G.R. No. 171008. September 13, 2007.]
CARMELITA FUDOT, petitioner, vs. CATTLEYA LAND, INC.,
respondent.
D E C I S I O N
TINGA, J p:
For resolution is a petition that seeks to nullify the Decision 1 and Resolution 2 of the
Court of Appeals dated 28 April 2005 and 11 January 2006, respectively, in C.A.-G.R.
CV No. 73025 which declared respondent as having a better right over a parcel of land
located in Doljo, Panglao, Bohol.
The facts, as culled from the records, follow. aSIDCT
Sometime in July 1992, Cattleya Land, Inc. (hereinafter referred to as respondent) asked
someone to check, on its behalf, the titles of nine (9) lots, the subject land included,
which it intended to buy from the spouses Troadio and Asuncion Tecson. Finding no
defect on the titles, respondent purchased the nine lots through a Deed of Conditional
Sale on 6 November 1992. Subsequently, on 30 August 1993, respondent and the
Tecsons executed a Deed of Absolute Sale over the same properties. The Deed of
Conditional Sale and the Deed of Absolute Sale were registered with the Register of
Deeds on 06 November 1992 and 04 October 1993, respectively. 3 The Register of
Deeds, Atty. Narciso dela Serna, refused to actually annotate the deed of sale on the titles
because of the existing notice of attachment in connection with Civil Case No. 3399
pending before the Regional Trial Court of Bohol. 4 The attachment was eventually
cancelled by virtue of a compromise agreement between the Tecsons and their attaching
creditor which was brokered by respondent. Titles to six (6) of the nine (9) lots were
issued, but the Register of Deeds refused to issue titles to the remaining three (3) lots,
because the titles covering the same were still unaccounted for.
On 23 January 1995, petitioner presented for registration before the Register of Deeds the
owner's copy of the title of the subject property, together with the deed of sale
purportedly executed by the Tecsons in favor of petitioner on 19 December 1986. On the
following day, respondent sent a letter of protest/opposition to petitioner's application.
Much to its surprise, respondent learned that the Register of Deeds had already registered
the deed of sale in favor of petitioner and issued a new title in her name. 5
On 5 May 1995, respondent filed its Complaint 6 for Quieting Of Title &/Or Recovery Of
Ownership, Cancellation Of Title With Damages before the Regional Trial Court of
Tagbilaran City. 7 On 26 June 1995, Asuncion filed a complaint-in-intervention, claiming
that she never signed any deed of sale covering any part of their conjugal property in
favor of petitioner. She averred that her signature in petitioner's deed of sale was forged
thus, said deed should be declared null and void. 8 She also claimed that she has
discovered only recently that there was an amorous relationship between her husband and
petitioner. 9
Petitioner, for her part, alleged in her answer 10 that the spouses Tecson had sold to her
the subject property for P20,000.00 and delivered to her the owner's copy of the title on
26 December 1986. She claims that she subsequently presented the said title to the
Register of Deeds but the latter refused to register the same because the property was still
under attachment. EcHTCD
On 31 October 2001, the trial court rendered its decision: 11 (i) quieting the title or
ownership of the subject land in favor of respondent; (ii) declaring the deed of sale
between petitioner and spouses Tecson invalid; (iii) ordering the registration of the
subject land in favor of respondent; (iv) dismissing respondent's claim for damages
against the Register of Deeds for insufficiency of evidence; (v) dismissing Asuncion's
claim for damages against petitioner for lack of factual basis; and (vi) dismissing
petitioner's counterclaim for lack of the required preponderance of evidence. 12
According to the trial court, respondent had recorded in good faith the deed of sale in its
favor ahead of petitioner. Moreover, based on Asuncion's convincing and unrebutted
testimony, the trial court concluded that the purported signature of Asuncion in the deed
of sale in favor of petitioner was forged, thereby rendering the sale void. 13
Petitioner sought recourse to the Court of Appeals, arguing in the main that the rule on
double sale was applicable to the case. The appellate court, however, dismissed her
appeal, holding that there was no double sale because the alleged sale to petitioner was
null and void in view of the forgery of Asuncion's purported signature in the deed. The
appellate court noted that petitioner failed to rebut Asuncion's testimony despite
opportunities to do so. 14 Moreover, even if there was double sale, according to the
appellate court, respondent's claim would still prevail since it was able to register the
second sale in its favor in good faith, had made inquiries before it purchased the lots, and
was informed that the titles were free from encumbrance except the attachment on the
property due to Civil Case No. 3399. 15
Petitioner sought reconsideration of the decision but the Court of Appeals denied her
motion for reconsideration for lack of merit. 16
Petitioner thus presents before this Court the following issues for resolution:
I.
BETWEEN 2 BUYERS OF REGISTERED LAND, WHO HAS THE BETTER
RIGHT-IS IT THE FIRST BUYER WHO WAS GIVEN THE OWNER'S
DUPLICATE TCT TOGETHER WITH A DEED OF SALE IN 1986, OR THE
SECOND BUYER IN 1992 WITH ONLY A DEED OF SALE. cEDIAa
II.
IS A BUYER OF REGISTERED LAND WHO DID NOT DEMAND OR
REQUIRE THE DELIVERY OF THE OWNER'S DUPLICATE TCT A
BUYER IN GOOD FAITH.
III.
II. IN SUBSEQUENT REGISTRATION OF REGISTERED LANDS, AS BY
SALE, WHICH LAW SHALL GOVERN, ARTICLE 1455 * OF CIVIL CODE
OR P.D. 1529 OR TORRENS SYSTEM. 17
Petitioner avers that she was the first buyer in good faith and even had in her possession
the owner's copy of the title so much so that she was able to register the deed of sale in
her favor and caused the issuance of a new title in her name. She argues that the
presentation and surrender of the deed of sale and the owner's copy carried with it the
"conclusive authority of Asuncion Tecson" which cannot be overturned by the latter's
oral deposition. 18
Petitioner claims that respondent did not demand nor require delivery of the owner's
duplicate title from the spouses Tecson, neither did it investigate the circumstances
surrounding the absence of the title. These indicate respondent's knowledge of a defect in
the title of the spouses and, thus, petitioner concludes that respondent was not a buyer in
good faith. 19 DCaSHI
Finally, petitioner insists that the applicable law in this case is P.D. No. 1529, a special
law dealing precisely with the registration of registered lands or any subsequent sale
thereof, and not Article 1544 of the Civil Code which deals with immovable property not
covered by the Torrens System. 20
Respondent points out, on one hand, that petitioner's first two issues which present an
inquiry on who has a better right or which one is a buyer in good faith, are questions of
fact not proper in a petition for review. The third issue, on the other hand, is ostensibly a
question of law which had been unsuccessfully raised below. 21 TcDIaA
Respondent maintains that there is no room to speak of petitioner as a buyer in good faith
since she was never a buyer in the first place, as her claim is based on a null and void
deed of sale, so the court a quo found. Respondent also asserts that its status as a buyer in
good faith was established and confirmed in the proceedings before the two courts below.
22
Lastly, respondent argues that P.D. No. 1529 finds no application in the instant case. The
"production of the owner's duplicate certificate . . . being conclusive authority from the
registered owner" is only true as between the registration applicant and the register of
deeds concerned, but never to third parties. Such conclusive authority, respondent adds, is
"only for the Register of Deeds to enter a new certificate or to make a memorandum of
registration in accordance with such instrument." It cannot cure the fatal defect that the
instrument from which such registration was effected is null and void ab initio,
respondent concludes. 23 IASTDE
The petition is bereft of merit.
Petitioner's arguments, which rest on the assumption that there was a double sale, must
fail. cdasia
In the first place, there is no double sale to speak of. Art. 1544 of the Civil Code 24
which provides the rule on double sale, applies only to a situation where the same
property is validly sold to different vendees. In this case, there is only one sale to advert
to, that between the spouses Tecson and respondent.
In Remalante v. Tibe, 25 this Court ruled that the Civil Law provision on double sale is
not applicable where there is only one valid sale, the previous sale having been found to
be fraudulent. Likewise, in Espiritu and Apostol v. Valerio, 26 where the same parcel of
land was purportedly sold to two different parties, the Court held that despite the fact that
one deed of sale was registered ahead of the other, Art. 1544 of the Civil Code will not
apply where said deed is found to be a forgery, the result of this being that the right of the
other vendee should prevail. cHCSDa
The trial court declared that the sale between the spouses Tecson and petitioner is invalid,
as it bears the forged signature of Asuncion. Said finding is based on the unrebutted
testimony of Asuncion and the trial court's visual analysis and comparison of the
signatures in her Complaint-in-Intervention and the purported deed of sale. This finding
was upheld by the Court of Appeals, as it ruled that the purported sale in petitioner's
favor is null and void, taking into account Asuncion's unrefuted deposition. In particular,
the Court of Appeals noted petitioner's failure to attend the taking of the oral deposition
and to give written interrogatories. In short, she did not take the necessary steps to rebut
Asuncion's definitive assertion.

The congruence of the wills of the spouses is essential for the valid disposition of
conjugal property. 27 Thus, under Article 166 of the Civil Code 28 which was still in
effect on 19 December 1986 when the deed of sale was purportedly executed, the
husband cannot generally alienate or encumber any real property of the conjugal
partnership without the wife's consent. DcCITS
In this case, following Article 173 29 of the Civil Code, on 26 June 1995, or eight and a
half years (8 1/2) after the purported sale to petitioner, Asuncion filed her Complaint-in-
Intervention seeking the nullification thereof, and while her marriage with Troadio was
still subsisting. Both the Court of Appeals and the trial court found Asuncion's signature
in the deed of sale to have been forged, and consequently, the deed of sale void for lack
of marital consent. We find no reason to disturb the findings of the trial court and the
Court of Appeals. Findings of fact of lower courts are deemed conclusive and binding
upon the Supreme Court subject to certain exceptions, 30 none of which are present in
this case. Besides, it has long been recognized in our jurisprudence that a forged deed is a
nullity and conveys no title. 31
Petitioner argues she has a better right over the property in question, as the holder of and
the first one to present, the owner's copy of the title for the issuance of a new TCT. The
Court is not persuaded. SDIaHE
The act of registration does not validate petitioner's otherwise void contract. Registration
is a mere ministerial act by which a deed, contract, or instrument is sought to be inscribed
in the records of the Office of the Register of Deeds and annotated at the back of the
certificate of title covering the land subject of the deed, contract, or instrument. While it
operates as a notice of the deed, contract, or instrument to others, it does not add to its
validity nor converts an invalid instrument into a valid one as between the parties, 32 nor
amounts to a declaration by the state that the instrument is a valid and subsisting interest
in the land. 33 The registration of petitioner's void deed is not an impediment to a
declaration by the courts of its invalidity.
Even assuming that there was double sale in this case, petitioner would still not prevail.
The pertinent portion of Art. 1544 provides: ISCHET
Art. 1544. . . . .
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.
xxx xxx xxx
In interpreting this provision, the Court declared that the governing principle is primus
tempore, potior jure (first in time, stronger in right). Knowledge gained by the first buyer
of the second sale cannot defeat the first buyer's rights, except where the second buyer
registers in good faith the second sale ahead of the first as provided by the aforequoted
provision of the Civil Code. Such knowledge of the first buyer does not bar him from
availing of his rights under the law, among them to register first his purchase as against
the second buyer. However, knowledge gained by the second buyer of the first sale
defeats his rights even if he is first to register the second sale, since such knowledge
taints his prior registration with bad faith. 34 It is thus essential, to merit the protection of
Art. 1544, second paragraph, that the second realty buyer must act in good faith in
registering his deed of sale. 35
We agree with the trial court and the Court of Appeals that respondent was a buyer in
good faith, having purchased the nine (9) lots, including the subject lot, without any
notice of a previous sale, but only a notice of attachment relative to a pending civil case.
In fact, in its desire to finally have the title to the properties transferred in its name, it
persuaded the parties in the said case to settle the same so that the notice of attachment
could be cancelled. TaEIAS
Relevant to the discussion are the following provisions of P.D. No. 1529:
Sec. 51. Conveyance and other dealings by registered owner. An owner of
registered land may convey, mortgage, lease, charge or otherwise deal with the
same in accordance with existing laws. He may use such forms of deeds,
mortgages, lease or other voluntary instruments as are sufficient in law. But no
deed, mortgage, lease or other voluntary instrument, except a will purporting to
convey or affect registered land shall take effect as a conveyance or bind the
land, but shall operate only as a contract between the parties and as evidence of
authority to the Register of Deeds to make Registration. DTAESI
The act of registration shall be the operative act to convey or affect the land
insofar as third persons are concerned, and in all cases under this Decree, the
registration shall be made in the office of the Register of Deeds for the province
or city where the land lies. (Emphasis supplied)
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage,
lease, lien attachment, order, judgment, instrument or entry affecting registered
land shall, if registered, filed or entered in the office of the Register of Deeds for
the province or city where the land to which it relates lies, be constructive notice
to all persons from the time of such registering, filing or entering. IaDTES
It has been held that between two transactions concerning the same parcel of land, the
registered transaction prevails over the earlier unregistered right. The act of registration
operates to convey and affect the registered land so that a bona fide purchaser of such
land acquires good title as against a prior transferee, if such prior transfer was
unrecorded. 36 As found by the courts a quo, respondent was able to register its purchase
ahead of petitioner. It will be recalled that respondent was able to register its Deed of
Conditional Sale with the Register of Deeds as early as 6 November 1992, and its Deed
of Absolute Sale on 14 October 1993. On the other hand, petitioner was able to present
for registration her deed of sale and owner's copy of the title only on 23 January 1995, or
almost nine years after the purported sale. Why it took petitioner nine (9) years to present
the deed and the owner's copy, she had no credible explanation; but it is clear that when
she finally did, she already had constructive notice of the deed of sale in respondent's
favor. Without a doubt, respondent had acquired a better title to the property.
Finally, anent petitioner's claim that P.D. No. 1529 applies to registered lands or any
subsequent sale thereof, while Art. 1544 of the Civil Code applies only to immovable
property not covered by the Torrens System, suffice it to say that this quandary has
already been answered by an eminent former member of this Court, Justice Jose Vitug,
who explained that the registration contemplated under Art. 1544 has been held to refer
to registration under P.D. No. 1529, thus: EcHIAC
The registration contemplated under Art. 1544 has been held to refer to
registration under Act 496 Land Registration Act (now PD 1529) which
considers the act of registration as the operative act that binds the land (see
Mediante v. Rosabal, 1 O.G. [12] 900, Garcia v. Rosabal, 73 Phil 694). On
lands covered by the Torrens System, the purchaser acquires such rights and
interest as they appear in the certificate of title, unaffected by any prior lien or
encumbrance not noted therein. The purchaser is not required to explore farther
than what the Torrens title, upon its face, indicates. The only exception is where
the purchaser has actual knowledge of a flaw or defect in the title of the seller or
of such liens or encumbrances which, as to him, is equivalent to registration (see
Sec. 39, Act 496; Bernales v. IAC, G.R. 75336, 18 October 1988; Hernandez vs.
Sales, 69 Phil 744; Tajonera vs. Court of Appeals, L-26677, 27 March 1981)
(Emphasis supplied) 37
WHEREFORE, the petition is DENIED. The assailed decision and resolution of the
Court of Appeals are affirmed. Costs against petitioner.
SO ORDERED.
||| (Fudot v. Cattleya Land, Inc., G.R. No. 171008, September 13, 2007)

SECOND DIVISION
[G.R. No. 152627. September 16, 2005.]
SPOUSES AMANCIO and LUISA SARMIENTO and PEDRO
OGSINER, petitioners, vs. THE HON. COURT OF APPEALS
(Special Former Fifth Division), RODEANNA REALTY
CORPORATION, THE HEIRS OF CARLOS MORAN SISON,
PROVINCIAL SHERIFF OF PASIG, M.M., MUNICIPAL (CITY)
TREASURER OF MARIKINA, JOSE F. PUZON, THE HON.
EFICIO ACOSTA, REGIONAL TRIAL COURT OF PASIG CITY,
BRANCH 155 and REGISTER OF DEEDS OF MARIKINA (CITY),
RIZAL, respondents.
Jaime C. Opinion and Samuel L. Viernes for petitioner.
Benjamin P. Quitoriano for J. Puzon.
Romeo Gutierrez for Heirs of C.M. Sison.
Doroja Law Office for Rodeanna Realty Corp.
Saguisag & Associates for R. Sison.
SYLLABUS
1.CIVIL LAW; LAND REGISTRATION; DIRECT ATTACK ON A TITLE
DISTINGUISHED FROM COLLATERAL ATTACK. An action is deemed an attack
on a title when the object of the action or proceeding is to nullify the title, and thus
challenge the judgment pursuant to which the title was decreed. The attack is direct when
the object of the action is to annul or set aside such judgment, or enjoin its enforcement.
On the other hand, the attack is indirect or collateral when, in an action to obtain a
different relief, an attack on the judgment is nevertheless made as an incident thereof.
2.ID.; ID.; INNOCENT PURCHASER FOR VALUE; NOTWITHSTANDING THE
VOID TAX SALE, THE BUYER'S TITLE CANNOT BE ASSAILED IF IT IS A
PURCHASER IN GOOD FAITH AND FOR VALUE. A complaint for recovery of
possession based on ownership (accion reivindicatoria or accion reivindicacion) is an
action whereby the plaintiff alleges ownership over a parcel of land and seeks recovery of
its full possession. As possession is sought based on ownership, we must inquire into the
title of RRC which it acquired from Mr. Puzon who, in turn, derived his title from the
void tax sale. The void tax sale notwithstanding, RRC's title cannot be assailed if it is a
purchaser in good faith and for value.
3.ID.; ID.; ID.; GENERAL RULE; EXCEPTION; A PERSON WHO DELIBERATELY
IGNORES A SIGNIFICANT FACT WHICH WOULD CREATE SUSPICION IN AN
OTHERWISE REASONABLE MAN IS NOT AN INNOCENT PURCHASER FOR
VALUE; CASE AT BAR. Verily, every person dealing with registered land may
safely rely on the correctness of the certificate of title issued therefor and the law will in
no way oblige him to go behind the certificate to determine the condition of the property.
Thus, the general rule is that a purchaser may be considered a purchaser in good faith
when he has examined the latest certificate of title. An exception to this rule is when
there exist important facts that would create suspicion in an otherwise reasonable man to
go beyond the present title and to investigate those that preceded it. Thus, it has been said
that a person who deliberately ignores a significant fact which would create suspicion in
an otherwise reasonable man is not an innocent purchaser for value. A purchaser cannot
close his eyes to facts which should put a reasonable man upon his guard, and then claim
that he acted in good faith under the belief that there was no defect in the title of the
vendor. As we have held: The failure of appellees to take the ordinary precautions which
a prudent man would have taken under the circumstances, specially in buying a piece of
land in the actual, visible and public possession of another person, other than the vendor,
constitutes gross negligence amounting to bad faith. In this connection, it has been held
that where, as in this case, the land sold is in the possession of a person other than the
vendor, the purchaser is required to go beyond the certificate of title to ma[k]e inquiries
concerning the rights of the actual possessor. Failure to do so would make him a
purchaser in bad faith. . . . One who purchases real property which is in the actual
possession of another should, at least make some inquiry concerning the right of those in
possession. The actual possession by other than the vendor should, at least put the
purchaser upon inquiry. He can scarely, in the absence of such inquiry, be regarded as a
bona fide purchaser as against such possessors. Prescinding from the foregoing, the fact
that private respondent RRC did not investigate the Sarmiento spouses' claim over the
subject land despite its knowledge that Pedro Ogsiner, as their overseer, was in actual
possession thereof means that it was not an innocent purchaser for value upon said land.
Article 524 of the Civil Code directs that possession may be exercised in one's name or in
that of another. In herein case, Pedro Ogsiner had informed RRC that he was occupying
the subject land on behalf of the Sarmiento spouses. Being a corporation engaged in the
business of buying and selling real estate, it was gross negligence on its part to merely
rely on Mr. Puzon's assurance that the occupants of the property were mere squatters
considering the invaluable information it acquired from Pedro Ogsiner and considering
further that it had the means and the opportunity to investigate for itself the accuracy of
such information.
4.REMEDIAL LAW; CIVIL PROCEDURE; PLEADINGS; THIRD-PARTY
COMPLAINT; NATURE. A third-party complaint is in the nature of an original
complaint. This is so because it is "actually independent of and separate and distinct from
the plaintiff's complaint." In herein case, after leave of court was secured to file a third-
party complaint, the third-party complainants (Sarmiento spouses) had to pay the
necessary docket fees. Summonses were then issued on the third-party defendants who
answered in due time. In Firestone Tire and Rubber Company of the Philippines v.
Tempongko, we had occasion to expound on the nature of a third-party complaint, thus:
The third-party complaint, is therefore, a procedural device whereby a "third party" who
is neither a party nor privy to the act or deed complained of by the plaintiff, may be
brought into the case with leave of court, by the defendant, who acts as third-party
plaintiff to enforce against such third-party defendant a right for contribution, indemnity,
subrogation or any other relief, in respect of the plaintiff's claim. The third-party
complaint is actually independent of and separate and distinct from the plaintiff's
complaint. Were it not for this provision of the Rules of Court, it would have to be filed
independently and separately from the original complaint by the defendant against the
third-party. But the Rules permit defendant to bring in a third-party defendant or so to
speak, to litigate his separate cause of action in respect of plaintiff's claim against a third
party in the original and principal case with the object of avoiding circuity of action and
unnecessary proliferation of lawsuits and of disposing expeditiously in one litigation the
entire subject matter arising from one particular set of facts. . . . When leave to file the
third-party complaint is properly granted, the Court renders in effect two judgments in the
same case, one on the plaintiff's complaint and the other on the third-party complaint.
Prescinding from the foregoing, the appellate court grievously erred in failing to
appreciate the legal ramifications of the third-party complaint vis- -vis the original
complaint for recovery of possession of property. The third-party complaint for
cancellation of TCT being in the nature of an original complaint for cancellation of TCT,
it therefore constitutes a direct attack of such TCT.
5.ID.; ID.; ID.; COUNTERCLAIM; CONSIDERED AN ORIGINAL COMPLAINT, AS
SUCH, THE ATTACK ON THE TITLE IN A CASE ORIGINALLY FOR RECOVERY
OF POSSESSION CANNOT BE CONSIDERED AS A COLLATERAL ATTACK.
The situation at bar can be likened to a case for recovery of possession wherein the
defendant files a counterclaim against the plaintiff attacking the validity of the latter's
title. Like a third-party complaint, a counterclaim is considered an original complaint, as
such, the attack on the title in a case originally for recovery of possession cannot be
considered as a collateral attack. We thus held in Development Bank of the Philippines
(DBP) v. Court of Appeals: Nor is there any obstacle to the determination of the validity
of TCT No. 10101. It is true that the indefeasibility of torrens titles cannot be collaterally
attacked. In the instant case, the original complaint is for recovery of possession filed by
petitioner against private respondent, not an original action filed by the latter to question
the validity of TCT No. 10101 on which the petitioner bases its right. To rule on the issue
of validity in a case for recovery of possession is tantamount to a collateral attack.
However, it should not be overlooked that private respondent filed a counterclaim against
petitioner, claiming ownership over the land and seeking damages. Hence, we could rule
in the question of the validity of TCT No. 10101 for the counterclaim can be considered a
direct attack on the same. "A counterclaim is considered a complaint, only this time, it is
the original defendant who becomes plaintiff . . . . It stands on the same footing and is to
be tested by the same rules as if it were an independent action." There being a direct
attack on the TCT which was unfortunately ignored by the appellate court, it behooves
this Court to deal with and to dispose of the said issue more so because all the facts and
evidence necessary for a complete determination of the controversy are already before us.
Again, DBP instructs: . . . In an analogous case, we ruled on the validity of a certificate of
title despite the fact that the original action instituted before the lower court was a case
for recovery of possession. The Court reasoned that since all the facts of the case are
before it, to direct the party to institute cancellation proceedings would be needlessly
circuitous and would unnecessarily delay the termination of the controversy which has
already dragged on for 20 years.
6.TAXATION; REAL PROPERTY TAX CODE; REAL PROPERTY TAX; NOTICE
OF SALE TO THE DELINQUENT LAND OWNERS AND TO THE PUBLIC IN
GENERAL, AN ESSENTIAL AND INDISPENSABLE REQUIREMENT OF LAW,
THE NON-FULFILLMENT OF WHICH VITIATES THE SALE. We cannot
overemphasize that strict adherence to the statutes governing tax sales is imperative not
only for the protection of the taxpayers, but also to allay any possible suspicion of
collusion between the buyer and the public officials called upon to enforce the laws.
Notice of sale to the delinquent land owners and to the public in general is an essential
and indispensable requirement of law, the non-fulfillment of which vitiates the sale.
Thus, the holding of a tax sale despite the absence of the requisite notice is tantamount to
a violation of delinquent taxpayer's substantial right to due process. Administrative
proceedings for the sale of private lands for nonpayment of taxes being in personam, it is
essential that there be actual notice to the delinquent taxpayer, otherwise the sale is null
and void although preceded by proper advertisement or publication.
7.ID.; ID.; ID.; ID.; NOTICE REQUIREMENT NOT COMPLIED WITH IN CASE AT
BAR. The Sarmiento spouses insist that they were not notified of the tax sale. The trial
court found otherwise, as it declared that a notice was sent to the spouses' last known
address. Such conclusion constitutes the second fundamental error in the trial court's
disposition of the case as such conclusion is totally bereft of factual basis. When findings
of fact are conclusions without citation of specific evidence upon which they are based,
this Court is justified in reviewing such finding. In herein case, the evidence does not
support the conclusion that notice of the tax sale was sent to the Sarmiento spouses' last
known address. What is clear from the evidence is that the Sarmiento spouses were
notified by mail after the subject property was already sold, i.e., the notice that was sent
to the last known address was the "Notice of Sold Properties" and not the notice to hold a
tax sale. This was testified upon by third-party defendant Natividad M. Cabalquinto, the
Municipal Treasurer of Marikina, who swore that per her records, neither notice of tax
delinquency nor notice of tax sale was sent to the Sarmiento spouses. Counsel for
respondent RRC did not cross-examine Ms. Cabalquinto on this on the theory that Ms.
Cabalquinto had no personal knowledge of the tax sale and the proceedings leading
thereto as she became Municipal Treasurer only in 1989.
8.ID.; ID.; ID.; ID.; ID.; NO PRESUMPTION OF THE REGULARITY OF ANY
ADMINISTRATIVE ACTION WHICH RESULTS IN DEPRIVING A TAXPAYER OF
HIS PROPERTY THROUGH A TAX SALE. Notwithstanding Ms. Cabalquinto's lack
of personal knowledge, her testimony that per records in her possession no notice was
actually sent to the Sarmiento spouses is sufficient proof of the lack of such notice in
the absence of contrary proof coming from the purchaser in the tax sale, Mr. Puzon, and
from his eventual buyer, herein private respondent RRC. Be it noted that under Section
73 of the Real Property Tax Code, it is required that a return of the proof of service to the
registered owner be made under oath and filed by the person making the service with the
provincial or city treasurer concerned. This implies that as far as tax sales are concerned,
there can be no presumption of the regularity of any administrative action; hence the
registered owner/delinquent taxpayer does not have the burden of proof to show that,
indeed, he was not personally notified of the sale thru registered mail. There can be no
presumption of the regularity of any administrative action which results in depriving a
taxpayer of his property through a tax sale. This is an exception to the rule that
administrative proceedings are presumed to be regular. This doctrine can be traced to the
1908 case of Valencia v. Jimenez and Fuster where this Court held: The American law
does not create a presumption of the regularity of any administrative action which results
in depriving a citizen or taxpayer of his property, but, on the contrary, the due process of
law to be followed in tax proceedings must be established by proof and the general rule is
that the purchaser of a tax title is bound to take upon himself the burden of showing the
regularity of all proceedings leading up to the sale. The difficulty of supplying such proof
has frequently lead to efforts on the part of legislatures to avoid it by providing by statute
that a tax deed shall be deemed either conclusive or presumptive proof of such regularity.
Those statutes attributing to it a conclusive effect have been held invalid as operating to
deprive the owner of his property without due process of law. But those creating a
presumption only have been sustained as affecting a rule of evidence, changing nothing
but the burden of proof. (Turpin v. Lemon, 187 U.S., 51.) The tax law applicable to
Manila does not attempt to give any special probative effect to the deed of the assessor
and collector, and therefore leaves the purchaser to establish the regularity of all vital
steps in the assessment and sale.
D E C I S I O N
CHICO-NAZARIO, J p:
In a case for recovery of possession based on ownership (accion reivindicatoria), is the
defendant's third-party complaint for cancellation of plaintiff's title a collateral attack on
such title?
This is the primary issue that requires resolution in this petition for review on certiorari
of the Decision 1 of the Court of Appeals dated 27 November 2001 and its Resolution 2
dated 08 March 2002 affirming the Decision of the Regional Trial Court (RTC) of Pasig,
Branch 162, in Civil Case No. 54151, finding for then plaintiff (private respondent
herein) Rodeanna Realty Corporation (RRC).
The relevant antecedents of this case have been summarized by the Court of Appeals as
follows:
The subject of the present controversy is a parcel of land situated in Marikina
covered by Transfer Certificate of Title No. N-119631 and registered in the
name of the plaintiff-appellee RODEANNA REALTY CORPORATION.
The aforementioned land was previously owned by the Sarmiento spouses by
virtue of a deed of absolute sale executed on July 17, 1972 and as evidenced by
a Transfer Certificate of Title No. 3700807. Upon acquisition of the land, the
Sarmiento spouses appointed PEDRO OGSINER as their overseer.
On August 15, 1972, the subject land was mortgaged by the Sarmiento spouses
to Carlos Moran Sison (Mr. Sison) as a security for a sixty-five thousand three
hundred seventy pesos and 25/100 loan obtained by the Sarmiento spouses from
Mr. Sison.
Upon failure of the Sarmiento spouses to pay the loan, Mr. Sison initiated the
extra-judicial foreclosure sale of the mortgaged property, and on October 20,
1977, the said property was foreclosed through the Office of the Sheriff of
Rizal, which accordingly, issued a certificate of sale in favor of Mr. Sison, and
which Mr. Sison caused to be annotated on the title of Sarmiento spouses on
January 31, 1978.
On August 25, 1982, JOSE PUZON (Mr. Puzon) purchased the same property
in an auction sale conducted by the Municipal Treasurer of Marikina for non-
payment of taxes. After paying P3,400.00, he was issued a certificate of sale and
caused it to be registered in the Registry of Deeds of Marikina. No redemption
having been made by the Sarmiento spouses, a final bill of sale was issued in his
(Mr. Puzon) favor. Thereafter, Mr. Puzon filed a petition for consolidation of
ownership and issuance of new title over the subject property before the
Regional Trial Court of Pasig, Branch 155. The said petition, which was
docketed as LRC Case No. T-3367, was granted by the court in its Order dated
August 03, 1984. Thereafter, Transfer Certificate of Title No. 102902 was
issued in the name of Jose Puzon.
On August 16, 1986, Mr. Puzon sold the property in question to herein plaintiff-
appellee. By virtue of such sale, a transfer certificate of title over the subject
property was issued in favor of the plaintiff-appellee. Records show that Mr.
Puzon assured the plaintiff-appellee that he (Jose Puzon) will take care of the
squatters in the subject property by filing an ejectment case against them.
However, Mr. Puzon failed to comply with his promise.
On December 19, 1986, plaintiff-appellee filed a complaint for recovery of
possession with damages against the Sarmiento spouses and Pedro Ogsiner, the
Sarmiento spouses' caretaker of the subject property who refused to vacate the
premises. In its complaint, plaintiff-appellee alleged that the Sarmiento spouses
lost all the rights over the property in question when a certificate of sale was
executed in favor of Mr. Sison for their failure to pay the mortgage loan.
On January 30, 1987, the Sarmiento spouses filed a motion for leave to file a
third-party complaint against Mr. Sison, the Provincial Sheriff of Pasig, Mr.
Puzon, the Judge of Regional Trial Court of Branch 155 in LRC Case No. R-
3367 and the Register of Deeds of Marikina. On the same date the Sarmiento
spouses filed their answer to the complaint. Expectedly, plaintiff-appellee
opposed the motion.
In its order dated June 16, 1987, the trial court denied the motion of the
Sarmiento spouses. Records show that the said order of the trial court was set
aside in a petition for certiorari filed before this Court. Hence, the third-party
complaint was admitted. Consequently, Mr. Sison, the Register of Deeds of
Marikina filed their answer, while Mr. Puzon filed a motion to dismiss the third-
party complaint on the grounds of misjoinder of causes of action and non-
jurisdiction of the trial court over said third-party complaint. In a motion to set
for hearing its special and affirmative defenses, the Register of Deeds of
Marikina moved for the dismissal of the third-party complaint against them. The
motion of Mr. Puzon was held in abeyance by the trial court ratiocinating that
the issues raised in the motion still do not appear to be indubitable.
On October 20, 1988, Mr. Puzon filed his answer.
In its order dated February 22, 1989, the trial court dismissed the third-party
complaint against the Register of Deeds of Marikina on the ground that the case
may proceed even without the Register of Deeds being impleaded.
On April 29, 1991, the trial court issued its assailed decision in favor of the
plaintiff-appellee. A timely appeal was filed by the Sarmiento spouses. In their
manifestation filed on July 17, 1989, the Heirs of Mr. Sison prayed for
substitution for their late father. Consequently, the Heirs of Mr. Sison moved for
new trial or reconsideration on the ground that they were not properly
represented in the case after the death of Mr. Sison. In its order dated November
28, 1991, the trial court granted the motion.
On February 4, 1993, the trial court dismissed the claim of Mr. Sison as
represented by his heirs, that he is the beneficial owner of the subject property.
In its order dated May 18, 1993, the court a quo denied the motion for
reconsideration of the Heirs of Mr. Sison. 3
The dispositive portion of the trial court ruling dated 29 April 1991 reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiff against all defendants:
1)ordering defendant Pedro Ogsiner and all persons claiming rights under him
to vacate the premises and surrender peaceful possession to the plaintiff within
fifteen (15) days from receipt of this order;
2)ordering defendant spouses Sarmiento to pay the sum of P20,000.00 as and
for attorney's fees;
3)ordering the defendants jointly and severally to pay the sum of P300.00 a
month as reasonable compensation for the use of the property in question
starting June, 1986 until such time that they actually surrendered the possession
of the property to the plaintiff;
4)ordering defendant spouses Sarmiento to pay the cost of this suit.
Defendant's third-party complaint against all third-party defendants is hereby
dismissed for lack of sufficient merit. 4
On appeal by herein petitioners Amancio and Luisa Sarmiento (Sarmiento spouses) and
by the heirs of Carlos Moran Sison, the Court of Appeals rendered the assailed Decision,
dated 27 November 2001, the dispositive portion of which reads:
WHEREFORE, for lack of merit, the instant appeal is hereby DISMISSED. The
assailed April 29, 1991 Decision of the Regional Trial Court of Pasig, Metro
Manila is hereby AFFIRMED with the modification that the award of
P20,000.00 as attorney's fees is hereby DELETED. The February 03, 1993
Resolution and the May 18, 1993 Order of the trial court are also hereby
AFFIRMED. 5
On 08 March 2002, the Court of Appeals rendered the assailed Resolution denying
petitioners' motion for reconsideration.
The Sarmiento spouses anchor their petition on the following legal arguments:
1)The ruling of the Court of Appeals that private respondent RRC's
certificate of title cannot be collaterally attacked and that their right
to claim ownership over the subject property is beyond the
province of the action for recovery of possession is contrary to law
and applicable decisions of the Supreme Court;
2)The ruling of the Court of Appeals that private respondent RRC is
entitled to ownership of subject property simply by virtue of its
title as evidenced by Transfer Certificate of Title (TCT) No. N-
119631 is contrary to law and jurisprudence and is not supported
by evidence; and
3)The affirmation by the Court of Appeals of the award of rentals to
private respondent RRC lacks factual and legal basis.
First Issue:
The Court of Appeals, in holding that the third-party complaint of the Sarmiento spouses
amounted to a collateral attack on TCT No. N-119631, ratiocinated as follows:
In resolving the errors/issues assigned by the herein parties, We should be
guided by the nature of action filed by the plaintiff-appellee before the lower
court, and as previously shown it is an action for the recovery of possession of
the property in question with damages. Thus, from the said nature of action, this
Court believes that the focal point of the case is whether or not the plaintiff-
appellee has a better right to possess the contested real property. Corollary, it
must also be answered whether or not the Transfer Certificate of Title No. N-
119631 can be collaterally attacked in an action for recovery of possession.
xxx xxx xxx
In their assigned errors, the Sarmiento spouses alleged that the plaintiff-appellee
is not a purchaser in good faith, as they were chargeable with the knowledge of
occupancy by Pedro Ogsiner in behalf of the Sarmiento spouses, and that the
auction sale of the property in favor of Mr. Puzon is null and void for its failure
to comply with the requirement of notice provided by the law. The same have
been argued by the Heirs of Mr. Sison.

The above assertions, We rule, amounts to a collateral attack on the certificate
of title of the plaintiff-appellee. A collateral attack is made when, in another
action to obtain a different relief, an attack on the judgment is made as an
incident in said action. This is proper only when the judgment on its face is null
and void, as where it is patent that the court, which rendered said judgment has
no jurisdiction. On the other hand, a direct attack against a judgment is made
through an action or proceeding the main object of which is to annul, set aside,
or enjoin the enforcement of such judgment, if not carried into effect, or if the
property has been disposed of, the aggrieved party may sue for recovery.
In the present case, to rule for the nullity of the auction sale in favor of Mr.
Puzon will result in ruling for the nullity of the order of Branch 155 of the
Regional Trial Court of Pasig City, granting the petition for consolidation of
ownership over the subject property filed by Mr. Puzon. It will also result in the
nullity of title issued in the name of Mr. Puzon. Hence, the end objective in
raising the aforementioned arguments is to nullify the title in the name of the
plaintiff-appellee. In fact, a reading of the answer of the Sarmiento spouses and
the Heirs of Mr. Sison reveals that they are asking the court to nullify all
documents and proceedings which led to the issuance of title in favor of the
plaintiff-appellee. This is obviously a collateral attack which is not allowed
under the principle of indefeasibility of torrens title. The issue of validity of
plaintiff-appellee's title can only be raised in an action expressly instituted for
that purpose. A certificate of title shall not be subject to collateral attack. It
cannot be altered, modified, or canceled except in a direct proceeding in
accordance with law. Case law on the matter shows that the said doctrine
applies not only with respect to the original certificate of title but also to transfer
certificate of title. Hence, whether or not the plaintiff-appellee has a right to
claim ownership over the subject property is beyond the province of the present
action. It does not matter whether the plaintiff-appellee's title is
questionable because this is only a suit for recovery of possession. It should
be raised in a proper action for annulment of questioned documents and
proceedings, considering that it will not be procedurally unsound for the
affected parties to seek for such remedy. In an action to recover possession of
real property, attacking a transfer certificate of title covering the subject
property is an improper procedure. The rule is well-settled that a torrens title as
a rule, is irrevocable and indefeasible, and the duty of the court is to see to it
that this title is maintained and respected unless challenged in a direct
proceeding. 6 (Emphasis and underscoring supplied) DEcTCa
An action is deemed an attack on a title when the object of the action or proceeding is to
nullify the title, and thus challenge the judgment pursuant to which the title was decreed.
7 The attack is direct when the object of the action is to annul or set aside such judgment,
or enjoin its enforcement. 8 On the other hand, the attack is indirect or collateral when, in
an action to obtain a different relief, an attack on the judgment is nevertheless made as an
incident thereof. 9
In its analysis of the controversy, the Court of Appeals, alas, missed one very crucial
detail which would have turned the tide in favor of the Sarmiento spouses. What the
Court of Appeals failed to consider is that Civil Case No. 54151 does not merely consist
of the case for recovery of possession of property (filed by RRC against the Sarmiento
spouses) but embraces as well the third-party complaint filed by the Sarmiento spouses
against Carlos Moran Sison, Jose F. Puzon (Mr. Puzon), the Provincial Sheriff of Pasig,
Metro Manila, the Municipal Treasurer of Marikina, Rizal, the Judge of the RTC, Branch
155, in LRC Case No. R-3367 and the Register of Deeds of the then Municipality of
Marikina, Province of Rizal.
The rule on third-party complaints is found in Section 22, Rule 6 of the 1997 Rules of
Court, which reads:
Sec. 22.Third, (fourth, etc.)-party complaint. A third (fourth, etc.)-party
complaint is a claim that a defending party may, with leave of court, file against
a person not a party to the action, called the third-party defendant, for
contribution, indemnity, subrogation or any other relief, in respect of his
opponent's claim.
A third-party complaint is in the nature of an original complaint. This is so because it is
"actually independent of and separate and distinct from the plaintiff's complaint." 10 In
herein case, after leave of court was secured 11 to file a third-party complaint, the third-
party complainants (Sarmiento spouses) had to pay the necessary docket fees. 12
Summonses were then issued on the third-party defendants 13 who answered in due time.
14
In Firestone Tire and Rubber Company of the Philippines v. Tempongko, 15 we had
occasion to expound on the nature of a third-party complaint, thus:
The third-party complaint, is therefore, a procedural device whereby a "third
party" who is neither a party nor privy to the act or deed complained of by the
plaintiff, may be brought into the case with leave of court, by the defendant,
who acts as third-party plaintiff to enforce against such third-party defendant a
right for contribution, indemnity, subrogation or any other relief, in respect of
the plaintiff's claim. The third-party complaint is actually independent of
and separate and distinct from the plaintiff's complaint. Were it not for this
provision of the Rules of Court, it would have to be filed independently and
separately from the original complaint by the defendant against the third-
party. But the Rules permit defendant to bring in a third-party defendant or so
to speak, to litigate his separate cause of action in respect of plaintiff's claim
against a third party in the original and principal case with the object of
avoiding circuity of action and unnecessary proliferation of lawsuits and of
disposing expeditiously in one litigation the entire subject matter arising from
one particular set of facts. . . When leave to file the third-party complaint is
properly granted, the Court renders in effect two judgments in the same case,
one on the plaintiff's complaint and the other on the third-party complaint.
(Emphasis supplied)
Prescinding from the foregoing, the appellate court grievously erred in failing to
appreciate the legal ramifications of the third-party complaint vis--vis the original
complaint for recovery of possession of property. The third-party complaint for
cancellation of TCT being in the nature of an original complaint for cancellation of TCT,
it therefore constitutes a direct attack of such TCT.
The situation at bar can be likened to a case for recovery of possession wherein the
defendant files a counterclaim against the plaintiff attacking the validity of the latter's
title. Like a third-party complaint, a counterclaim is considered an original complaint, as
such, the attack on the title in a case originally for recovery of possession cannot be
considered as a collateral attack. We thus held in Development Bank of the Philippines
(DBP) v. Court of Appeals: 16
Nor is there any obstacle to the determination of the validity of TCT No. 10101.
It is true that the indefeasibility of torrens titles cannot be collaterally attacked.
In the instant case, the original complaint is for recovery of possession filed by
petitioner against private respondent, not an original action filed by the latter to
question the validity of TCT No. 10101 on which the petitioner bases its right.
To rule on the issue of validity in a case for recovery of possession is
tantamount to a collateral attack. However, it should not be overlooked that
private respondent filed a counterclaim against petitioner, claiming ownership
over the land and seeking damages. Hence, we could rule in the question of the
validity of TCT No. 10101 for the counterclaim can be considered a direct
attack on the same. "A counterclaim is considered a complaint, only this time, it
is the original defendant who becomes plaintiff . . . It stands on the same footing
and is to be tested by the same rules as if it were an independent action."
There being a direct attack on the TCT which was unfortunately ignored by the appellate
court, it behooves this Court to deal with and to dispose of the said issue more so because
all the facts and evidence necessary for a complete determination of the controversy are
already before us. Again, DBP instructs:
. . . In an analogous case, we ruled on the validity of a certificate of title despite
the fact that the original action instituted before the lower court was a case for
recovery of possession. The Court reasoned that since all the facts of the case
are before it, to direct the party to institute cancellation proceedings would be
needlessly circuitous and would unnecessarily delay the termination of the
controversy which has already dragged on for 20 years. 17
Second Issue:
In their third-party complaint, as amended, the Sarmiento spouses asserted six causes of
action. The second 18 to sixth causes of action referred to the proceedings leading to and
resulting from the tax sale held on 28 August 1982, summarized by the trial court as
follows:
. . . Third Party Plaintiffs alleged that on August 28, 1982, the Municipal
Treasurer of Marikina sold at public auction, the same property in favor of Jose
F. Puzon for tax deficiency at the price of Three Thousand Three Hundred
Eighty Four Pesos and 89/100 (P3,383.89) which is very low considering that
the area of the property is 1,060 square meters; that they were not notified of the
public auction sale and further, the requirements, such as posting of notices in
public places, among other requirements, were not complied with; that since the
property was sold at a very low price, the public auction sale and the Certificate
of Sale issued by Municipal Treasurer of Marikina in favor of third party
defendant Jose F. Puzon are null and void; that in August 1984, the third party
defendant in order to consolidate his ownership and title to the property filed a
Petition with the Land Registration Commission in the Regional Trial Court,
Branch 155, Pasig, Metro Manila in LRC Case No. R-3367, for consolidation of
his ownership and title; that third party plaintiffs were not notified thereof and
did not have their day in Court; hence, the order of the Judge of the Regional
trial Court in LRC Case No. R-3367 authorizing the consolidation of the
ownership and title of Jose F. Puzon is null and void, that Jose F. Puzon after
having been issued a new title in his name sold in June 1986, the property in
favor of plaintiff RODEANNA REALTY CORPORATION. 19

The Sarmiento spouses thus prayed that: (a) the certificate of sale executed by the
Municipal Treasurer of the then Municipality of Marikina, Rizal, in favor of Mr. Puzon
be declared null and void and all subsequent transactions therefrom declared null and
void as well; (b) the Order of the RTC in LRC Case No. R-3367, authorizing the
consolidation of ownership of and issuance of new TCT No. 102909 in favor of Mr.
Puzon, be declared null and void; (c) the Register of Deeds be directed to cancel the
Certificate of Sale and TCT No. 102909 issued in favor of Mr. Puzon as well as TCT No.
N-119631 issued in the name of RRC and that TCT No. 370807 in the name of the
Sarmiento spouses be restored; (d) all third-party defendants be made to pay, jointly and
severally, moral and exemplary damages such amount as to be fixed by the court as well
as attorney's fees in the amount of P10,000.00; and (e) Mr. Puzon be made to pay
P500,000.00 the actual value of the property at the time of the tax sale in the
remote event that the title of RRC is not invalidated. TDcAIH
The trial court held that the Sarmiento spouses were not entitled to the relief sought by
them as there was nothing irregular in the way the tax sale was effected, thus:
Defendants Sarmiento aver that they were not notified of the auction sale of the
property by the Municipal Treasurer of Marikina. However, the Court would
like to point out that during the examination of Amancio Sarmiento, he testified
that in 1969 or 1970, he started residing at No. 13 19th Avenue, Cubao, Quezon
City; that his property was titled in 1972; that he transferred his residence from
Cubao to No. 76 Malumanay Street, Quezon City but he did not inform the
Municipal Treasurer of the said transfer. Hence, notice was directed to his last
known address.
xxx xxx xxx
The law requires posting of notice and publication. Personal notice to the
delinquent taxpayer is not required. In the case at bar, notice was sent to
defendants (sic) address at No. 12 13th Avenue, Cubao Quezon City. If said
notice did not reach the defendant, it is because of defendants' fault in not
notifying the Municipal Treasurer of Marikina of their change of address. 20
The above-quoted ratiocination does not sit well with this Court for two fundamental
reasons. First, the trial court erroneously declared that personal notice to the delinquent
taxpayer is not required. On the contrary, personal notice to the delinquent taxpayer is
required as a prerequisite to a valid tax sale under the Real Property Tax Code, 21 the law
then prevailing at the time of the tax sale on 28 August 1982. 22
Section 73 of the Real Property Tax Code provides:
Sec. 73.Advertisement of sale of real property at public auction. After the
expiration of the year for which the tax is due, the provincial or city treasurer
shall advertise the sale at public auction of the entire delinquent real property,
except real property mentioned in subsection (a) of Section forty hereof, to
satisfy all the taxes and penalties due and the costs of sale. Such advertisement
shall be made by posting a notice for three consecutive weeks at the main
entrance of the provincial building and of all municipal buildings in the
province, or at the main entrance of the city or municipal hall in the case of
cities, and in a public and conspicuous place in barrio or district wherein the
property is situated, in English, Spanish and the local dialect commonly used,
and by announcement at least three market days at the market by crier, and, in
the discretion of the provincial or city treasurer, by publication once a week for
three consecutive weeks in a newspaper of general circulation published in the
province or city.
The notice, publication, and announcement by crier shall state the amount of the
taxes, penalties and costs of sale; the date, hour, and place of sale, the name of
the taxpayer against whom the tax was assessed; and the kind or nature of
property and, if land, its approximate areas, lot number, and location stating the
street and block number, district or barrio, municipality and the province or city
where the property to be sold is situated.
Copy of the notice shall forthwith be sent either by registered mail or by
messenger, or through the barrio captain, to the delinquent taxpayer, at his
address as shown in the tax rolls or property tax record cards of the
municipality or city where the property is located, or at his residence, if
known to said treasurer or barrio captain: Provided, however, That a return
of the proof of service under oath shall be filed by the person making the service
with the provincial or city treasurer concerned. (Emphasis supplied)
We cannot overemphasize that strict adherence to the statutes governing tax sales is
imperative not only for the protection of the taxpayers, but also to allay any possible
suspicion of collusion between the buyer and the public officials called upon to enforce
the laws. 23 Notice of sale to the delinquent land owners and to the public in general is an
essential and indispensable requirement of law, the non-fulfillment of which vitiates the
sale. 24 Thus, the holding of a tax sale despite the absence of the requisite notice is
tantamount to a violation of delinquent taxpayer's substantial right to due process. 25
Administrative proceedings for the sale of private lands for nonpayment of taxes being in
personam, it is essential that there be actual notice to the delinquent taxpayer, otherwise
the sale is null and void although preceded by proper advertisement or publication. 26
The consequential issue in this case, therefore, is whether or not the registered owners
the Sarmiento spouses were personally notified that a tax sale was to be conducted on
28 August 1982.
The Sarmiento spouses insist that they were not notified of the tax sale. The trial court
found otherwise, as it declared that a notice was sent to the spouses' last known address.
Such conclusion constitutes the second fundamental error in the trial court's disposition
of the case as such conclusion is totally bereft of factual basis. When findings of fact are
conclusions without citation of specific evidence upon which they are based, this Court is
justified in reviewing such finding. 27
In herein case, the evidence does not support the conclusion that notice of the tax sale
was sent to the Sarmiento spouses' last known address. What is clear from the evidence is
that the Sarmiento spouses were notified by mail after the subject property was already
sold, i.e., the notice that was sent to the last known address was the "Notice of Sold
Properties" and not the notice to hold a tax sale. 28 This was testified upon by third-party
defendant Natividad M. Cabalquinto, the Municipal Treasurer of Marikina, who swore
that per her records, neither notice of tax delinquency nor notice of tax sale was sent to
the Sarmiento spouses. 29 Counsel for respondent RRC did not cross-examine Ms.
Cabalquinto on this on the theory that Ms. Cabalquinto had no personal knowledge of the
tax sale and the proceedings leading thereto as she became Municipal Treasurer only in
1989. 30
Notwithstanding Ms. Cabalquinto's lack of personal knowledge, her testimony that per
records in her possession no notice was actually sent to the Sarmiento spouses is
sufficient proof of the lack of such notice in the absence of contrary proof coming from
the purchaser in the tax sale, Mr. Puzon, and from his eventual buyer, herein private
respondent RRC. Be it noted that under Section 73 of the Real Property Tax Code, it is
required that a return of the proof of service to the registered owner be made under oath
and filed by the person making the service with the provincial or city treasurer concerned.
This implies that as far as tax sales are concerned, there can be no presumption of the
regularity of any administrative action; hence the registered owner/delinquent taxpayer
does not have the burden of proof to show that, indeed, he was not personally notified of
the sale thru registered mail. EcDTIH
There can be no presumption of the regularity of any administrative action which results
in depriving a taxpayer of his property through a tax sale. 31 This is an exception to the
rule that administrative proceedings are presumed to be regular. 32 This doctrine can be
traced to the 1908 case of Valencia v. Jimenez and Fuster 33 where this Court held:
The American law does not create a presumption of the regularity of any
administrative action which results in depriving a citizen or taxpayer of his
property, but, on the contrary, the due process of law to be followed in tax
proceedings must be established by proof and the general rule is that the
purchaser of a tax title is bound to take upon himself the burden of showing the
regularity of all proceedings leading up to the sale. The difficulty of supplying
such proof has frequently lead to efforts on the part of legislatures to avoid it by
providing by statute that a tax deed shall be deemed either conclusive or
presumptive proof of such regularity.
Those statutes attributing to it a conclusive effect have been held invalid as
operating to deprive the owner of his property without due process of law. But
those creating a presumption only have been sustained as affecting a rule of
evidence, changing nothing but the burden of proof. (Turpin v. Lemon, 187
U.S., 51.)
The tax law applicable to Manila does not attempt to give any special probative
effect to the deed of the assessor and collector, and therefore leaves the
purchaser to establish the regularity of all vital steps in the assessment and sale.
In the fairly recent case of Requiron v. Sinaban, 34 we had occasion to reiterate the
doctrine laid down in Valencia with respect specifically to tax sales conducted under
Commonwealth Act No. 470 (Assessment Law). Nevertheless, no substantial variance
exists between Commonwealth Act No. 470 and the Real Property Tax Code, which took
effect on 01 June 1974, concerning the required procedure in the conduct of public
auction sale involving real properties with tax delinquencies. 35

In sum, for failure of the purchaser in the tax sale (third-party defendant Mr. Puzon) to
prove that notice of the tax sale was sent to the Sarmiento spouses, such sale is null and
void.
As the tax sale was null and void, the title of the buyer therein (Mr. Puzon) was also null
and void, which thus leads us to the question of who between petitioners and private
respondent RRC has the right to possess the subject property.
In its complaint for recovery of possession with damages filed before the trial court, RRC
averred that it is the present registered owner of the subject land which it bought from
Mr. Puzon, who was then the registered owner thereof, free from liens and
encumbrances. It also stated that therein defendant Pedro Ogsiner was an illegal occupant
as he was the overseer for the Sarmiento spouses who no longer had any title to or rights
over the property. It thus prayed that Pedro Ogsiner vacate the property and that he and
the Sarmiento spouses be ordered to pay attorney's fees and rent in the amount of
P500.00 monthly from 1984 until Pedro Ogsiner finally vacates the land. 36
In their Answer, 37 the Sarmiento spouses invoked certain affirmative defenses, to wit:
(1)The certificate of sale issued by the Municipal Treasurer of Marikina, Rizal, the
order authorizing consolidation of ownership and the issuance of a new title all in
favor of Mr. Puzon were null and void as the Sarmiento spouses and Pedro Ogsiner
were not notified of the tax sale;
(2)Mr. Puzon, knowing that the sale of the subject property by the Municipal
Treasurer of Marikina was null and void, still sold the same to herein private
respondent RRC; and
(3)RRC purchased the property in bad faith, thus the sale to it was null and void.
A complaint for recovery of possession based on ownership (accion reivindicatoria or
accion reivindicacion) is an action whereby the plaintiff alleges ownership over a parcel
of land and seeks recovery of its full possession. 38 As possession is sought based on
ownership, we must inquire into the title of RRC which it acquired from Mr. Puzon who,
in turn, derived his title from the void tax sale.
The void tax sale notwithstanding, RRC's title cannot be assailed if it is a purchaser in
good faith and for value. 39
In its narration of the facts, the trial court acknowledged that RRC through its
President, Roberto Siy, and through its representative, Lorenzo Tabilog conducted an
ocular inspection of the subject land and found therein that its actual occupant, Pedro
Ogsiner, had a house erected thereon and that such occupant was the overseer for the
Sarmiento spouses who claimed ownership over the subject land. 40 Armed with this
knowledge, RRC did only one thing: it offered Pedro Ogsiner P2,000.00 to vacate the
subject property. 41 Relying on the fact that the TCT in Mr. Puzon's name was free of
liens and encumbrances and that Mr. Puzon would take care of the "squatters," RRC did
not investigate whatever claim Pedro Ogsiner and the Sarmiento spouses had over the
subject land.
From the foregoing undisputed facts, the trial court held:
There is no doubt that when the plaintiff Rodeanna Realty Corporation
purchased the property, there was a title in the name of Jose Puzon, thus,
making them a purchaser (sic) in good faith and for value. Said buyers relied on
the owners (sic) title which is free and clear of all liens and encumbrances.
xxx xxx xxx
After a careful evaluation of the facts of this case, the Court believes that
plaintiff is entitled to the relief sought for. As enunciated in the case of
Carmelita E. Reyes vs. Intermediate Appellate Court, Gregorio Galang and
Soledad Pangilinan (No. L-60941, February 28, 1985, 135 SCRA 214), a
contract of sale between a buyer from public auction of land sold for unpaid
realty taxes and subsequent innocent purchaser in good faith and for value is
valid whether or not the City Treasurer followed the prescribed procedure.
In the case at bar, assuming that the Municipal Treasurer of Marikina failed to
comply with certain procedure, it does not follow that the Rodeanna Realty
Corporation has no valid title. For as they have asserted, they are purchaser in
good faith and for value in the amount of P190,000.00. There is nothing in the
record which would show that they were aware or they were party to the alleged
irregularities. Hence, title of Rodeanna Realty Corporation cannot now be
assailed (William vs. Barrera, 68 Phil. 656; PMHC vs. Mencias, August 16,
1967, 20 SCRA 1031; Pascua vs. Capuyos, 77 SCRA 78). 42
In affirming the trial court, the Court of Appeals ruled:
As proven by the plaintiff-appellee, they obtained the property in question from
Mr. Puzon, who in turn acquired it in a public auction conducted by the
Municipality of Marikina. By virtue of the sale by Mr. Puzon to plaintiff-
appellee, TCT No. N-119631 was issued in its name. The best proof of
ownership of a piece of land is the certificate of title. The certificate of title is
considered the evidence of plaintiff-appellee's ownership over the subject real
property, and as its registered owner, it is entitled to its possession. Hence, as
compared to the Sarmiento spouses whose previous title over the subject
property has been cancelled, and to the Heirs of Mr. Sison, who had not shown
any better proof of ownership, the plaintiff-appellee, as evidenced by its
certificate of title, has superior right to possess the contested property. . . . 43
Verily, every person dealing with registered land may safely rely on the correctness of
the certificate of title issued therefor and the law will in no way oblige him to go behind
the certificate to determine the condition of the property. 44 Thus, the general rule is that
a purchaser may be considered a purchaser in good faith when he has examined the latest
certificate of title. 45 An exception to this rule is when there exist important facts that
would create suspicion in an otherwise reasonable man to go beyond the present title and
to investigate those that preceded it. Thus, it has been said that a person who deliberately
ignores a significant fact which would create suspicion in an otherwise reasonable man is
not an innocent purchaser for value. 46 A purchaser cannot close his eyes to facts which
should put a reasonable man upon his guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of the vendor. 47 As we have held:
The failure of appellees to take the ordinary precautions which a prudent man
would have taken under the circumstances, specially in buying a piece of land in
the actual, visible and public possession of another person, other than the
vendor, constitutes gross negligence amounting to bad faith.
In this connection, it has been held that where, as in this case, the land sold is in
the possession of a person other than the vendor, the purchaser is required to
go beyond the certificate of title to ma[k]e inquiries concerning the rights of the
actual possessor. Failure to do so would make him a purchaser in bad faith.
(Citations omitted).
xxx xxx xxx
One who purchases real property which is in the actual possession of another
should, at least make some inquiry concerning the right of those in possession.
The actual possession by other than the vendor should, at least put the purchaser
upon inquiry. He can scarely, in the absence of such inquiry, be regarded as a
bona fide purchaser as against such possessors. 48 (Emphasis supplied)
Prescinding from the foregoing, the fact that private respondent RRC did not investigate
the Sarmiento spouses' claim over the subject land despite its knowledge that Pedro
Ogsiner, as their overseer, was in actual possession thereof means that it was not an
innocent purchaser for value upon said land. Article 524 of the Civil Code directs that
possession may be exercised in one's name or in that of another. In herein case, Pedro
Ogsiner had informed RRC that he was occupying the subject land on behalf of the
Sarmiento spouses. Being a corporation engaged in the business of buying and selling
real estate, 49 it was gross negligence on its part to merely rely on Mr. Puzon's assurance
that the occupants of the property were mere squatters considering the invaluable
information it acquired from Pedro Ogsiner and considering further that it had the means
and the opportunity to investigate for itself the accuracy of such information.
Third Issue:
As it is the Sarmiento spouses, as exercised by their overseer Pedro Ogsiner, who have
the right of possession over the subject property, they cannot be made to pay rent to
private respondent RRC.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 27
November 2001 and its Resolution dated 08 March 2002 are REVERSED and SET
ASIDE. The public auction sale conducted on 28 August 1982 is declared VOID for lack
of notice to the registered owners Amancio and Luisa Sarmiento. Transfer Certificate of
Title No. N-119631 of the Registry of Deeds of what was then the Municipality of
Marikina, Province of Rizal, in the name of Rodeanna Realty Corporation is hereby
ANNULLED. The Register of Deeds of Marikina City, Metro Manila, is ordered to
cancel TCT No. N-119631 and to issue, in lieu thereof, a new title in the name of spouses
Amancio and Luisa Sarmiento. Costs against private respondent RRC.
SO ORDERED.
||| (Spouses Sarmiento v. Court of Appeals, G.R. No. 152627, September 16, 2005)

THIRD DIVISION
[G.R. No. 171460. July 27, 2007.]
LILLIAN N. MERCADO, CYNTHIA M. FEKARIS, and JULIAN
MERCADO, JR., represented by their Attorney-In-Fact, ALFREDO
M. PEREZ, petitioners, vs. ALLIED BANKING CORPORATION,
respondent.
D E C I S I O N
CHICO-NAZARIO, J p:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised
Rules of Court, filed by petitioners Lillian N. Mercado, Cynthia M. Fekaris and Julian
Mercado, Jr., represented by their Attorney-In-Fact, Alfredo M. Perez, seeking to reverse
and set aside the Decision 1 of the Court of Appeals dated 12 October 2005, and its
Resolution 2 dated 15 February 2006 in CA-G.R. CV No. 82636. The Court of Appeals,
in its assailed Decision and Resolution, reversed the Decision 3 of the Regional Trial
Court (RTC) of Quezon City, Branch 220 dated 23 September 2003, declaring the deeds
of real estate mortgage constituted on TCT No. RT-18206 (106338) null and void. The
dispositive portion of the assailed Court of Appeals Decision thus reads:
WHEREFORE, the appealed decision is REVERSED and SET ASIDE, and a
new judgment is hereby entered dismissing the [petitioners] complaint. 4
Petitioners are heirs of Perla N. Mercado (Perla). Perla, during her lifetime, owned
several pieces of real property situated in different provinces of the Philippines.
Respondent, on the other hand, is a banking institution duly authorized as such under the
Philippine laws.
On 28 May 1992, Perla executed a Special Power of Attorney (SPA) in favor of her
husband, Julian D. Mercado (Julian) over several pieces of real property registered under
her name, authorizing the latter to perform the following acts:
1. To act in my behalf, to sell, alienate, mortgage, lease and deal otherwise over
the different parcels of land described hereinafter, to wit:
a) Calapan, Oriental Mindoro Properties covered by Transfer
Certificates of Title Nos. T-53618 3,522 Square Meters, T-
46810 3,953 Square Meters, T-53140 177 Square Meters,
T-21403 263 Square Meters, T-46807 39 Square Meters of
the Registry of Deeds of Oriental Mindoro;
b) Susana Heights, Muntinlupa covered by Transfer Certificates of Title
Nos. T-108954 600 Square Meters and RT-106338 805
Square Meters of the Registry of Deeds of Pasig (now
Makati);
c) Personal property 1983 Car with Vehicle Registration No. R-
16381; Model 1983; Make Toyota; Engine No. T-2464. IECcAT
2. To sign for and in my behalf any act of strict dominion or ownership any sale,
disposition, mortgage, lease or any other transactions including quit-
claims, waiver and relinquishment of rights in and over the parcels of
land situated in General Trias, Cavite, covered by Transfer Certificates
of Title Nos. T-112254 and T-112255 of the Registry of Deeds of
Cavite, in conjunction with his co-owner and in the person ATTY.
AUGUSTO F. DEL ROSARIO;
3. To exercise any or all acts of strict dominion or ownership over the above-
mentioned properties, rights and interest therein. (Emphasis supplied.)
On the strength of the aforesaid SPA, Julian, on 12 December 1996, obtained a loan from
the respondent in the amount of P3,000,000.00, secured by real estate mortgage
constituted on TCT No. RT-18206 (106338) which covers a parcel of land with an area
of 805 square meters, registered with the Registry of Deeds of Quezon City (subject
property). 5
Still using the subject property as security, Julian obtained an additional loan from the
respondent in the sum of P5,000,000.00, evidenced by a Promissory Note 6 he executed
on 5 February 1997 as another real estate mortgage (REM).
It appears, however, that there was no property identified in the SPA as TCT No. RT-
18206 (106338) and registered with the Registry of Deeds of Quezon City. What was
identified in the SPA instead was the property covered by TCT No. RT-106338
registered with the Registry of Deeds of Pasig.
Subsequently, Julian defaulted on the payment of his loan obligations. Thus, respondent
initiated extra-judicial foreclosure proceedings over the subject property which was
subsequently sold at public auction wherein the respondent was declared as the highest
bidder as shown in the Sheriff's Certificate of Sale dated 15 January 1998. 7
On 23 March 1999, petitioners initiated with the RTC an action for the annulment of
REM constituted over the subject property on the ground that the same was not covered
by the SPA and that the said SPA, at the time the loan obligations were contracted, no
longer had force and effect since it was previously revoked by Perla on 10 March 1993,
as evidenced by the Revocation of SPA signed by the latter. 8
Petitioners likewise alleged that together with the copy of the Revocation of SPA, Perla,
in a Letter dated 23 January 1996, notified the Registry of Deeds of Quezon City that any
attempt to mortgage or sell the subject property must be with her full consent documented
in the form of an SPA duly authenticated before the Philippine Consulate General in New
York. 9
In the absence of authority to do so, the REM constituted by Julian over the subject
property was null and void; thus, petitioners likewise prayed that the subsequent extra-
judicial foreclosure proceedings and the auction sale of the subject property be also
nullified.
In its Answer with Compulsory Counterclaim, 10 respondent averred that, contrary to
petitioner's allegations, the SPA in favor of Julian included the subject property, covered
by one of the titles specified in paragraph 1 (b) thereof, TCT No. RT-106338 registered
with the Registry of Deeds of Pasig (now Makati). The subject property was
purportedly registered previously under TCT No. T-106338, and was only subsequently
reconstituted as TCT RT-18206 (106338). Moreover, TCT No. T-106338 was actually
registered with the Registry of Deeds of Quezon City and not before the Registry of
Deeds of Pasig (now Makati). Respondent explained that the discrepancy in the
designation of the Registry of Deeds in the SPA was merely an error that must not prevail
over the clear intention of Perla to include the subject property in the said SPA. In sum,
the property referred to in the SPA Perla executed in favor of Julian as covered by TCT
No. 106338 of the Registry of Deeds of Pasig (now Makati) and the subject property in
the case at bar, covered by RT-18206 (106338) of the Registry of Deeds of Quezon
City, are one and the same. CaAIES
On 23 September 2003, the RTC rendered a Decision declaring the REM constituted over
the subject property null and void, for Julian was not authorized by the terms of the SPA
to mortgage the same. The court a quo likewise ordered that the foreclosure proceedings
and the auction sale conducted pursuant to the void REM, be nullified. The dispositive
portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the [herein petitioners] and against the [herein respondent] Bank:
1. Declaring the Real Estate Mortgages constituted and registered under Entry
Nos. PE-4543/RT-18206 and 2012/RT-18206 annotated on TCT No. RT-18206
(106338) of the Registry of Deeds of Quezon City as NULL and VOID;
2. Declaring the Sheriff's Sale and Certificate of Sale under FRE No. 2217 dated
January 15, 1998 over the property covered by TCT No. RT-18206 (106338) of
the Registry of Deeds of Quezon City as NULL and VOID;
3. Ordering the defendant Registry of Deeds of Quezon City to cancel the
annotation of Real Estate Mortgages appearing on Entry Nos. PE-4543/RT-
18206 and 2012/RT-18206 on TCT No. RT-18206 (106338) of the Registry of
Deeds of Quezon City;
4. Ordering the [respondent] Bank to deliver/return to the [petitioners]
represented by their attorney-in-fact Alfredo M. Perez, the original Owner's
Duplicate Copy of TCT No. RT-18206 (106338) free from the encumbrances
referred to above; and
5. Ordering the [respondent] Bank to pay the [petitioners] the amount of
P100,000.00 as for attorney's fees plus cost of the suit.
The other claim for damages and counterclaim are hereby DENIED for lack of
merit. 11
Aggrieved, respondent appealed the adverse Decision before the Court of Appeals.
In a Decision dated 12 October 2005, the Court of Appeals reversed the RTC Decision
and upheld the validity of the REM constituted over the subject property on the strength
of the SPA. The appellate court declared that Perla intended the subject property to be
included in the SPA she executed in favor of Julian, and that her subsequent revocation of
the said SPA, not being contained in a public instrument, cannot bind third persons.
The Motion for Reconsideration interposed by the petitioners was denied by the Court of
Appeals in its Resolution dated 15 February 2006.
Petitioners are now before us assailing the Decision and Resolution rendered by the Court
of Appeals raising several issues, which are summarized as follows:
I WHETHER OR NOT THERE WAS A VALID MORTGAGE
CONSTITUTED OVER SUBJECT PROPERTY.
II WHETHER OR NOT THERE WAS A VALID REVOCATION OF THE
SPA.
III WHETHER OR NOT THE RESPONDENT WAS A MORTGAGEE-IN-
GOOD FAITH.
For a mortgage to be valid, Article 2085 of the Civil Code enumerates the following
essential requisites:
Art. 2085. The following requisites are essential to the contracts of pledge and
mortgage:
(1) That they be constituted to secure the fulfillment of a principal obligation;
aIAEcD
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or
mortgaged;
(3) That the persons constituting the pledge or mortgage have the free disposal
of their property, and in the absence thereof, that they be legally authorized for
the purpose.
Third persons who are not parties to the principal obligation may secure the
latter by pledging or mortgaging their own property.
In the case at bar, it was Julian who obtained the loan obligations from respondent which
he secured with the mortgage of the subject property. The property mortgaged was owned
by his wife, Perla, considered a third party to the loan obligations between Julian and
respondent. It was, thus, a situation recognized by the last paragraph of Article 2085 of
the Civil Code afore-quoted. However, since it was not Perla who personally mortgaged
her own property to secure Julian's loan obligations with respondent, we proceed to
determining if she duly authorized Julian to do so on her behalf.

Under Article 1878 of the Civil Code, a special power of attorney is necessary in cases
where real rights over immovable property are created or conveyed. 12 In the SPA
executed by Perla in favor of Julian on 28 May 1992, the latter was conferred with the
authority to "sell, alienate, mortgage, lease and deal otherwise" the different pieces of
real and personal property registered in Perla's name. The SPA likewise authorized Julian
"[t]o exercise any or all acts of strict dominion or ownership" over the identified
properties, and rights and interest therein. The existence and due execution of this SPA
by Perla was not denied or challenged by petitioners.
There is no question therefore that Julian was vested with the power to mortgage the
pieces of property identified in the SPA. However, as to whether the subject property was
among those identified in the SPA, so as to render Julian's mortgage of the same valid, is
a question we still must resolve.
Petitioners insist that the subject property was not included in the SPA, considering that it
contained an exclusive enumeration of the pieces of property over which Julian had
authority, and these include only: (1) TCT No. T-53618, with an area of 3,522 square
meters, located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds
of Oriental Mindoro; (2) TCT No. T-46810, with an area of 3,953 square meters, located
at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of Oriental
Mindoro; (3) TCT No. T-53140, with an area of 177 square meters, located at Calapan,
Oriental Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (4)
TCT No. T-21403, with an area of 263 square meters, located at Calapan, Oriental
Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (5) TCT No. T-
46807, with an area of 39 square meters, located at Calapan, Oriental Mindoro, and
registered with the Registry of Deeds of Oriental Mindoro; (6) TCT No. T-108954, with
an area of 690 square meters and located at Susana Heights, Muntinlupa; (7) RT-106338
805 Square Meters registered with the Registry of Deeds of Pasig (now Makati); and
(8) Personal Property consisting of a 1983 Car with Vehicle Registration No. R-16381,
Model 1983, Make Toyota, and Engine No. T-2464. Nowhere is it stated in the
SPA that Julian's authority extends to the subject property covered by TCT No. RT-
18206 (106338) registered with the Registry of Deeds of Quezon City. Consequently, the
act of Julian of constituting a mortgage over the subject property is unenforceable for
having been done without authority.
Respondent, on the other hand, mainly hinges its argument on the declarations made by
the Court of Appeals that there was no property covered by TCT No. 106338 registered
with the Registry of Deeds of Pasig (now Makati); but there exists a property, the
subject property herein, covered by TCT No. RT-18206 (106338) registered with the
Registry of Deeds of Quezon City. Further verification would reveal that TCT No. RT-
18206 is merely a reconstitution of TCT No. 106338, and the property covered by both
certificates of title is actually situated in Quezon City and not Pasig. From the foregoing
circumstances, respondent argues that Perla intended to include the subject property in
the SPA, and the failure of the instrument to reflect the recent TCT Number or the exact
designation of the Registry of Deeds, should not defeat Perla's clear intention. EcHTDI
After an examination of the literal terms of the SPA, we find that the subject property
was not among those enumerated therein. There is no obvious reference to the subject
property covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds
of Quezon City.
There was also nothing in the language of the SPA from which we could deduce the
intention of Perla to include the subject property therein. We cannot attribute such alleged
intention to Perla who executed the SPA when the language of the instrument is bare of
any indication suggestive of such intention. Contrariwise, to adopt the intent theory
advanced by the respondent, in the absence of clear and convincing evidence to that
effect, would run afoul of the express tenor of the SPA and thus defeat Perla's true
intention.
In cases where the terms of the contract are clear as to leave no room for interpretation,
resort to circumstantial evidence to ascertain the true intent of the parties, is not
countenanced. As aptly stated in the case of JMA House, Incorporated v. Sta. Monica
Industrial and Development Corporation, 13 thus:
[T]he law is that if the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulation shall
control. When the language of the contract is explicit, leaving no doubt as to the
intention of the drafters, the courts may not read into it [in] any other intention
that would contradict its main import. The clear terms of the contract should
never be the subject matter of interpretation. Neither abstract justice nor the rule
on liberal interpretation justifies the creation of a contract for the parties which
they did not make themselves or the imposition upon one party to a contract or
obligation not assumed simply or merely to avoid seeming hardships. The true
meaning must be enforced, as it is to be presumed that the contracting parties
know their scope and effects. 14
Equally relevant is the rule that a power of attorney must be strictly construed and
pursued. The instrument will be held to grant only those powers which are specified
therein, and the agent may neither go beyond nor deviate from the power of attorney. 15
Where powers and duties are specified and defined in an instrument, all such powers and
duties are limited and are confined to those which are specified and defined, and all other
powers and duties are excluded. 16 This is but in accord with the disinclination of courts
to enlarge the authority granted beyond the powers expressly given and those which
incidentally flow or derive therefrom as being usual and reasonably necessary and proper
for the performance of such express powers. 17
Even the commentaries of renowned Civilist Manresa 18 supports a strict and limited
construction of the terms of a power of attorney:
The law, which must look after the interests of all, cannot permit a man to
express himself in a vague and general way with reference to the right he
confers upon another for the purpose of alienation or hypothecation, whereby he
might be despoiled of all he possessed and be brought to ruin, such excessive
authority must be set down in the most formal and explicit terms, and when this
is not done, the law reasonably presumes that the principal did not mean to
confer it.
In this case, we are not convinced that the property covered by TCT No. 106338
registered with the Registry of Deeds of Pasig (now Makati) is the same as the subject
property covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds
of Quezon City. The records of the case are stripped of supporting proofs to verify the
respondent's claim that the two titles cover the same property. It failed to present any
certification from the Registries of Deeds concerned to support its assertion. Neither did
respondent take the effort of submitting and making part of the records of this case copies
of TCTs No. RT-106338 of the Registry of Deeds of Pasig (now Makati) and RT-18206
(106338) of the Registry of Deeds of Quezon City, and closely comparing the technical
descriptions of the properties covered by the said TCTs. The bare and sweeping statement
of respondent that the properties covered by the two certificates of title are one and the
same contains nothing but empty imputation of a fact that could hardly be given any
evidentiary weight by this Court.
Having arrived at the conclusion that Julian was not conferred by Perla with the authority
to mortgage the subject property under the terms of the SPA, the real estate mortgages
Julian executed over the said property are therefore unenforceable. DIHETS
Assuming arguendo that the subject property was indeed included in the SPA executed
by Perla in favor of Julian, the said SPA was revoked by virtue of a public instrument
executed by Perla on 10 March 1993. To address respondent's assertion that the said
revocation was unenforceable against it as a third party to the SPA and as one who relied
on the same in good faith, we quote with approval the following ruling of the RTC on this
matter:
Moreover, an agency is extinguished, among others, by its revocation (Article
1999, New Civil Code of the Philippines). The principal may revoke the agency
at will, and compel the agent to return the document evidencing the agency.
Such revocation may be express or implied (Article 1920, supra).
In this case, the revocation of the agency or Special Power of Attorney is
expressed and by a public document executed on March 10, 1993.
The Register of Deeds of Quezon City was even notified that any attempt to
mortgage or sell the property covered by TCT No. [RT-18206] 106338 located
at No. 21 Hillside Drive, Blue Ridge, Quezon City must have the full consent
documented in the form of a special power of attorney duly authenticated at the
Philippine Consulate General, New York City, N.Y., U.S.A.
The non-annotation of the revocation of the Special Power of Attorney on TCT
No. RT-18206 is of no consequence as far as the revocation's existence and
legal effect is concerned since actual notice is always superior to constructive
notice. The actual notice of the revocation relayed to defendant Registry of
Deeds of Quezon City is not denied by either the Registry of Deeds of Quezon
City or the defendant Bank. In which case, there appears no reason why Section
52 of the Property Registration Decree (P.D. No. 1529) should not apply to the
situation. Said Section 52 of P.D. No. 1529 provides:

"Section 52. Constructive notice upon registration. Every
conveyance, mortgage, lease, lien, attachment, order, judgment,
instrument or entry affecting registered land shall, if registered, filed
or entered in the Office of the Register of Deeds for the province or city
where the land to which it relates lies, be constructive notice to all
persons from the time of such registering, filing or entering. (Pres.
Decree No. 1529, Section 53) (emphasis ours)
It thus developed that at the time the first loan transaction with defendant Bank
was effected on December 12, 1996, there was on record at the Office of the
Register of Deeds of Quezon City that the special power of attorney granted
Julian, Sr. by Perla had been revoked. That notice, works as constructive notice
to third parties of its being filed, effectively rendering Julian, Sr. without
authority to act for and in behalf of Perla as of the date the revocation letter was
received by the Register of Deeds of Quezon City on February 7, 1996. 19
Given that Perla revoked the SPA as early as 10 March 1993, and that she informed
the Registry of Deeds of Quezon City of such revocation in a letter dated 23 January
1996 and received by the latter on 7 February 1996, then third parties to the SPA are
constructively notified that the same had been revoked and Julian no longer had any
authority to mortgage the subject property. Although the revocation may not be
annotated on TCT No. RT-18206 (106338), as the RTC pointed out, neither the
Registry of Deeds of Quezon City nor respondent denied that Perla's 23 January 1996
letter was received by and filed with the Registry of Deeds of Quezon City.
Respondent would have undoubtedly come across said letter if it indeed diligently
investigated the subject property and the circumstances surrounding its mortgage.
The final issue to be threshed out by this Court is whether the respondent is a mortgagee-
in-good faith. Respondent fervently asserts that it exercised reasonable diligence required
of a prudent man in dealing with the subject property. SHaIDE
Elaborating, respondent claims to have carefully verified Julian's authority over the
subject property which was validly contained in the SPA. It stresses that the SPA was
annotated at the back of the TCT of the subject property. Finally, after conducting an
investigation, it found that the property covered by TCT No. 106338, registered with the
Registry of Deeds of Pasig (now Makati) referred to in the SPA, and the subject property,
covered by TCT No. 18206 (106338) registered with the Registry of Deeds of Quezon
City, are one and the same property. From the foregoing, respondent concluded that
Julian was indeed authorized to constitute a mortgage over the subject property.
We are unconvinced. The property listed in the real estate mortgages Julian executed in
favor of PNB is the one covered by "TCT#RT-18206 (106338)." On the other hand, the
Special Power of Attorney referred to TCT No. "RT-106338 805 Square Meters of the
Registry of Deeds of Pasig now Makati". The palpable difference between the TCT
numbers referred to in the real estate mortgages and Julian's SPA, coupled with the fact
that the said TCTs are registered in the Registries of Deeds of different cities, should
have put respondent on guard. Respondent's claim of prudence is debunked by the fact
that it had conveniently or otherwise overlooked the inconsistent details appearing on the
face of the documents, which it was relying on for its rights as mortgagee, and which
significantly affected the identification of the property being mortgaged. In Arrofo v.
Quio, 20 we have elucidated that:
[Settled is the rule that] a person dealing with registered lands [is not required]
to inquire further than what the Torrens title on its face indicates. This rule,
however, is not absolute but admits of exceptions. Thus, while it is true, . . .
that a person dealing with registered lands need not go beyond the
certificate of title, it is likewise a well-settled rule that a purchaser or
mortgagee cannot close his eyes to facts which should put a reasonable man
on his guard, and then claim that he acted in good faith under the belief
that there was no defect in the title of the vendor or mortgagor. His mere
refusal to face up the fact that such defect exists, or his willful closing of his
eyes to the possibility of the existence of a defect in the vendor's or mortgagor's
title, will not make him an innocent purchaser for value, if it afterwards
develops that the title was in fact defective, and it appears that he had such
notice of the defect as would have led to its discovery had he acted with the
measure of precaution which may be required of a prudent man in a like
situation.
By putting blinders on its eyes, and by refusing to see the patent defect in the scope of
Julian's authority, easily discernable from the plain terms of the SPA, respondent cannot
now claim to be an innocent mortgagee.
Further, in the case of Abad v. Guimba, 21 we laid down the principle that where the
mortgagee does not directly deal with the registered owner of real property, the law
requires that a higher degree of prudence be exercised by the mortgagee, thus:
While [the] one who buys from the registered owner does not need to look
behind the certificate of title, one who buys from [the] one who is not [the]
registered owner is expected to examine not only the certificate of title but all
factual circumstances necessary for [one] to determine if there are any flaws in
the title of the transferor, or in [the] capacity to transfer the land. Although the
instant case does not involve a sale but only a mortgage, the same rule applies
inasmuch as the law itself includes a mortgagee in the term "purchaser". 22
This principle is applied more strenuously when the mortgagee is a bank or a banking
institution. Thus, in the case of Cruz v. Bancom Finance Corporation, 23 we ruled:
Respondent, however, is not an ordinary mortgagee; it is a mortgagee-bank. As
such, unlike private individuals, it is expected to exercise greater care and
prudence in its dealings, including those involving registered lands. A banking
institution is expected to exercise due diligence before entering into a mortgage
contract. The ascertainment of the status or condition of a property offered to it
as security for a loan must be a standard and indispensable part of its operations.
24 SHTaID
Hence, considering that the property being mortgaged by Julian was not his, and there are
additional doubts or suspicions as to the real identity of the same, the respondent bank
should have proceeded with its transactions with Julian only with utmost caution. As a
bank, respondent must subject all its transactions to the most rigid scrutiny, since its
business is impressed with public interest and its fiduciary character requires high
standards of integrity and performance. 25 Where respondent acted in undue haste in
granting the mortgage loans in favor of Julian and disregarding the apparent defects in the
latter's authority as agent, it failed to discharge the degree of diligence required of it as a
banking corporation.
Thus, even granting for the sake of argument that the subject property and the one
identified in the SPA are one and the same, it would not elevate respondent's status to that
of an innocent mortgagee. As a banking institution, jurisprudence stringently requires that
respondent should take more precautions than an ordinary prudent man should, to
ascertain the status and condition of the properties offered as collateral and to verify the
scope of the authority of the agents dealing with these. Had respondent acted with the
required degree of diligence, it could have acquired knowledge of the letter dated 23
January 1996 sent by Perla to the Registry of Deeds of Quezon City which recorded the
same. The failure of the respondent to investigate into the circumstances surrounding the
mortgage of the subject property belies its contention of good faith.
On a last note, we find that the real estate mortgages constituted over the subject property
are unenforceable and not null and void, as ruled by the RTC. It is best to reiterate that
the said mortgage was entered into by Julian on behalf of Perla without the latter's
authority and consequently, unenforceable under Article 1403 (1) of the Civil Code.
Unenforceable contracts are those which cannot be enforced by a proper action in court,
unless they are ratified, because either they are entered into without or in excess of
authority or they do not comply with the statute of frauds or both of the contracting
parties do not possess the required legal capacity. 26 An unenforceable contract may be
ratified, expressly or impliedly, by the person in whose behalf it has been executed,
before it is revoked by the other contracting party. 27 Without Perla's ratification of the
same, the real estate mortgages constituted by Julian over the subject property cannot be
enforced by any action in court against Perla and/or her successors in interest.
In sum, we rule that the contracts of real estate mortgage constituted over the subject
property covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds
of Quezon City are unenforceable. Consequently, the foreclosure proceedings and the
auction sale of the subject property conducted in pursuance of these unenforceable
contracts are null and void. This, however, is without prejudice to the right of the
respondent to proceed against Julian, in his personal capacity, for the amount of the
loans.
WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is GRANTED.
The Decision dated 12 October 2005 and its Resolution dated 15 February 2006 rendered
by the Court of Appeals in CA-G.R. CV No. 82636, are hereby REVERSED. The
Decision dated 23 September 2003 of the Regional Trial Court of Quezon City, Branch
220, in Civil Case No. Q-99-37145, is hereby REINSTATED and AFFIRMED with
modification that the real estate mortgages constituted over TCT No. RT-18206
(106338) are not null and void but UNENFORCEABLE. No costs.

SO ORDERED.
||| (Mercado v. Allied Banking Corporation, G.R. No. 171460, July 27, 2007)

THIRD DIVISION
[G.R. No. 142403. March 26, 2003.]
ALEJANDRO GABRIEL and ALFREDO GABRIEL, petitioners, vs.
SPOUSES PABLO MABANTA AND ESCOLASTICA
COLOBONG, DEVELOPMENT BANK OF THE PHILIPPINES
(Isabela Branch) and ZENAIDA TAN-REYES, respondents.
Public Attorney's Office for petitioner.
Rodrigo A. Rigos for Z. Tan.
SYNOPSIS
Spouses Pablo Mabanta, the registered owners of the subject lots, sold said lots
to petitioner Alejandro Gabriel and subsequently to respondent Zenaida Reyes who
had the previous titles covering said lots cancelled and in lieu thereof, another one
issued in her name. Alejandro filed a complaint for specific performance,
reconveyance and damages. The trial court sustained Alejandro's right over the lot.
The CA, however, reversed the decision and ruled in favor of Reyes on the ground
that a person dealing with registered land may simply rely on the correctness of the
title, in the absence of anything to engender suspicion.
The Supreme Court set aside the CA decision and reinstated the trial court's
decision. The Court ruled: that while the findings of fact of the CA are generally
conclusive on the Supreme Court, an exception to the rule is when the findings of the
CA are contrary to those of the trial court; that in case of double sale of immovable,
mere registration of title is not enough, good faith must concur with registration; and
that certain pieces of evidence in this case, put together, prove that Reyes did not act
in good faith when she bought the lot and had the sale registered.
SYLLABUS
1. REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF THE COURT OF
APPEALS ARE BINDING ON THE SUPREME COURT; EXCEPTION. Settled is
the principle that this Court is not a trier of facts. In the exercise of its power of review,
the findings of fact of the Court of Appeals are conclusive and binding and consequently,
it is not our function to analyze or weigh evidence all over again. This rule, however, is
not an iron-clad rule. In Floro vs. Llenado, we enumerated the various exceptions and
one which finds application to the present case is when the findings of the Court of
Appeals are contrary to those of the trial court. AaITCS
2. CIVIL LAW; SALES; DOUBLE SALE OF IMMOVABLES; TO BE ENTITLED TO
PRIORITY, SECOND BUYER MUST REGISTER SECOND SALE IN GOOD FAITH.
We have consistently held that "in cases of double sale of immovables, what finds
relevance and materiality is not whether or not the second buyer was a buyer in good
faith but whether or not said second buyer registers such second sale in good faith, that
is, without knowledge of any defect in the title of the property sold." Mere registration of
title is not enough, good faith must concur with the registration. To be entitled to priority,
the second purchaser must not only establish prior recording of his deed, but must have
acted in good faith, without knowledge of the existence of another alienation by the
vendor to the other.
3. ID.; ID.; ID.; ID.; CASE AT BAR. In the case at bar, certain pieces of evidence, put
together, would prove that respondent Reyes is not a buyer in good faith. The records
show that on August 18, 1985, spouses Mabanta offered to her for sale the disputed lot.
They told her it was mortgaged with respondent DBP and that she had to pay the loan if
she wanted to buy it. She readily agreed to such a condition. The following day, her
father Benito Tan, accompanied by barangay official Tridanio, went to petitioner
Alejandro's house offering to return to him the P5,000.00 he had paid to spouses
Mabanta. Tan did not suggest to return the 500-square meter lot petitioner delivered to
Susana Soriano. For this reason, petitioner refused Tan's offer and even prohibited him
from going to respondent DBP. . . We are thus convinced that respondent Reyes had
knowledge that petitioner previously bought the disputed lot from respondent spouses
Mabanta. . . . Moreover, it bears noting that on September 16, 1985, both petitioners filed
with the trial court their complaint involving the lot in question against respondents. After
a month, or on October 17, 1985, respondent Reyes had the "Deed of Absolute Sale"
registered with the Registry of Property. Evidently, she wanted to be the first one to
effect its registration to the prejudice of petitioners who, although in possession, have not
registered the same. This is another indicum of bad faith.
D E C I S I O N
SANDOVAL-GUTIERREZ, J p:
Born of the need to protect our land registration system from being converted into an
instrument of fraud, this Court has consistently adhered to the principle that "a mere
registration of title in case of double sale is not enough, good faith must concur with the
registration." ACaEcH
In this petition for review on certiorari, Alejandro Gabriel and Alfredo Gabriel assailed
the Decision 1 dated March 30, 1999 of the Court of Appeals in CA-G.R. CV No. 33941
modifying the Decision 2 dated April 12, 1991 of the Regional Trial Court, Branch 21,
Santiago, Isabela in Civil Case No. 0399 for specific performance, reconveyance and
damages with application for preliminary injunction.
The facts are as follows:
Spouses Pablo and Escolastica Mabanta were the registered owners of two lots located in
Patul and Capaltitan, Santiago, Isabela, with an area of 512 and 15,000 square meters,
covered by Transfer Certificates of Title (TCT) Nos. 72705 and 72707, respectively. On
October 25, 1975, they mortgaged both lots with the Development Bank of the
Philippines (DBP) as collateral for a loan of P14,000.00. 3
Five years thereafter or on September 1, 1980, spouses Mabanta sold the lots to Susana
Soriano by way of a "Deed of Sale of Parcels of Land With Assumption of Mortgage." 4
Included in the Deed is an agreement that they could repurchase the lots within a period
of two (2) years.
Spouses Mabanta failed to repurchase the lots. But sometime in 1984, they were able to
convince Alejandro Gabriel to purchase the lots from Susana Soriano. As consideration,
Alejandro delivered to Susana a 500-square meter residential lot with an actual value of
P40,000.00 and paid spouses Mabanta the sum of P5,000.00. On May 15, 1984, spouses
Mabanta executed a "Deed of Sale with Assumption of Mortgage" 5 in favor of
Alejandro. For her part, Susana executed a document entitled "Cancellation of Contract"
6 whereby she transferred to Alejandro all her rights over the two lots.
Alejandro and his son Alfredo cultivated the lots. They also caused the restructuring of
spouses Mabanta's loan with the DBP. 7 However, when they were ready to pay the entire
loan, they found that spouses Benito and Pura Tan had paid it and that the mortgage was
already cancelled. 8
On August 18, 1985, Benito Tan and Alejandro Tridanio, a barangay official, approached
Alejandro to refund to him the P5,000.00 he paid to spouses Mabanta. Alejandro refused
because Tan was unwilling to return the former's 500-square meter lot delivered to
Susana as purchase price for the lots. Thereafter, spouses Tan tried to eject Alejandro
from the lot covered by TCT No. 72707.
On September 17, 1985, Alejandro and Alfredo filed with the Regional Trial Court,
Branch 21, Santiago, Isabela a complaint (involving the lot covered by TCT No. 72707)
for specific performance, reconveyance and damages with an application for a
preliminary injunction against spouses Mabanta, spouses Tan, the DBP and barangay
officials Dominador Maylem and Alejandro Tridanio. In due time, these defendants filed
their respective answers.
During the proceedings, it turned out that it was spouses Tan's daughter, Zenaida Tan-
Reyes who bought one of the lots (covered by TCT No. 72707) from spouses Mabanta on
August 21, 1985. Not having been impleaded as a party-defendant, she filed an answer-
in-intervention alleging that she is the registered owner of the lot covered by TCT No.
72707; that she purchased it from spouses Mabanta "in good faith and for value"; that she
paid their loan with the DBP in the amounts of P17,580.88 and P16,845.17 per Official
Receipts Nos. 1749539 and 1749540, respectively; that the mortgage with the DBP was
cancelled and spouses Mabanta executed a "Deed of Absolute Sale" 9 in her favor; and
that TCT No. T-72707 was cancelled and in lieu thereof, TCT No. T-160391 was issued
in her name.
On April 12, 1991, the trial court rendered its Decision sustaining the right of Alejandro
and Alfredo Gabriel over the lot covered by TCT No. 72707 (now TCT No. T-160391),
thus:
"WHEREFORE, in the light of the foregoing considerations judgment is hereby
rendered:
1. DECLARING Exhibit "A", the deed of sale with assumption of
mortgage executed by the spouses Pablo Mabanta and
Escolastica Colobong (in favor of Alejandro and Alfredo
Gabriel) valid and subsisting.
2. ORDERING the plaintiff Alejandro Gabriel to pay to the spouses
Pablo Mabanta and Escolastica Colobong the sums of P5,000.00
plus P34,426.05 (representing the loan with the DBP which
plaintiff assumed) within 30 days from receipt hereof.
3. DECLARING the deed of sale executed by the spouses Pablo
Mabanta and Escolastica Colobong in favor of Zenaida Tan-
Reyes as null and void.
4. ORDERING the intervenor Zenaida Tan-Reyes to reconvey the land
covered by T.C.T. No. T-160391 in favor of Alejandro Gabriel.
"SO ORDERED."
In declaring null and void the "Deed of Absolute Sale" (or second sale) of the lot covered
by TCT No. 72707 between spouses Mabanta and Zenaida Tan-Reyes, the trial court
ratiocinated as follows:
"But Zenaida (Tan) Reyes professes that she is a buyer in good faith and for
value. In her testimony she said that the spouses Mabanta offered to sell the land
to her on August 19, 1985. She was informed that the land was mortgaged in the
DBP. She readily agreed to buy the land on that same day. She did not inquire
further into the status of the land. She did not go and see the land first. What she
did was to immediately go to the DBP the following day and paid the mortgage
obligation in the amount of P16,845.17 and P17,580.88 (Exhibits "1" and "2").
The following day August 21, a deed of sale in her favor was prepared and on
October 17, 1985 she secured a certificate of title (Exhibit "5"). Under the above
circumstances, it cannot be said that she is a purchaser in good faith. She should
have first made a thorough investigation of the status of the land. Had she
inquired, she should have been informed that the land was previously sold to at
least two persons Susana Soriano and Alejandro Gabriel. She should also have
first visited the land she was buying. Had she done so she should have
discovered that the land was being cultivated by the Gabriels who would have
informed her that they already bought the land from the Mabantas. The reason
why she did not do this is because she already was appraised of the status of the
land by her father Benito Tan. For reasons known only to her, she decided to
buy the land just the same.

xxx xxx xxx
"Zenaida Tan therefore is not a purchaser in good faith and she cannot seek
refuge behind her certificate of title. True, Article 1544 of the Civil Code
provides that should immovable property be sold to different vendees, the
ownership shall belong to the person who in good faith first recorded it in the
registry of property. Unfortunately, the registration made by Zenaida (Tan)
Reyes of her deed of sale was not in good faith. For this reason in accordance
with the same Article 1544, the land shall pertain to the person who in good
faith was first in possession. There is no question that it is the Gabriels who are
in possession of the land."
Unsatisfied, spouses Mabanta and Zenaida Tan-Reyes interposed an appeal to the Court
of Appeals.
On March 30, 1999, the Court of Appeals rendered a Decision modifying the trial court's
Decision, declaring as valid the second sale of the lot covered by TCT No. 72707
between spouses Mabanta and Zenaida Tan-Reyes on the ground that a person dealing
with registered land may simply rely on the correctness of the certificate of title and, in
the absence of anything to engender suspicion, he is under no obligation to look beyond
it. The dispositive portion of the Appellate Court's Decision reads:
"Wherefore the appealed judgment is AFFIRMED with the following
modification:
1. DECLARING Exhibit "A", the deed of sale with assumption of mortgage
executed by the defendants-appellants spouses Pablo Mabanta and Escolastica
Colobong over lots covered by TCT Nos. T-72705 and T-72707 valid and
subsisting;
2. ORDERING spouses Pablo Mabanta and Escolastica Colobong to surrender
TCT No. 72705 to plaintiff-appellee Alejandro Gabriel;
3. DECLARING the deed of sale executed over lot with TCT No. 72707 (now T-
160391) by spouses Pablo Mabanta and Escolastica Colobong in favor of
intervenor-appellant Zenaida Tan Reyes as valid;
4. ORDERING plaintiffs-appellees and any all persons claiming rights under
them to vacate Lot 3651-A now covered by TCT No. T-160391 and to deliver to
intervenor-appellant Zenaida Tan-Reyes the possession thereof;
5. Dismissing the case against defendants-appellants Benito Tan and Purita
Masa;
6. No pronouncement as to costs.
"SO ORDERED."
In the instant petition for review on certiorari, petitioners Alejandro and Alfredo Gabriel
raise this lone issue:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN DECLARING
THE SECOND SALE OF THE DISPUTED LOT EXECUTED BY SPOUSES
MABANTA IN FAVOR OF ZENAIDA TAN-REYES VALID UNDER
ARTICLE 1544 OF THE CIVIL CODE.
Petitioners contend that respondent Reyes is not a purchaser in good faith since she
bought the disputed lot with the knowledge that petitioner Alejandro is claiming it in a
previous sale.
In her comment on the petition, respondent Reyes maintains that the Court of Appeals'
factual finding that she is a purchaser in good faith and for value is final and conclusive.
Meeting the issue head on, she claims that there is no evidence that prior to August 21,
1985, when she purchased the lot from respondent spouses Mabanta, she had knowledge
of any previous lien or encumbrance on the property.
For its part, respondent DBP avers that it acted in utmost good faith in releasing the
mortgaged lots to respondent spouses Mabanta who had the loan restructured and paid
the same. Also, it did not transact business with spouses Tan.
With respect to respondent spouses Mabanta, this Court's Resolution dated June 14, 2000
requiring them to file comment on the present petition was returned unserved. Thus, in its
Resolution dated January 22, 2001, this Court resolved to consider the Resolution of June
14, 2000 "deemed served" upon them. 10
The petition is impressed with merit.
The issue for our resolution is whether or not respondent Zenaida Tan-Reyes acted in
good faith when she purchased the subject lot and had the sale registered.
Settled is the principle that this Court is not a trier of facts. In the exercise of its power of
review, the findings of fact of the Court of Appeals are conclusive and binding and
consequently, it is not our function to analyze or weigh evidence all over again. 11 This
rule, however, is not an iron-clad rule. 12 In Floro vs. Llenado, 13 we enumerated the
various exceptions and one which finds application to the present case is when the
findings of the Court of Appeals are contrary to those of the trial court.
We start first with the applicable law.
Article 1544 of the Civil Code provides:
"ART. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first possession
thereof in good faith, if it should be movable property.
"Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
"Should there be no inscription, the ownership shall pertain to the person who in
good faith was first in possession; and, in the absence thereof, to the person who
presents the oldest title, provided there is good faith."
Otherwise stated, where it is an immovable property that is the subject of a double sale,
ownership shall be transferred (1) to the person acquiring it who in good faith first
recorded it in the Registry of Property; (2) in default thereof, to the person who in good
faith was first in possession; and (3) in default thereof, to the person who presents the
oldest title, provided there is good faith. 14 The requirement of the law then is two-fold:
acquisition in good faith and registration in good faith. 15 The rationale behind this is
well-expounded in Uraca vs. Court of Appeals, 16 where this Court held:
"Under the foregoing, the prior registration of the disputed property by the
second buyer does not by itself confer ownership or a better right over the
property. Article 1544 requires that such registration must be coupled with
good faith. Jurisprudence teaches us that "(t)he governing principle is primus
tempore, potior jure (first in time, stronger in right). Knowledge gained by the
first buyer of the second sale cannot defeat the first buyer's right except where
the second buyer registers in good faith the second sale ahead of the first, as
provided by the Civil Code. Such knowledge of the first buyer does not bar her
from availing of her rights under the law, among them, to register first her
purchase as against the second buyer. But in converso, knowledge gained by the
second buyer of the first sale defeats his right even if he is first to register the
second sale, since such knowledge taints his prior registration with bad faith.
This is the price exacted by Article 1544 of the Civil Code for the second buyer
being able to displace the first buyer, that before the second buyer can obtain
priority over the first, he must show that he acted in good faith throughout (i.e.
in ignorance of the first sale and of the first buyer's right) from the time of
acquisition until the title is transferred to him by registration or failing
registration, by delivery of possession." (Italics supplied)
In the case at bar, certain pieces of evidence, put together, would prove that respondent
Reyes is not a buyer in good faith. The records show that on August 18, 1985, spouses
Mabanta offered to her for sale the disputed lot. They told her it was mortgaged with
respondent DBP and that she had to pay the loan if she wanted to buy it. 17 She readily
agreed to such a condition. The following day, her father Benito Tan, accompanied by
barangay official Tridanio, went to petitioner Alejandro's house offering to return to him
the P5,000.00 he had paid to spouses Mabanta. Tan did not suggest to return the 500-
square meter lot petitioner delivered to Susana Soriano. 18 For this reason, petitioner
refused Tan's offer and even prohibited him from going to respondent DBP. We quote the
following testimony of petitioner who, despite his blindness as shown by the records,
testified to assert his right, thus:
"ATTY. CHANGALE:
Q What can you say to that statement?
A That is their mistake, sir.
Q Why do you say that is their mistake?
A Because her husband and Tridanio went at home offering to return the money
but I did not accept, sir.
Q Who is this Benito Tan you are referring to?
A The husband of Pura Masa, sir.
Q What is the relationship with the intervenor Zenaida Tan?
A The daughter, sir.
Q When did Benito Tan together with Councilman Tridanio came?
A Before they went to the Development Bank of the Philippines they came at
home and I prohibit them, sir.
Q How did you prohibit them?
A No, I said please I am just waiting for the Bank to inspect then I will pay my
obligation.
xxx xxx xxx
Q You stated earlier that you will just pay the payments. What are those
payments you are referring to?
A The payment I have given to Colobong and to the Bank, sir. They do not want
to return the payment I have given to Susana Soriano and that is the
beginning of our quarrel." 19
We are thus convinced that respondent Reyes had knowledge that petitioner previously
bought the disputed lot from respondent spouses Mabanta. Why should her father
approach petitioner and offer to return to him the money he paid spouses Mabanta?
Obviously, aware of the previous sale to petitioner, respondent Reyes informed her father
about it. At this juncture, it is reasonable to conclude that what prompted him to go to
petitioner's house was his desire to facilitate his daughter's acquisition of the lot, i.e., to
prevent petitioner Alejandro from contesting it. He did not foresee then that petitioner
would insist he has a prior right over the lot. HIAEcT
Now respondent Reyes claims that she is a purchaser in good faith. This is preposterous.
Good faith is something internal. Actually, it is a question of intention. In ascertaining
one's intention, this Court must rely on the evidence of one's conduct and outward acts.
From her actuations as specified above, respondent Reyes cannot be considered to be in
good faith when she bought the lot.

Moreover, it bears noting that on September 16, 1985, both petitioners filed with the trial
court their complaint involving the lot in question against respondents. After a month, or
on October 17, 1985, respondent Reyes had the "Deed of Absolute Sale" registered with
the Registry of Property. Evidently, she wanted to be the first one to effect its registration
to the prejudice of petitioners who, although in possession, have not registered the same.
This is another indicum of bad faith.
We have consistently held that "in cases of double sale of immovables, what finds
relevance and materiality is not whether or not the second buyer was a buyer in good
faith but whether or not said second buyer registers such second sale in good faith, that
is, without knowledge of any defect in the title of the property sold." 20 In Salvoro vs.
Tanega, 21 we had the occasion to rule that:
"If a vendee in a double sale registers the sale after he has acquired knowledge
that there was a previous sale of the same property to a third party or that
another person claims said property in a previous sale, the registration will
constitute a registration in bad faith and will not confer upon him any right."
Mere registration of title is not enough, good faith must concur with the registration. To
be entitled to priority; the second purchaser must not only establish prior recording of his
deed, but must have acted in good faith, without knowledge of the existence of another
alienation by the vendor to the other. 22 In the old case of Leung Yee vs. F. L. Strong
Machinery, Co. and Williamson, this Court ruled:
"One who purchases a real estate with knowledge of a defect of title in his
vendor cannot claim that he has acquired title thereto in good faith as against
the true owner of the land or of an interest therein; and the same rule must be
applied to one who has knowledge of facts which should have put him upon
such inquiry and investigation as might be necessary to acquaint him with the
defects in the title of his vendor. A purchaser cannot close his eyes to facts
which should put a reasonable man upon his guard, and then claim that he
acted in good faith under the belief that there was no defect in the title of the
vendor. His mere refusal to believe that such a defect exists, or his willful
closing of his eyes to the possibility of the existence of a defect in his vendor's
title will not make him an innocent purchaser for value, if it afterwards develops
that the title was in fact defective, and it appears that he had such notice of the
defect as would have led to its discovery had he acted with that measure of
precaution which may reasonably be required of a prudent man in a like
situation. . . ." 23
In fine, we hold that respondent Zenaida Tan-Reyes did not act in good faith when she
bought the lot and had the sale registered.
WHEREFORE, the assailed Decision of the Court of Appeals is REVERSED and SET
ASIDE. The Decision of the trial court is hereby REINSTATED.
SO ORDERED.
Puno, Panganiban, Corona and Carpio-Morales, JJ., concur.
||| (Gabriel v. Spouses Mabanta, G.R. No. 142403, March 26, 2003)

FIRST DIVISION
[G.R. No. 13442. December 20, 1919.]
NARCISA SANCHEZ, plaintiff-appellant, vs. ROQUE RAMOS,
defendant-appellee.
Irureta Goyena & Recto for appellant.
Sisenando Palarca for appellee.
SYLLABUS
1. PURCHASE AND SALE; PREFERENCE IN CASE OF DOUBLE SALE.
F Sold a piece of land to G and S under pacto de retro executed in a public
instrument which was not recorded in the registry of deeds. G and S never took
material possession of said land. The period for repurchase elapsed without the
vendor making use of it. Later on F sold the same land, by means of a private
document, to R who immediately took material possession thereof. Held: That,
according to article 1473 of the Civil Code, G and S were the first to take possession
of the land and, consequently, the sale executed in their favor is preferable.
2. ID.; ID.; MATERIAL AND SYMBOLIC POSSESSION. The possession
mentioned in article 1473 (for determining who has better right when the same piece
of land has been sold several times by the same vendor) includes not only the material
but also the symbolic possession, which is acquired by the execution of a public
instrument.
D E C I S I O N
AVANCEA, J p:
This is an action for the recovery of a piece of land described in the second
paragraph of the complaint. This land is in the defendant's possession and formerly
belonged to Ciriaco Fernandez. On July 1, 1910, Ciriaco Fernandez sold it to the
spouses Marcelino Gomez and Narcisa Sanchez under pacto de retro for the period of
one year. This sale was executed in a public instrument. Marcelino Gomez and
Narcisa Sanchez never took material possession of the land. The period for repurchase
elapsed without the vendor making use of it. On July 3, 1912, Ciriaco Fernandez
again sold the same land, by means of a private document, to Roque Ramos who
immediately took material possession thereof. By applying article 1473 of the Civil
Code, the trial court declared preferable the sale executed to the defendant and
absolved him from the complaint. By the same article applied by the lower court, we
are of the opinion that the sale executed to the plaintiff must be declared preferable.
This article provides:
"ART. 1473. 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 personal property.
"Should it be real property, it shall belong to the purchaser who first
recorded it in the registry of deeds.
"Should it not be recorded, the property shall belong to the person who
first took possession of it in good faith, or, in default of possession, to the
person who presents the oldest title, provided there is good faith."
Not one of the documents of sale in this case having been recorded, preference
must be decided in favor of the vendee who first. took possession.
To what kind of possession does this article refer? Possession is acquired by
the material occupancy of the thing or right possessed, or by the fact that the latter is
subjected to the action of our will, or by the appropriate acts and legal formalities
established for acquiring possession (art. 438, Civil Code.). By a simple reasoning, it
appears that, because the law does not mention to which of these kinds of possession
the article refers, it must be understood that it refers to all of these kinds. The
proposition that this article, according to its letter, refers to the material possession
and excludes the symbolic does not seem to be founded upon a solid ground. It is said
that the law, in the gradation of the causes of preference between several sales, fixes,
first, possession and then the date of the title and, as a public instrument is a title, it is
claimed that the inference is that the law has deliberately intended to place the
symbolic possession, which the execution of the public document implies, after the
material possession. This argument, however, would only be forceful if the title,
mentioned by this article, includes public instruments, and this would only be true if
public instruments are not included in the idea of possession spoken of in said article.
In other words, the strength of the argument rests in that this possession is precisely
the material and does not include the symbolic. Consequently, the argument is
deficient for it is begging the same question, because if this possession includes the
symbolic, which is acquired by the execution of a public instrument, it should be
understood that the title, mentioned by the law as the next cause of preference, does
not include public instruments.
Furthermore, our interpretation of this article 1473 is more in consonance with
the principles of justice. The execution of a public instrument is equivalent to the
delivery of the realty sold (art. 1462, Civil Code) and its possession by the vendee
(art. 438). Under these conditions the sale is considered consummated and completely
transfers to the vendee all of the vendor's rights of ownership including his real right
over the thing. The vendee by virtue of this sale has acquired everything and nothing,
absolutely nothing, is left to the vendor From this moment the vendor is a stranger to
the thing sold like any other who has never been its owner. As the thing is considered
delivered, the vendor has no longer the obligation of even delivering it. If he
continues taking material possession of it, it is simply on account of vendee's
tolerance and, in this sense, his possession is vendor's possession. And if the latter
should have to ask him for the delivery of this material possession, it would not be by
virtue of the sale, because this has been already consummated and has produced all its
effects, but by virtue of the vendee's ownership, in the same way as said vendee could
require of another person although same were not the vendor. This means that after
the sale of a realty by means of a public instrument, the vendor, who resells it to
another, does not transmit anything to the second vendee and if the latter, by virtue of
this second sale, takes material Possession of the thing, he does it as mere detainer,
and it would be unjust to protect this detention against the rights to the thing lawfully
acquired by the first vendee.
We are of the opinion that the possession mentioned in article 1473 (for
determining who has better right when the same piece of land has been sold several
times by the same vendor) includes not only the material but also the symbolic
possession, which is acquired by the execution of a public instrument.
From the foregoing it follows that the plaintiff was the first to take possession
of the land, and consequently the sale executed to him is preferable.
Wherefore, the judgment appealed from is hereby reversed; the plaintiff is
declared owner of the land in question; and the defendant is ordered to deliver the
possession of the land to the plaintiff. No special findings as to costs. So ordered.
Arellano, C. J., Torres, Johnson, Araullo and Malcolm, JJ, concur.
Separate Opinions
STREET, J., dissenting:
In my judgment the possession referred to in article 1473 of the Civil Code is
the actual, material and physical possession of the thing sold; and in applying that
provision no account should ever be taken of the symbolic possession which is
supposed to be acquired by the purchaser, under article 1462 of the Civil Code, when
the sale is proved by a public document.
The authors of the Civil Code have stated three distinct criteria for determining
who has the better right when the same piece of real property is sold by the same
vendor, to two different persons, which are: First, priority of registration; secondly, in
default of registration, the taking of possession in good faith by the purchaser, and
thirdly, in default of both the preceding factors, mere priority of title.
The only possible purpose which the codifiers could have had in mind in
inserting this article in the Code was to prevent what in many cases amounts to a
fraud upon the innocent second purchaser. The first purchaser needs no protection, for
in the absence of special provision, he would always have the superior right by virtue
of the priority of his title. Now, as will be discerned, the danger to the second
purchaser consists precisely in his ignorance of the fact that a prior sale was made,
due to the possible secrecy of the transaction and to the occultation by the parties
thereto of the circumstances which would ordinarily reveal the existence of such sale.
In order, then, to protect the second purchaser, the authors of the Civil Code
saw fit to state two conditions either of which, when fulfilled, gives the second
purchaser the better right, namely, priority of registration and priority in the
acquisition of possession. These tests must both be understood to relate to acts
extrinsic to the contracts, or documents of sale, under which the rival purchasers
pretend to have acquired title. Otherwise the whole purpose of the article is defeated.
When a question is made between two persons claiming the same land under
documents executed by the same vendor, and the right has to be determined by the
fact of registration, we here have recourse to a test which is extrinsic to the original
act of executing the document and incapable of occultation. Likewise, when the right
is to be determined by the other test, namely, the taking of possession by one or the
other of the vendees, reference must be had to the taking of material possession as an
act extrinsic to the execution of the contract, or document of sale, under which
possession was taken.
The question as to who has the material possession of a parcel of real property
can usually be ascertained by inspection or inquiry among persons living in the
neighborhood, and although the information thus obtained is less certain and absolute
than that which would be revealed by the registration of title; nevertheless there is a
presumption of ownership from the fact of possession, and a purchaser who, relying
on the evidence supplied by his eyes, pays his money to one who is believed to be the
true owner and takes the material possession from him, should be protected as against
any prior purchaser except the one who may have registered his title. This was
without doubt the intention of the codifiers. Otherwise the third paragraph of article
1473 would have been so drawn as to read as follows:

"Should it not be recorded, the property shall belong to the person whose
purchase is proved by a public instrument, and if neither sale be this proved, to
the person who first took possession of it in good faith, or, in default of
possession, to the person who presents the oldest title, provided there is good
faith."
In other words, if the codifiers had intended to create a preferential right based
upon the fact that a contract of sale is executed in the form of a public instrument, this
would have been enumerated among the criteria expressed in article 1473, as giving
the better right.
The omission of the authors of the Code to take this course in framing that
article is significant; and it was doubtless due to a perception of the fact that the form
in which a contract happens to be executed affords no proper test when the question is
between one who claims under that contract and one who claims under another
contract of later date executed by the same vendor. The court, by the decision made in
this case has, we submit, amended article 1473 by inserting therein a provision
antagonistic to the spirit of that article and destructive of its purpose.
If there were any real publicity incident to the execution of a public instrument,
the result would not be so baleful. But under our existing notarial system, the
acknowledgment of a document before a notary involves no general publicity; and the
notarial register is apparently not even open to general inspection so long as it remains
in the hands of the notary. Besides, where there are dozens of notaries accessible to
the public, as in the city of Manila, it would be impracticable for a person, desirous of
purchasing a particular piece of unregistered property, to ascertain whether or not
such property has been the subject of a prior sale acknowledges before a notary. The
impossibility of protecting a purchaser in good faith from such occult prior
transactions is obvious.

||| (Sanchez v. Ramos, G.R. No. 13442, December 20, 1919)

THIRD DIVISION
[G.R. No. 151212. September 10, 2003.]
TEN FORTY REALTY AND DEVELOPMENT CORP.,
Represented by its President, VERONICA G. LORENZANA,
petitioner, vs. MARINA CRUZ, respondent.
Oscar L. Karaan for petitioner.
Carmelino M. Roque for respondent.
SYNOPSIS
Galino allegedly sold the property in question to petitioner in 1996, then sold the same
property to respondent in, 1998. Petitioner argued that being the first buyer, it has a better
right to own the realty.
In denying the petition, the Supreme Court applied Article 1544 of the Civil Code. In
case of double sale of immovable property, the law gives preferential right to the buyer
who in good faith first recorded it in the registry of property. In the absence of the
required inscription, the person who in good faith was first in possession has the better
right to own the realty. Petitioner in this case admitted that its Deed of Sale had not been
recorded in the Registry of Deeds. Subject property had also not been delivered to
petitioner, hence, as between the two buyers, respondent was first in actual possession of
the property. aTEHIC
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; UNLAWFUL DETAINER;
OWNER'S PERMISSION OR TOLERANCE MUST HAVE BEEN PRESENT AT THE
BEGINNING OF INTRUDER'S OCCUPATION OF THE PREMISES; CASE AT
BAR. In its Complaint, petitioner alleged that, having acquired the subject property
from Barbara Galino on December 5, 1996, it was the true and absolute owner thereof;
that Galino had sold the property to Respondent Cruz on April 24, 1998; that after the
sale, the latter immediately occupied the property, an action that was merely tolerated by
petitioner; and that, in a letter given to respondent on April 12, 1999, petitioner had
demanded that the former vacate the property, but that she refused to do so. Petitioner
thereupon prayed for judgment ordering her to vacate the property and to pay reasonable
rentals for the use of the premises, attorney's fees and the costs of the suit. The above
allegations appeared to show the elements of unlawful detainer. They also conferred
initiatory jurisdiction on the MTCC, because the case was filed a month after the last
demand to vacate hence, within the one-year prescriptive period. . . To justify an
action for unlawful detainer, the permission or tolerance must have been present at the
beginning of the possession. However, what was actually proven by petitioner was that
possession by respondent had been illegal from the beginning. While the Complaint was
crafted to be an unlawful detainer suit, petitioner's real cause of action was for forcible
entry, which had already prescribed. Consequently, the MTCC had no more jurisdiction
over the action. TcEaDS
2. CIVIL LAW; SPECIAL CONTRACTUAL; SALES, BUYER ACQUIRES THE
THING UPON ITS DELIVERY; PETITIONER DID NOT GAIN CONTROL AND
POSSESSION OF PROPERTY IN CASE AT BAR. In a contract of sale, the buyer
acquires the thing sold only upon its delivery "in any of the ways specified in Articles
1497 to 1501, or in any other manner signifying an agreement that the possession is
transferred from the vendor to the vendee." With respect to incorporeal property, Article
1498 lays down the general rule: the execution of a public instrument shall be equivalent
to the delivery of the thing that is the object of the contract if, from the deed, the contrary
does not appear or cannot be clearly inferred. However, ownership is transferred not by
contract but by tradition or delivery. Nowhere in the Civil Code is it provided that the
execution of a Deed of Sale is a conclusive presumption of delivery of possession of a
piece of real estate. This Court has held that the execution of a public instrument gives
rise only to a prima facie presumption of delivery. Such presumption is destroyed when
the delivery is not effected because of a legal impediment. . . In the case at bar it is
undisputed that petitioner did not occupy the property from the time it was allegedly sold
to it on December 5, 1996 or at any time thereafter. SHECcT
3. ID.; ID.; ID.; DOUBLE SALE OF IMMOVABLE PROPERTY; ORDER OF
PREFERENCE; CASE AT BAR. The ownership of immovable property sold to two
different buyers at different times is governed by Article 1544 of the Civil Code. . .
Galino allegedly sold the property in question to petitioner on December 5, 1996 and,
subsequently, to respondent on April 24, 1998. Petitioner thus argues that being the first
buyer, it has a better right to own the realty. However, it has not been able to establish
that its Deed of Sale was recorded in the Registry of Deeds of Olongapo City. Its claim of
an unattested and unverified notation on its Deed of Absolute Sale is not equivalent to
registration. It admits that, indeed, the sale has not been recorded in the Registry of
Deeds. In the absence of the required inscription, the law gives preferential right to the
buyer who in good faith is first in possession. . . Earlier, we ruled that the subject
property had not been delivered to petitioner; hence, it did not acquire possession either
materially or symbolically. As between the two buyers, therefore, respondent was first in
actual possession of the property.
D E C I S I O N
PANGANIBAN, J p:
In an ejectment suit, the question of ownership may be provisionally ruled upon for the
sole purpose of determining who is entitled to possession de facto. In the present case,
both parties base their alleged right to possess on their right to own. Hence, the Court of
Appeals did not err in passing upon the question of ownership to be able to decide who
was entitled to physical possession of the disputed land.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, seeking to
nullify the August 31, 2001 Decision 2 and December 19, 2001 Resolution 3 of the Court
of Appeals (CA) in CA-G.R. SP No. 64861. The dispositive portion of the assailed
Decision is as follows:
"WHEREFORE, premises considered, the petition is hereby DISMISSED and
the Decision dated May 4, 2001 is hereby AFFIRMED." 4
The assailed Resolution denied petitioner's Motion for Reconsideration.
The Facts
The facts of the case are narrated by the CA as follows:
"A complaint for ejectment was filed by [Petitioner Ten Forty Realty and
Development Corporation] against . . . [Respondent Marina Cruz] before the
Municipal Trial Court in Cities (MTCC) of Olongapo City, docketed as Civil
Case 4269, which alleged that: petitioner is the true and absolute owner of a
parcel of lot and residential house situated in #71 18th Street, E.B.B. Olongapo
City, particularly described as:
'A parcel of residential house and lot situated in the above-mentioned
address containing an area of 324 square meters more or less bounded
on the Northeast by 041 (Lot 255, Ts-308); on the Southeast by 044 (Lot
255, Ts-308); on the Southwest by 043 (Lot 226-A & 18th street) and on
the Northwest by 045 (Lot 227, Ts-308) and declared for taxation
purposes in the name of [petitioner] under T.D. No. 002-4595-R and
002-4596. ISDCaT
having acquired the same on December 5, 1996 from Barbara Galino by virtue
of a Deed of Absolute Sale; the sale was acknowledged by said Barbara Galino
through a 'Katunayan'; payment of the capital gains tax for the transfer of the
property was evidenced by a Certification Authorizing Registration issued by
the Bureau of Internal Revenue; petitioner came to know that Barbara Galino
sold the same property on April 24, 1998 to Cruz, who immediately occupied
the property and which occupation was merely tolerated by petitioner; on
October 16, 1998, a complaint for ejectment was filed with the Barangay East
Bajac-Bajac, Olongapo City but for failure to arrive at an amicable settlement, a
Certificate to File Action was issued; on April 12, 1999 a demand letter was
sent to [respondent] to vacate and pay reasonable amount for the use and
occupation of the same, but was ignored by the latter; and due to the refusal of
[respondent] to vacate the premises, petitioner was constrained to secure the
services of a counsel for an agreed fee of P5,000.00 as attorney's fee and
P500.00 as appearance fee and incurred an expense of P5,000.00 for litigation.
"In respondent's Answer with Counterclaim, it was alleged that: petitioner is not
qualified to own the residential lot in dispute, being a public land; according to
Barbara Galino, she did not sell her house and lot to petitioner but merely
obtained a loan from Veronica Lorenzana; the payment of the capital gains tax
does not necessarily show that the Deed of Absolute Sale was at that time
already in existence; the court has no jurisdiction over the subject matter
because the complaint was filed beyond the one (1) year period after the alleged
unlawful deprivation of possession; there is no allegation that petitioner had
been in prior possession of the premises and the same was lost thru force, stealth
or violence; evidence will show that it was Barbara Galino who was in
possession at the time of the sale and vacated the property in favor of
respondent; never was there an occasion when petitioner occupied a portion of
the premises, before respondent occupied the lot in April 1998, she caused the
cancellation of the tax declaration in the name of Barbara Galino and a new one
issued in respondent's name; petitioner obtained its tax declaration over the
same property on November 3, 1998, seven (7) months [after] the respondent
[obtained hers]; at the time the house and lot [were] bought by respondent, the
house was not habitable, the power and water connections were disconnected;
being a public land, respondent filed a miscellaneous sales application with the
Community Environment and Natural Resources Office in Olongapo City; and
the action for ejectment cannot succeed where it appears that respondent had
been in possession of the property prior to the petitioner." 5
In a Decision 6 dated October 30, 2000, the Municipal Trial Court in Cities (MTCC)
ordered respondent to vacate the property and surrender to petitioner possession thereof.
It also directed her to pay, as damages for its continued unlawful use, P500 a month from
April 24, 1999 until the property was vacated, P5,000 as attorney's fees, and the costs of
the suit.

On appeal, the Regional Trial Court 7 (RTC) of Olongapo City (Branch 72) reversed the
MTCC. The RTC ruled as follows: 1) respondents entry into the property was not by
mere tolerance of petitioner, but by virtue of a Waiver and Transfer of Possessory Rights
and Deed of Sale in her favor; 2) the execution of the Deed of Sale without actual transfer
of the physical possession did not have the effect of making petitioner the owner of the
property, because there was no delivery of the object of the sale as provided for in Article
1428 of the Civil Code; and 3) being a corporation, petitioner was disqualified from
acquiring the property, which was public land.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioner had failed to make a case for unlawful
detainer, because no contract express or implied had been entered into by the
parties with regard to possession of the property. It ruled that the action should have been
for forcible entry, in which prior physical possession was indispensable a
circumstance petitioner had not shown either.
The appellate court also held that petitioner had challenged the RTC's ruling on the
question of ownership for the purpose of compensating for the latter's failure to counter
such ruling. The RTC had held that, as a corporation, petitioner had no right to acquire
the property which was alienable public land.
Hence, this Petition. 8
Issues
Petitioner submits the following issues for our consideration:
"1. The Honorable Court of Appeals had clearly erred in not holding that
[r]espondent's occupation or possession of the property in question was
merely through the tolerance or permission of the herein [p]etitioner;
"[2.] The Honorable Court of Appeals had likewise erred in holding that the
ejectment case should have been a forcible entry case where prior
physical possession is indispensable; and
"[3.] The Honorable Court of Appeals had also erred when it ruled that the
herein [r]espondent's possession or occupation of the said property is in
the nature of an exercise of ownership which should put the herein
[p]etitioner on guard." 9
The Court's Ruling
The Petition has no merit.
First Issue:
Alleged Occupation by Tolerance
Petitioner faults the CA for not holding that the former merely tolerated respondent's
occupation of the subject property. By raising this issue, petitioner is in effect asking this
Court to reassess factual findings. As a general rule, this kind of reassessment cannot be
done through a petition for review on certiorari under Rule 45 of the Rules of Court,
because this Court is not a trier of facts; it reviews only questions of law. 10 Petitioner
has not given us ample reasons to depart from the general rule.
On the basis of the facts found by the CA and the RTC, we find that petitioner failed to
substantiate its case for unlawful detainer. Admittedly, no express contract existed
between the parties. Not shown either was the corporation's alleged tolerance of
respondent's possession.
While possession by tolerance may initially be lawful, it ceases to be so upon the owner's
demand that the possessor by tolerance vacate the property. 11 To justify an action for
unlawful detainer, the permission or tolerance must have been present at the beginning of
the possession. 12 Otherwise, if the possession was unlawful from the start, an action for
unlawful detainer would be an improper remedy. Sarona v. Villegas 13 elucidates thus:
"A close assessment of the law and the concept of the word 'tolerance' confirms
our view heretofore expressed that such tolerance must be present right from the
start of possession sought to be recovered, to categorize a cause of as one of
unlawful detainer not of forcible entry. Indeed, to hold otherwise would espouse
a dangerous doctrine. And for two reasons. First. Forcible entry into the land is
an open challenge to the right of the possessor. Violation of that right authorizes
the speedy redress in the inferior court provided for in the rules. If one
year from the forcible entry is allowed to lapse before suit is filed, then the
remedy ceases to be speedy; and the possessor is deemed to have waived his
right to seek relief in the inferior court. Second, if a forcible entry action in the
inferior court is allowed after the lapse of a number of years, then the result may
well be that no action for forcible entry can really prescribe. No matter how
long such defendant is in physical possession, plaintiff will merely make a
demand, bring suit in the inferior court upon a plea of tolerance to prevent
prescription to set in and summarily throw him out of the land. Such a
conclusion is unreasonable. Especially if we bear in mind the postulates that
proceedings of forcible entry and unlawful detainer are summary in nature, and
that the one year time bar to suit is but in pursuance of the summary nature of
the action." 14
In this case, the Complaint and the other pleadings do not recite any, averment of fact that
would substantiate the claim of petitioner that it permitted or tolerated the occupation of
the property by Respondent Cruz. The Complaint contains only bare allegations that 1)
respondent immediately occupied the subject property after its sale to her, an action
merely tolerated by petitioner; 15 and 2) her allegedly illegal occupation of the premises
was by mere tolerance. 16
These allegations contradict, rather than support, petitioner's theory that its cause of
action is for unlawful detainer. First, these arguments advance the view that respondent's
occupation of the property was unlawful at its inception. Second, they counter the
essential requirement in unlawful detainer cases that petitioner's supposed act of
sufferance or tolerance must be present right from the start of a possession that is later
sought to be recovered. 17
As the bare allegation of petitioner's tolerance of respondent's occupation of the premises
has not been proven, the possession should be deemed illegal from the beginning. Thus,
the CA correctly ruled that the ejectment case should have been for forcible entry an
action that had already prescribed, however, when the Complaint was filed on May 12,
1999. The prescriptive period of one year for forcible entry cases is reckoned from the
date of respondent's actual entry into the land, which in this case was on April 24, 1998.
Second Issue:
Nature of the Case
Much of the difficulty in the present controversy stems from the legal characterization of
the ejectment Complaint filed by petitioner. Specifically, was it for unlawful detainer or
for forcible entry?
The answer is given in Section 1 of Rule 70 of the Rules of Court, which we reproduce as
follows:
"SECTION 1. Who may institute proceedings, and when. Subject to the
provisions of the next succeeding section, a person deprived of the possession of
any land or building by force, intimidation, threat, strategy, or stealth, or a
vendor, vendee, or other person against whom the possession of any land or
building is unlawfully withheld after expiration or termination of the right to
hold possession, by virtue of any contract, express or implied, or the legal
representatives or assigns of any such lessor, vendor, vendee, or other person,
may, at any time within one (1) year after such unlawful deprivation or
withholding of possession, bring an action in the proper Municipal Trial Court
against the person or persons unlawfully withholding or depriving of
possession, or any person or persons claiming under them, for the restitution of
such possession, together with damages and costs.''
While both causes of action deal only with the sole issue of physical or de facto
possession, 18 the two cases are really separate and distinct, as explained below:
". . . . In forcible entry, one is deprived of physical possession of land or
building by means of force, intimidation, threat, strategy, or stealth. In unlawful
detainer, one unlawfully withholds possession thereof after the expiration or
termination of his right to hold possession under any contract, express or
implied. In forcible entry, the possession is illegal from the beginning and the
basic inquiry centers on who has the prior possession de facto. In unlawful
detainer, the possession was originally lawful but became unlawful by the
expiration or termination of the right to possess, hence the issue of rightful
possession is decisive for, in such action, the defendant is in actual possession
and the plaintiff's cause of action is the termination of the defendant's right to
continue in possession.
"What determines the cause of action is the nature of defendant's entry into the
land. If the entry is illegal, then the action which may be filed against the
intruder within one year therefrom is forcible entry. If, on the other hand, the
entry is legal but the possession thereafter became illegal, the case is one of
unlawful detainer which must be filed within one year from the date of the last
demand." 19
It is axiomatic that what determines the nature of an action as well as which court has
jurisdiction over it are the allegations in the complaint 20 and the character of the relief
sought. 21
In its Complaint, petitioner alleged that, having acquired the subject property from
Barbara Galino on December 5 1996, 22 it was the true and absolute owner 23 thereof;
that Galino had sold the property to Respondent Cruz on April 24, 1998; 24 that after the
sale, the latter immediately occupied the property, an action that was merely tolerated by
petitioner; 25 and that, in a letter given to respondent on April 12, 1999, 26 petitioner had
demanded that the former vacate the property, but that she refused to do so. 27 Petitioner
thereupon prayed for judgment ordering her to vacate the property and to pay reasonable
rentals for the use of the premises, attorney's fees and the costs of the suit. 28
The above allegations appeared to show the elements of unlawful detainer. They also
conferred initiatory jurisdiction on the MTCC, because the case was filed a month after
the last demand to vacate hence, within the one-year prescriptive period.

However, what was actually proven by petitioner was that possession by respondent had
been illegal from the beginning. While the Complaint was crafted to be an unlawful
detainer suit, petitioner's real cause of action was for forcible entry, which had already
prescribed. Consequently, the MTCC had no more jurisdiction over the action.
The appellate court, therefore, did not err when it ruled that petitioner's Complaint for
unlawful detainer was a mere subterfuge or a disguised substitute action for forcible
entry, which had already prescribed. To repeat, to maintain a viable action for forcible
entry, plaintiff must have been in prior physical possession of the property; this is an
essential element of the suit. 29
Third Issue:
Alleged Acts of Ownership
Petitioner next questions the CA's pronouncement that respondent's occupation of the
property was an exercise of a right flowing from a claim of ownership. It submits that the
appellate court should not have passed upon the issue of ownership, because the only
question for resolution in an ejectment suit is that of possession de facto.
Clearly, each of the parties claimed the right to possess the disputed property because of
alleged ownership of it. Hence, no error could have been imputed to the appellate court
when it passed upon the issue of ownership only for the purpose of resolving the issue of
possession de facto. 30 The CA's holding is moreover in accord with jurisprudence and
the law.
Execution of a Deed of Sale Not Sufficient as Delivery
In a contract of sale, the buyer acquires the thing sold only upon its delivery "in any of
the ways specified in Articles 1497 to 1501, or any other manner signifying an agreement
that the possession is transferred from the vendor to the vendee." 31 With respect to
incorporeal property, Article 1498 lays down the general rule: the execution of a public
instrument shall be equivalent to the delivery of the thing that is the object of the contract
if, from the deed, the contrary does not appear or cannot be clearly inferred. ASETHC
However, ownership is transferred not by contract but by tradition or delivery. 32
Nowhere in the Civil Code is it provided that the execution of a Deed of Sale is a
conclusive presumption of delivery of possession of a piece of real estate. 33
This Court has held that the execution of a public instrument gives rises only to a prima
facie presumption of delivery. Such presumption is destroyed when the delivery is not
effected because of a legal impediment. 34 Pasagui v. Villablanca 35 had earlier ruled
that such constructive or symbolic delivery, being merely presumptive, was deemed
negated by the failure of the vendee to take actual possession of the land sold.
It is undisputed that petitioner did not occupy the property from the time it was allegedly
sold to it on December 5, 1996 or at any time thereafter. Nonetheless, it maintains that
Galino's continued stay in the premises from the time of the sale up to the time
respondent's occupation of the same on April 24, 1998, was possessions held on its behalf
and had the effect of delivery under the law. 36
Both the RTC and the CA disagreed. According to the RTC, petitioner did not gain
control and possession of the property, because Galino had continued to exercise
ownership rights over the realty. That is, she had remained in possession, continued to
declare it as her property for tax purposes and sold it to respondent in 1998.
For its part, the CA found it highly unbelievable that petitioner which claims to be the
owner of the disputed property would tolerate possession of the property by
respondent from April 24, 1998 up to October 16, 1998. How could it have been so
tolerant despite its knowledge that the property had been sold to her, and that it was by
virtue of that sale that she had undertaken major repairs and improvements on it?
Petitioner should have likewise been put on guard by respondent's declaration of the
property for tax purposes on April 23, 1998, 37 as annotated in the tax certificate filed
seven months later. 38 Verily, the tax declaration represented an adverse claim over the
unregistered property and was inimical to the right of petitioner.
Indeed, the above circumstances derogated its claim of control and possession of the
property.
Order of Preference in Double Sale of Immovable Property
The ownership of immovable property sold to two different buyers at different times is
governed by Article 1544 of the Civil Code, which reads as follows:
"Article 1544. . . .
"Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
"Should there be no inscription, the ownership shall pertain to the person who in
good faith was first in possession; and, in the absence thereof, to the person who
presents the oldest title, provided there is good faith."
Galino allegedly sold the property in question to petitioner on December 5, 1996 and,
subsequently, to respondent on April 24, 1998. Petitioner thus argues that being the first
buyer, it has a better right to own the realty. However, it has not been able to establish
that its Deed of Sale was recorded in the Registry of Deeds of Olongapo City. 39 Its
claim of an unattested and unverified notation on its Deed of Absolute Sale 40 is not
equivalent to registration. It admits that, indeed, the sale has not been recorded in the
Registry of Deeds. 41
In the absence of the required inscription, the law gives preferential right to the buyer
who in good faith is first in possession. In determining the question of who is first in
possession, certain basic parameters have been established by jurisprudence.
First, the possession mentioned in Article 1544 includes not only material but also
symbolic possession. 42 Second, possessors in good faith are those who are not aware of
any flaw in their title or mode of acquisition. 43 Third, buyers of real property that is in
the possession of persons other than the seller must be wary they must investigate the
rights of the possessors. 44 Fourth, good faith is always presumed; upon those who allege
bad faith on the part of the possessors rests the burden of proof. 45
Earlier, we ruled that the subject property had not been delivered to petitioner; hence, it
did not acquire possession either materially or symbolically. As between the two buyers,
therefore, respondent was first in actual possession of the property.
Petitioner has not proven that respondent was aware that her mode of acquiring the
property was defective at the time she acquired it from Galino. At the time, the property
which was public land had not been registered in the name of Galino; thus,
respondent relied on the tax declarations thereon. As shown, the former's name appeared
on the tax declarations for the property until its sale to the latter in 1998. Galino was in
fact occupying the realty when respondent took over possession. Thus, there was no
circumstance that could have placed the latter upon inquiry or required her to further
investigate petitioner's right of ownership.
Disqualification from Ownership of Alienable Public Land
Private corporations are disqualified from acquiring lands of the public domain, as
provided under Section 3 of Article XII of the Constitution, which we quote:
"Sec. 3. Lands of the public domain are classified into agricultural, forest or
timber, mineral lands, and national parks. Agricultural lands of the public
domain may be further classified by law according to the uses to which they
may be devoted. Alienable lands of the public domain shall be limited to
agricultural lands. Private corporations or associations may not hold such
alienable lands of the public domain except by lease, for a period not exceeding
twenty-five years, and not to exceed one thousand hectares in area. Citizens of
the Philippines may not lease not more than five hundred hectares, or acquire
not more than twelve hectares thereof by purchase, homestead, or grant. . . ."
(Italics supplied)
While corporations cannot acquire land of the public domain, they can however acquire
private land. 46 Hence, the next issue that needs to be resolved is the determination of
whether the disputed property is private land or of the public domain.
According to the certification by the City Planning and Development Office of Olongapo
City, the contested property in this case is alienable and disposable public land. 47 It was
for this reason that respondent filed a miscellaneous sales application to acquire it. 48
On the other hand, petitioner has not presented proof that, at the time it purchased the
property from Galino, the property had ceased to be of the public domain and was already
private land. The established rule is that alienable and disposable land of the public
domain held and occupied by a possessor personally or through predecessors-in-
interest, openly, continuously, and exclusively for 30 years is ipso jure converted to
private property by the mere lapse of time. 49
In view of the foregoing, we affirm the appellate court's ruling that respondent is entitled
to possession de facto. This determination, however, is only provisional in nature. 50
Well-settled is the rule that an award of possession de facto over a piece of property does
not constitute res judicata as to the issue of its ownership. 51
WHEREFORE, this Petition is DENIED and the assailed Decision AFFIRMED. Costs
against petitioner.
SO ORDERED.
Sandoval-Gutierrez, Corona and Carpio Morales, JJ., concur.
Puno, J., is on official leave.
||| (Ten Forty Realty and Development Corp. v. Cruz, G.R. No. 151212, September 10,
2003)

EN BANC
[G.R. No. 11907. February 27, 1919.]
FAUSTINO LICHAUCO, ET. AL,., plaintiffs-appellants, vs. JOSE
BERENGUER, ET. AL., defendants-appellees.
Sumulong and Estrada for appellants.
Ramon Salinas for appellees.
SYLLABUS
1. VENDOR AND PURCHASER; PREFERENCE IN CASE OF DOUBLE
SALE; POSSESSION BY VENDOR. In 1882 B sold to S a piece of land. After
the sale B continued in the possession of the land in the capacity of lessee of S
through payment of rent, and continued as such until his death when he was
substituted by the administrator of his property. In 1889 B sold again the same piece
of land to L who leased it to B himself under certain conditions. Both sales were
executed in a public instrument, the one executed in favor of L being registered only
in 1907. Thus, S and L acquired possession of the land through the same vendor upon
the latter's ceasing to be the owner and becoming the lessee of said S and L,
respectively, Held: (1) That, with reference to the time prior to 1907, the preference
should be in favor of the purchaser who first took possession of the land, because this
possession, according to the law in force prior to the promulgation of the Civil Code,
constituted the consummation of the contract, and also because afterwards the Civil
Code expressly establishes that possession in such cases transfers the ownership of the
thing sold. (2) That, when a person buys a piece of land and, instead of taking
possession of it, leases it to the vendor, possession by the latter after the sale is
possession by the vendee, and such possession, in case of a double sale, determines
the preference in favor of the one who first took possession of it, in the absence of
inscription, in accordance with the provisions of Article 1473 of the Civil Code,
notwithstanding the material and personal possession by the second vendee. (Bautista
vs. Sioson, 39 Phil. Rep., 615.)
2. ID.; ID.; ID. Because L had to receive his possession from B who was a
mere lessee of S and such had no possession to give, inasmuch as his possession was
not for himself but in representation of S, it follows that L never possessed the land.
3. ID.; ID.; INSCRIPTION OF LAST SALE; EFFECT WHEN MADE ONLY
AFTER EXPIRATION OF PERIOD OF PRESCRIPTION IN FAVOR OF FIRST
VENDEE. The effect which the law gives to the inscription of a sale against the
efficacy of the sale which was not registered is not extended to the other vendee was
able to acquire independently as, in this case, the title by prescription.
4. PAYMENT; BURDEN OF PROOF; PRESUMPTION. When it does not
appear that payment has been made, which fact should be proved by him who obliged
to make such payment, it is presumed that such payment has not been made.
D E C I S I O N
AVANCEA, J p:
On July 26, 1882, by a public instrument (Exhibit A-1), Macario Berenguer
sold to Cristino Singian with right of repurchase for an indefinite time the land in
question which is described as parcel one in the complaint.
On October 7, 1889, by means of another public instrument, Macario
Berenguer sold the same land to Cornelia Lauchangco with right of repurchase for the
term of two years. It was stipulated that Macario Berenguer would take the land under
a lease, paying an annual rent therefor, either in cash or in sugar at the option of
Cornelia Lauchangco. It was also stipulated that all fruits of the land would be stored
in Cornelia Lauchangco's enfarderia (sugar packing house) in this city and the
proceeds thereof would be applied to the payment of the price of the repurchase
(Exhibit A). This sale was registered in 1907.
It appears that on September 2, 1890, Macario Berenguer, by virtue of a public
instrument, sold again the land in question with pacto de retro to Cristino Singian at a
higher price but the amount paid on account of the sale of 1882 was considered as a
part of the price. In the document wherein appears this contract, it is said that Cristino
Singian accepts the purchase in the name and representation of Anselmo Singian of
whom he was the tutor. the contract does not express the period for the redemption
(Exhibit A-1.)
On February 20, 1904, Anselmo Singian sold in an absolute sale, also by a
public instrument, the same land to Macario Berenguer. Anselmo Singian states in
this contract that the land was acquired by him from Macario Berenguer himself by
virtue of the above-mentioned contract of 1890 through his (Anselmo's) tutor,
Cristino Singian. It was stipulated that the price of this sale should be paid within the
period of eight years and that, if it be not completely paid on the expiration of the
term, the ownership of the land should revert to Anselmo Singian (Exhibit X).
The parties to this action are: Faustino Lichauco and others, in their capacity as
heirs of Cornelia Lauchangco, as plaintiffs; Jose Berenguer, administrator of the
estate of Macario Berenguer, and Anselmo Singian in his own behalf, as defendants.
The plaintiffs pray that the sale of the land executed by Macario Berenguer in
favor of Cornelia Lauchangco be declared absolute or that the defendant Jose
Berenguer be obliged to pay to the plaintiffs the sum of P3,000 the price of the
repurchase, with legal interest thereon from October 7, 1891, and the amount of
P9,236.86, as rents due, as well as the amounts which would be due until the
execution of the sentence with the corresponding interests. The defendant Jose
Berenguer prays that he be absolved from the complaint and that the plaintiffs be
obliged to execute in his favor the document of repurchase of the land. The defendant
Anselmo Singian prays that the sale of the land executed by Macario Berenguer in
favor of Cornelia Lauchangco be declared null and void and that he be declared
absolute owner of the said land.
The trial court absolved the defendants without any finding as to costs and
from this judgment the plaintiffs appealed.
From what has been said, it appears that the land in question had been twice
sold by Macario Berenguer: the first sale was made in 1882 in favor of Cristino
Singian and the second, in 1889, in favor of Cornelia Lauchangco, predecessor in
interest of the plaintiffs. The question to be decided is, which of these two sales is to
be preferred. Both were executed by means of public instruments. Considering the
facts in connection with the time prior to 1907, it follows that, since neither of these
instruments was inscribed, the preference should be in favor of the purchaser who
took possession of the land, inasmuch as this possession, according to the law in force
prior to the promulgation of the Civil Code, constituted the consummation of the
contract, and also inasmuch as the Civil Code (Article 1478) expressly provides that
possession in such cases transfers the ownership of the thing sold. The trial court
accepted the fact that the defendant Anselmo Singian, by himself and through a
representative, took possession of the land since its sale in 1882 and has been
continuing in this possession up to the present time. There is evidence in the records
which establishes this conclusion, and there is no proof to the contrary.
It appears that after the sale in 1882 to Cristino Singian, the land was held,
under a lease through payment of an annual rent, by Macario Berenguer until his
death, and even after his death the administrator of his property continued the lease
under the same conditions until two years before this action was filed. It does not
appear whether, after the sale, Cristino Singian first took possession of the land and
then leased it to Macario Berenguer or the land was immediately leased after the sale
without the lease having been preceded by direct possession on the part of the
purchaser, Cristino Singian. But, as regards the basis upon which this decision rests,
we accept the second alternative as true. It appears also that when the same land was
sold in 1889 by the same Macario Berenguer to Cornelia Lauchangco, the latter did
not also take a direct possession of it but agreed to lease it to Macario Berenguer
under certain conditions. It thus appears that both Cristino Singian and Cornelia
Lauchangco in like manner took possession of the land through the same vendor,
when the latter on ceasing to be the owner became the lessee of each of the former
respectively. This court has held that when a person buys a piece of land and, instead
of taking possession of it, gives it under a lease to the vendor, possession thereof by
the latter after the sale is possession by the vendee, and such possession, in case of a
double sale, determines the preference in favor of the one who first took possession of
it, in the absence of inscription, in accordance with the provision of Article 1473 of
the Civil Code and notwithstanding the material and personal possession by the
second vendee. (Bautista vs. Sioson, p. 615, ante.) This doctrine is with greater reason
applicable to this case in that the possession by the second vendee, granting that he
had it, was under the same conditions as that of the first vendee. Therefore, in
determining the preference between both sales by reason of the priority of possession,
supposing that both vendees had such possession in the same manner as we have
indicated, the decision must necessarily be in favor of the sale to Cristino Singian who
first enjoyed such possession.
But we can still say that Cornelia Lauchangco never had in the manner
indicated the possession of the land. She had to derive this possession from Macario
Berenguer. It is true that it is stipulated in the sale to her that Berenguer would cease
to be the owner and would be her lessee, but there is lack of juridical reality to
suppose that this was equivalent to a delivery of possession, because on that date
Berenguer had no possession which he could transfer, inasmuch as he was then a
mere lessee of the former vendee, Cristino Singian, and therefore his possession was
not for himself but in representation of the latter.

At all events, if it be interpreted that, in case of a double sale and in the
absence of inscription, the preference between both can not be determined, according
to Article 1473 of the Civil Code, by the possession which the stipulation implies that
vendor ceases to become owner and becomes the lessee of the vendee, it follows that,
for the purposes of this article, neither Cristino Singian nor Cornelia Lauchangco took
possession of the land. Under this supposition the preference between both sales shall
also have to be decided in favor of that made to Cristino Singian, because it is of a
prior date. (Art. 1473, Civil Code.)
As has been stated, Macario Berenguer sold the land to Cristino Singian in
1882 and in 1890 he again sold it to Cristino Singian in his capacity as tutor of
Anselmo Singian. The plaintiffs contend that according to this sale to defendant
Anselmo Singian was effected only in 1890 and therefore was not anterior to that
made to Cornelia Lauchangco in 1889. We believe that this conclusion is erroneous.
After the sale of 1882, Macario Berenguer took from Cristino Singian some more
money which amounted to P6,000 and this fact impelled him to make the sale in 1890
in which it was stipulated that the amount paid in the sale of 1882 plus the P 6,000
subsequently given by Cristino Singian to Macario Berenguer be considered as part of
the price received. It is true that in the sale to Cristino Singian in 1882 it was not
stated that he acted in his capacity as tutor of Anselmo Singian, but it appears that
with the latter's money the former paid the price in both sales. What really appears is
that the second sale was made with the object of aggregating, as part of the price, the
amount of P 6,000 received subsequently by Macario Berenguer for the purpose of the
purchase and not for the transmission of the ownership which was already affected.
We accept as a fact that both the sale of 1882 and that 1890 were made in favor of
Anselmo Singian.
The registry in 1907 of the sale to Lauchangco does not alter the aspect of the
question involved. From the time Singian took possession of the land up to that date
twenty-five years had elapsed. Thus, on the date in which the registry was made,
Singian had acquired the ownership of the land by prescription. The registry could
have destroyed the efficacy of the sale to Singian but not the legal effects of his
possession. The effect which the law gives to the registry of a sale, in case of a double
sale, against the efficacy of the sale that was not registered does not extend to the
other titles which the other vendee may have gained independently, as the title of
prescription in this case. And thus, even supposing that the sale to Singian, for lack of
registry, had lost all its efficacy, in itself, as a title transferring ownership as against
the sale to Lauchangco which was registered, still there remains for Singian the title
of prescription which has not been destroyed by another to the contrary
The fact that in 1904 Anselmo Singian in turn sold the land in question to
Macario Berenguer does not affect the merits of the case. In the said sale it was
agreed that Berenguer would pay the stipulated price within the period of eight years,
the amount should not have been completely paid, the ownership of the land would
revert to the vendor. It does not appear that no payment on account of this price has
been made and inasmuch as this payment should be proved by him who is obliged to
do so, we accept as a fact that it was not so made. Under such circumstances,
whatever effect may be attributed to that sale during the said period of eight years,
which was fixed for the payment of the price cannot be given such effect after the
expiration of the said period, without the price having been paid. At all events, the
ownership of the land sold reverted to the vendor.
We have reached the conclusion that the sale to Anselmo Singian represented
by his tutor Cristino Singian was valid and produced the effect of transferring in his
favor the ownership of the land in question. And, even disregarding the proper effect
of this sale, the defendant Anselmo Singian has also acquired the ownership of the
land by prescription.
Having reached the conclusion and as the action of the plaintiffs against the
defendant Berenguer is entirely based upon the efficacy of the sale of the same land
made in favor of Cornelia Lauchangco, we have to hold also that the complaint
against the latter is improper.
Therefore, we hereby affirm the judgment appealed from in so far it absolves
the defendants from the complaint with the cost against the appellants. So ordered.
Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.
||| (Lichauco v. Berenguer, G.R. No. 11907, February 27, 1919)
SECOND DIVISION
[G.R. No. 168220. August 31, 2005.]
SPS. RUDY PARAGAS AND CORAZON B. PARAGAS, petitioners,
vs. HRS. OF DOMINADOR BALACANO, namely: DOMINIC,
RODOLFO, NANETTE AND CYRIC, all surnamed BALACANO,
represented by NANETTE BALACANO and ALFREDO
BALACANO, respondents.
Jandoc Flores Manuel Law Offices for petitioners.
Cirilo A. Bravo for respondents.
SYLLABUS
1.REMEDIAL LAW; CIVIL PROCEDURE; APPEALS; PETITION FOR REVIEW ON
CERTIORARI UNDER RULE 45 OF THE REVISED RULES OF COURT; LIMITED
TO REVIEW OF ERRORS OF LAW. [W]e held in Blanco v. Quasha that this Court
is not a trier of facts. As such, it is not its function to examine and determine the weight
of the evidence supporting the assailed decision. Factual findings of the Court of
Appeals, which are supported by substantial evidence, are binding, final and conclusive
upon the Supreme Court, and carry even more weight when the said court affirms the
factual findings of the trial court. Moreover, well-entrenched is the prevailing
jurisprudence that only errors of law and not of facts are reviewable by this Court in a
petition for review on certiorari under Rule 45 of the Revised Rules of Court.
2.ID.; EVIDENCE; CREDIBILITY OF WITNESSES; GUIDING PRINCIPLES IN THE
ASSESSMENT THEREOF. In the assessment of the credibility of witnesses, we are
guided by the following well-entrenched rules: (1) that evidence to be believed must not
only spring from the mouth of a credible witness but must itself be credible, and (2)
findings of facts and assessment of credibility of witness are matters best left to the trial
court who had the front-line opportunity to personally evaluate the witnesses' demeanor,
conduct, and behavior while testifying.
R E S O L U T I O N
CHICO-NAZARIO, J p:
This petition for review seeks to annul the Decision 1 dated 15 February 2005 of the
Court of Appeals in CA-G.R. CV No. 64048, affirming with modification the 8 March
1999 Decision 2 of the Regional Trial Court (RTC), Branch 21, of Santiago City, Isabela,
in Civil Case No. 21-2313. The petition likewise seeks to annul the Resolution 3 dated 17
May 2005 denying petitioners' motion for reconsideration.
The factual antecedents were synthesized by the Court of Appeals in its decision.
Gregorio Balacano, married to Lorenza Sumigcay, was the registered owner of
Lot 1175-E and Lot 1175-F of the Subd. Plan Psd-38042 [located at Baluarte,
Santiago City, Isabela] covered by TCT No. T-103297 and TCT No. T-103298
of the Registry of Deeds of the Province of Isabela.
Gregorio and Lorenza had three children, namely: Domingo, Catalino and
Alfredo, all surnamed Balacano. Lorenza died on December 11, 1991. Gregorio,
on the other hand, died on July 28, 1996.
Prior to his death, Gregorio was admitted at the Veterans General Hospital in
Bayombong, Nueva Vizcaya on June 28, 1996 and stayed there until July 19,
1996. He was transferred in the afternoon of July 19, 1996 to the Veterans
Memorial Hospital in Quezon City where he was confined until his death.
Gregorio purportedly sold on July 22, 1996, or barely a week prior to his death,
a portion of Lot 1175-E (specifically consisting of 15,925 square meters from its
total area of 22,341 square meters) and the whole Lot 1175-F to the Spouses
Rudy ("Rudy") and Corazon Paragas (collectively, "the Spouses Paragas") for
the total consideration of P500,000.00. This sale appeared in a deed of absolute
sale notarized by Atty. Alexander V. de Guzman, Notary Public for Santiago
City, on the same date July 22, 1996 and witnessed by Antonio Agcaoili
("Antonio") and Julia Garabiles ("Julia"). Gregorio's certificates of title over
Lots 1175-E and 1175-F were consequently cancelled and new certificates of
title were issued in favor of the Spouses Paragas.
The Spouses Paragas then sold on October 17, 1996 a portion of Lot 1175-E
consisting of 6,416 square meters to Catalino for the total consideration of
P60,000.00.
Domingo's children (Dominic, Rodolfo, Nanette and Cyric, all surnamed
Balacano; . . .) filed on October 22, 1996 a complaint for annulment of sale and
partition against Catalino and the Spouses Paragas. They essentially alleged
in asking for the nullification of the deed of sale that: (1) their grandfather
Gregorio could not have appeared before the notary public on July 22, 1996 at
Santiago City because he was then confined at the Veterans Memorial Hospital
in Quezon City; (2) at the time of the alleged execution of the deed of sale,
Gregorio was seriously ill, in fact dying at that time, which vitiated his consent
to the disposal of the property; and (3) Catalino manipulated the execution of
the deed and prevailed upon the dying Gregorio to sign his name on a paper the
contents of which he never understood because of his serious condition.
Alternatively, they alleged that assuming Gregorio was of sound and disposing
mind, he could only transfer a half portion of Lots 1175-E and 1175-F as the
other half belongs to their grandmother Lorenza who predeceased Gregorio
they claimed that Lots 1175-E and 1175-F form part of the conjugal partnership
properties of Gregorio and Lorenza. Finally, they alleged that the sale to the
Spouses Paragas covers only a 5-hectare portion of Lots 1175-E and 1175-F
leaving a portion of 6,416 square meters that Catalino is threatening to dispose.
They asked for the nullification of the deed of sale executed by Gregorio and
the partition of Lots 1175-E and 1175-F. They likewise asked for damages.
Instead of filing their Answer, the defendants Catalino and the Spouses Paragas
moved to dismiss the complaint on the following grounds: (1) the plaintiffs have
no legal capacity the Domingo's children cannot file the case because
Domingo is still alive, although he has been absent for a long time; (2) an
indispensable party is not impleaded that Gregorio's other son, Alfredo was
not made a party to the suit; and (3) the complaint states no cause of action
that Domingo's children failed to allege a ground for the annulment of the deed
of sale; they did not cite any mistake, violence, intimidation, undue influence or
fraud, but merely alleged that Gregorio was seriously ill. Domingo's children
opposed this motion.
The lower court denied the motion to dismiss, but directed the plaintiffs-
appellees to amend the complaint to include Alfredo as a party. Alfredo was
subsequently declared as in default for his failure to file his Answer to the
Complaint.
The defendants-appellees filed their Answer with Counterclaim on May 7,
1997, denying the material allegations of the complaint. Additionally, they
claimed that: (1) the deed of sale was actually executed by Gregorio on July 19
(or 18), 1996 and not July 22, 1996; (2) the Notary Public personally went to the
Hospital in Bayombong, Nueva Vizcaya on July 18, 1996 to notarize the deed
of sale already subject of a previously concluded covenant between Gregorio
and the Spouses Paragas; (3) at the time Gregorio signed the deed, he was
strong and of sound and disposing mind; (4) Lots 1175-E and 1175-F were
Gregorio's separate capital and the inscription of Lorenza's name in the titles
was just a description of Gregorio's marital status; (5) the entire area of Lots
1175-E and 1175-F were sold to the Spouses Paragas. They interposed a
counterclaim for damages.
At the trial, the parties proceeded to prove their respective contentions.
Plaintiff-appellant Nanette Balacano testified to prove the material allegations
of their complaint. On Gregorio's medical condition, she declared that: (1)
Gregorio, who was then 81 years old, weak and sick, was brought to the hospital
in Bayombong, Nueva Vizcaya on June 28, 1996 and stayed there until the
afternoon on July 19, 1996; (2) thereafter, Gregorio, who by then was weak and
could no longer talk and whose condition had worsened, was transferred in the
afternoon of July 19, 1996 to the Veterans Memorial Hospital in Quezon City
where Gregorio died. She claimed that Gregorio could not have signed a deed of
sale on July 19, 1996 because she stayed at the hospital the whole of that day
and saw no visitors. She likewise testified on their agreement for attorney's fees
with their counsel and the litigation expenses they incurred.
Additionally, the plaintiffs-appellees presented in evidence Gregorio's medical
records and his death certificate.
Defendants-appellees, on the other hand, presented as witnesses Notary Public
de Guzman and instrumental witness Antonio to prove Gregorio's execution of
the sale and the circumstances under the deed was executed. They uniformly
declared that: (1) on July 18, 1996, they went to the hospital in Bayombong,
Nueva Vizcaya where Gregorio was confined with Rudy; (2) Atty. De
Guzman read and explained the contents of the deed to Gregorio; (3) Gregorio
signed the deed after receiving the money from Rudy; (4) Julia and Antonio
signed the deed as witnesses. Additionally, Atty. De Guzman explained that the
execution of the deed was merely a confirmation of a previous agreement
between the Spouses Paragas and Gregorio that was concluded at least a month
prior to Gregorio's death; that, in fact, Gregorio had previously asked him to
prepare a deed that Gregorio eventually signed on July 18, 1996. He also
explained that the deed, which appeared to have been executed on July 22,
1996, was actually executed on July 18, 1996; he notarized the deed and entered
it in his register only on July 22, 1996. He claimed that he did not find it
necessary to state the precise date and place of execution (Bayombong, Nueva
Vizcaya, instead of Santiago City) of the deed of sale because the deed is
merely a confirmation of a previously agreed contract between Gregorio and the
Spouses Paragas. He likewise stated that of the stated P500,000.00
consideration in the deed, Rudy paid Gregorio P450,000.00 in the hospital
because Rudy had previously paid Gregorio P50,000.00. For his part, Antonio
added that he was asked by Rudy to take pictures of Gregorio signing the deed.
He also claimed that there was no entry on the date when he signed; nor did he
remember reading Santiago City as the place of execution of the deed. He
described Gregorio as still strong but sickly, who got up from the bed with
Julia's help.
Witness for defendants-appellants Luisa Agsalda testified to prove that Lot
1175-E was Gregorio's separate property. She claimed that Gregorio's father
(Leon) purchased a two-hectare lot from them in 1972 while the other lot was
purchased from her neighbor. She also declared that Gregorio inherited these
lands from his father Leon; she does not know, however, Gregorio's brothers'
share in the inheritance. Defendant-appellant Catalino also testified to
corroborate the testimony of witness Luisa Agsalda; he said that Gregorio told
him that he (Gregorio) inherited Lots 1175-E and 1175-F from his father Leon.
He also stated that a portion of Lot 1175-E consisting of 6,416 square meters
was sold to him by the Spouses Paragas and that he will pay the Spouses
Paragas P50,000.00, not as consideration for the return of the land but for the
transfer of the title to his name.
Additionally, the defendants-appellants presented in evidence the pictures taken
by Antonio when Gregorio allegedly signed the deed. 4
The lower court, after trial, rendered the decision declaring null and void the deed of sale
purportedly executed by Gregorio Balacano in favor of the spouses Rudy Paragas and
Corazon Paragas. In nullifying the deed of sale executed by Gregorio, the lower court
initially noted that at the time Gregorio executed the deed, Gregorio was ill. The lower
court's reasoning in declaring the deed of sale null and void and this reasoning's premises
may be summarized as follows: (1) the deed of sale was improperly notarized; thus it
cannot be considered a public document that is usually accorded the presumption of
regularity; (2) as a private document, the deed of sale's due execution must be proved in
accordance with Section 20, Rule 132 of the Revised Rules on Evidence either: (a) by
anyone who saw the document executed or written; or (b) by evidence of the genuineness
of the signature or handwriting of the maker; and (3) it was incumbent upon the Spouses
Paragas to prove the deed of sale's due execution but failed to do so the lower court
said that witness Antonio Agcaoili is not credible while Atty. Alexander De Guzman is
not reliable. 5

The lower court found the explanations of Atty. De Guzman regarding the erroneous
entries on the actual place and date of execution of the deed of sale as justifications for a
lie. The lower court said
The Court cannot imagine an attorney to undertake to travel to another province
to notarize a document when he must certainly know, being a lawyer and by all
means, not stupid, that he has no authority to notarize a document in that
province. The only logical thing that happened was that Rudy Paragas brought
the deed of sale to him on July 22, 1996 already signed and requested him to
notarize the same which he did, not knowing that at that time the vendor was
already in a hospital and [sic] Quezon City. Of course had he known, Atty. De
Guzman would not have notarized the document. But he trusted Rudy Paragas
and moreover, Gregorio Balacano already informed him previously in June that
he will sell his lands to Paragas. In addition [sic, (,) was omitted] Rudy Paragas
also told him that Balacano received an advance of P50,000.00.
The intention to sell is not actual selling. From the first week of June when,
according to Atty. De Guzman, Gregorio Balacano informed him that he will
sell his land to Rudy Paragas, enough time elapsed to the time he was brought to
the hospital on June 28, 1996. Had there been a meeting of the minds between
Gregorio Balacano and Rudy Paragas regarding the sale, surely Gregorio
Balacano would have immediately returned to the office of Atty. De Guzman to
execute the deed of sale. He did not until he was brought to the hospital and
diagnosed to have liver cirrhosis. Because of the seriousness of his illness, it is
not expected that Gregorio Balacano would be negotiating a contract of
sale. Thus, Rudy Paragas negotiated with Catalino Balacano, the son of
Gregorio Balacano with whom the latter was staying. 6
The lower court also did not consider Antonio Agcaoili, petitioner Rudy Paragas's driver,
a convincing witness, concluding that he was telling a rehearsed story. The lower court
said
The only portion of his testimony that is true is that he signed the document.
How could the Court believe that he brought a camera with him just to take
pictures of the signing? If the purpose was to record the proceeding for
posterity, why did he not take the picture of Atty. De Guzman when the latter
was reading and explaining the document to Gregorio Balacano? Why did he
not take the picture of both Gregorio Balacano and Atty. de Guzman while the
old man was signing the document instead of taking a picture of Gregorio
Balacano alone holding a ball pen without even showing the document being
signed? Verily there is a picture of a document but only a hand with a ball pen is
shown with it. Why? Clearly the driver Antonio Agcaoili must have only been
asked by Rudy Paragas to tell a concocted story which he himself would not
dare tell in Court under oath. 7
The lower court likewise noted that petitioner Rudy Paragas did not testify about the
signing of the deed of sale. To the lower court, Rudy's refusal or failure to testify raises a
lot of questions, such as: (1) was he (Rudy) afraid to divulge the circumstances of how he
obtained the signature of Gregorio Balacano, and (2) was he (Rudy) afraid to admit that
he did not actually pay the P500,000.00 indicated in the deed of sale as the price of the
land? 8
The lower court also ruled that Lots 1175-E and 1175-F were Gregorio's and Lorenza's
conjugal partnership properties. The lower court found that these lots were acquired
during the marriage because the certificates of title of these lots clearly stated that the lots
are registered in the name Gregorio, "married to Lorenza Sumigcay." Thus, the lower
court concluded that the presumption of law (under Article 160 of the Civil Code of the
Philippines) that property acquired during the marriage is presumed to belong to the
conjugal partnership fully applies to Lots 1175-E and 1175-F. 9
Thus, on 8 March 1999, the RTC, Branch 21, of Santiago City, Isabela, rendered a
Decision 10 in Civil Case No. 21-2313, the dispositive portion of which reads as follows:
WHEREFORE in the light of the foregoing considerations judgment is hereby
rendered:
1.DECLARING as NULL and VOID the deed of sale purportedly
executed by Gregorio Balacano in favor of the spouses Rudy
Paragas and Corazon Paragas over lots 1175-E and 1175-F
covered by TCT Nos. T-103297 and T-103298, respectively;
2.ORDERING the cancellation of TCT Nos. T-258042 and T-258041
issued in the name of the spouses Rudy and Corazon Paragas by
virtue of the deed of sale; and
Declaring the parcel of lands, lots 1175-E and 1175-F as part of the estate of the
deceased spouses Gregorio Balacano and Lorenza Balacano. 11
In the assailed Decision dated 15 February 2005, the Court of Appeals affirmed the
Decision of the trial court, with the modification that Lots 1175-E and 1175-F were
adjudged as belonging to the estate of Gregorio Balacano. The appellate court disposed as
follows:
Wherefore, premises considered, the appeal is hereby DISMISSED. We
AFFIRM the appealed Decision for the reasons discussed above, with the
MODIFICATION that Lots 1175-E and 1175-F belong to the estate of Gregorio
Balacano.
Let a copy of this Decision be furnished the Office of the Bar Confidant for
whatever action her Office may take against Atty. De Guzman. 12 (Emphasis in
the original.)
Herein petitioners' motion for reconsideration was met with similar lack of success when
it was denied for lack of merit by the Court of Appeals in its Resolution 13 dated 17 May
2005.
Hence, this appeal via a petition for review where petitioners assign the following errors
to the Court of Appeals, viz:
A.THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF
DISCRETION, SERIOUSLY ERRED IN FINDING THAT THERE
WAS NO PERFECTED AND PARTIALLY EXECUTED CONTRACT
OF SALE OVER LOTS 1175-E AND 1175-F PRIOR TO THE
SIGNING OF THE DEED OF SALE.
B.THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF
DISCRETION, SERIOUSLY FAILED TO APPRECIATE THE
SIGNIFICANCE OF THE JUDICIAL ADMISSION ON THE
AUTHENTICITY AND DUE EXECUTION OF THE DEED OF SALE
MADE BY THE RESPONDENTS DURING THE PRE-TRIAL
CONFERENCE.
C.THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF
DISCRETION, BASED ITS CONCLUSION THAT GREGORIO'S
CONSENT TO THE SALE OF THE LOTS WAS ABSENT MERELY
ON SPECULATIONS AND SURMISES.
D.THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF
DISCRETION, SERIOUSLY ERRED IN NOT RULING ON THE
ISSUE OF RESPONDENTS' LACK OF LEGAL CAPACITY TO SUE
FOR NOT BEING THE PROPER PARTIES IN INTEREST.
E.THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF
DISCRETION, SERIOUSLY ERRED IN DISMISSING ATTY.
ALEXANDER DE GUZMAN AND ANTONIO AGCAOILI AS NOT
CREDIBLE WITNESSES. 14
At bottom is the issue of whether or not the Court of Appeals committed reversible error
in upholding the findings and conclusions of the trial court on the nullity of the Deed of
Sale purportedly executed between petitioners and the late Gregorio Balacano.
To start, we held in Blanco v. Quasha 15 that this Court is not a trier of facts. As such, it
is not its function to examine and determine the weight of the evidence supporting the
assailed decision. Factual findings of the Court of Appeals, which are supported by
substantial evidence, are binding, final and conclusive upon the Supreme Court, 16 and
carry even more weight when the said court affirms the factual findings of the trial court.
Moreover, well-entrenched is the prevailing jurisprudence that only errors of law and not
of facts are reviewable by this Court in a petition for review on certiorari under Rule 45
of the Revised Rules of Court.
The foregoing tenets in the case at bar apply with greater force to the petition under
consideration because the factual findings by the Court of Appeals are in full agreement
with that of the trial court.
Specifically, the Court of Appeals, in affirming the trial court, found that there was no
prior and perfected contract of sale that remained to be fully consummated. The appellate
court explained
In support of their position, the defendants-appellants argue that at least a month
prior to Gregorio's signing of the deed, Gregorio and the Spouses Paragas
already agreed on the sale of Lots 1175-E and 1175-F; and that, in fact, this
agreement was partially executed by Rudy's payment to Gregorio of P50,000.00
before Gregorio signed the deed at the hospital. In line with this position,
defendants-appellants posit that Gregorio's consent to the sale should be
determined, not at the time Gregorio signed the deed of sale on July 18, 1996,
but at the time when he agreed to sell the property in June 1996 or a month prior
to the deed's signing; and in June 1996, Gregorio was of sound and disposing
mind and his consent to the sale was in no wise vitiated at that time. The
defendants-appellants further argue that the execution or signing of the deed of
sale, however, irregular it might have been, does not affect the validity of the
previously agreed sale of the lots, as the execution or signing of the deed is
merely a formalization of a previously agreed oral contract.
xxx xxx xxx
In the absence of any note, memorandum or any other written instrument
evidencing the alleged perfected contract of sale, we have to rely on oral
testimonies, which in this case is that of Atty. de Guzman whose testimony on
the alleged oral agreement may be summarized as follows: (1) that sometime in
the first week of June 1996, Gregorio requested him (Atty. de Guzman) to
prepare a deed of sale of two lots; (2) Gregorio came to his firm's office in the
morning with a certain Doming Balacano, then returned in the afternoon with
Rudy; (3) he (Atty. de Guzman) asked Gregorio whether he really intends to sell
the lots; Gregorio confirmed his intention; (4) Gregorio and Rudy left the law
office at 5:00 p.m., leaving the certificates of title; (5) he prepared the deed a
day after Rudy and Gregorio came. With regard to the alleged partial execution
of this agreement, Atty. de Guzman said that he was told by Rudy that there was
already a partial payment of P50,000.00.

We do not consider Atty. de Guzman's testimony sufficient evidence to
establish the fact that there was a prior agreement between Gregorio and the
Spouses Paragas on the sale of Lots 1175-E and 1175-F. This testimony does
not conclusively establish the meeting of the minds between Gregorio and the
Spouses Paragas on the price or consideration for the sale of Lots 1175-E and
1175-F Atty. de Guzman merely declared that he was asked by Gregorio to
prepare a deed; he did not clearly narrate the details of this agreement. We
cannot assume that Gregorio and the Spouses Paragas agreed to a P500,000.00
consideration based on Atty. de Guzman's bare assertion that Gregorio asked
him to prepare a deed, as Atty. de Guzman was not personally aware of the
agreed consideration in the sale of the lots, not being privy to the parties'
agreement. To us, Rudy could have been a competent witness to testify on the
perfection of this prior contract; unfortunately, the defendants-appellants did not
present Rudy as their witness.
We seriously doubt too the credibility of Atty. de Guzman as a witness. We
cannot rely on his testimony because of his tendency to commit falsity. He
admitted in open court that while Gregorio signed the deed on July 18, 1996 at
Bayombong, Nueva Vizcaya, he nevertheless did not reflect these matters when
he notarized the deed; instead he entered Santiago City and July 22, 1996, as
place and date of execution, respectively. To us, Atty. de Guzman's propensity
to distort facts in the performance of his public functions as a notary public, in
utter disregard of the significance of the act of notarization, seriously affects his
credibility as a witness in the present case. In fact, Atty. de Guzman's act in
falsifying the entries in his acknowledgment of the deed of sale could be the
subject of administrative and disciplinary action, a matter that we however do
not here decide.
Similarly, there is no conclusive proof of the partial execution of the contract
because the only evidence the plaintiffs-appellants presented to prove this claim
was Atty. de Guzman's testimony, which is hearsay and thus, has no probative
value. Atty. de Guzman merely stated that Rudy told him that Rudy already
gave P50,000.00 to Gregorio as partial payment of the purchase price; Atty. de
Guzman did not personally see the payment being made. 17
But, did Gregorio give an intelligent consent to the sale of Lots 1175-E and 1175-F when
he signed the deed of sale? The trial court as well as the appellate court found in the
negative. In the Court of Appeals' rationale
It is not disputed that when Gregorio signed the deed of sale, Gregorio was
seriously ill, as he in fact died a week after the deed's signing. Gregorio died of
complications caused by cirrhosis of the liver. Gregorio's death was neither
sudden nor immediate; he fought at least a month-long battle against the disease
until he succumbed to death on July 22, 1996. Given that Gregorio purportedly
executed a deed during the last stages of his battle against his disease, we
seriously doubt whether Gregorio could have read, or fully understood, the
contents of the documents he signed or of the consequences of his act. We note
in this regard that Gregorio was brought to the Veteran's Hospital at Quezon
City because his condition had worsened on or about the time the deed was
allegedly signed. This transfer and fact of death not long after speak volumes
about Gregorio's condition at that time. We likewise see no conclusive evidence
that the contents of the deed were sufficiently explained to Gregorio before he
affixed his signature. The evidence the defendants-appellants offered to prove
Gregorio's consent to the sale consists of the testimonies of Atty. de Guzman
and Antonio. As discussed above, we do not find Atty. de Guzman a credible
witness. Thus, we fully concur with the heretofore-quoted lower court's
evaluation of the testimonies given by Atty. de Guzman and Antonio because
this is an evaluation that the lower court was in a better position to make. HCEISc
Additionally, the irregular and invalid notarization of the deed is a falsity that
raises doubts on the regularity of the transaction itself. While the deed was
indeed signed on July 18, 1996 at Bayombong, Nueva Vizcaya, the deed states
otherwise, as it shows that the deed was executed on July 22, 1996 at Santiago
City. Why such falsity was committed, and the circumstances under which this
falsity was committed, speaks volume about the regularity and the validity of
the sale. We cannot but consider the commission of this falsity, with the
indispensable aid of Atty. de Guzman, an orchestrated attempt to legitimize a
transaction that Gregorio did not intend to be binding upon him nor on his
bounty.
Article 24 of the Civil Code tells us that in all contractual, property or other
relations, when one of the parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender age or other
handicap, the courts must be vigilant for his protection. 18
Based on the foregoing, the court of Appeals concluded that Gregorio's consent to the
sale of the lots was absent, making the contract null and void. Consequently, the spouses
Paragas could not have made a subsequent transfer of the property to Catalino Balacano.
Indeed, nemo dat quod non habet. Nobody can dispose of that which does not belong to
him. 19
We likewise find to be in accord with the evidence on record the ruling of the Court of
Appeals declaring the properties in controversy as paraphernal properties of Gregorio in
the absence of competent evidence on the exact date of Gregorio's acquisition of
ownership of these lots.
On the credibility of witnesses, it is in rhyme with reason to believe the testimonies of the
witnesses for the complainants vis--vis those of the defendants. In the assessment of the
credibility of witnesses, we are guided by the following well-entrenched rules: (1) that
evidence to be believed must not only spring from the mouth of a credible witness but
must itself be credible, and (2) findings of facts and assessment of credibility of witness
are matters best left to the trial court who had the front-line opportunity to personally
evaluate the witnesses' demeanor, conduct, and behavior while testifying. 20
In the case at bar, we agree in the trial court's conclusion that petitioners' star witness,
Atty. De Guzman is far from being a credible witness. Unlike this Court, the trial court
had the unique opportunity of observing the demeanor of said witness. Thus, we affirm
the trial court and the Court of Appeals' uniform decision based on the whole evidence in
record holding the Deed of Sale in question to be null and void.
In Domingo v. Court of Appeals, 21 the Court declared as null and void the deed of sale
therein inasmuch as the seller, at the time of the execution of the alleged contract, was
already of advanced age and senile. We held
. . . She died an octogenarian on March 20, 1966, barely over a year when the
deed was allegedly executed on January 28, 1965, but before copies of the deed
were entered in the registry allegedly on May 16 and June 10, 1966. The general
rule is that a person is not incompetent to contract merely because of advanced
years or by reason of physical infirmities. However, when such age or
infirmities have impaired the mental faculties so as to prevent the person from
properly, intelligently, and firmly protecting her property rights then she is
undeniably incapacitated. The unrebutted testimony of Zosima Domingo shows
that at the time of the alleged execution of the deed, Paulina was already
incapacitated physically and mentally. She narrated that Paulina played with her
waste and urinated in bed. Given these circumstances, there is in our view
sufficient reason to seriously doubt that she consented to the sale of and the
price for her parcels of land. Moreover, there is no receipt to show that said
price was paid to and received by her. Thus, we are in agreement with the trial
court's finding and conclusion on the matter: . . .
In the case at bar, the Deed of Sale was allegedly signed by Gregorio on his death bed in
the hospital. Gregorio was an octogenarian at the time of the alleged execution of the
contract and suffering from liver cirrhosis at that circumstances which raise grave
doubts on his physical and mental capacity to freely consent to the contract. Adding to
the dubiety of the purported sale and further bolstering respondents' claim that their uncle
Catalino, one of the children of the decedent, had a hand in the execution of the deed is
the fact that on 17 October 1996, petitioners sold a portion of Lot 1175-E consisting of
6,416 square meters to Catalino for P60,000.00. 22 One need not stretch his imagination
to surmise that Catalino was in cahoots with petitioners in maneuvering the alleged sale.
On the whole, we find no reversible error on the part of the appellate court in CA-G.R.
CV No. 64048 that would warrant the reversal thereof.
WHEREFORE, the present petition is hereby DENIED. Accordingly, the Decision 23 and
the Resolution, 24 dated 15 February 2005 and 17 May 2005, respectively, of the Court
of Appeals in CA-G.R. CV No. 64048 are hereby AFFIRMED. No costs.
SO ORDERED.
||| (Spouses Paragas v. Heirs of Balacano, G.R. No. 168220, August 31, 2005)

SECOND DIVISION
[G.R. No. 124242. January 21, 2005.]
SAN LORENZO DEVELOPMENT CORPORATION, petitioner, vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL
LU and PACITA ZAVALLA LU, respondents.
D E C I S I O N
TINGA, J p:
From a coaptation of the records of this case, it appears that respondents Miguel Lu and
Pacita Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land situated in
Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-39023 both measuring
15,808 square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to
respondent Pablo Babasanta, (hereinafter, Babasanta) for the price of fifteen pesos
(P15.00) per square meter. Babasanta made a downpayment of fifty thousand pesos
(P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same
date. Several other payments totaling two hundred thousand pesos (P200,000.00) were
made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of
a final deed of sale in his favor so that he could effect full payment of the purchase price.
In the same letter, Babasanta notified the spouses about having received information that
the spouses sold the same property to another without his knowledge and consent. He
demanded that the second sale be cancelled and that a final deed of sale be issued in his
favor. cEAIHa
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having
agreed to sell the property to him at fifteen pesos (P15.00) per square meter. She,
however, reminded Babasanta that when the balance of the purchase price became due,
he requested for a reduction of the price and when she refused, Babasanta backed out of
the sale. Pacita added that she returned the sum of fifty thousand pesos (P50,000.00) to
Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court
(RTC), Branch 31, of San Pedro, Laguna, a Complaint for Specific Performance and
Damages 1 against his co-respondents herein, the Spouses Lu. Babasanta alleged that the
lands covered by TCT No. T-39022 and T-39023 had been sold to him by the spouses at
fifteen pesos (P15.00) per square meter. Despite his repeated demands for the execution
of a final deed of sale in his favor, respondents allegedly refused.
In their Answer, 2 the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta
and when the total advances of Pacita reached fifty thousand pesos (P50,000.00), the
latter and Babasanta, without the knowledge and consent of Miguel Lu, had verbally
agreed to transform the transaction into a contract to sell the two parcels of land to
Babasanta with the fifty thousand pesos (P50,000.00) to be considered as the
downpayment for the property and the balance to be paid on or before 31 December
1987. Respondents Lu added that as of November 1987, total payments made by
Babasanta amounted to only two hundred thousand pesos (P200,000.00) and the latter
allegedly failed to pay the balance of two hundred sixty thousand pesos (P260,000.00)
despite repeated demands. Babasanta had purportedly asked Pacita for a reduction of the
price from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter and when the
Spouses Lu refused to grant Babasanta's request, the latter rescinded the contract to sell
and declared that the original loan transaction just be carried out in that the spouses
would be indebted to him in the amount of two hundred thousand pesos (P200,000.00).
Accordingly, on 6 July 1989, they purchased Interbank Manager's Check No. 05020269
in the amount of two hundred thousand pesos (P200,000.00) in the name of Babasanta to
show that she was able and willing to pay the balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 1990 3 wherein he prayed
for the issuance of a writ of preliminary injunction with temporary restraining order and
the inclusion of the Register of Deeds of Calamba, Laguna as party defendant. He
contended that the issuance of a preliminary injunction was necessary to restrain the
transfer or conveyance by the Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition 4 to the amended complaint contending that it
raised new matters which seriously affect their substantive rights under the original
complaint. However, the trial court in its Order dated 17 January 1990 5 admitted the
amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC)
filed a Motion for Intervention 6 before the trial court. SLDC alleged that it had legal
interest in the subject matter under litigation because on 3 May 1989, the two parcels of
land involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute
Sale with Mortgage. 7 It alleged that it was a buyer in good faith and for value and
therefore it had a better right over the property in litigation.
In his Opposition to SLDC's motion for intervention, 8 respondent Babasanta demurred
and argued that the latter had no legal interest in the case because the two parcels of land
involved herein had already been conveyed to him by the Spouses Lu and hence, the
vendors were without legal capacity to transfer or dispose of the two parcels of land to
the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene.
SLDC filed its Complaint-in-Intervention on 19 April 1990. 9 Respondent Babasanta's
motion for the issuance of a preliminary injunction was likewise granted by the trial court
in its Order dated 11 January 1991 10 conditioned upon his filing of a bond in the
amount of fifty thousand pesos (P50,000.00). cAECST
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu
executed in its favor an Option to Buy the lots subject of the complaint. Accordingly, it
paid an option money in the amount of three hundred sixteen thousand one hundred sixty
pesos (P316,160.00) out of the total consideration for the purchase of the two lots of one
million two hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After
the Spouses Lu received a total amount of six hundred thirty-two thousand three hundred
twenty pesos (P632,320.00) they executed on 3 May 1989 a Deed of Absolute Sale with
Mortgage in its favor. SLDC added that the certificates of title over the property were
delivered to it by the spouses clean and free from any adverse claims and/or notice of lis
pendens. SLDC further alleged that it only learned of the filing of the complaint
sometime in the early part of January 1990 which prompted it to file the motion to
intervene without delay. Claiming that it was a buyer in good faith, SLDC argued that it
had no obligation to look beyond the titles submitted to it by the Spouses Lu particularly
because Babasanta's claims were not annotated on the certificates of title at the time the
lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale
of the property to SLDC. It ordered the Spouses Lu to pay Babasanta the sum of two
hundred thousand pesos (P200,000.00) with legal interest plus the further sum of fifty
thousand pesos (P50,000.00) as and for attorney's fees. On the complaint-in-intervention,
the trial court ordered the Register of Deeds of Laguna, Calamba Branch to cancel the
notice of lis pendens annotated on the original of the TCT No. T-39022 (T-7218) and No.
T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta
and SLDC did not register the respective sales in their favor, ownership of the property
should pertain to the buyer who first acquired possession of the property. The trial court
equated the execution of a public instrument in favor of SLDC as sufficient delivery of
the property to the latter. It concluded that symbolic possession could be considered to
have been first transferred to SLDC and consequently ownership of the property
pertained to SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial court's decision to the Court of Appeals alleging
in the main that the trial court erred in concluding that SLDC is a purchaser in good faith
and in upholding the validity of the sale made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended
that the trial court erred in failing to consider that the contract to sell between them and
Babasanta had been novated when the latter abandoned the verbal contract of sale and
declared that the original loan transaction just be carried out. The Spouses Lu argued that
since the properties involved were conjugal, the trial court should have declared the
verbal contract to sell between Pacita Lu and Pablo Babasanta null and void ab initio for
lack of knowledge and consent of Miguel Lu. They further averred that the trial court
erred in not dismissing the complaint filed by Babasanta; in awarding damages in his
favor and in refusing to grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision 11 which set aside the
judgment of the trial court. It declared that the sale between Babasanta and the Spouses
Lu was valid and subsisting and ordered the spouses to execute the necessary deed of
conveyance in favor of Babasanta, and the latter to pay the balance of the purchase price
in the amount of two hundred sixty thousand pesos (P260,000.00). The appellate court
ruled that the Absolute Deed of Sale with Mortgage in favor of SLDC was null and void
on the ground that SLDC was a purchaser in bad faith. The Spouses Lu were further
ordered to return all payments made by SLDC with legal interest and to pay attorney's
fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate
court. 12 However, in a Manifestation dated 20 December 1995, 13 the Spouses Lu
informed the appellate court that they are no longer contesting the decision dated 4
October 1995.

In its Resolution dated 11 March 1996, 14 the appellate court considered as withdrawn
the motion for reconsideration filed by the Spouses Lu in view of their manifestation of
20 December 1995. The appellate court denied SLDC's motion for reconsideration on the
ground that no new or substantial arguments were raised therein which would warrant
modification or reversal of the court's decision dated 4 October 1995. DIcSHE
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO
WAS NOT A BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER
PACITA ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE OF
P200,000.00, SAN LORENZO WAS PUT ON INQUIRY OF A PRIOR
TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE
ESTABLISHED FACT THAT THE ALLEGED FIRST BUYER,
RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE
DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND TOOK
POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN,
ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE
TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE
FACT THAT RESPONDENT BABASANTA HAS SUBMITTED NO
EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF HIS
RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT
NOTWITHSTANDING ITS FULL CONCURRENCE ON THE FINDINGS
OF FACT OF THE TRIAL COURT, IT REVERSED AND SET ASIDE THE
DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF SAN
LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH. 15
SLDC contended that the appellate court erred in concluding that it had prior notice of
Babasanta's claim over the property merely on the basis of its having advanced the
amount of two hundred thousand pesos (P200,000.00) to Pacita Lu upon the latter's
representation that she needed the money to pay her obligation to Babasanta. It argued
that it had no reason to suspect that Pacita was not telling the truth that the money would
be used to pay her indebtedness to Babasanta. At any rate, SLDC averred that the amount
of two hundred thousand pesos (P200,000.00) which it advanced to Pacita Lu would be
deducted from the balance of the purchase price still due from it and should not be
construed as notice of the prior sale of the land to Babasanta. It added that at no instance
did Pacita Lu inform it that the lands had been previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately
took possession of the property and asserted its rights as new owner as opposed to
Babasanta who has never exercised acts of ownership. Since the titles bore no adverse
claim, encumbrance, or lien at the time it was sold to it, SLDC argued that it had every
reason to rely on the correctness of the certificate of title and it was not obliged to go
beyond the certificate to determine the condition of the property. Invoking the
presumption of good faith, it added that the burden rests on Babasanta to prove that it was
aware of the prior sale to him but the latter failed to do so. SLDC pointed out that the
notice of lis pendens was annotated only on 2 June 1989 long after the sale of the
property to it was consummated on 3 May 1989.
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu
informed the Court that due to financial constraints they have no more interest to pursue
their rights in the instant case and submit themselves to the decision of the Court of
Appeals. 16
On the other hand, respondent Babasanta argued that SLDC could not have acquired
ownership of the property because it failed to comply with the requirement of registration
of the sale in good faith. He emphasized that at the time SLDC registered the sale in its
favor on 30 June 1990, there was already a notice of lis pendens annotated on the titles of
the property made as early as 2 June 1989. Hence, petitioner's registration of the sale did
not confer upon it any right. Babasanta further asserted that petitioner's bad faith in the
acquisition of the property is evident from the fact that it failed to make necessary inquiry
regarding the purpose of the issuance of the two hundred thousand pesos (P200,000.00)
manager's check in his favor. HTCISE
The core issue presented for resolution in the instant petition is who between SLDC and
Babasanta has a better right over the two parcels of land subject of the instant case in
view of the successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a
document signed by Pacita Lu acknowledging receipt of the sum of fifty thousand pesos
(P50,000.00) as partial payment for 3.6 hectares of farm lot situated at Barangay Pulong,
Sta. Cruz, Sta. Rosa, Laguna. 17 While the receipt signed by Pacita did not mention the
price for which the property was being sold, this deficiency was supplied by Pacita Lu's
letter dated 29 May 1989 18 wherein she admitted that she agreed to sell the 3.6 hectares
of land to Babasanta for fifteen pesos (P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by the
parties, irresistibly leads to the conclusion that the agreement between Babasanta and the
Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent, 19 which is manifested by the
meeting of the offer and the acceptance upon the thing which are to constitute the
contract. The offer must be certain and the acceptance absolute. 20 Moreover, contracts
shall be obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present. 21
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand
pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot situated
in Sta. Rosa, Laguna. While there is no stipulation that the seller reserves the ownership
of the property until full payment of the price which is a distinguishing feature of a
contract to sell, the subsequent acts of the parties convince us that the Spouses Lu never
intended to transfer ownership to Babasanta except upon full payment of the purchase
price.
Babasanta's letter dated 22 May 1989 was quite telling. He stated therein that despite his
repeated requests for the execution of the final deed of sale in his favor so that he could
effect full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta
himself recognized that ownership of the property would not be transferred to him until
such time as he shall have effected full payment of the price. Moreover, had the sellers
intended to transfer title, they could have easily executed the document of sale in its
required form simultaneously with their acceptance of the partial payment, but they did
not. Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a
perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane. In a
contract of sale, title passes to the vendee upon the delivery of the thing sold; whereas in
a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass
until the full payment of the price. 22 In a contract of sale, the vendor has lost and cannot
recover ownership until and unless the contract is resolved or rescinded; whereas in a
contract to sell, title is retained by the vendor until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not a breach but an
event that prevents the obligation of the vendor to convey title from becoming effective.
23
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance
of the purchase price. There being an obligation to pay the price, Babasanta should have
made the proper tender of payment and consignation of the price in court as required by
law. Mere sending of a letter by the vendee expressing the intention to pay without the
accompanying payment is not considered a valid tender of payment. 24 Consignation of
the amounts due in court is essential in order to extinguish Babasanta's obligation to pay
the balance of the purchase price. Glaringly absent from the records is any indication that
Babasanta even attempted to make the proper consignation of the amounts due, thus, the
obligation on the part of the sellers to convey title never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not a
contract to sell, Babasanta's claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent 25 and from that moment,
the parties may reciprocally demand performance. 26 The essential elements of a contract
of sale, to wit: (1) consent or meeting of the minds, that is, to transfer ownership in
exchange for the price; (2) object certain which is the subject matter of the contract; (3)
cause of the obligation which is established. 27
The perfection of a contract of sale should not, however, be confused with its
consummation. In relation to the acquisition and transfer of ownership, it should be noted
that sale is not a mode, but merely a title. A mode is the legal means by which dominion
or ownership is created, transferred or destroyed, but title is only the legal basis by which
to affect dominion or ownership. 28 Under Article 712 of the Civil Code, "ownership and
other real rights over property are acquired and transmitted by law, by donation, by
testate and intestate succession, and in consequence of certain contracts, by tradition."
Contracts only constitute titles or rights to the transfer or acquisition of ownership, while
delivery or tradition is the mode of accomplishing the same. 29 Therefore, sale by itself
does not transfer or affect ownership; the most that sale does is to create the obligation to
transfer ownership. It is tradition or delivery, as a consequence of sale, that actually
transfers ownership. aHSCcE

Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee
from the moment it is delivered to him in any of the ways specified in Article 1497 to
1501. 30 The word "delivered" should not be taken restrictively to mean transfer of actual
physical possession of the property. The law recognizes two principal modes of delivery,
to wit: (1) actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the
vendee. 31 Legal or constructive delivery, on the other hand, may be had through any of
the following ways: the execution of a public instrument evidencing the sale; 32
symbolical tradition such as the delivery of the keys of the place where the movable sold
is being kept; 33 traditio longa manu or by mere consent or agreement if the movable
sold cannot yet be transferred to the possession of the buyer at the time of the sale; 34
traditio brevi manu if the buyer already had possession of the object even before the sale;
35 and traditio constitutum possessorium, where the seller remains in possession of the
property in a different capacity. 36
Following the above disquisition, respondent Babasanta did not acquire ownership by the
mere execution of the receipt by Pacita Lu acknowledging receipt of partial payment for
the property. For one, the agreement between Babasanta and the Spouses Lu, though
valid, was not embodied in a public instrument. Hence, no constructive delivery of the
lands could have been effected. For another, Babasanta had not taken possession of the
property at any time after the perfection of the sale in his favor or exercised acts of
dominion over it despite his assertions that he was the rightful owner of the lands. Simply
stated, there was no delivery to Babasanta, whether actual or constructive, which is
essential to transfer ownership of the property. Thus, even on the assumption that the
perfected contract between the parties was a sale, ownership could not have passed to
Babasanta in the absence of delivery, since in a contract of sale ownership is transferred
to the vendee only upon the delivery of the thing sold. 37
However, it must be stressed that the juridical relationship between the parties in a double
sale is primarily governed by Article 1544 which lays down the rules of preference
between the two purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in
good faith was first in the possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith.
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of double sale of immovable property. When the thing sold twice is
an immovable, the one who acquires it and first records it in the Registry of Property,
both made in good faith, shall be deemed the owner. 38 Verily, the act of registration
must be coupled with good faith that is, the registrant must have no knowledge of the
defect or lack of title of his vendor or must not have been aware of facts which should
have put him upon such inquiry and investigation as might be necessary to acquaint him
with the defects in the title of his vendor. 39
Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired
knowledge of Babasanta's claim. Babasanta, however, strongly argues that the
registration of the sale by SLDC was not sufficient to confer upon the latter any title to
the property since the registration was attended by bad faith. Specifically, he points out
that at the time SLDC registered the sale on 30 June 1990, there was already a notice of
lis pendens on the file with the Register of Deeds, the same having been filed one year
before on 2 June 1989. ACTIcS
Did the registration of the sale after the annotation of the notice of lis pendens obliterate
the effects of delivery and possession in good faith which admittedly had occurred prior
to SLDC's knowledge of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option
to Buy in favor of SLDC upon receiving P316,160.00 as option money from SLDC. After
SLDC had paid more than one half of the agreed purchase price of P1,264,640.00, the
Spouses Lu subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or
SLDC. At the time both deeds were executed, SLDC had no knowledge of the prior
transaction of the Spouses Lu with Babasanta. Simply stated, from the time of execution
of the first deed up to the moment of transfer and delivery of possession of the lands to
SLDC, it had acted in good faith and the subsequent annotation of lis pendens has no
effect at all on the consummated sale between SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of another without notice that some
other person has a right to, or interest in, such property and pays a full and fair price for
the same at the time of such purchase, or before he has notice of the claim or interest of
some other person in the property. 40 Following the foregoing definition, we rule that
SLDC qualifies as a buyer in good faith since there is no evidence extant in the records
that it had knowledge of the prior transaction in favor of Babasanta. At the time of the
sale of the property to SLDC, the vendors were still the registered owners of the property
and were in fact in possession of the lands. Time and again, this Court has ruled that a
person dealing with the owner of registered land is not bound to go beyond the certificate
of title as he is charged with notice of burdens on the property which are noted on the
face of the register or on the certificate of title. 41 In assailing knowledge of the
transaction between him and the Spouses Lu, Babasanta apparently relies on the principle
of constructive notice incorporated in Section 52 of the Property Registration Decree
(P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage,
lease, lien, attachment, order, judgment, instrument or entry affecting registered
land shall, if registered, filed, or entered in the office of the Register of Deeds
for the province or city where the land to which it relates lies, be constructive
notice to all persons from the time of such registering, filing, or entering.
However, the constructive notice operates as such by the express wording of
Section 52 from the time of the registration of the notice of lis pendens which in
this case was effected only on 2 June 1989, at which time the sale in favor of SLDC
had long been consummated insofar as the obligation of the Spouses Lu to transfer
ownership over the property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta
the annotation of the notice of lis pendens cannot help Babasanta's position a bit and it is
irrelevant to the good or bad faith characterization of SLDC as a purchaser. A notice of
lis pendens, as the Court held in Natao v. Esteban, 42 serves as a warning to a
prospective purchaser or incumbrancer that the particular property is in litigation; and
that he should keep his hands off the same, unless he intends to gamble on the results of
the litigation." Precisely, in this case SLDC has intervened in the pending litigation to
protect its rights. Obviously, SLDC's faith in the merit of its cause has been vindicated
with the Court's present decision which is the ultimate denouement on the controversy.
The Court of Appeals has made capital 43 of SLDC's averment in its Complaint-in-
Intervention 44 that at the instance of Pacita Lu it issued a check for P200,000.00 payable
to Babasanta and the confirmatory testimony of Pacita Lu herself on cross-examination.
45 However, there is nothing in the said pleading and the testimony which explicitly
relates the amount to the transaction between the Spouses Lu and Babasanta for what
they attest to is that the amount was supposed to pay off the advances made by Babasanta
to Pacita Lu. In any event, the incident took place after the Spouses Lu had already
executed the Deed of Absolute Sale with Mortgage in favor of SLDC and therefore, as
previously explained, it has no effect on the legal position of SLDC. EHSITc
Assuming ex gratia argumenti that SLDC's registration of the sale had been tainted by
the prior notice of lis pendens and assuming further for the same nonce that this is a case
of double sale, still Babasanta's claim could not prevail over that of SLDC's. In Abarquez
v. Court of Appeals, 46 this Court had the occasion to rule that if a vendee in a double
sale registers the sale after he has acquired knowledge of a previous sale, the registration
constitutes a registration in bad faith and does not confer upon him any right. If the
registration is done in bad faith, it is as if there is no registration at all, and the buyer who
has taken possession first of the property in good faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only after the
second vendee, Abarquez, registered their deed of sale with the Registry of Deeds, but
the Israels were first in possession. This Court awarded the property to the Israels
because registration of the property by Abarquez lacked the element of good faith. While
the facts in the instant case substantially differ from that in Abarquez, we would not
hesitate to rule in favor of SLDC on the basis of its prior possession of the property in
good faith. Be it noted that delivery of the property to SLDC was immediately effected
after the execution of the deed in its favor, at which time SLDC had no knowledge at all
of the prior transaction by the Spouses Lu in favor of Babasanta.

The law speaks not only of one criterion. The first criterion is priority of entry in the
registry of property; there being no priority of such entry, the second is priority of
possession; and, in the absence of the two priorities, the third priority is of the date of
title, with good faith as the common critical element. Since SLDC acquired possession of
the property in good faith in contrast to Babasanta, who neither registered nor possessed
the property at any time, SLDC's right is definitely superior to that of Babasanta's.
At any rate, the above discussion on the rules on double sale would be purely academic
for as earlier stated in this decision, the contract between Babasanta and the Spouses Lu
is not a contract of sale but merely a contract to sell. In Dichoso v. Roxas, 47 we had the
occasion to rule that Article 1544 does not apply to a case where there was a sale to one
party of the land itself while the other contract was a mere promise to sell the land or at
most an actual assignment of the right to repurchase the same land. Accordingly, there
was no double sale of the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of
Appeals appealed from is REVERSED and SET ASIDE and the decision of the Regional
Trial Court, Branch 31, of San Pedro, Laguna is REINSTATED. No costs.
SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur.
||| (San Lorenzo Development Corp. v. Court of Appeals, G.R. No. 124242, January 21,
2005)

THIRD DIVISION
[G.R. No. 158682. January 31, 2005.]
SPOUSES BIENVENIDO R. MACADANGDANG and VIRGINIA
C. MACADANGDANG, petitioners, vs. SPOUSES RAMON
MARTINEZ and GLORIA F. MARTINEZ, respondents.
D E C I S I O N
CORONA, J p:
Petitioners, spouses Bienvenido and Virginia Macadangdang (Macadangdang spouses),
assail the October 25, 2001 decision 1 of the Court of Appeals in CA-G.R. CV No.
32018, modifying the November 13, 1990 decision 2 of Branch 149 of the Makati
Regional Trial Court in Civil Case No. 88-796.
The present controversy involves a house and lot in Lot 6, Block 22-A, Phase 5-A,
Parkhomes Subdivision, Tunasan, Muntinlupa, Metro Manila, covered by TCT No.
146553 in the name of Emma A. Omalin.
On December 20, 1986, the Macadangdang spouses offered to buy the subject property
from Omalin for P380,000 on installment basis.
On the same date, the Macadangdang spouses made a downpayment of P5,000 through
the broker, Sto. Nino Realty Services, Inc. On January 3, 1987, they paid another
P175,000. Thereafter, Omalin executed a deed of sale with mortgage dated January 5,
1987. The deed provided for the payment of the balance of P200,000 in three
installments. IDTSEH
The Macadangdang spouses took possession of the house and lot on January 18, 1987.
On April 22, 1987, they paid P60,000 and on October 1, 1987, another P30,000. After the
Macadangdangs had paid a total of P270,000, the parties agreed that the balance of
P110,000 was to be paid upon delivery of the TCT.
On January 29, 1988, Omalin executed a deed of absolute sale in favor of the
Macadangdang spouses. However, the latter did not pay the P110,000 balance because
Omalin failed to deliver the TCT. It turned out that the property was mortgaged to private
respondent spouses Ramon and Gloria Martinez (Martinez spouses).
It appears that on March 5, 1987, a certain Atty. Paterno Santos, a broker, offered to
mortgage the subject property to the Martinez spouses for P200,000. Atty. Santos was in
possession of a "clean" TCT No. 146553 and a fire insurance policy covering said
property. The spouses Martinez accepted the mortgage with interest at 36% p.a. and duly
recorded it at the Registry of Deeds of Makati. The proper annotation was made at the
back of the title.
From September 1987 to March 9, 1988, Omalin paid the monthly interest of P6,000 but
failed to pay the subsequent interest from April 1988 to October 1989 amounting to
P114,000. HESIcT
The Macadangdang spouses filed a criminal case for estafa against Omalin and a
combined action for specific performance, annulment of contract and damages against the
spouses Martinez and Omalin.
After trial, the Makati RTC rendered a decision in favor of the Macadangdang spouses:
WHEREFORE, in view of the foregoing, judgment is rendered as follows:
1. The defendants Emma A. Omalin, Ramon Martinez and Gloria
Martinez are hereby ordered to deliver to the plaintiffs the
owner's duplicate copy of TCT No. 146553, free from the
encumbrance under Entry No. 30110 of the Register of Deeds of
Makati, upon plaintiffs' payment of the balance of P100,000.
2. The defendant Emma A. Omalin is hereby ordered to pay plaintiffs
the amount of P30,000 as moral damages and P20,000 as
attorney's fees and costs of suit. 3
On appeal, however, the appellate court modified the decision of the Makati RTC:
Considering that defendant Omalin remains to be the owner of the property
despite the existence of a valid mortgage, she has the right to sell it. Hence, we
rule that the sale in favor of plaintiffs-appellee is likewise valid, subject to the
right of defendants-appellants to foreclose the property for failure of defendant
Omalin to pay her indebtedness. ScAHTI
xxx xxx xxx
WHEREFORE, the appealed decision is MODIFIED. A new one is hereby
entered:
1. Declaring defendants-appellants Ramon and Gloria Martinez as mortgagees
in good faith.
2. Declaring the deed of sale with mortgage in favor of plaintiffs-appellees
Bienvenido and Virginia Macadangdang as valid and ordering them to pay
defendant Omalin the balance of the price in the sum of P110,000.
3. Ordering defendants-appellants to deliver the owner's duplicate copy of TCT
No. 146553 to plaintiffs-appellees, subject to the existing encumbrance and the
right of defendants-appellants to foreclose the property should defendant
Omalin fail to pay her obligation.
4. Ordering defendant Emma A. Omalin to pay plaintiffs-appellees the amount
of P30,000 as moral damages and P20,000 as attorney's fees and costs of suit.
The Macadangdang spouses are now before the Court with the following assignments of
error:
FIRST ASSIGNED ERROR
THE COURT OF APPEALS' "DECISION" OPENLY DISREGARDED AND
OVERTURNED EXISTING JURISPRUDENCE INVOLVING SIMILAR
FACTS. EcATDH
SECOND ASSIGNED ERROR
UNLESS REVERSED AND/OR MODIFIED, THE COURT OF APPEALS'
DECISION, IF EVENTUALLY IMPLEMENTED, MIGHT GIVE RISE TO
ABSURD RESULTS.
THIRD ASSIGNED ERROR
THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE
TRIAL COURT'S DECISION DATED NOVEMBER 13, 1990. 4
The petition lacks merit.
The subject matter of the instant petition involves registered land. Unlike the case of
unregistered land, in which an earlier instrument, be it sale or mortgage, prevails over a
latter one, and the registration of any one of them is immaterial, 5 with respect to
registered land, the rule is different. Between two transactions concerning the same parcel
of land, the registered transaction prevails over the earlier unregistered right. 6 The act of
registration operates to convey and affect the registered land so that a bonafide purchaser
of such land acquires good title as against a prior transferee, if such prior transfer was
unrecorded. 7
Sections 51 and 52 of PD 1529, otherwise known as the Property Registration Decree, are
pertinent:
Sec. 51. Conveyance and other dealings by registered owner. An owner of registered land
may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing
laws. He may use such forms of deeds, mortgages, lease or other voluntary instruments as are
sufficient in law. But no deed, mortgage, lease or other voluntary instrument, except a will
purporting to convey or affect registered land shall take effect as a conveyance or bind the land,
but shall operate only as a contract between the parties and as evidence of authority to the
Register of Deeds to make Registration. HIaSDc
The act of registration shall be the operative act to convey or affect the land
insofar as third persons are concerned, and in all cases under this Decree, the
registration shall be made in the office of the Register of Deeds for the province
or city where the land lies.
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien
attachment, order, judgment, instrument or entry affecting registered land shall, if registered,
filed or entered in the office of the Register of Deeds for the province or city where the land to
which it relates lies, be constructive notice to all persons from the time of such registering, filing
or entering.
It is clear from the foregoing that the registration of the deed is the effectual act which
binds the land insofar as third persons are concerned. Prior registration of a lien creates a
preference as the act of registration is the operative act that conveys and affects the land.
8 Considering that the prior sale of the subject property to the Macadangdang spouses
was not registered, it was the registered mortgage to the spouses Martinez that was valid
and effective. For sure, it was binding on Omalin and, for that matter, even on the
Macadangdang spouses, the parties to the prior sale.
The rule on prior registration is subject only to one exception, that is, when a party has
knowledge of a prior existing interest which is unregistered at the time he acquires a right
to the same land, his knowledge of that prior unregistered interest has the effect of
registration as to him. 9
The Martinez spouses claimed they had never met the Macadangdang spouses and were
unaware that Omalin had already sold the property to them. Hence, the appellate court
declared the Martinez spouses as mortgagees in good faith and innocent mortgagees for
value. 2005cdasia
An innocent mortgagee for value is akin to an innocent purchaser for value. The phrase
"innocent purchaser for value" is deemed to include an innocent lessee, mortgagee or
other (beneficiary of an) encumbrance for value. 10 An innocent purchaser for value is
one who buys the property of another without notice that some other person has a right to
or interest in such property and pays a full and fair price for the same at the time of such
purchase or before he has notice of the claim of another person. 11 As a general rule,
where the certificate of title is in the name of the vendor when the land is sold, the vendee
for value has the right to rely on what appears on the face of the title and is not obligated
to look beyond what appears on the face of the certificate of title of the vendor. As an
exception, the vendee is required to make the necessary inquiries if there is anything in
the certificate of title which raises any cloud or vice in the ownership of the property. 12
Otherwise, his mere refusal to believe that such defect exists, or his willful disregard of
the possibility of the existence of a defect in his vendor's title will not make him an
innocent purchaser for value if it afterwards develops that the title is in fact defective, and
it appears that he had such notice of the defect as would have led to its discovery had he
acted with that measure of precaution which may reasonably be required of a prudent
man in a like situation. 13
Nothing on record shows that the title of Omalin, the mortgagor, was flawed when it was
presented to the spouses Martinez. Their reliance on the title was therefore reasonable
and correct. They were in no way obliged to go beyond the TCT to determine the legal
condition of the property since there was nothing that should have aroused their suspicion
about any defect or problem about the title.

Where innocent third persons rely on the lack of defect of a certificate of title and acquire
rights over the property, the Court cannot disregard such rights. Otherwise, public
confidence in the certificate of title and ultimately, in the entire Torrens system will be
impaired, for every one dealing with registered property will have to inquire at every
instance whether the title has been regularly or irregularly issued. 14
On this note, being innocent registered mortgagees for value, the Martinez spouses
acquired a superior right over the property.
Accordingly, we find no reversible error by the appellate court in upholding the existing
encumbrance over the subject property acquired by the Macadangdang spouses, in
declaring the spouses Martinez as mortgagees in good faith and in recognizing their right
to foreclose on the mortgage should Omalin fail to pay her obligation. ITCHSa
The assailed decision of the appellate court is neither absurd nor unjust. The registered
mortgage contract of the Martinez spouses has given them the superior right, not as
owners but only as mortgagees. Consequently, they are entitled to be paid the amounts
due them under the real estate mortgage registered in their favor. In the event Omalin, as
mortgagor, fails to pay the mortgage obligation or, should any party, for that matter, who
may have an interest in the mortgaged property like the petitioners herein fail to redeem it
from the mortgagees, the latter, as declared by the Court of Appeals, may enforce their
rights against the property by foreclosing on the mortgage, regardless of who its owner
may be, considering that the registered mortgage attaches to the property.
WHEREFORE, the instant petition is hereby DENIED and the October 25, 2001 decision
of the Court of Appeals in CA-G.R. CV No. 32018 is AFFIRMED.
Costs against petitioners.
SO ORDERED.
Panganiban, Sandoval-Gutierrez, Carpio Morales and Garcia, JJ., concur.
||| (Spouses Macadangdang v. Spouses Martinez, G.R. No. 158682, January 31, 2005)

THIRD DIVISION
[G.R. No. 128122. March 18, 2005.]
PREMIERE DEVELOPMENT BANK, petitioner, vs. HON. COURT
OF APPEALS, LIBERATO G. YAMBAO, JESUS B. RODRIGUEZ
and JESUS D. MORALES, respondents.
[G.R. No. 128184. March 18, 2005.]
LILIAN M. TOUNDJIS, petitioner, vs. HON. COURT OF APPEALS,
LIBERATO G. YAMBAO, et al., and JOSELITO GARAYGAY, ET
AL., respondents.
[G.R. No. 128229. March 18, 2005.]
JOSELITO P. GARAYGAY, CENTURY REALTY and
DEVELOPMENT CORPORATION, petitioners, vs. HON. COURT
OF APPEALS, LIBERATO G. YAMBAO, JESUS B. RODRIGUEZ
and JESUS D. MORALES, respondents.
D E C I S I O N
GARCIA, J p:
Before the Court are these three (3) separate petitions for review on certiorari under Rule
45 of the Rules of Court to nullify and set aside the Decision 1 dated November 29, 1995
and Resolution 2 dated February 6, 1997 of the Court of Appeals in CA-G.R. CV 42121.
The first assailed issuance affirmed an earlier decision 3 dated January 28, 1993 of the
Regional Trial Court at Quezon City, Branch 88 in its Civil Case No. Q-92-8455,
declaring, inter alia, herein private respondents, as plaintiffs therein, Liberato G.
Yambao, Jesus B. Rodriguez and Jesus D. Morales ("Yambao", "Rodriguez" and
"Morales", respectively), as rightful owners of the land subject of this case. The second
assailed issuance, on the other hand, denied reconsideration of the first.
At the core of the controversy is a 2,660-square meter parcel of land, denominated as Lot
23 of the subdivision plan Fls-2804-D of SWO-17514, registered under TCT No. 9780 of
the Manila Registry, located as it were in Matandang Balara, which used to be a part of
the then district of Caloocan, City of Manila. The creation of Quezon City which found
Lot 23 within its borders saw the transfer of the corresponding property records to the
new political unit and the generation of new certificates of title to reflect territorial
changes. As thus transferred, TCT No. 9780 was assigned title number TCT No. 9780
(693).
The evidence on record disclose the following factual antecedents:
Two (2) different persons with exactly the same name, i.e., Vicente T. Garaygay, each
claimed exclusive ownership of Lot 23 by virtue of an owner's duplicate certificate each
had possession of during the period material covering said lot. One held TCT No. 9780,
supra, and the other, TCT No. 9780 (693), supra. The technical description of the land
appearing in one copy corresponds exactly with that in the other. The date "June 14,
1944" appears on the face of both copies as a common date of entry. One, however,
contained certain features, markings, and/or entries not found in the other and vice versa.
On April 17, 1979, one of the two Vicente T. Garaygays, a resident of Cebu City
(hereinafter referred to as Garaygay of Cebu), executed a deed of sale 4 over the lot
described in and covered by his TCT No. 9780 (693) in favor of his nephew, Joselito P.
Garaygay ("Joselito", hereinafter). The sale notwithstanding, the owner's duplicate
certificate remained for some time in the seller's possession. cACEHI
In another transaction, the other Vicente T. Garaygay, a resident of Rizal (hereinafter
referred to as Garaygay of Rizal), sold to Liberto G. Yambao and Jesus B. Rodriguez the
same property described in TCT 9780. "YCM Compound, Angono, Rizal" is set out in the
February 11, 1986 conveying deed 5 as the seller's residence. Buyers Yambao and
Rodriguez would later sell a portion of their undivided interests on the land to Jesus D.
Morales. 6
Then came the June 11, 1988 fire that gutted a portion of the Quezon City hall and
destroyed in the process the original copy of TCT No. 9780 (693) on file with the
Registry of Deeds of Quezon City. Barely a month later, a certain Engr. Hobre filed an
application, signed by Garaygay of Cebu, for the reconstitution of the burned original on
the basis of the latter's owner's duplicate certificate. One Engr. Felino Cortez of the Land
Registration Authority (LRA) did the follow-up on the application. After due
proceedings, the LRA issued an order of reconstitution, 7 by virtue of which Garaygay of
Cebu acquired reconstituted TCT No. RT-1764 (9780) (693). 8
Meanwhile, or on May 26, 1989, the deed of sale executed by Garaygay of Cebu in favor
of his nephew Joselito was registered, paving the issuance in the latter's name of TCT No.
12183. 9 Thereafter, thru the efforts of same Engr. Cortez, 10 Lot 23 was subdivided into
three (3) lots, namely: Lot 23-A, Lot 23-B and Lot 23-C for which TCT Nos. 14414,
14415 and 14416, respectively, 11 were issued. Joselito posthaste sold Lot 23-A to Lilian
Toundjis who, pursuant to a Contract to Sell executed on March 23, 1990, 12 undertook
to pay Joselito the P.5 Million balance of the P2.5 Million purchase price once she is
placed in possession of a fenced-off property. And, for shares of stock, Joselito assigned
on February 26, 1991, the other two (2) lots, i.e., Lot 23-B and Lot 23-C to Century
Realty and Development Corporation ("Century Realty") which, after securing TCT Nos.
34390 and 34391 therefor, mortgaged 13 the same to Premiere Development Bank, Inc.
("Premiere Bank") to secure a P2.5 Million loan. jur2005cda
Clashing claims of ownership first came to a head when, sometime in May 1990,
Liberato G. Yambao and his agents forcibly prevented Joselito's hired hands from
concrete-fencing the subject property. The police and eventually the National Bureau of
Investigation (NBI) entered into the picture.
In the meantime, Yambao, Rodriguez and Morales as pro indiviso buyers of Lot No. 23,
caused the annotation on December 17, 1990, January 16, 1991 and February 15, 1991 of
their respective adverse claims on Joselito's TCT Nos. 14414, 14415 and 14416. They
then filed with the Regional Trial Court at Quezon City suit against Joselito, Century
Realty and Premiere Bank for quieting of title and annulment of said defendants' fake
titles with prayer for damages.
In their amended complaint, 14 docketed as Civil Case No. Q-92-8455 and raffled to
Branch 88 of the court, Yambao, Rodriguez and Morales alleged, inter alia, the
following:
1. That Joselito, taking advantage of the 1988 burning of the Quezon City Hall, and
"using an impostor, who pretended to be Vicente Garaygay, by means of fraud, deceit,
and unlawful manipulation succeeded in administratively reconstituting the aforesaid
property (sic) in 1990 on the basis of an alleged owner's copy, which on its face is
patently fake and spurious and fake title bearing [TCT] No. 9780 (693)".
2. That a reconstituted title secured by means of fraud, deceit, or other machinations is
void ab initio under Section 11 of Republic Act (R.A.) 6732;
3. That after causing the reconstitution of the title, Joselito "acted fast to consummate his
scheme of depriving the plaintiffs of their ownership . . . of the [disputed] land by the
following successive acts", referring to Joselito's act of securing title in his name,
subdividing Lot No. 23 and securing titles to and disposing of the subdivided lots;
4. That they (Yambao, Rodriguez and Morales) filed their separate adverse claims and
caused the same to be annotated at the back of Joselito's TCT Nos. 14414, 14415 and
14416; that while the adverse claim of Rodriguez was still valid, Joselito executed on
February 26, 1991 a Deed of Assignment in favor of Century Realty, which thus made
the latter a "transferee in bad faith"; that on March 26, 1991, Century Realty executed a
mortgage contract in favor of Premiere Bank, "a mortgagee in bad faith"; and
5. That at the time the mortgage was executed, the houses of plaintiffs' caretaker and a
chapel belonging to them were standing on the two lots in question. HcSDIE
Answering, principal defendants Joselito and Century Realty denied plaintiffs' material
allegations and asserted, by way of affirmative defense, the validity of (a) the
reconstitution of TCT No. 9780 (693); (b) the assignment of real property in favor of
Century Realty; and (c) the mortgage made by Century Realty in favor of Premiere Bank.
In their separate answers, also with crossclaim and counterclaim, Lilian Toundjis, who
was allowed to intervene to oppose the action thus filed, and Premiere Bank virtually
adopted Joselito's position and pleaded, in addition, their right as bona fide purchaser or
mortgagee for value, as the case may be, of the subject property.
Issues having been joined, trial ensued with plaintiffs Yambao, Rodriguez and Morales
offering in evidence several documents. Foremost of these was Exhibit "B" 15 which is
the owner's duplicate copy of TCT No. 9780 of the Registry of Manila once in the
possession of Garaygay of Rizal. On the other hand, the principal defendants presented
no less than 38 pieces of marked and sub-marked documentary evidence, among which
was Exhibit "1", 16 identical to Exhibit "D", which is the duplicate copy of TCT No.
9780 (693) that pertained to Garaygay of Cebu and used in the reconstitution of the
burned original thereof.
In his testimony, Yambao stated having noticed, when Garaygay of Rizal offered to sell
Lot 23, that the corners and the portion of Exhibit "B" containing the owner's personal
circumstances were torn and related the owner's explanation as to how these oddities
came about. Yambao related that owing to the physical appearance of Exhibit "B", the
recording of the Garaygay of Rizal Yambao/Rodriguez deed of sale (Exh. "A") was
refused since the more crucial document, i.e., the torn owner's copy was itself not
registrable unless it is first reconstituted. He also testified that, to assure himself of the
genuineness of the seller's owner's duplicate certificate, he and Garaygay of Rizal
repaired to the Quezon City Registry to compare his (Garaygay of Rizal's) copy with the
original copy on file with the registry, and discovered that the only difference was that
the owner's duplicate bears the title number "9780", while the original had "9780 (693)"
typewritten on a straight line. 17 As told by Yambao, Garaygay of Rizal's explanation for
the figure difference is that "693" was not affixed on his (Garaygay of Rizal's) title
because he never, in first place, presented the same to the Quezon City Registry for
correction or affixture.

Yambao also testified that Garaygay of Rizal, when asked to show proof of his identity,
presented a voter's ID with his picture, 18 a Commission of Elections (COMELEC)
certification attesting to his being a registered voter in Precinct No. 21 in Angono, Rizal
19 and a certification of residence issued by the barangay captain of the place. 20
Yambao added that before concluding the sale, he, together with the prospective seller,
proceeded to the land site where the residents and/or caretakers thereat assured him that
his companion, Garaygay of Rizal, was actually the landowner.
For their part, defendants presented Garaygay of Cebu who alleged, among other things,
having acquired Lot 23 from one Macaria Lim vda. Arambulo sometime in 1944, having
paid taxes thereon for the period 1949-1990 21 and mortgaging in 1949 the titled
property with Meralco Employees Savings & Loan Association, with the mortgage deed
and later the discharge of mortgage being annotated on his title. 22 Joselito also took the
witness stand in defense of his ownership of Lot 23 and the transactions he entered into
involving the lot.
Eventually, the trial court rendered judgment finding for the plaintiffs and against the
defendants, declaring Joselito's TCT No. 9780 (693) and all subsequent titles traceable to
it and transactions involving its derivatives as null and void. To the trial court, plaintiffs'
evidence preponderated over those of the defendants' whose main witness, Garaygay of
Cebu, gave inconsistent testimony, while Joselito hedged on his answer regarding a
cousin connected with LRA. Going against the defendants' cause, the trial court further
observed dubious circumstances surrounding the reconstitution of TCT 9780 (693), the
more disturbing of which is the admitted participation of LRA personnel in the
reconstitution process.
Dated January 28, 1993, the trial court's decision 23 dispositively reads:
WHEREFORE, in view of the foregoing, the Court renders the following
judgment to wit:
1. Plaintiffs Liberato G. Yambao, Jesus B. Rodriguez and Jesus D. Morales are
hereby declared the rightful owners and possessors of the land described in TCT
No. 9780 marked as Exh. 'B'; HSIDTE
2. Defendants' title, TCT No. 9780 (693), marked as Exh. '1' (p. 349, Rollo,
identical to Exh. 'D', p. 493 Rollo); the LRA Order of Reconstitution . . .;
defendants' reconstituted title No. RT-1764 (9780) (693) marked as Exh. "4" . .
.; the cancelled title TCT No. 12183 and its derivative titles, TCT Nos. 14414,
14415, and 14416, all in the name of defendant Joselito P. Garaygay and
intervenor Lilian M. Toundjis involving TCT 14414; the Deed of Assignment
and Transfer between Joselito P. Garaygay and Century Realty involving TCT
Nos. 14415 and 14416; [the derivative] titles of defendant Century Realty . . .
namely TCT Nos. 34390 . . . and 34391 . . .; and the Deed of Real Estate
Mortgage executed by Century Realty . . . in favor of defendant Premiere Bank,
Inc. are all declared null and void and without force and effect;
3. The Register of Deeds of Quezon City to strike out the reconstituted title [but
already cancelled] No. 1764 (9780) (693) and TCT No. 12183, . . . ; to cancel
TCT 14414 . . .; to cancel the Deed of Assignment and Transfer between
Joselito P. Garaygay and Century Realty . . . covered by TCT Nos. 14415 and
14416, and necessarily cancel TCT Nos. 34390 and 34391 . . .; to cancel the
Deed of Real Estate Mortgage over TCT Nos. 34390 and 34390 . . .; and
thereafter, to enter and register the Deeds of Sale, dated February 11, 1986
(Exh. "A") and July 10, 1988 (Exh. "C") and forthwith issue corresponding new
title/s in the names of the plaintiffs, free from all encumbrances, except those
entered into by them, upon payment of all taxes and fees prescribed by law;
4. Defendant Joselito P. Garaygay is sentenced to pay each of the [three]
plaintiffs . . ., the sum of P100,000.00 as moral damages;
5. Defendants Joselito P. Garaygay, Century Realty . . . and Premiere Bank, Inc.
are sentenced to pay jointly and severally each of the two plaintiffs, namely
Liberato Yambao and Jesus Morales, the sum of P25,000.00 as exemplary
damages and to plaintiff Jesus B. Rodriguez the sum of P25,000.00 as nominal
damages. The defendants are also sentenced to pay jointly and severally the sum
of P20,000.00 as attorney's fees and the cost of suit;
6. Defendant Joselito P. Garaygay is further sentenced to reimburse Lilian M.
Toundjis the sum of P2,000,000.00 with interest thereon at 6% per annum from
the date of judgment;
7. With the annulment of the [aforementioned] Deed of Assignment and
Transfer between defendant Joselito P. Garaygay and defendant Century Realty
. . . and the Deed of Real Estate Mortgage . . . between defendant Century
Realty . . . and defendant Premiere Bank, Inc., all aforementioned defendants
who are respective parties to the named deeds are hereby ordered to make a full
return and restitution to each other of all monies, things and objects they have
received thereunder without interest within fifteen days from finality of this
judgment;
8. All other claims are dismissed.
SO ORDERED. [Words in bracket added]
In time, herein petitioners appealed to the Court of Appeals whereat their recourse was
docketed as CA-G.R. CV No. 42121.
In its Decision of November 29, 1995, 24 the Court of Appeals affirmed in toto the
appealed decision of the trial court, the affirmance being predicated on the following
main justifications:
All in all, the Court agrees with the trial court in giving low rating to both
Vicente Garaygay of Cebu and appellant JOSELITO as witnesses. The court
notes that Vicente T. Garaygay of Cebu has no explanation why the deed of sale
between him and Arambulo was not adduced in evidence . . .
In view of the foregoing questionable actuations of Vicente T. Garaygay of
Cebu and his nephew . . . and their cohorts, the trial court (sic) is constrained to
declare that the defendants' mother title TCT No. 9780 (693) marked as Exhibit
1, which served as the basis of the reconstitution is a fake and spurious title. . . .
Thus, all titles in the name of Vicente T. Garaygay of Cebu and Joselito
Garaygay are null and void. . . .
On the other hand, the claim of appellees that their certificate of title is a
genuine title is supported with credible and sufficient evidence. The contention
of the appellants that the appellees' title should not be accepted as genuine
because it is not authenticated lacks merit. The owner's copy of the title of
appellees is a public document (Broce vs. Broce, 4 Phil. 611). Unlike a private
document which must be authenticated before its admission . . ., there is no need
to authenticate a public document to make it admissible in evidence (Rule 132,
Sec 24). The rule that a document must be authenticated before it is admissible
in evidence does not apply to public documents which are admissible without
further proof of their due execution or genuineness . . . Public documents are
already authenticated by the official signature and seal which they bear, of
which this Court takes judicial notice (Apostol, Essentials of Evidence, 1991,
ed., p. 430) (Underlining added). SIcEHD
Their motion for reconsideration having been denied by the appellate court in its
Resolution of February 6, 1997, 25 petitioners have separately come to this Court. That
of petitioner Premier Bank was docketed as G.R. No. 128122; that of Toundjis as G.R.
No. 128184; and that of Joselito Garaygay and Century Realty as G.R. No. 128229.
Per this Court's Resolution dated June 18, 1997, 26 the three (3) separate petitions were,
upon private respondents' motion, ordered consolidated.
The principal issue tendered in the separate petitions, albeit formulated a bit differently,
comes down to the following: whether or not the Court of Appeals erred in holding
Garaygay of Rizal, instead of Garaygay of Cebu, as the real owner of Lot 23. Behind this
issue is the corollary question of whether or not the same court erred in finding Garaygay
of Rizal's owner's copy, TCT No. 9780, instead of the Garaygay of Cebu's copy, TCT No.
9780 (693), as the authentic title covering Lot 23.
Petitioners urge reversal on the submission that, unlike Garaygay of Cebu who came
forward and took the witness stand, the identity of Garaygay of Rizal who they
stressed at every turn had not been presented to testify has not been established. Albeit
they do not say so, the inference of their posture is that an impostor has taken the identity
of Vicente T. Garaygay. Corollarily, they also contend that the authenticity of the
impostor Garaygay's adverted owner's copy of TCT No. 9780 has remained unproven.
The desired reversal cannot be granted.
Both defining documents, Exhibit "1" and Exhibit "B", appear to have been issued by the
appropriate Registry of Deeds and as such would ordinarily enjoy the guarantees flowing
from the legal presumption of regularity of issuance. 27 But how and precisely when the
legal aberration occurred where two (2) owner's duplicate certificates ended up in the
hands of two (2) distinct persons, complete strangers to each other, are questions which
the records do not provide clear answer. It may not be idle to speculate, though, that fraud
or other improper manipulations had been employed along the way, with likely the
willing assistance of land registry official/s, to secure what for the nonce may be tagged
as the other title. Consistent with the presumption of regularity of issuance, however, the
authenticity of one copy has to be recognized. And necessarily, one of the two (2)
outstanding owner's copies has to be struck down as wrongly issued, if not plainly
spurious, under the governing Torrens system of land registration. For, a piece of land
cannot plausibly be covered at the same time, under the same concept of ownership, by
two (2) outstanding certificates of title, each having the same validity, force and effect.
One has to be spurious, or at least one has to prevail over the other. 28 Else, the ideal
sought to be achieved by the Torrens system would be illusory. As it were, the Torrens
system of land registration aims to obviate possible conflicts of title by giving the public
the right to rely upon the face of the Torrens certificate and to dispense, as a rule, with the
necessity of inquiring further; 29 on the part of the registered owner, the system gives
him complete peace of mind that he would be secured in his ownership as long as he has
not voluntarily disposed of any right over the covered property. 30

The categorical conclusion of the Court of Appeals confirmatory of that of the trial
court is that Exhibit "B" is genuine and that Garaygay of Rizal is a real person. On the
other hand, Exhibit "1" was adjudged spurious. These factual determinations as a matter
of long and sound appellate practice must be accorded great weight, and, as rule, should
not be disturbed on appeal, 31 save for the most compelling and cogent reasons, 32 like
when such factual findings were drawn from a vacuum, or, in fine, reached arbitrarily. 33
To be sure, arbitrariness cannot contextually be imputed on the appellate court. Its
finding that Garaygay of Rizal is an authentic person, once residing in and a registered
voter of Angono, Rizal has adequate evidentiary support in his voter's ID, the COMELEC
and barangay certifications aforementioned and the testimony of an occupant of Lot 23.
And for whatever it is worth, Garaygay of Cebu no less testified that there are three (3)
Vicente T: Garaygay in the Philippines. 34 The reality that the private respondents failed
to put Garaygay of Rizal on the witness box to identify his copy of the title and defend
his erstwhile ownership of Lot 23 may perhaps support petitioners' claim about his being
fictitious if his whereabouts during the trial, if still alive then, was known. But, as found
by the appellate court, "Yambao never heard from or about Garaygay of Rizal" after they
have executed the Deed of Absolute Sale (Exh. "A", supra) on February 11, 1986. AEHTIC
Petitioners' attribution of error on the part of the appellate court's declaring Garaygay of
Rizal as owner of the disputed parcel of land is untenable. It cannot be overemphasized
that the possessor-owner of the authentic copy of TCT No. 9780 was necessary the real
owner of Lot 23. That possessory distinction happened to belong to Garaygay of Rizal.
Moreover, facts and reasonable inferences drawn therefrom point to Exhibit "1" as being
spurious, necessarily leaving Exhibit "B" as the authentic duplicate copy. For starters,
there is the appearance and physical condition of the owner's copies in question which, if
properly evaluated in the light of attendant circumstances, would help in determining
which is genuine and which is sham. 35 For, the condition and physical appearance of a
document would, to borrow from Junquera, reveal, albeit silently, "the naked truth,
hiding nothing, forgetting nothing and exaggerating nothing." As aptly observed by the
appellate court, rationalizing its conclusion adverted to above, Exhibit "B" has no defect,
except for its partly being torn. Respondents' explanation for the defective state of
Exhibit "B", as related to them by Garaygay of Rizal, i.e., it was due to exposure of the
document to the elements, like rain, following his evacuation from Manila to a small nipa
hut in Angono, Rizal during the Japanese occupation, 36 merited approval from the trial
court and the Court of Appeals. Both courts, being in a better position to pass upon the
credibility of petitioners' witness and appreciate his testimony respecting the less than
usual appearance of Exhibit "B", their findings command the respect of this Court.
Lest it be overlooked, what might be considered as defects in Garaygay of Cebu's copy
are, at bottom, the combined effects thereon of the passage of time and the elements.
Standing alone, these defects do not, in our view, undermine the integrity of the
document.
However, unlike Exhibit "B", Exhibit "1" contained entries and other uncommon
markings or features which could not have existed without human intervention. Although
any one of them may perhaps not be appreciable in isolation, these features and/or
markings, taken together, indeed put the integrity of Exhibit "1" under heavy cloud and
indeed cast doubt on its genuineness.
The irregularities listed in the appealed decision may be summed up in the following
wise:
1. Two (2) Victory stamps issued after liberation were strangely pasted on the seal of
Garaygay of Cebu's title Exhibit "1" when such stamps were not yet in existence
when such title was entered in the Registry of Deeds of Manila on June 14, 1944;
2. Exhibit "1" was prepared on "Judicial Form No. 109-D Revised June 1945", which
came into circulation after June 14, 1944;
3. Exhibit "1" bears the handwritten figure "9780" in ink above the typewritten number
"693". There is no initial to suggest that the handwritten number "9780 over the
typewritten title number "693" was officially authorized;
4. The first letter "Y" in the surname "Garaygay" in Exhibit "1" was inserted in ink. In
contrast, there is no such insertion in Exhibit "B"; and
5. Exhibit "1" carries the annotation "subject to further disposition by the government
with respect to real estate transactions consummated during the Japanese regime, and
subject to the provisions of Sec. 4, Rule 74 of the New Rules of Court". 37 Such
annotation is supposed to have been contemporaneously made on the date of the issuance
of the title in 1944. Yet, in what appears to be an anomalous instance, advertence is made
to "transactions consummated during the Japanese regime" and to "Rule 74 of the Rules
of Court", logically implying, as aptly observed by the Court of Appeals, that the
annotation was entered after liberation and also after 1964 when the New Rules of Court
came into effect.
Almost as if it were an afterthought, petitioners explained that the Victory stamps could
have been pasted, the 1945 revised judicial form utilized, and the annotations referred to
in item # (5) entered when the TCT of Garaygay of Cebu was reissued. Anent the number
"9780" appearing in ink, the proffered explanation was that the handwritten "9780" was a
mere provisional marking.
The foregoing explanations are, at best speculative, thus correctly struck down by the
appellate court. And unfortunately, Garaygay of Cebu, the best person to shed light on
the foregoing unusual situations and help the limping case of the petitioners, could not
himself offer an explanation. THCSAE
Petitioners' insistence that the inscription on Garaygay of Cebu's copy of the deed of
mortgage and the discharge of mortgage he constituted over Lot 23 in favor of Meralco
Employees Savings and Loan Association proves the authenticity of the latter's owner
duplicate is valid to a point. But, to suggest that such inscription could not have been
possible were his title spurious is altogether a different matter. We need not cite cases
memorialized in books of jurisprudence where land dealings are annotated on
reconstituted certificates secured thru fraud or otherwise issued irregularly. Stated a little
differently, an annotation of what is otherwise a bona-fide land transaction is not a
peremptory argument against the spurious character, if that be the case, of the document
on which it is annotated.
In the same token, the payment by Garaygay of Cebu of land taxes on Lot 23 does not
also necessary detract from the spurious nature of his title, Exhibit "1". After all, any one
can pay real estate taxes on a given property without being quizzed by the local treasury
whether or not the payor owns the real property in question. This is not to say of course
that tax receipts are evidence of ownership, since they are not, albeit they are good
indicia of possession in the concept of owner, for no one would ordinarily be paying
taxes for a property not in his actual or at least constructive possession. 38
Other than paying taxes from 1949 to 1990 39 (mistakenly stated by respondent court as
from 1949 to 1960), however, Garaygay of Cebu and this holds true for his nephew
Joselito did not appear before the current stand-off to have exercised dominion over
Lot 23. For one, it has not been shown that Garaygay of Cebu was at any time in
possession of the property in question, unlike his namesake from Rizal who managed to
place the property under the care of certain individuals who built semi-permanent
structure-dwelling houses thereon without so much of a protest from Garaygay of Cebu
or his nephew Joselito after the latter purportedly bought the property. For another,
neither Garaygay of Cebu nor his nephew Joselito ever instituted any action to eject or
recover possession from the occupants of Lot 23. This passivity bespeaks strongly against
their claim of ownership. It has been said that a party's failure to raise a restraining arm or
a shout of dissent to another's possession for an unreasonably long period is simply
contrary to his claim of ownership. 40 Not lost on this Court are circumstances noted by
the trial court which negatively reflect on Garaygay of Cebu's and his nephew's claim of
ownership. Some excerpts of what the trial court wrote:
"On its face, Exh. "5" [the original copy of the deed of sale between Garaygay
and his nephew] was notarized by one Armando Pulgado. However, there are
certifications by both the Bureau of National Archives that 'no Notarial records
of Armando Pulgado exist in Manila.' (Exh. "KK") or 'in Quezon City' (Exh.
"LL"), and by the Clerk of Court that 'Atty. Armando Pulgado was not
appointed as notary public for and in the City of Manila for the year 1979' (Exh.
"MM")
Exh. "5" dated April 17, 1979 was registered only on May 26, 1989, over 10
years from the sale. JOSELITO could not explain how thereafter his own title
(TCT 12183) was issued in his name since it was not he who registered the
Deed of Sale, Exh. "5". In other words, someone else registered it for him.
Neither JOSELITO nor his uncle . . . followed up the petition for reconstitution
which was prepared, filed and processed by interested persons in Manila, which
scenario prompted plaintiffs' counsel to observe that the reconstitution was
'among the first of all applicants in Quezon City' to be approved (p. 32, TSN
August 17, 1992). Of these interested persons, the most unthinkable was Engr.
Felino Cortez of the LRA who did the follow-ups on the application in Manila.
It is remarkable why Cortez, who is neither a friend nor relative, took special
interest in not only following up the application for reconstitution but in
effecting the subdivision of TCT 12183 into [3 lots], for which three derivative
titles of TCT 12183 were issued . . . Again JOSELITO had no knowledge of this
fact of subdivision until his uncle, . . . telephoned him with the information that
the land was already subdivided.

In short, it appears to the Court that without doing anything, Vicente T.
Garaygay of Cebu has his title (Exh. "1") reconstituted. On the other hand,
without knowing anything, JOSELITO obtained TCT 12183 in his name and
had the land subdivided and sold.
These circumstances demonstrate that neither JOSELITO nor his uncle, Vicente
T. Garaygay of Cebu acted ante litem motam like the true owners they claim to
be in their respective times. . . .
Several questions confound the Court's curiosity. Why were some LRA officials
so interested in the speedy reconstitution and in the subdivision of the land in
excess of their bureaucratic duties? Where did Vicente T. Garaygay of Cebu get
his owner's copy, Exh. "1". Did some conniving LRA officers supply the
judicial form and Victory stamps? Why was JOSELITO so evasive about his
cousin in the LRA as shown in his examination?
xxx xxx xxx
As the Court sees it, the Deed of Sale (Exh. "5" was a simulated transaction
because both JOSELITO and his uncle admit this was a 'joint venture to sell the
property in question. However, the facts suggest that the 'joint venture' was not
limited to the two of them. The persons who prepared and filed the application
for reconstitution, and those officers in the LRA who followed it up and who
thereafter subdivided the land into three lots for easier sale, those at the NBI
who tried to persuade Yambao and Morales to settle the dispute . . . are
apparently part of the 'joint venture' or stand to profit from it".
This brings us to the core of Toundjis' and Premiere Bank's petitions. The first asserts the
rights of a purchaser and the other, that of a mortgagee, in good faith and for value of Lot
23, a status respectively denied them by the appellate court.
The rule that a subsequent declaration of a title as null and void is not a ground for
nullifying the contractual right of a purchaser, mortgagee or other transferees in good
faith, with the exceptions thereto, is well-settled. Where the certificate of title is in the
name of the seller or mortgagor, the innocent purchaser or mortgagee for value has the
right to rely on what appears on the certificate without inquiring further. 41 In the
absence of anything to excite or arouse suspicion, or except when the party concerned
had actual knowledge of facts or circumstances that should impel a reasonably cautious
person to make such further inquiry, said purchaser or mortgagee is without obligation to
look beyond the certificate and investigate the title of the seller or mortgagor. Thus,
where innocent third persons, relying on the correctness of the certificate, acquire rights
over the property as buyer or mortgagee, the subsequent declaration of nullity of title is
not a ground for nullifying the right of such buyer or mortgagee. 42
Tested by the above norm, may Toundjis be considered, as she has claimed, an innocent
purchaser for value, meaning one who buys or acquires, for valuable consideration, a
piece of land of another without notice that some other person has a right to, or interest
in, such property at the time of purchase, or before he has notice of the claim or interest
of some other persons in the property. 43
The Court of Appeals rejected the claim of Toundjis, and rightly so.
A study of the record shows that TCT 14414 covering Lot 23-A that Toundjis contracted
to buy from Joselito carried an annotation that it was administratively reconstituted.
Records also indicate that Toundjis knew at the time of the sale that Joselito did not have
possession of the lot inasmuch as she agreed to pay the balance of the purchase price as
soon as the seller can fence off the property and surrender physical possession thereof to
her. ITAaCc
Even for these two (2) reasons alone, which should have placed Toundjis on guard
respecting Joselito's title, her claim of being a bona fide purchaser for value must fail.
The rejection, therefore, by the Court of Appeals of such claim is correct. Likewise
acceptable is the appellate court's holding, citing Republic vs. Court of Appeals, 44 that a
purchaser of a property cannot be in good faith where the title thereof shows that it was
reconstituted. Noted with approval, too, is the appellate court's observation that the
"contract to sell (Exh. "44") which is unregistered and not annotated at the back of the
title of the property [cannot adversely affect appellees]" for the reason that under "Sec. 51
of PD 1529 (Property Registration Act), 'the act of registration shall be the operative act
to convey or affect the land in so far (sic) as third parties are concerned.'" 45
Premiere Bank cannot also be accorded the status of an innocent mortgagee for value vis-
-vis the mortgage of the lots covered by TCT Nos. 34390 and 34391 constituted in its
favor by Century Realty. Apart from the annotations that said titles are only
administratively reconstituted, 46 the appellate court provided the ensuing compelling
reasons:
"Premiere inspected the property to be mortgaged . . . on March 6, and 11, 1991
as can be seen in its Real Estate Appraisal Report (Exhs. "EE", "EE-1"). The
adverse claim of Jesus Rodriguez was cancelled on March 26, 1991 . . . Hence,
when Premiere inspected the property . . ., it was aware of the existence of
Rodriguez' adverse claim. This is admitted by Premiere's witness . . . The
adverse claim of Rodriguez annotated at the back of TCT No. 14415 and
marked as Exhibit 1-3 and also at the back of TCT No. 14416 (Exh. J) marked
as Exhibit J-3 declares that 'he is the vendee of the land described.'
There are buildings of strong material on the land in dispute . . .
Premiere is aware of the existence of these structures as can be seen in its real
estate report (Exh. EE). Said report states that there are 'shanties erected in the
property in dispute.
But despite the existence of alleged 'shanties' which are in fact and in truth big
structures, two of them being concrete buildings (Exhs. O- to O-3), Premiere
Bank proceeded in the execution of the mortgage contract. . . .
If the land mortgaged is in the possession of a person other than the mortgagor,
the mortgagee is required to go beyond the certificate of title and make inquiries
as to the rights of the actual possessors. Failure to do so would make him a
mortgagee in bad faith (Sunshine Finance vs. IAC, 203 SCRA 213; Conspecto
vs. Fruto, 31 Phil 144)".
It cannot be overemphasized, that Premiere Bank, being in the business of extending
loans secured by real estate mortgage, is familiar with rules on land registration. As such,
it was, as here, expected to exercise more care and prudence than private individuals in
their dealing with registered lands. 47 Accordingly, given inter alia the suspicion-
provoking presence of occupants other than the owner on the land to be mortgaged, it
behooved Premiere Bank to conduct a more exhaustive investigation on the history of the
mortgagor's title. That Premiere Bank accepted in mortgage the property in question
notwithstanding the existence of structures on the property and which were in actual,
visible and public possession of a person other than the mortgagor, constitutes gross
negligence amounting to bad faith. 48 Premier Bank is thus not entitled to have its lien
annotated on the genuine title. 49
A final consideration: Petitioners maintain that the appellate court erred in annulling the
LRA order of reconstitution (Exh. "3"), even if such relief was not prayed for in private
respondents' amended complaint and notwithstanding the fact that the LRA was not
impleaded as an indispensable party in Civil Case No. Q-92-8455.
The contention is far from tenable. An action for quieting of title, as here, is equivalent to
an action for reconveyance of title wrongfully or erroneously registered in another's
name. The successful outcome of such action would in most cases necessarily entail the
cancellation of existing title wrongly issued to another, which in turn requires the action
of the LRA and/or the proper Register of Deeds. As in the past, this Court, to obviate
multiplicity of suits, had ordered the LRA or the Register of Deeds, albeit not impleaded
below, to cancel such erroneously issued titles.
Before writing finisto this ponencia, two (2) peripheral matters raised need to be
addressed.
First, petitioner Toundjis has, as an alternative prayer, asked that the appealed decision
ordering Joselito to reimburse her the sum of P2,000,000.00 be modified, such that the
reimbursable amount shall bear interest of nineteen (19%) percent (down from the 25%
she sought in her answer-in-intervention) instead of six (6%) per annum reckoned from
March 23, 1990, instead of from January 28, 1993, the date of judgment of the trial court.
Absent an explanation with cogent legal support why her plea for a modificatory ruling
should be favorably considered, this Court denies the same. DcICEa
Second, petitioners have invited attention to and made much of this Court's per curiam
Decision dated April 7, 1993 50 in A.M. P-91-593, entitled "Office of the Court
Administrator vs. Atty. Liberato Yambao et al." 51 In it, the Court dismissed herein
respondent Yambao from the service as then Clerk of Court, RTC, Quezon City, Branch
80 for, among other things, having in his possession a forged deed of sale executed by
Vicente T. Garaygay. It should be stressed in this regard, however, that this Court, in its
Resolution of May 18, 1994, 52 resolved to "SUSPEND the implementation of the effects
of the decision of April 7, 1993 pending the judicious review by the Court of Appeals of
the decision of the Regional Trial Court, Branch 80, Quezon City in Civil Case No. Q-92-
8455."
This Court need not belabor the effects on A.M. P-91-593 of the appealed decision of the
Court of Appeals, as hereby affirmed.
WHEREFORE, the instant petitions are DENIED and the impugned decision of the Court
of Appeals AFFIRMED.

Costs against petitioners.
SO ORDERED.
||| (Premiere Development Bank v. Court of Appeals, G.R. No. 128122, 128184, 128229,
March 18, 2005)

SECOND DIVISION
[G.R. No. 143254. August 18, 2005.]
JUSTINA COSIPE SIGAYA, ROMEO, FELY, TOMAS,
BERNARDO, LEDA, ANASTACIO, ERLINDA, ROSA, TERESITA,
EDWIN and HELEN, all surnamed SIGAYA, petitioners, vs.
DIOMER MAYUGA, JOSE VIVA and ROSELA VIVA,
HONORATO DE LOS SANTOS and RENATO DISTOR,
respondents.
Padojinog Amane Gengos & Billena Law Offices for petitioners.
Esteban Angeles B. Contreras for respondents.
SYLLABUS
1.REMEDIAL LAW; CIVIL PROCEDURE; APPEAL BY CERTIORARI; QUESTION
OF FACT DIFFERENTIATED FROM QUESTION OF LAW. There is a question of
fact when the doubt or difference arises as to the truth or the falsity of the statement of
facts while a question of law exists when there is doubt or controversy as to what the law
is on a certain state of facts.
2.ID.; ID.; ID.; SUPREME COURT IS NOT A TRIER OF FACTS; EXCEPTIONS.
The determination of whether Teodulfo is a buyer in good faith is a factual issue which is
generally outside the province of this Court to determine in a petition for review. If for
this matter alone, the petition should be dismissed because the remedy of appeal by
certiorari under Rule 45 of the Rules of Court contemplates only questions of law.
Indeed, this Court is not a trier of facts, and the factual findings of the CA are binding
and conclusive upon this Court, unless: (1) the conclusion is a finding grounded entirely
on speculation, surmise and conjecture; (2) the inference made is manifestly mistaken;
(3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of
facts; (5) the findings of fact are conflicting; (6) the Court of Appeals went beyond the
issues of the case and its findings are contrary to the admissions of both appellant and
appellees; (7) the findings of fact of the Court of Appeals are contrary to those of the trial
court; (8) said findings of fact are conclusions without citation of specific evidence on
which they are based; (9) the facts set forth in the petition as well as in the petitioner's
main and reply briefs are not disputed by the respondents; and (10) the findings of fact of
the Court of Appeals are premised on the supposed absence of evidence and contradicted
by the evidence on record.
3.ID.; EVIDENCE; CREDIBILITY; SUPREME COURT NECESSARILY UPHOLDS
THE FINDINGS OF FACT OF THE TRIAL COURT ESPECIALLY IF AFFIRMED
BY THE COURT OF APPEALS. The binding effect of the CA's factual findings on
this Court applies with greater force when both the trial court and the CA are in complete
agreement on their factual findings. It is also settled that absent any circumstance
requiring the overturning of the factual conclusion made by the trial court, particularly if
affirmed by the CA, the Court necessarily upholds such findings of fact.
4.CIVIL LAW; SALES; PURCHASER IN GOOD FAITH; BURDEN OF PROVING
LIES UPON THE ONE WHO ASSERTS IT. This Court has held that the burden of
proving the status of a purchaser in good faith lies upon one who asserts that status and
this onus probandi cannot be discharged my mere invocation of the legal presumption of
good faith.
5.ID.; ID.; ID.; ELUCIDATED. A purchaser in good faith is one who buys property
without notice that some other person has a right to or interest in such property and pays
its fair price before he has notice of the adverse claims and interest of another person in
the same property. The honesty of intention which constitutes good faith implies a
freedom from knowledge of circumstances which ought to put a person on inquiry. As
enunciated in Lim vs. Chuatoco . . . good faith consists in the possessor's belief that the
person from whom he received the thing was the owner of the same and could convey his
title. Good faith, while it is always to be presumed in the absence of proof to the contrary,
requires a well founded belief that the person from whom title was received was himself
the owner of the land, with the right to convey it. There is good faith where there is an
honest intention to abstain from taking any unconscientious advantage from another.
Otherwise stated, good faith is the opposite of fraud and it refers to the state of mind
which is manifested by the acts of the individual concerned.
6.ID.; LAND REGISTRATION; LAND TITLES AND DEEDS; EVERY PERSON
DEALING WITH REGISTERED LAND MAY SAFELY RELY ON THE
CORRECTNESS OF THE CERTIFICATE OF TITLE. Indeed, it is a well-settled rule
that every person dealing with registered land may safely rely on the correctness of the
certificate of title issued therefor and the law will in no way oblige him to go beyond the
certificate to determine the condition of the property. Where there is nothing in the
certificate of title to indicate any cloud or vice in the ownership of the property, or any
encumbrance thereon, the purchaser is not required to explore further than what the
Torrens Title upon its face indicates in quest for any hidden defects or inchoate right that
may subsequently defeat his right thereto.
7.ID.; ID.; ID.; ID.; WHEN IT IS NOT APPLICABLE. However, this rule shall not
apply when the party has actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry or when the purchaser has knowledge of a
defect or the lack of title in his vendor or of sufficient facts to induce a reasonably
prudent man to inquire into the status of the title of the property in litigation. . . . As the
Court has stated: A purchaser cannot simply close his eyes to facts which should put a
reasonable man on his guard and then claim that he acted in good faith under the belief
that there was no defect in the title of his vendor. His mere refusal to believe that such
defect exists or his willful closing of his eyes to the possibility of the existence of a defect
in his vendor's 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.
8.ID.; SALES; LAW ON DOUBLE SALES; NOT APPLICABLE. [T]he law on
double sales as provided in Art. 1544 of the Civil Code contemplates a situation where a
single vendor sold one and the same immovable property to two or more buyers. For the
rule to apply, it is necessary that the conveyance must have been made by a party who
has an existing right in the thing and the power to dispose it. The rule cannot be invoked
where the two different contracts of sale are made by two different persons, one of them
not being the owner of the property sold.
D E C I S I O N
AUSTRIA-MARTINEZ, J p:
The question of whether or not a person is a purchaser in good faith is a factual matter
that will generally be not delved into by this Court especially when the findings of the
trial court on the matter were affirmed by the Court of Appeals (CA). Settled as this rule
may be, petitioners now come before this Court seeking an exception to the general rule.
The facts are as follows:
Dionisia Alorsabes owned a three hectare land in Dao, Capiz, denominated as Lot 3603.
In 1934, she sold a portion of the lot to Juanito Fuentes while the remainder was inherited
by her children Paz Dela Cruz, Rosela Dela Cruz, and Consorcia Arroja (an adopted
child), and a grandson, Francisco Abas, in representation of his deceased mother
Margarita Dela Cruz. These four heirs executed an Extra-Judicial Settlement with Sale
dated February 4, 1964 wherein Consorcia sold her share with an area of 6,694 square
meters to spouses Balleriano Mayuga. On April 1, 1977, Paz also sold her share to
Honorato de los Santos. Later, another document entitled Extra-Judicial Partition with
Deed of Sale dated November 2, 1972 was uncovered wherein the heirs of Dionisia
purportedly adjudicated Lot 3603 among themselves and sold their shares to Francisco.
On January 9, 1978, Francisco executed a Deed of Sale over Lot 3603 in favor of
Teodulfo Sigaya. Thus, the title over Lot 3603 was cancelled and a new one was issued in
the name of Teodulfo, predecessor-in-interest of the petitioners herein. 1
On October 14, 1986, the petitioners, who are the widow and children of Teodulfo, filed
Civil Case Nos. V-5325, V-5326, V-5327 and V-5328 for recovery of possession and
damages against Diomer Mayuga, Honorato de los Santos, Sps. Jose Viva and Rosela
Dela Cruz-Viva, and Renato Distor, 2 respectively, before the Regional Trial Court
(RTC) of Roxas City, Branch 16, praying that respondents be ordered to vacate Lot 3603,
and turn over the same to petitioners; that petitioners' right of ownership and possession
over the property be confirmed and that respondents be ordered to pay damages in the
form of unrealized income starting 1980, plus attorney's fees and costs. 3
Respondents in their answers with counterclaim averred that: the Deed of Sale executed
by Francisco in favor of Teodulfo and the title thereon are null and void for being based
on a fictitious Extra-Judicial Settlement with Sale; Rosela Dela Cruz-Viva and Paz Dela
Cruz, who are illiterates, were fraudulently made to sign as vendees in the Extra-Judicial
Settlement with Sale dated 1972, when Francisco represented that they were merely
signing as witnesses to the sale of Francisco of his share to Teodulfo. As counterclaim,
they asked for attorney's fees and damages. 4
Respondent Mayuga further asserted that he possesses his portion of the property by
virtue of the sale by Consorcia Arroja of her share to his parents, Sps. Balleriano
Mayuga. Respondent de los Santos meanwhile averred that Paz Dela Cruz sold her share
to him in 1957. Respondents Rosela Dela Cruz-Viva and her husband Jose Viva claimed
that the portion of land occupied by them pertains to Rosela's share which she inherited
from Dionisia, while respondent Renato Distor claimed that his wife inherited said
property from her father Juanito Fuentes, who in turn bought the same from Dionisia
during her lifetime. 5
The four cases were consolidated and on February 14, 1992, the trial court rendered its
decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered as follows:
1.Declaring the defendants Geomer (sic) Mayuga as the real and absolute owner
of the portion of land, containing an area of Six Thousand Six Hundred Ninety
Four (6,694) square meters, more [or] less, portion of Lot No. 3603, Dao
Cadastre and subject matter in Civil Case No. 5325 indicated in the
Commissioner's Report (Exh. "4") as Exh. "4-B";
2.Declaring the defendant Honorato de los Santos as the absolute owner of the
portion of land containing an area of Six Thousand Six Hundred Ninety Five
(6,695) square meters more or less, portion of lot No. 3603 Dao Cadastre, and
subject matter in Civil Case No. 5326 indicated in the Commissioner's Report
(Exh. "4") as Exh. "4-D";
3.Declaring the defendants spouses Jose Viva and Rosela dela Cruz as the
absolute owners of the portion of land containing an area of Six Thousand Six
Hundred Ninety Four (6,694) square meters, more or less, portion of Lot No.
3603, Dao Cadastre, and subject matter in Civil Case No. 5327 indicated in the
Commissioner's Report (Exh. "4") as Exh. "4-C";
4.Declaring the defendant, Renato Distor, as the absolute owner of the portion
of land containing an area of Six Thousand Three Hundred Forty Four (6,344)
square meters, more or less, portion of Lot No. 3603, Dao Cadastre, and subject
matter in Civil Case No. 5328 indicated in the Commissioner's Report (Exh.
"4") as Exh. "4-E";
5.Declaring the plaintiffs as the absolute owners of the portion of land
containing an area of Seven Thousand Forty-Six (7,046) square meters, more or
less, portion of Lot No. 3603, Dao Cadastre, indicated in the Commissioner's
Report (Exh. "4") as Exh. "4-F";
6.Declaring Transfer Certificate of Title No. T-15630 of the Register of Deeds
of Capiz as null and void and should be cancelled;
7.Declaring that Deed of Sale, Exh. "C" as null and void except as affecting the
portion with an area of Seven Thousand Forty Six (7,046) square [meters] of
Lot 3603 which portion had been sold by Francisco Abas to the spouses
Teodulfo Sigaya and Justina Cosipe;
8.Declaring that Extra-Judicial Partition with Deed of Sale as having been
procured through fraud and therefore not valid in so far as the sale of the shares
of Paz de la Cruz and Priscilla de la Cruz were concerned;
9.Condemning the plaintiffs to severally and jointly pay the following:
a)Unto Diomar Mayuga, defendant in Civil Case No. V-5325,
P10,000.00 as attorney's fees and litigation expenses;
b)Unto Honorato de los [Santos], defendant, in Civil Case No. V-5326,
P10,000.00 as [attoney's] fees and litigation expenses;
c)Unto the (sic) Jose Viva and Rosela de la Cruz, defendants in Civil
Case No. V-5327, P10,000.00 as [attorney's] fees and litigation
expenses; and
d)Unto Renato Distor, defendant in Civil Case No. V-5328, P10,000.00
as [attorney's] fees and litigation expenses; and
e)Dismissing Civil Case Nos. V-5325, V-5326, V-5327 and V-5328
with costs in each case against the plaintiffs.
SO ORDERED. 6
The trial court explained that:
There is no question that the deed of sale of the portion bought by Jacinto
Fuentes from Dionisia Alorsabes and now possessed by defendants Renato
Distor was a public instrument executed in 1934; and the portion occupied by
defendant Diomer Mayuga is the portion bought by spouses Florentina Viva and
Balleriano Mayuga from Consorcia Mayuga as her share in lot 3603; defendant
Honorato de los Santos is in possession of the portion which he bought from
Paz de la Cruz, in 1977, although he had been possessing this portion since May
15, 1957 by virtue of a private document of mortgage. (citations omitted)
xxx xxx xxx
In these cases, the court believes and so holds that the evidence of actual
occupation and possession of the defendants of the portions of Lot 3603, to each
of them appertaining had been satisfactorily proven. The defendants were not
able to file any opposition to the reconstitution of title solely because they were
not notified actually. They could not also be considered to have constructive
notice because there was no publication of the Notice of Hearing of the petition.
STECDc
From the evidence taken together by its totality of evidence tilts more in favor
of the defendants and against the plaintiffs. 7
Not satisfied with the decision, petitioners went to the CA which affirmed, in its Decision
promulgated on April 19, 2000, the ruling of the RTC except as to the award of attorney's
fees and expenses of litigation. 8 It then disposed of the appeal as follows:
WHEREFORE, premises considered, the decision of the court a quo is hereby
AFFIRMED, with the modification that the awards of attorney's fees and
expenses of litigation to the defendants-appellants are hereby eliminated.
SO ORDERED. 9
The CA found:
Looking at the evidence presented, the trial court considered the defendants-
appellees as having proven the actual possession and validity of the possession
of the lots in question. Against that, the plaintiffs-appellants put forward the
TCT held by Teodulfo Sigaya, whose validity rests upon the ability of Francisco
Abas to sell Lot 3603, which the TCT now covers, and that the sale to Teodulfo
Sigaya was registered. Prior registration would protect an innocent purchaser in
good faith and for value. But the plaintiffs-appellants cannot now claim the (sic)
Teodulfo Sigaya was an innocent purchaser for value. The trial court gave more
credence to the testimony of defendants-appellees and their witnesses that they
had been in possession for a longer period of time, even before the sale to
Teodulfo Sigaya in 1978. This issue of credibility requires a determination that
is concededly best left to the trial court with its unique position of having been
enabled to observe that elusive and incommunicable evidence of the deportment
of witnesses on the stand. Findings of the trial court, following that assessment,
must be given the highest degree of respect absent compelling reasons to
conclude otherwise. Teodolfo (sic) Sigaya examined the land in question, and
did so as a reasonably prudent man buying real property should. As the
defendants-appellees were in possession before him, he should have questioned
such and delved deeper into the title and right of Francisco Abas to sell the lot.
Not having done so, he is not an innocent purchaser in good faith, and not
entitled to protection under the Torrens system.

It is clear that the title of Francisco Abas was obtained through fraud, thus
further damaging the case of the plaintiffs-appellants, whose predecessor-in-
interest should have probed beyond the title after examining the lot to be sold
him. As held by the Supreme Court:
" . . . Having bought the land registered under the Torrens system from
their vendors who procured title thereto by means of fraud, petitioners
cannot invoke the indefeasibility of a certificate of title against the
private respondent to the extent of her interest. The Torrens system of
land registration should not be used as a means to perpetuate fraud
against the rightful owner of real property. Registration to be effective,
must be made in good faith. (Palanca vs. Registry of Lands, 43 Phil. 149
[1922]). Thus, it is a settled rule that the defense of indefeasibility of a
certificate of title does not extend to a transferee who takes it with notice
of the flaws in his transferor's title. If at all, the petitioners only acquire
the right which their vendors then had. (Ramos et al. vs. Direno, et al.,
50 Phil. 786 [1927]).
The plaintiffs-appellants' contentions as to their ownership of the lot in question
must then fail in the face of the principles laid down in jurisprudence. 10
Petitioners now come before this Court on a petition for review under Rule 45 of the
Rules of Court, raising the sole issue of: WHETHER A PERSON DEALING WITH A
REGISTERED LAND CAN SAFELY RELY ON THE CORRECTNESS OF THE
CERTIFICATE OF TITLE ISSUED THEREFOR. 11
Petitioners argue that: Teodulfo, their predecessor-in-interest, purchased the subject
property from Francisco, who was in possession of the Original Certificate of Title
(OCT) No. RO-5841 (17205), a reconstituted copy of the original, in the name of
Dionisia and of the Extra-Judicial Partition with Deed of Sale, dated November 2, 1972;
relying on these instruments and after inspecting the land and seeing that nobody
occupied the same, Teodulfo bought the land and had the title subsequently issued in his
name; the fact that Teodulfo examined the lot does not give rise to the conclusion that he
is not an innocent purchaser in good faith as adverted to by the CA; if indeed Abas
committed fraud in acquiring said lot, Teodulfo is also a victim of misrepresentation;
there was no evidence that Teodulfo and Francisco connived to defraud respondents;
Teodulfo did not have actual knowledge of facts and circumstances that would impel him
to make further inquiry; and as purchaser in good faith, Teodulfo enjoys the protection of
the Torrens system. 12
Respondents in their Comment meanwhile contend that: the petition failed to comply
with the requirements of Rule 45 of the Rules of Court as respondents were not served a
copy of the motion for extension of time; the issue in the present petition does not involve
a question of law but entails only a review of the facts which cannot be done by this
Court; in any case, Teodulfo relied on a title that is not in the name of his transferor,
Francisco, but on its registered owner, Dionisia, who was already deceased at the time of
the supposed sale to Teodulfo; since the right of the supposed transferor was not shown
in the title but merely on a Deed of Extra-Judicial Settlement with Sale, which turned out
irregular, it was incumbent upon Teodulfo to examine further the extent of the right of the
supposed transferor and why there were a lot of occupants in the land in dispute; his
failure to do so operates against his favor and those of his successors-in-interest. 13
The parties filed their respective memoranda.
Petitioners, in their Memorandum, further aver that: Teodulfo is a purchaser in good faith
having relied on OCT No. RO-5841 (17205) in the name of Dionisia and the Extra-
Judicial Partition with Deed of Sale dated November 2, 1972 which shows that Francisco
is the absolute owner of the lot; four years had elapsed from the date that the OCT was
reconstituted and the time Teodulfo bought the property from Francisco and yet none of
the respondents had registered their right in the property; the Extra-Judicial Settlement of
Lot 3603 of the Cadastral Survey of Dao, Capiz with Sale dated February 4, 1964, on
which respondents base their claims, was never registered with the Registry of Deeds; not
having been registered, this will not affect the right of third persons who had no
knowledge thereof; there was no circumstance that would put Teodulfo on his guard and
in cases of double sales of real property, the ownership shall be awarded to the vendee
who first registers the sale in good faith; Teodulfo is a resident of Zarraga, Capiz which is
more than 50 kilometers from Dao, Capiz, thus Teodulfo could not have actual
knowledge of facts and circumstances that would impel him to make further inquiry; the
land was merely pointed to him by Francisco and from what he had seen, there was
nothing that would arouse his suspicion. 14
Meanwhile, respondents, in their Memorandum, contend that they were in possession of
the property before Teodulfo; that Teodulfo should have probed deeper into the right of
Francisco to sell said lot, and not having done so, he cannot be considered as a purchaser
in good faith; and that the issue of credibility requires a determination that is best left to
the trial court with its unique position of being able to observe the elusive and
incommunicable evidence of the deportment of witnesses on the stand. 15
Petitioners claim that they are raising before this Court the legal issue of: Whether a
person dealing with a registered land can safely rely on the correctness of the Certificate
of Title issued therefor. 16
Contrary to what petitioners would like this Court to believe, the resolution of the present
petition hinges principally on the determination of a question of fact and not one of law.
Both parties concede that a purchaser in good faith can safely rely on the four corners of
a Torrens Title. The disagreement lies, however, as to whether or not Teodulfo should be
considered as a purchaser in good faith and thus enjoy the protection of the Torrens
system. Indeed, this question is one of fact and not one of law. There is a question of fact
when the doubt or difference arises as to the truth or the falsity of the statement of facts
while a question of law exists when there is doubt or controversy as to what the law is on
a certain state of facts. 17
The determination of whether Teodulfo is a buyer in good faith is a factual issue which is
generally outside the province of this Court to determine in a petition for review. 18 If for
this matter alone, the petition should be dismissed because the remedy of appeal by
certiorari under Rule 45 of the Rules of Court contemplates only questions of law. 19
Indeed, this Court is not a trier of facts, 20 and the factual findings of the CA are binding
and conclusive upon this Court, unless:
(1) the conclusion is a finding grounded entirely on speculation, surmise and
conjecture; (2) the inference made is manifestly mistaken; (3) there is grave
abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5)
the findings of fact are conflicting; (6) the Court of Appeals went beyond the
issues of the case and its findings are contrary to the admissions of both
appellant and appellees; (7) the findings of fact of the Court of Appeals are
contrary to those of the trial court; (8) said findings of fact are conclusions
without citation of specific evidence on which they are based; (9) the facts set
forth in the petition as well as in the petitioner's main and reply briefs are not
disputed by the respondents; and (10) the findings of fact of the Court of
Appeals are premised on the supposed absence of evidence and contradicted by
the evidence on record. 21
The binding effect of the CA's factual findings on this Court applies with greater force
when both the trial court and the CA are in complete agreement on their factual findings.
22 It is also settled that absent any circumstance requiring the overturning of the factual
conclusion made by the trial court, particularly if affirmed by the CA, the Court
necessarily upholds such findings of fact. 23
In this case, petitioners failed to show that they fall under any of the exceptional
circumstances.
In reaching its conclusion, the trial court gave weight to the testimonies of Engineer Jesus
Pimentel, a geodetic engineer commissioned by the court to conduct a survey of the land,
who found that respondents acquired their respective lots through sale or inheritance; 24
of Rolly Daniel, a barangay official who lived 50 meters from said lot, who said that
respondents had been in possession of their respective lots even before 1960 and that
Teodulfo and Francisco asked him to accompany them sometime between 1976 to 1978
as they went to the different houses of respondents because Teodulfo was going to buy
Francisco's share; 25 of Ursula Abas, wife of Francisco, who said that Francisco
committed suicide after it was discovered that he fraudulently sold the portion belonging
to his aunts to Teodulfo by making them sign a prepared document on the pretext that
they were only signing as witnesses to the sale of his share, when in fact said document
also sold their aunts' shares; 26 as well as the testimonies of Prudencio Fuentes, son of
Jacinto and brother-in-law of respondent Renato Distor; Lourdes Distor, wife of Renato;
Florentina Mayuga, mother of Diomer; and respondents Renato Distor, Honorato de los
Santos, Rosela Dela Cruz-Viva who asserted that they have been in possession of said
lots before the purported sale to Teodulfo. 27
Petitioners, meanwhile, could only present Fely Sigaya and Cesar de los Santos. Fely
testified that: the land was acquired by her father from Francisco by virtue of a Deed of
Sale dated January 9, 1978 and that Francisco became the owner of the property by virtue
of an Extra-Judicial Partition with Deed of Sale; when her father bought the property, he
showed the documents to a lawyer who said that the same were in order; when her father
visited the property, he found no occupants thereat; her father also filed a petition in 1974
for reconstitution of title of Lot 3603 thus a reconstituted title was issued in the name of
Dionisia Alorsabes. 28 Cesar, petitioners' caretaker meanwhile, merely corroborated
Fely's testimony. 29

This Court has held that the burden of proving the status of a purchaser in good faith lies
upon one who asserts that status and this onus probandi cannot be discharged my mere
invocation of the legal presumption of good faith. 30
In this case, the Court finds that petitioners have failed to discharge such burden.
A purchaser in good faith is one who buys property without notice that some other person
has a right to or interest in such property and pays its fair price before he has notice of the
adverse claims and interest of another person in the same property. The honesty of
intention which constitutes good faith implies a freedom from knowledge of
circumstances which ought to put a person on inquiry. 31 As enunciated in Lim vs.
Chuatoco 32
. . . good faith consists in the possessor's belief that the person from whom he
received the thing was the owner of the same and could convey his title. Good
faith, while it is always to be presumed in the absence of proof to the contrary,
requires a well founded belief that the person from whom title was received was
himself the owner of the land, with the right to convey it. There is good faith
where there is an honest intention to abstain from taking any unconscientious
advantage from another. Otherwise stated, good faith is the opposite of fraud
and it refers to the state of mind which is manifested by the acts of the
individual concerned. 33
Indeed, it is a well-settled rule that every person dealing with registered land may safely
rely on the correctness of the certificate of title issued therefor and the law will in no way
oblige him to go beyond the certificate to determine the condition of the property. Where
there is nothing in the certificate of title to indicate any cloud or vice in the ownership of
the property, or any encumbrance thereon, the purchaser is not required to explore further
than what the Torrens Title upon its face indicates in quest for any hidden defects or
inchoate right that may subsequently defeat his right thereto. 34
However, this rule shall not apply when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such inquiry or when
the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient
facts to induce a reasonably prudent man to inquire into the status of the title of the
property in litigation. 35
In this case, preponderance of evidence shows that respondents had been in actual
possession of their respective portions even prior to 1960. Rolly Daniel, which the trial
court considered as a credible witness, testified that not only were respondents in actual
possession of their respective portions prior to 1960, he even accompanied Francisco and
Teodulfo to the different houses of respondents sometime between 1976 to 1978 as
Teodulfo was going to buy the portion of Francisco. 36 This Court cannot give credence
therefore to the claim of petitioners that Teodulfo found no occupants in the property. cIaHDA
There being occupants of the property, the Court cannot ascribe good faith to Teodulfo
who has not shown any diligence in protecting his rights.
As the Court has stated:
A purchaser cannot simply close his eyes to facts which should put a reasonable
man on his guard and then claim that he acted in good faith under the belief that
there was no defect in the title of his vendor. His mere refusal to believe that
such defect exists or his willful closing of his eyes to the possibility of the
existence of a defect in his vendor's title will not make him an innocent
purchaser for value if it later develops that the title was in fact defective,
and it appears that he would have notice of the defect had he acted with
that measure of precaution which may reasonably be required of a prudent
man in a similar situation. 37 (Emphasis supplied)
Petitioners also argue that the rule on double sale of real property should apply in this
case, and since they are the first to register the sale in good faith, they are entitled to be
awarded ownership thereof.
The Court disagrees. Apart from the fact that Teodulfo is not a purchaser in good faith,
the law on double sales as provided in Art. 1544 of the Civil Code 38 contemplates a
situation where a single vendor sold one and the same immovable property to two or
more buyers. For the rule to apply, it is necessary that the conveyance must have been
made by a party who has an existing right in the thing and the power to dispose it. The
rule cannot be invoked where the two different contracts of sale are made by two
different persons, one of them not being the owner of the property sold. 39 In this case,
respondents derive their right over their respective portions either through inheritance or
sale from Dionisia while petitioners' invoke their right from the sale of the land from
Francisco. Clearly, the law on double sales does not apply here.
WHEREFORE, the petition is DENIED for lack of merit and the decision of the Court of
Appeals is AFFIRMED.
SO ORDERED.
Puno, Callejo, Sr., Tinga and Chico-Nazario, JJ., concur.
||| (Sigaya v. Mayuga, G.R. No. 143254, August 18, 2005)

THIRD DIVISION
[G.R. No. 125254. October 11, 2005.]
SPOUSES SAMUEL ULEP (Deceased) and SUSANA REPOGIA-
ULEP; SAMUEL ULEP is substituted by his surviving spouses
SUSANA REPOGIA-ULEP and his children: SALLY, RENATO,
RODELIO and RICHARD, all surnamed ULEP, and VALENTINA
ULEP, petitioners, vs. HONORABLE COURT OF APPEALS, former
Eight Division, IGLESIA NI CRISTO, MAXIMA RODICO and
spouses WARLITO PARINGIT and ENCARNACION PARINGIT-
GANTE, respondents.
D E C I S I O N
GARCIA, J p:
Under consideration is this petition for review under Rule 45 of the Rules of Court
seeking the reversal and setting aside of the Decision 1 dated August 15, 1995 of the
Court of Appeals (CA) in CA-G.R. CV. No. 39333, and its Resolution 2 dated April 25,
1996, denying petitioners' motion for reconsideration.
The assailed decision modified the June 17, 1991 decision 3 of the Regional Trial Court
at Urdaneta, Pangasinan, Branch 48, in its Civil Case No. U-3929, an action for Quieting
of Title, Reconveyance and Declaration of Nullity of Titles and Subdivision Plan, with
Damages, thereat commenced by the petitioners against the herein private respondents.
The factual antecedents:
Principal petitioners SAMUEL ULEP, now deceased and substituted by his heirs, and
VALENTINA ULEP are brother-and-sister. Together with their siblings, namely,
Atinedoro Ulep and Rosita Ulep, they are children of the late Valentin Ulep.
During his lifetime, the father Valentin Ulep owned a parcel of land, identified as Lot
840 with an area of 3,270 square meters, located at Asingan, Pangasinan.
Sometime in 1950, the older Ulep sold the one-half (1/2) eastern portion of Lot 840,
comprising an area of 1,635 square meters, to respondent Maxima Rodico, while the
remaining one-half (1/2) western portion with the same area, to his son Atinedoro Ulep
married to Beatriz Ulep, and to his other daughter Valentina Ulep.
On June 5, 1952, all the transferees of Lot 840, namely, Maxima Rodico (for the eastern
portion) and Atinedoro Ulep and Valentina Ulep (for the western portion), were jointly
issued in their names Transfer Certificate of Title No. 12525.
On June 18, 1971, Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep sold the
one-half (1/2) portion of the area sold to them by their father to their brother Samuel
Ulep and the latter's wife, Susana Repogia-Ulep. The portion sold to Samuel and Susana
has an area of 817.5 square meters. The document of sale was registered with the Office
of the Registry of Deeds of Pangasinan on February 20, 1973. HaTSDA
Later, an area of 507.5 square meters of the western portion of Lot 840 was sold by the
spouses Atinedoro Ulep and Beatriz Ulep to respondent Warlito Paringit and the latter's
spouse Encarnacion Gante, who were then issued TCT No. 12688 on September 23,
1975.
Evidently, all the foregoing transactions were done and effected without an actual ground
partition or formal subdivision of Lot 840.
In June 1977, respondent Iglesia ni Cristo (INC) begun constructing its chapel on Lot
840. In the process, INC encroached portions thereof allegedly pertaining to petitioners
and blocked their pathways.
This prompted Samuel Ulep and sister Rosita Ulep to make inquiries with the Office of
the Register of Deeds of Pangasinan. To their consternation, they discovered from the
records of said office that a deed of sale bearing date December 21, 1954, was
purportedly executed by their brother Atinedoro Ulep his wife, Beatriz and their sister
Valentina Ulep in favor of INC over a portion of 620 square meters, more or less, of Lot
840, and that on the basis of said deed, INC was issued TCT No. 12689 on September 23,
1975 4 over the portion allegedly sold to it by the three. Samuel was further shocked to
find out that on July 9, 1975, an affidavit of subdivision was executed by respondents
INC, Maxima Rodico and the spouses Warlito Paringit and Encarnation Gante, on
the basis of which affidavit Lot 840 was subdivided into four (4) lots, namely: (1) Lot
840-A, covered by TCT No. 16205 in his (Samuel's) name that of his wife, Susana
Repogia-Ulep; (2) Lot 840-B, covered by TCT No. 12688 in the names of Warlito
Paringit and the latter's wife Encarnacion Gante; (3) Lot-C 840-C, covered by TCT No.
12689 in the name of INC; and (4) Lot 840-D, covered by TCT No. 12690 5 in the name
of Maxima Rodico.
Such was the state of things when, on March 29, 1983, in the Regional Trial Court at
Pangasinan, the spouses Samuel Ulep and Susana Repogia-Ulep, the spouses
Atinedoro Ulep and Beatriz Ulep and their sister Valentina Ulep, filed their complaint
for Quieting of Title, Reconveyance and Declaration of Nullity of Title and Subdivision
Plan with Damages against respondents INC, Maxima Rodico and the spouses Warlito
Paringit and Encarnacion Gante. In their complaint, docketed as Civil Case No. U-
3929, the Uleps basically alleged that they and respondents are co-owners of Lot 840 in
the following proportions:
1,635 square meters to Maxima Rodico;
817.5 square meters to spouses Samuel Ulep and Susana Repogia-Ulep;
507.5 square meters to spouses Warlito Paringit and Encarnacion Gante;
210 square meters to spouses Atinedoro Ulep and Beatriz Ulep, and Valentina
Ulep;
100 square meters to Iglesia Ni Cristo. 6
In the same complaint, the spouses Atinedoro Ulep and Beatriz Ulep and their sister
Valentina Ulep denied having executed a deed of sale in favor of INC over a portion of
620 square meters of Lot 840, claiming that their signatures appearing on the deed were
forged. At the most, so they claimed, what they sold to INC was only 100 square meters
and not 620 square meters. Petitioners Samuel Ulep and Valentina Ulep, along with the
spouses Atinedoro Ulep and Beatriz Ulep, likewise averred that the subject lot was
subdivided without their knowledge and consent.
In their common "Answer," respondents Maxima Rodico and the spouses Warlito
Paringit and Encarnacion Gante maintained that the segregation of their shares was
known to petitioners and that it was done with the consent of Samuel Ulep himself. EaIDAT
For its part, INC, in its separate "Answer", asserted that it purchased from the spouses
Atinedoro Ulep and Beatriz Ulep and their sister Valentina Ulep the portion containing
620 square meters of Lot 840 on December 21, 1954, as evidenced by a deed of sale
duly registered with the Registry of Deeds of Pangasinan.
During the pendency of the proceedings in Civil Case No. U-3929, Atinedoro Ulep died.
Less than a month thereafter, or more specifically on November 16, 1987, Atinedoro's
widow Beatriz Ulep and their children executed a deed of renunciation, thereunder
waiving all their rights and interests over Lot 840 and relinquishing the same in favor of
the spouses Samuel Ulep and Susana Repogia-Ulep. 7
Eventually, in a decision dated June 17, 1991, the trial court rendered judgment, as
follows:
There being no res adjudicata in this case as already decided by the Court of
Appeals, this Court renders judgment as borne out by the evidence presented in
favor of the [petitioners] and against the [respondents], ordering the latter and
all persons claiming title under them to vacate and surrender a portion of 520 sq.
m. of the land in question in favor of the [petitioners] in such a way that
[respondent] INC owns only 100 sq. m.; declaring and annulling the following
documents;
1. Deed of sale dated December 21, 1954 allegedly executed by
plaintiffs-spouses Atinedoro Ulep and Beatriz Aguilar and
Valentina Ulep in favor of [respondent] INC, (Exh. A);
2. TCT No. 12689 issued to Iglesia Ni Cristo (Exh. K-1);
3. The affidavit of confirmation of subdivision, (Exh. K and Exh. 2); and
4. TCT No. 12605 (Exh. K-4) and a new TCT No. be issued to include
the original 817.5 sq. m. in favor of Samuel Ulep and Susan
Repogia;
Declaring Lot No. 840 to be owned by the following parties in the following
proportions:
(a) 1,635 sq. m. eastern portion to [respondent] Maxima Rodico already
covered by TCT No. 12690 (Exh. K-3);
(b) 817.5 sq. m. to [petitioners] Samuel Ulep and Susana Repogia and a
new TCT to be issued;
(c) 1/2 of 210 sq. m. to [petitioners] Samuel Ulep and Susana Repogia;
and the other one-half or 105 sq. m. to [petitioner] Valentina
Ulep in accordance with Exh. "C," a deed of renunciation
executed by the heirs of Atinedoro Ulep who died in 1987 and
his surviving spouse Beatriz Aguilar and a new Transfer
Certificate of Title be issued;
(d) 507.5 sq. m. to [respondents] Warlito Paringit and Encarnacion
Gante, already covered by TCT No. 12688 (Exh. K-2);
(e) 100 sq. m. to [respondent] Iglesia Ni Cristo; and a new title to be
issued;
and ordering the Register of Deeds of Pangasinan, to issue new Transfer
Certificate of Title in favor of [petitioners] Samuel Ulep and Susana Repogia
covering 817.5 sq. m.; and another new Transfer Certificate of Title covering
105 sq. m. in favor of Valentina Ulep and the other 1/2 of 210 sq. m. or 105 sq.
m. in favor of Samuel Ulep and Susana Repogia pursuant to Exh. "C"; and still
another new Transfer Certificate of Title covering 100 sq. m. in favor of Iglesia
Ni Cristo and for the latter to pay the costs.
SO ORDERED. 8 (Words in bracket ours).
Dissatisfied, respondent INC interposed an appeal to the Court of Appeals (CA), which
appellate recourse was thereat docketed as CA-G.R. CV No. 39333. For their part,
respondents Maxima Rodico and the spouses Warlito Paringit and Encarnacion Gante
opted not to appeal. DIESHT
As stated at the threshold hereof, the appellate court, in its Decision dated August 15,
1995, modified that of the trial court, thus:
WHEREFORE, premises considered, the appealed judgment is MODIFIED as
above indicated. Accordingly, the decretal portion of said judgment should read
as follows:
"1. The Deed of Absolute Sale dated December 21, 1954 executed by
plaintiffs-spouses Atinedoro Ulep and Beatriz Aguilar and
Valentina Ulep in favor of [respondent] INC is declared valid
(Exh. K-1).

"2. Lot No. 840 is declared as owned by the following parties in the
following proportions:
(f) 1,635 sq. m. eastern portion to [respondent] Maxima Rodico
already covered by TCT No. 12690 (Exh. K-3);
(g) 297.5 sq. m. to [petitioner]-spouses Samuel Ulep and Susana
Repogia;
(h) 1/2 of 210 sq. m. to [petitioner]-spouses Samuel Ulep and
Susana Repogia; and the other one-half or 105 sq. m. to
Valentina Ulep in accordance with Exh. "C," a deed of
renunciation executed by the heirs of Atinedoro Ulep
who died in 1987 and his surviving spouse Beatriz
Aguilar;
(i) 507.5 sq. m. to [respondents] Warlito Paringit and
Encarnacion Gante, already covered by TCT No. 12688
(Exh. K-2);
(j) 620 sq. m. to [respondent] INC, already covered by TCT No.
12689 (Exh. K-1).
"3. TCT No. 16205 registered in the names of [petitioner-spouses] Samuel and
Susan Ulep (Exh. K-4) is annulled.
"The Register of Deeds of Pangasinan is ordered to issue a new TCT in favor of
[petitioner-spouses] Samuel Ulep and Susana Repogia covering only 297.5 sq.
m.; and another new TCT covering 105 sq. m. in favor of Valentina Ulep and
the other 1/2 of 210 sq. m. or 105 sq. m. in favor of [petitioner-spouses] Samuel
Ulep and Susana Repogia pursuant to Exh. "C". No Costs."
SO ORDERED. 9 (Words in brackets ours).
In so ruling, the Court of Appeals explained:
There is no adequate evidentiary demonstration in the record that the deed of
sale (dated December 21, 1954 executed by Atinedoro Ulep, his wife Beatriz
and sister Valentina Ulep in favor of INC over the 620 square-meter area of the
western portion of Lot 840) is void and inefficacious on account of forgery.
As a public instrument which enjoys the presumption of regularity, clear and
convincing evidence is necessary to contradict the terms thereof.
xxx xxx xxx
In the present case, the biased, interested testimony of [petitioners] cannot
overcome the evidentiary force of the deed of sale which was acknowledged
before a notary public, and hence, a public document. cDTSHE
xxx xxx xxx
The sale of 620 sq. m. in favor of [respondent] INC executed by vendors
Atinedoro and Valentina Ulep is dated December 21, 1954, while the sale of
817.50 sq. meters by the same vendors to [petitioners] Samuel and Susana Ulep
was made on June 18, 1971. [Respondent] INC registered its 620 sq. meters on
December 21, 1954 by reason of which TCT No. 12689 was issued in its name.
[Petitioner-spouses] Samuel and Susana Ulep registered the land sold to them
on February 9, 1977 and TCT No. 16205 was issued in their names. Evidently,
applying Article 1544, [petitioner] INC's ownership and title over the 620 sq.
meters prevail. The land consisting of 620 sq. meters was first sold to INC and
its title was registered first. Thus, the same vendors could have sold only the
remaining 297.50 sq. meters of Lot 840 to [petitioner-spouses] Samuel and
Susana Ulep and TCT No. 16205 issued in the latter's name for 817.50 sq.
meters is null and void. There is no evidence that [respondent] INC is guilty of
bad faith in acquiring the 620 sq. meters portion of Lot 840. (Words in bracket
ours).
Their motion for reconsideration having been denied by the same court in its equally
challenged Resolution of April 25, 1996, petitioners are now with us via the present
recourse, faulting the appellate court as follows:
I.
THE HONORABLE COURT OF APPEALS ERRED IN NOT AFFIRMING
THE DECISION DATED JUNE 17, 1991 (ANNEX A) OF THE TRIAL
COURT, REGIONAL TRIAL COURT, FIRST JUDICIAL REGION,
BRANCH 48, URDANETA PANGASINAN IN CIVIL CASE NO. 3929.
II.
AND IN THE ALTERNATIVE, THE HONORABLE COURT OF APPEALS
ERRED IN NOT AWARDING PETITIONERS SAMUEL ULEP AND
SUSANA REPOGIA THE AREA OF 817.5 SQUARE METERS AND IN
NOT REDUCING THE SHARE OF PRIVATE RESPONDENTS, SPOUSES
WARLITO PARINGIT AND ENCARNACION GANTE FROM 507.5
SQUARE METERS TO 197 SQUARE METERS. 10
Petitioners initially submit that the factual findings of the trial court should not have been
disturbed by the appellate court, the same being entitled to great weight and respect.
We have consistently held that factual findings of the Court of Appeals and other lower
courts are, as a rule, final and conclusive upon this Court, except, inter alia, where their
findings are at odd with each other, 11 as here.
Simply put, the issue before us is whether or not the Court of Appeals committed
reversible error in modifying the decision of the trial court.
Evidently, the issue necessitates an inquiry into the facts. While, as a rule, factual issues
are not within the province of this Court, nonetheless, in light of the conflicting factual
findings of the two (2) courts below, an examination of the facts obtaining in this case is
in order.
Petitioners contend that respondent INC is entitled to only 100 square meters and not 620
square meters of the western portion of Lot 840. To them, the deed of sale conveying 620
square meters thereof to INC was void as the signatures of the vendors therein, namely,
the spouses Atinedoro Ulep and Beatriz Ulep and Valentina Ulep, were forged. They
submit that what should instead be upheld was the sale of 817.5 square meters in their
favor by the same vendors. aTcESI
As the Court sees it, the present controversy is a classic case of double sale. On
December 21, 1954, Atinedoro Ulep, his wife Beatriz Ulep and sister Valentina Ulep
sold the disputed area (620 square-meter) of Lot 840 to INC. Subsequently, on January
18, 1971, a second sale was executed by the same vendors in favor of spouses Samuel
Ulep and Susana Ulep. The Court is, therefore, called upon to determine which of the two
groups of buyers has a better right to the area in question.
Article 1544 of the Civil Code provides the statutory solution:
Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in
good faith was first in the possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith.
Otherwise stated, the law provides that a double sale of immovable transfers ownership to
(1) the first registrant in good faith; (2) then, the first possessor in good faith; and (3)
finally, the buyer who in good faith presents the oldest title. 12
Jurisprudence teaches that the governing principle is primus tempore, potior jure (first in
time, stronger in right). Knowledge gained by the first buyer of the second sale cannot
defeat the first buyer's rights except where the second buyer registers in good faith the
second sale ahead of the first, as provided by the aforequoted provision of the Civil
Code. Such knowledge of the first buyer does not bar him from availing of his rights
under the law, among them to register first his purchase as against the second buyer. In
converso, knowledge gained by the second buyer of the first sale defeats his rights even if
he is first to register the second sale, since such knowledge taints his prior registration
with bad faith. This is the price exacted by the same provision of the Civil Code for the
second buyer to be able to displace the first buyer; before the second buyer can obtain
priority over the first, he must show that he acted in good faith throughout (i.e. ignorance
of the first sale and of the first buyer's rights) from the time of acquisition until the title is
transferred to him by registration, or, failing registration, by delivery of possession. 13
Per records, the sale of the disputed 620 square-meter portion of Lot 840 to respondent
INC was made on December 21, 1954 and registered with the Registry of Deeds of
Pangasinan on January 5, 1955. In fact, INC was issued a title over the same portion on
September 23, 1975. On the other hand, the conveyance to the spouses Samuel Ulep and
Susana Repogia-Ulep happened on January 18, 1971 and the spouses registered their
document of conveyance only on February 22, 1973. 14
Clearly, not only was respondent INC the first buyer of the disputed area. It was also the
first to register the sale in its favor long before petitioners Samuel's and Susana's
intrusion as second buyers. Although Samuel and Susana thereafter registered the sale
made to them, they did so only after 18 years from the time INC caused the registration
of its own document of sale.
"Registration" means any entry made in the books of the Registry which records
solemnly and permanently the right of ownership and other real rights. 15 However, mere
registration is not sufficient. Good faith must concur with registration, else registration
becomes an exercise in futility. 16 In the instant case, the registration made by respondent
INC of its deed of sale more than satisfies this requirement. The same thing cannot be
said of petitioners Samuel Ulep and Susana Ulep. Said petitioners, by their own
admission, were aware that there existed an agreement between INC and vendors
Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep involving a portion of 100
square meters of Lot 840. Knowledge of such transaction should have put the spouses
Samuel Ulep and Susana Ulep upon such inquiry or investigation as might be necessary
to acquaint them with the possible defects in the title of their vendors. They should have
acted with that measure of precaution which may reasonably be required of a prudent
man in a similar situation. After all, good faith, or the lack of it, is, in the last analysis, a
question of intention. But in ascertaining the intention by which one is actuated on a
given occasion, courts are necessarily controlled by the evidence as to the conduct and
outward acts by which the inward motive may, with safety, be determined. So it is that
'the honesty of intention,' 'the honest lawful intent,' which constitutes good faith implies a
'freedom from knowledge and circumstances which ought to put a person on inquiry.' 17
Hence, proof of such knowledge overcomes the presumption of good faith.

Here, the spouses Samuel Ulep and Susana Ulep were fully aware, or could have been, if
they had chosen to inquire, of the rights of INC under the deed of sale duly annotated on
the common title of the spouses Atinedoro Ulep and Beatriz Ulep and Valentina Ulep.
Verily, the sale to INC should prevail over the sale made to spouses Samuel and Susana
because INC was the first registrant in good faith. IHcTDA
Petitioners' allegation of forgery relative to the deed of sale executed on December 21,
1954 by the spouses Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep over the
620 square-meter portion of Lot 840 cannot be sustained. As a rule, forgery cannot be
presumed and must be proved by clear, positive and convincing evidence, the burden for
which lies on the party alleging it. The fact of forgery can only be established by a
comparison between the alleged forged signature and the authentic and genuine signature
of the person whose signature is theorized to have been forged. 18
Here, petitioners' claim of forgery is unsupported by any substantial evidence other than
their own self-serving testimonies. As it were, they failed to present handwriting experts
and other persons familiar with the handwriting of the spouses Atinedoro Ulep, his wife
Beatriz and sister Valentina Ulep that would show that their signatures appearing in the
questioned deed of sale in favor of respondent INC were forged. Due to the technicality
of the procedure involved in the examination of forged documents, the expertise of
questioned document examiners is usually helpful. These handwriting experts can help
determine fundamental, significant differences in writing characteristics between the
questioned and the standard or sample specimen signatures, as well as the movement and
manner of execution strokes.
Petitioners insist that the conveyance of only 100 square meters to INC was in fact
evidenced by a deed of sale notarized by a certain Atty. Benjamin Fernandez. 19
However, they sorely failed to produce in court the said alleged deed of sale. They could
have, at the very least, presented Atty. Fernandez to prove the existence of that deed, but
they did not. The only plausible conclusion is that no such deed exists.
On the other hand, to bolster its claim of ownership, respondent INC presented the
December 21, 1954 deed of sale executed in its favor by the spouses Atinedoro and
Beatriz Ulep and Valentina Ulep over a portion of 620 square meters of Lot 840. To be
sure, INC's deed of sale was duly notarized by Atty. Bernabe Salcedo Calimlim. 20
Generally, a notarized document carries the evidentiary weight conferred upon it with
respect to its due execution, and documents acknowledged before a notary public have in
their favor the presumption of regularity. 21 Thus, the notarized deed of sale executed on
December 21, 1954 by Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep over
the contested area in favor of respondent INC deserves full credence and is valid and
enforceable in the absence, as here, of overwhelming evidence to the contrary.
In a last-ditch but futile attempt to persuade the Court, petitioners alternatively pray that
INC's portion of 620 square meters of Lot 840, assuming that INC is entitled to it, should
be taken from the western portion of the same lot sold to respondent spouses Warlito
Paringit and Encarnacion Gante, and not from them. To petitioners, the share of the
spouses Warlito and Encarnacion should accordingly be reduced from 507.5 square
meters to only 197 square meters.
We note, however, that petitioners never raised before the trial court nor before the
appellate court the issue of Warlito's and Encarnacion's entitlement to 507.5 square
meters. Quite the contrary, petitioners even alleged in their complaint that the spouses
Warlito Paringit and Encarnacion Gante are owners of 507.5 square meters of Lot 840.
They never questioned the spouses' ownership of said portion. This issue was only posed
by petitioners in the instant petition before this Court. It is certainly too late for them to
raise said issue for the first time at this late stage of the proceedings. TDEASC
Points of law, theories, issues and arguments not brought to the attention of the lower
court need not be, and ordinarily will not be, considered by a reviewing court, as these
cannot be raised for the first time on appeal. Basic considerations of fair play, justice and
due process underlie the rule. It would be unfair to the adverse party who would have no
opportunity to present evidence in contra to the new theory, which it could have done had
it been aware of it at the time of the hearing before the trial court. 22
Of course, this rule admits of certain exceptions. For one, issues of lack of jurisdiction,
though not raised below, may be considered by the reviewing court as they may be raised
at any stage. For another, the reviewing court may also consider an issue not properly
raised during trial when there is plain error. Likewise, it may entertain such arguments
when there are jurisprudential developments affecting the issues, or when the issues
raised present a matter of public policy. 23 Unfortunately for petitioners, however, none
of these exceptions exists in this case. It is thus too late in the day for petitioners to raise
in this recourse the sale made by the spouses Atinedoro Ulep and Beatriz Ulep of the
507.5 square-meter area of Lot 840 to the spouses Warlito Paringit and Encarnacion
Gante. To allow petitioners to do so would be utterly unfair to the latter.
WHEREFORE, the petition is DENIED and the assailed decision and resolution of the
Court of Appeals AFFIRMED in toto.
Costs against petitioners.
SO ORDERED.
Panganiban, Sandoval-Gutierrez, Corona and Carpio Morales, JJ., concur.
||| (Spouses Ulep v. Court of Appeals, G.R. No. 125254, October 11, 2005)

FIRST DIVISION
[G.R. No. 123935. December 14, 2001.]
LEONCIO and ENRIQUETA, both surnamed BARRERA,
petitioners, vs. COURT OF APPEALS and ROSENDO C.
PALABASAN, respondents.
Pacifico M. Lontok and Arcangelita M. Romilla-Lontok for petitioners.
Rosenberg G. Palabasan for private respondent.
SYNOPSIS
Azalia Salome owned a house and lot located at Makati City. She mortgaged the said
property to Country Bankers Insurance and Surety Company. On July 1, 1966, Salome
sold the said property to Rosendo C. Palabasan. On April 19, 1989, Leoncio and
Enriqueta Barrera filed a complaint for reconveyance against Palabasan. They alleged
that they had been in possession of the property since 1962. On March 31, 1966, Salome
executed a notarized Deed of Sale with Assumption of Mortgage in their favor. They
tried to redeem the property but were not able to do so because Palabasan had done so
and the title to the property was released to Palabasan. In 1970, they signed a blank
document supposedly to become Palabasan's authority to sell the land for them, but in
1975, they were surprised to learn that the said blank document turned out to be a
contract of lease. In his answer, Palabasan asserted that he bought the property from
Salome on June 30, 1966, after he had paid the obligation of Salome with Country
Bankers and Insurance Surety Company. After trial, the court a quo declared Palabasan
to have validly acquired title to the property in question. It ruled that the case is one of
double sale of an immovable. On appeal, the Court of Appeals affirmed the decision of
the trial court. However, the appellate court ruled that there was no sale between the
spouses Barrera and Salome. Hence, the Spouses Barrera filed this petition.
The Court agreed with the Court of Appeals that respondent Palabasan is the lawful
owner of the property. There was no sufficient proof of sale between Salome and
petitioners. There was no double sale that would warrant the application of Article 1544
of the Civil Code. The evidence petitioners adduced to prove the sale was the notarized
deed executed on March 31, 1966. However, a perusal of the deed would show that the
sale was conditioned on the payment by the petitioners of Salome's obligation with the
Country Bankers Insurance and Surety Company under the contract of mortgage.
Petitioners submitted no evidence to show that they complied with the condition given.
Hence, there was no consummation of the contract that would transfer ownership of the
property to the petitioners. THIcCA
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; RECONVEYANCE OF PROPERTY;
ELUCIDATED. An action for reconveyance of a property is the sole remedy of a
landowner whose property has been wrongfully or erroneously registered in another's
name after one year from the date of the decree so long as the property has not passed to
an innocent purchaser for value. The action does not seek to reopen the registration
proceedings and set aside the decree of registration but only purports to show that the
person who secured the registration of the property in controversy is not the real owner
thereof.
2. ID.; ID.; ID.; FRAUD AS GROUND; INTENTIONAL ACTS TO DECEIVE AND
DEPRIVE ANOTHER OF HIS RIGHT MUST BE SPECIFICALLY ALLEGED AND
PROVED. Fraud may be a ground for reconveyance. For an action for reconveyance
based on fraud to prosper, the party seeking reconveyance must prove by clear and
convincing evidence his title to the property and the fact of fraud. It must be stressed that
mere allegations of fraud are not enough. Intentional acts to deceive and deprive another
of his right, or in some manner, injure him, must be specifically alleged and proved. DSCIEa
3. ID.; ID.; ID.; ID.; NOT ESTABLISHED IN CASE AT BAR. Petitioners offered no
proof that there was misrepresentation or concealment in the registration of the deed that
led to the issuance of Transfer Certificate of Title No. 167387. With the presumption of
regularity in the performance of official functions, the claim of petitioners that the
issuance of Transfer Certificate of Title No. 167387 was tainted with fraud must fail.
4. CIVIL LAW; MODES OF ACQUIRING OWNERSHIP; PRESCRIPTION; ACTION
UPON A JUDGMENT MUST BE BROUGHT WITHIN TEN YEARS. Article
1144(3) of the Civil Code provides that an action upon a judgment must be brought
within ten years from the time the right of action accrues.
5. REMEDIAL LAW; CIVIL PROCEDURE; EXECUTION OF JUDGMENT; COURT
CAN ISSUE A WRIT OF EXECUTION UPON MOTION WITHIN FIVE YEARS
FROM FINALITY OF THE DECISION. The rule is that the court could issue a writ of
execution by motion within five (5) years from finality of the decision. A writ of
execution issued after the expiration of that period is null and void.
6. ID.; ID.; ID.; AFTER FIVE YEARS BUT WITHIN TEN YEARS FROM THE
FINALITY OF THE DECISION, AN INTERESTED PARTY MAY FILE AN
INDEPENDENT ACTION FOR REVIVAL OF JUDGMENT. There is a need for the
interested party to file an independent action for revival of judgment. The judgment may
be enforced after the lapse of this period and before the same is barred by the statute of
limitations, by instituting an ordinary civil action. "The reason is that after the lapse of
the five-year period, the judgment is reduced to a mere right of action, which judgment
must be enforced, as all other ordinary actions, by the institution of a complaint in the
regular form. Such action must be filed within ten (10) years from the date the judgment
became final." TAHIED
7. CIVIL LAW; LAND TITLES AND DEEDS; CERTIFICATE OF TITLE IS
BINDING AND CONCLUSIVE UPON THE WHOLE WORLD; APPLIED IN CASE
AT BAR. [T]he greater weight of evidence lies in favor of respondent Palabasan's
claim of ownership over the land. Surely, Transfer Certificate of Title No. 167387 and
Tax Declaration No. 03251 which respondent Palabasan offered in evidence is more
convincing than petitioners' evidence. The certificate of title issued is an absolute and
indefeasible evidence of ownership of the property in favor of the person whose name
appears therein. It is binding and conclusive upon the whole world.
8. ID.; SALES; DOUBLE SALE; NOT ESTABLISHED SINCE THE CONDITION ON
THE FIRST TRANSACTION DID NOT MATERIALIZE. Anent the question of
whether this case is one of double sale, suffice it to say that there is no sufficient proof on
the sale between Salome and petitioners. There is no double sale that would warrant the
application of Article 1544 of the Civil Code. As mentioned at the outset, the evidence
petitioners adduced to prove the sale was the notarized deed executed on March 31, 1966.
However, a perusal of the deed would show that the sale is conditioned on the payment
by the petitioners of Salome's obligation with the Country Bankers Insurance and Surety
Company under the contract of mortgage. Petitioners submitted no evidence to show that
they complied with the condition given. Hence, there was no consummation of the
contract which would transfer ownership of the property to the petitioners. All that they
presented was the self-serving testimony of petitioner Leoncio Barrera to the effect that
the obligations were paid by them. Notable is Cenon Mateo's` testimony that he has no
knowledge of any transaction entered into by Salome on March 31, 1966. Likewise, there
is no sufficient evidence to show that the earlier transaction in 1962 ever materialized.
The testimony of Salome in Civil Case No. 14009 confirming the existence of this
transaction is inadmissible for lack of cross-examination. Likewise, the Deed of Absolute
Sale with Assumption of Real Estate Mortgage not having been notarized, its
genuineness and due execution will have to be proven. . . . The only sale that materialized
in this case was the sale by Salome to respondent Palabasan that was evidenced by a deed
of absolute sale that enabled respondent Palabasan to redeem the property from Country
Bankers Insurance and Surety Company and consequently to secure Transfer Certificate
of Title No. 167387 in his favor over the same property.
D E C I S I O N
PARDO, J p:
The Case
In this petition for certiorari, 1 petitioners seek to annul the decision of the Court of
Appeals 2 affirming the decision of the Regional Trial Court, 3 Makati, Branch 66, as
well as its resolution 4 denying reconsideration thereof. IAcDET
The Facts
Azalia Salome (Salome) owned a house and lot located at No. 2641 Bonifacio St.,
Bangkal, Makati City, covered by Transfer Certificate of Title No. 61772. Salome
mortgaged the property to Country Bankers Insurance and Surety Company to secure a
P10,000.00 loan.
On July 1, 1966, Salome sold the property to Rosendo C. Palabasan. 5 Transfer
Certificate of Title No. 61772 was cancelled and a new one, Transfer Certificate of Title
No. 167387, 6 was issued in the name of Rosendo C. Palabasan and Bella S. Palabasan.
On April 19, 1989, Leoncio and Enriqueta Barrera (spouses Barrera) filed with the
Regional Trial Court, Makati City, Branch 138, a complaint 7 against Palabasan for
reconveyance with damages. They alleged that they had been in possession of the
property since 1962 by virtue of a Deed of Sale with Assumption of Mortgage which was
not notarized; that Salome executed a notarized Deed of Sale with Assumption of
Mortgage in their favor on March 31, 1966 that, pursuant to this notarized deed, they
settled Salome's obligations with the Country Bankers Insurance and Surety Company;
that they tried to redeem the property but were not able to do so because Palabasan had
done so and the title to the property was released to Palabasan; that in 1970, they signed a
blank document which was supposed to become Palabasan's authority to sell the land for
them; that in 1975, they were surprised to learn that the blank document which they had
signed turned out to be a contract of lease wherein they were the lessees and Palabasan
was the lessor of the property; and that Palabasan registered the property in his name and
was able to secure Transfer Certificate of Title No. 167387.

In his answer to the complaint, Palabasan asserted that he bought the property from
Salome on June 30, 1966, after he had paid the obligation of Salome with Country
Bankers Insurance and Surety Company; that he had been issued Transfer Certificate of
Title No. 167387 in his name after he had the deed of sale registered; that the spouses
Barrera were in possession of the property as lessees of Salome; and that a contract of
lease was executed by and between the spouses Barrera and Palabasan in 1970.
Consequently, he claimed that the spouses Barrera had no legal right to claim re
conveyance of the property in question.
On February 23, 1993, after trial, the lower court rendered a decision 8 declaring
Palabasan to have validly acquired title to the property in question. The trial court, ruling
that the case is one of double sale of an immovable, applied the second paragraph of
Article 1544 9 of the Civil Code.
In time, the spouses Barrera appealed 10 the decision to the Court of Appeals. 11
On October 25, 1995, the Court of Appeals promulgated a decision affirming in toto the
decision of the trial court. The appellate court, however, found Article 1544 of the Civil
Code inapplicable to the case as there was no sale between the spouses Barrera and
Salome because Salome's testimony given in a previous case 12 to this effect was stricken
off the record since she died prior to cross-examination; the testimony of Cenon Mateo,
the common-law husband of Salome showed that he was not aware of the transaction
entered into on March 31, 1966; and counsel for spouses Barrera admitted that the sale
transaction in 1962 did not materialize as the property was mortgaged to Country
Bankers Insurance and Surety Company.
On December 4, 1995, the spouses Barrera filed a motion for reconsideration 13 of the
decision; however, on February 21, 1996, the Court of Appeals denied the same. 14
Hence, this petition. 15
The Issues
The issues raised are: whether respondent Palabasan is the owner of the property in
question; and whether there was double sale of an immovable property covered by
Article 1544 of the Civil Code.
The Court's Ruling
The petition is without merit.
An action for re conveyance of a property is the sole remedy of a landowner whose
property has been wrongfully or erroneously registered in another's name after one year
from the date of the decree so long as the property has not passed to an innocent
purchaser for value. 16 The action does not seek to reopen the registration proceedings
and set aside the decree of registration but only purports to show that the person who
secured the registration of the property in controversy is not the real owner thereof. 17
Fraud may be a ground for reconveyance. For an action for reconveyance based on fraud
to prosper, the party seeking reconveyance must prove by clear and convincing evidence
his title to the property and the fact of fraud. 18
It must be stressed that mere allegations of fraud are not enough. Intentional acts to
deceive and deprive another of his right, or in some manner, injure him, must be
specifically alleged and proved. 19 The burden of proof rests on petitioners; this, the
petitioners failed to do.
Petitioners offered no proof that there was misrepresentation or concealment in the
registration of the deed that led to the issuance of Transfer Certificate of Title No.
167387. With the presumption of regularity in the performance of official functions, the
claim of petitioners that the issuance of Transfer Certificate of Title No. 167387 was
tainted with fraud must fail.
As to proof of title to the property, respondent Palabasan offered the following: Transfer
Certificate of Title No. 167387, 20 Tax Declaration No. 03251, 21 the Deed of Absolute
Sale 22 dated June 30, 1966, executed by Salome in favor of respondent Palabasan, the
Contract of Lease, 23 with respondent Palabasan as the lessor and petitioner Leoncio
Barrera as the lessee, and the decision of the Court of First Instance, Pasig, Branch XIX
in Civil Case No. 38608, 24 finding respondent Palabasan to be the lawful owner of the
property covered by Transfer Certificate of Title No. 167387.
On the other hand, petitioner spouses Barrera only have the Deed of Absolute Sale with
Assumption of Real Estate Mortgage 25 evidencing a transaction which occurred in 1962,
a Deed of Sale with Assumption of Mortgage 26 dated March 31, 1966 and the
testimonies of Cenon Mateo 27 and petitioner Leoncio Barrera. 28 The spouses Barrera
attempted to offer in evidence the transcript of stenographic notes taken of the testimony
of Salome in Civil Case No. 14009. 29 Respondent objected to the offer which opposition
the trial court sustained. 30
We find respondent Palabasan to be the owner of the property.
The decision of the then Court of First Instance, Pasig, Branch XIX in Civil Case No.
38608, promulgated on September 4, 1981 31 and reinstated on August 10, 1990, 32
finding respondent Palabasan to be the lawful owner of the property covered by Transfer
Certificate of Title No. 167387 may not be invoked in this case since said decision had
become stale. 33
Article 1144(3) of the Civil Code provides that an action upon a judgment must be
brought within ten years from the time the right of action accrues. ITESAc
On the other hand, Section 6, Rule 39, Revised Rules of Court, states:
"A final and executory judgment or order may be executed on motion within
five (5) years from the date of its entry. After the lapse of such time, and before
it is barred by the statute of limitations, a judgment may be enforced by motion
within five (5) years from the date of its entry and thereafter by action before it
is barred by the statute of limitations."
The rule is that the court could issue a writ of execution by motion within five (5) years
from finality of the decision. 34
A writ of execution issued after the expiration of that period is null and void. 35 There is a
need for the interested party to file an independent action for revival of judgment. The
judgment may be enforced after the lapse of this period and before the same is barred by
the statute of limitations, by instituting an ordinary civil action. 36 "The reason is that
after the lapse of the five-year period, the judgment is reduced to a mere right of action,
which judgment must be enforced, as all other ordinary actions, by the institution of a
complaint in the regular form. Such action must be filed within ten (10) years from the
date the judgment became final." 37
The decision having become stale, "any action to enforce or revive it has prescribed." 38
This notwithstanding, the greater weight of evidence lies in favor of respondent
Palabasan's claim of ownership over the land. Surely, Transfer Certificate of Title No.
167387 and Tax Declaration No. 03251 which respondent Palabasan offered in evidence
is more convincing than petitioners' evidence.
The certificate of title issued is an absolute and indefeasible evidence of ownership of the
property in favor of the person whose name appears therein. It is binding and conclusive
upon the whole world. 39
Anent the question of whether this case is one of double sale, suffice it to say that there is
no sufficient proof on the sale between Salome and petitioners. There is no double sale
that would warrant the application of Article 1544 of the Civil Code.
As mentioned at the outset, the evidence petitioners adduced to prove the sale was the
notarized deed executed on March 31, 1966. However, a perusal of the deed would show
that the sale is conditioned on the payment by the petitioners of Salome's obligation with
the Country Bankers Insurance and Surety Company under the contract of mortgage.
Petitioners submitted no evidence to show that they complied with the condition given.
Hence, there was no consummation of the contract which would transfer ownership of the
property to the petitioners. All that they presented was the self-serving testimony of
petitioner Leoncio Barrera 40 to the effect that the obligations were paid by them. Notable
is Cenon Mateo's testimony that he has no knowledge of any transaction entered into by
Salome on March 31, 1966. 41
Likewise, there is no sufficient evidence to show that the earlier transaction in 1962 ever
materialized. The testimony of Salome in Civil Case No. 14009 confirming the existence
of this transaction is inadmissible for lack of cross-examination. Likewise, the Deed of
Absolute Sale with Assumption of Real Estate Mortgage 42 not having been notarized, its
genuineness and due execution will have to be proven. In this case, the petitioners only
presented the testimony of petitioner Leoncio Barrera and Cenon Mateo, which are,
again, self-serving assertions if not corroborated by any other evidence. Notable is the
counsel of petitioners own admission that "the said transaction however did not in any
way materialize for the reason that the property, subject of the transaction was mortgaged
to Country Bankers and Surety Company." 43
The only sale that materialized in this case was the sale by Salome to respondent
Palabasan that was evidenced by a deed of absolute sale that enabled respondent
Palabasan to redeem the property from Country Bankers Insurance and Surety Company
and consequently to secure Transfer Certificate of Title No. 167387 in his favor over the
same property.
The Fallo
WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court
of Appeals in CA-G. R. CV No. 40909 and its resolution denying reconsideration.
No costs.
SO ORDERED.
Davide, Jr., C.J., Kapunan and Ynares-Santiago, JJ., concur.
Puno, J., on official leave.
||| (Barrera v. Court of Appeals, G.R. No. 123935, December 14, 2001)

EN BANC
[G.R. No. 11198. March 20, 1917.]
THOS B. AITKEN, plaintiff-appellant, vs. JULIAN LA O, as
administrator of the estate of Apolonia Remigio, deceased, defendant-
appellee.
Aitken & DeSelms for appellant.
Gabriel La O for appellee.
SYLLABUS
1. EXECUTION SALE; TITLE OF PURCHASE AS AGAINST CLAIMANT
UNDER PRIOR UNRECORDED DEED OF SALE. A purchaser in good faith at a
sheriff's sale of all the right, title and interest of a judgment debtor in a house, is
entitled to the property under the provisions of article 1473 of the Civil Code as
against one who claims the property by virtue of an unrecorded deed of sale executed
in his favor by the judgment debtor prior to the date of the sheriff's sale, it appearing
that the purchaser at the sheriff's sale secured possession, and that the claimant under
the unrecorded deed of sale never went into possession.
D E C I S I O N
CARSON, J p:
It appears from the record in this case that a Chinaman named To Jan Co
erected a store building on a parcel of land belonging to Apolonia Remigio, under an
agreement whereby one-half of the rents were to go to her and one-half to To Jan Co;
that the owner of the land, not having received the rents agreed upon, instituted an
action on September 21, 1908, against To Jan Co and one of the occupants of the
building to recover these rents; that judgment having been and thereafter the house
was purchased by the judgment creditor, Apolonia Remigio, at the sheriff's sale on
February 11,1910, had under authority of the execution; that she took possession
forthwith; that the defendant in this action is the administrator of the estate of
Apolonia Remigio deceased, and as such is now in possession of the house and the
land upon which it stands; that on October 6, 1908, not long after the filing of the
complaint in the above-mentioned action, which was dated September 21, 1908, To
Jan Co executed an unregistered deed of sale of the house in question to another
Chinaman named To Cun, reserving therein the right to repurchase within ninety
days; that this right was never exercised; that To Cun (the second Chinaman) never
took possession under this deed; that thereafter, on October 22, 1912, To Cun (the
second Chinaman) executed an unregistered deed of sale of the house to the plaintiff
in this action, who, on June 9, 1915, instituted these proceedings wherein he prays a
judgment for possession of the house, and for an accounting of the rentals collected
thereon since the first day of September, 1908, alleging that his one-half share of
these rentals amounts to P2,485.
The opinion of the trial judge filed together with his judgment is as follows:
"The plaintiff herein seeks to recover the possession of a certain house
that was erected on land belonging to a third person. The said land belonged to
Apolonia Remigio during her lifetime but since her demise it forms part of her
estate. The estate is administered by Julian La O. Plaintiff further claims the
sum of P2,485, as being one half of the rentals obtained from the building since
September 1, 1908.
"Plaintiff alleges that he is the owner of the said building designated as
numbers 15, 17, 19 and 21 Calle Salazar, district of Binondo, and that he is
entitled to collect rentals therefrom.
"The defendant not only denies the plaintiff's claim to the building and
its rentals, but maintains that the building belongs to said party defendant.
"From the evidence introduced by the plaintiff, it appears that the
building in question is not properly a house, but a camarin of four doors or
apartments; that it was erected by the Chinaman To Jan Co on the lot that now
belongs to the estate of Apolonia Remigio (Exhibit C); that on October 6, 1908
(Exhibit A), To Jan Co sold it under pacto de retro for the term of three months,
which might be extended to nine, to a Chinaman named To Cun, for P1,800, a
sum in which, by reason of three due and unpaid notes, the vendor To Jan Co
was indebted to the vendee To Cun.
"The latter, in turn, by a deed certified on October 22, 1912 (Exhibit B), sold
the building or camarin to the plaintiff, Aitken, for the same amount of P1,800.
"But it has been proven by the evidence introduced by the defendant that when
the Chinaman To Jan Co conveyed the building to To Cun on October 6, 1908
(Exhibit A), he had already (on September 24, 1908) been personally notified of the
proceedings filed against him and the Chinaman To Ky in the justice of the peace
court of Manila by the representative of Apolonia Remigio to eject them from the lot
on which the building stands and to recover the sum of P3,425 as rent due for the said
house. After the trial was had (the other defendant, To Ky, who was absent, first
having been summoned by public notice), judgment was rendered against both of
them. On August 26, 1909, a writ of execution was issued by virtue of which the lot
was restored to the plaintiff and on February 11, 1910, after publication of notice, the
building or camarin erected thereon was sold at public auction for one peso and
adjudicated to the plaintiff, as attested by the certificate issued on the said date by the
clerk of this court. To Jan Co failed to exercise his right of redemption within the year
granted him and that right expired on the 10th of the same month of the following
year, 1911. To Cun, notwithstanding that he had purchased the building in question
under pacto de retro on October 6, 1908, did not redeem it either.
"Nowhere in the records does it appear that the ownership, which To
Cun pretends to have acquired in the building by the expiration of the period
granted for the exercise of the right of redemption that was not utilized by To
Jan Co, was consolidated, nor that either the latter, or To Cun, paid any taxes,
unless it was for the years 1914 and 1915, long after the sale referred to in
Exhibit B, the deed of October 22, 1912, executed by To Cun in behalf of the
herein plaintiff. But here it is to be noted that the two tax receipts (Exhibits F
and G), dated June 26, 1914, and June 30, 1915, appear to have been made out
to To Cun, notwithstanding that he had disposed of the building as far back as
October 22, 1912. Neither does the evidence show that to Jan Co
(notwithstanding that on October 6, 1908, he sold the building under pacto de
retro to To Cun) made any record in the ejectment proceedings with regard to
the lot occupied by the building, of the fact that he was not the owner of the
building or that he had conveyed his ownership therein to To Cun; much less
does it show that the latter filed any third-party claim.
"If the camarin was levied upon in execution of the judgment rendered
in the proceedings for ejectment and recovery of rentals, prosecuted against To
Jan Co; if the latter did nothing to pay the said rentals; if the alleged purchaser
To Cun made no effort to recover possession of the building; if the sale at public
auction, after proper advertisement and legal steps, was accomplished, the
property awarded to the highest bidder and no third-party claim was filed by the
person who considered himself to be the owner notwithstanding that he had
knowledge of the course of those proceedings; if the building was sold at
auction for the express purpose of applying the proceeds of the sale to the
payment of the rent owing for the lot on which it was erected; and if neither To
Jan Co, nor the alleged purchaser To Cun, exercised the right of redemption
within the year granted by law and specified in the certificate ownership of the
building by this official, in the name of the plaintiff and debtor To Jan Co, to the
highest bidder, who was the defendant herself, Apolonia Remigio, is perfectly
legal and valid.
"To Cun must so have understood the matter, as must also the plaintiff
himself, Aitken, who, notwithstanding his being a practicing attorney of this
city, has done nothing since October 22, 1912, in regard to the building which,
according to the deed Exhibit B, he acquired, either with regard to paying the
taxes or to collecting the rentals to which he claimed he was entitled and which
he is now trying to collect in the sum of P2,485, embracing the period which has
elapsed since September 1, 1908. If Aitken had had the least idea that he had
acquired a right in the building, it is not probable that he would have allowed
nearly three years to elapse from October 21, 1912, without having exerted
every possible effort to collect form the vendor and alleged owner To Cun, not
only the rentals unpaid from September 1, 1908, but also those due from
October 22, 1912, to April 7 of the present year, the date on which the idea
occurred to him to seek redress in the courts.
"The sale of the building to To Cun and the later sale of same by To Cun
to the plaintiff cannot be upheld because To Jan Co, the original vendor, had no
right to sell it to To Cun after having lost the right to do so, and the latter had no
right to make the sale to Aitken. To Cun acquired no right in the building;
consequently he could convey nothing to the purchaser.
"As the plaintiff acquired no right whatever in the building, still less in
the rentals produced by it, this action will not lie.
"Julian La O, in his capacity of administrator of the estate of Apolonia
Remigio, is absolved from the complaint, with the costs against the plaintiff."
While we are inclined to agree with the trial judge that the evidence of record
tends strongly to disclose that the transaction evidenced by the deed of sale with
reserved right of repurchase from To Jan Co to To Cun was not a bona fide
conveyance of the house; and that whatever rights in or to the house which To Cun
may have acquired by virtue of the transaction were abandoned and surrendered by
him long prior to the date of the execution of the deed of conveyance to the plaintiff
in this action; we prefer to rest our judgment affirming the dismissal of the complaint
upon the express provisions of article 1473 of the Civil Code.

That article is as follows:
"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 personal property.
"Should it be real property, it shall belong to the person acquiring it who
first recorded it in the registry.
"Should there be no entry, the property shall belong to the person who
first took possession of it in good faith, and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith."
Granting, for the sake of argument, that the sale from To Jan Co to To Cun was
a valid and binding transaction, it is evident that the house has been sold as his
property to two different vendees, and the sale to To Cun not having been recorded in
the registry, the property belongs to the estate of Apolonia Remigio, the purchaser
who first took possession in good faith.
It has been suggested that since To Jan Co, the judgment debtor, had conveyed
all his right, title and interest in the house to To Cun prior to the date of the sheriff's
sale to Apolonia Remigio, she took nothing thereunder, because, as it is said, she
could acquire merely such interest in the property as remained in the judgment debtor
at the date of the sale. It will readily be seen, however, that analogous reasoning
would defeat a claim of title by the second purchaser of real estate in each and all of
the cases wherein such right is secured to him under the provisions of the above cited
article of the Code.
Were it not for that article, it cannot be doubted, on general principles, that
should an owner of real estate execute an unregistered deed of sale of all right, title
and interest therein to two different persons, the second purchaser would take nothing
under the deed, because the vendor, at the date of the second sale, has no right, title or
interest in the property which he can lawfully convey to such purchaser. But the
provisions of this article except from the general doctrine the cases therein mentioned,
to this extent at least, that an unregistered deed to the first purchaser, cannot be held to
have had the effect of conveying title, good as against a second purchaser, when it
appears that the second purchaser was the first to secure possession.
The rule thus announced is in substantial conformity with the doctrine quite
uniformly upheld by the courts in the United States, which is set forth as follows in
Freeman on Executions (3d Ed. Sec. 336), supported by numerous citations of
authority:
"We have elsewhere had occasion to treat of the rights of purchasers at
execution sales, when brought in conflict with claims derived from unrecorded
instruments made by the defendant, or based upon some other secret transaction
not known to the purchaser. We then said: Wherever, under the law, a deed or
mortgage is valid without being recorded, a subsequently attaching judgment
lien against the grantor or mortgagor will not be of any benefit to the lien holder
as against the deed or mortgage. But a purchaser at a sale under a judgment is,
to the same extent as if he were purchaser at a private or voluntary sale,
protected from claims previously acquired by third persons from the judgment
debtor, of which he has no actual nor constructive notice. But if, at the time of
the sale, the purchaser has actual notice of any legal or equitable right in a third
person, or if, in the absence of such notice, the instrument evidencing such right
is properly of record, or if possession is held under it, then the title acquired by
the purchaser cannot prejudice the interest of such third person."
In a footnote (No. 45) to the paragraph from which the foregoing extract is
taken, we find the following concise statement of the precise proposition upon which
our ruling is based:
"Purchasers at execution sales are, to the same extent as other
purchasers, entitled to the benefit of the statutes requiring instruments affecting
the title to real estate to be recorded. (Stewart vs. Freeman, 22 Pa. St., 120;
Heister vs. Fortner, 2 Binn., 40; 4 Am. Dec., 417; Mann's Appeal, 1 Pa. St., 24;
Scribner vs. Lockwood, 9 Ohio, 184; Waldo vs. Russell, 5 Mo., 387; Goepp vs.
Gartiser, 35 Pa. St., 130 Duke vs. Clark, 58 Miss., 465; Lee vs. Bermingham, 30
Kan., 312; Draper vs. Bryson, 26 Mo., 108; 69 Am. Dec., 483; Grace vs. Wade,
45 Tex., 529; Milner vs. Hyland, 77 Ind., 458; Miles vs. King, 5 S. C., 146.)"
We conclude that the judgment entered in the court below should be affirmed,
with the costs of this instance against the appellant. So ordered.
Torres, Trent and Araullo, JJ., concur.
Moreland, J., did not sign.

||| (Aitken v. Julian La O, G.R. No. 11198, March 20, 1917)

FIRST DIVISION
[G.R. No. L-3667. September 5, 1907.]
NATALIA FABIAN ET AL., plaintiffs-appellants, vs. SMITH, BELL
& CO., defendants-appellees.
Rafael Palma, for appellants.
Kinney, Odlin & Lawrence, for appellees.
SYLLABUS
1. ATTACHMENT; UNRECORDED DEED OF PRIOR PURCHASER.
The levy of an execution against a judgment debtor upon real estate which stands in
his name in the registry of property, does not take precedence over an unrecorded
deed of the same property executed by the judgment debtor prior to the levy of the
attachment. Attachment does not change the character of a debt and does not convert
the claim of the creditor into a right to the thing itself, nor does it give him any
preference over existing claims against the attached property that have not been
recorded. (Martinez vs. Holliday, Wise & Co., 1 Phil. Rep., 194.)
2. ID.; GENERAL UNITED STATES RULE. The provision contained in
the statutes of many of the States of America, to the effect that an unrecorded deed
shall be void as to subsequent attachment or judgment creditors, is not found in the
laws of the Philippine islands.
3. ID.; CIVIL CODE. Article 1473 of the Civil Code, which gives
preference to that one of two deeds which is first recorded, does not extend to
attachments or executions.
D E C I S I O N
WILLARD, J p:
On the 28th of January 1901 Emiliano Boncan was the owner of the real estate
in question in this case his title thereto being recorded in the registry of property. On
that they he sold and conveyed the same by a public documents to the plaintiffs. This
deed was never recorded in the registry of property. The appellees, Smith, Bell & Co.,
having some years thereafter obtained a judgment against Emiliano Boncan, levied an
execution issued on said judgment upon the real estate in question, which then stood
upon the said record in the name of said Boncan. The plaintiffs thereupon brought this
action to restrain the judgment creditors from selling property under this execution.
Judgment was entered in the court below in favor of the defendants, and the plaintiffs
have appealed.
The question in the case is whether the levy of an execution against a judgment
debtor upon real estate which stands in his name in the registry of property takes
precedence or not of an unrecorded deed of the same property made by the judgment
debtor prior to the levy in question.
This question, so far as the Spanish law in force prior to the present Code of
Civil Procedure is concerned, has been considered by this court in a case relating to an
attachment made under the same circumstances. By the provisions of that law an
execution, such as was levied in the case at bar, stands upon the same footing as an
attachment. Both are provisional records, one mentioned in article 42, paragraph 2, of
the Mortgage Law, and the other in paragraph 3 of the same article. They are placed
upon the same footing also by article 44, which is as follows:
"The creditor who obtains an entry in his favor in cases Nos. 2, 3, and 4
of article 42 shall have preference, only with regard to the property entered,
over those who have another claim against the same debtor, contracted
subsequently to said entry."
The case above referred to is the case of Martinez vs. Holliday, Wise & Co. (1
Phil. Rep., 194). In that case it was said (p. 197):
"From the time when the Mortgage Law of 1861 was in consideration up
to the present time there has been only one opinion concerning the effects of
provisional record of this class. It has always been said that it did not change the
character of the debt; that it did not convert into a right to the thing itself the
claim of the creditor; that it did not give him any preference over existing
claims which were not s provisionally recorded."
This case was followed in that of Olivares vs. Hoskyn & Co. (2 Phil. Rep.,
689), where the creditor had obtained judgment and levied an execution, the case,
therefore, being similar to this case. It was also followed in the case of Peterson vs.
Newberry (6 Phil. Rep., 260).
In accordance with the provisions of Mortgage Law and the Civil Code, as they
have thus construed by this court, there can be no doubt that the claim of the
appellants is superior to the claim of the appellees.
These provisions of the Spanish law had not been modified or repealed in the
respect by the Code of Civil Procedure. The section of that code relating to
attachment provide that when real estate stands upon the records in name of the
defendant the attachment shall be made in a certain way, and when it stands in the
name of the third person the attachment shall be made in a certain way; but nothing is
said in any of these sections as to any priority secured by the attachment. The
provision which is found in the statute law of a great many of the States of America,
to the effect that an unrecorded deed shall be void as to subsequent attaching or
judgment creditors, nowhere appears in this code. Article 1473 of the Civil Code,
which gives preference to that one of two deeds which is first recorded, does not
extend to attachments or executions.
The same is true of the sections of the code (Civil Procedure) relating to
executions; it appearing, moreover, in section 463, that a purchaser under an
execution sale "shall be substituted to and acquire all the right, interest, title, and
claim of the judgment debtor thereto," which in this case would be nothing. The case
of Peterson vs. Newberry, above cited, arose after the publication of the present Code
of Civil Procedure.
Article 389 of the Mortgage Law is in part as follows:
"From the time this law goes into operation, no document or instrument
which has not been recorded in the registry shall be admitted in the ordinary of
special courts or tribunals. in the councils and offices of the Government, by
which interest subject to record are created, conveyed, acknowledged, modified
or extinguished, according to the same law, if the object of the presentation be
to enforce, to the prejudice of the third persons, the interest which should have
been recorded."
This article does not aid the appellees for they do not come within the meaning
of the phrase "third persons" found therein. In the Commentaries of Galindo y
Escolsura upon the Mortgage Law, volume 2 (2d ed.), page 635, it is said:
"Therefore it is the general opinion that when a person, by virtue of a
judgment for the recovery of the debt not supported by a mortgage , secures an
attachment against property which turns out to have been previously sold,
although the purchaser did not have the property registered in his name, the
latter has a superior right, as the attachment does not confer a real right."
See also page 641 of the same volume.
The judgment of the court below is reversed, and the cause remanded with
directions to enter judgment for the plaintiffs as prayed in the complaint. No costs will
be allowed to either party in this court. So ordered.
Arellano, C.J., Torres, Johnson, and Tracey, JJ., concur.

||| (Fabian v. Smith, Bell & Co., G.R. No. L-3667, September 05, 1907)

FIRST DIVISION
[G.R. No. L-28740. February 24, 1981.]
FERMIN Z. CARAM, JR., petitioner, vs. CLARO L. LAURETA,
respondent.
Paredes, Poblador and Nazareno, Azada and Tomacruz for petitioner.
Andres Law Office for respondent.
D E C I S I O N
FERNANDEZ, J p:
This is a petition for certiorari to review the decision of the Court of Appeals
promulgated on January 29, 1968 in CA-G.R. NO. 35721-R entitled "Claro L. Laureta,
plaintiff-appellee versus Marcos Mata, Codidi Mata and Fermin Caram, Jr., defendants-
appellant; Tampino (Mansaca), et al. Intervenors-appellants," affirming the decision of
the Court of First Instance of Davao in Civil Case No. 3083. 1
On June 25, 1959, Claro L. Laureta filed in the Court of First Instance of Davao an action
for nullity, recovery of ownership and/or reconveyance with damages and attorney's fees
against Marcos Mata, Codidi Mata, Fermin Z. Caram Jr. and the Register of Deeds of
Davao City. 2
On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land covered by
Original Certificate of Title 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. At the time
the sale was executed, there was no authorized officer before whom the sale could be
acknowledged inasmuch as the civil government in Tagum, Davao was not as yet
organized. However, the defendant Marcos Mata delivered to Laureta the peaceful and
lawful possession of the premises of the land together with the pertinent papers thereof
such as the Owner's Duplicate Original Certificate of Title No. 3019, sketch plan, tax
declaration, tax receipts and other papers related thereto. 3 Since June 10, 1945, the
plaintiff Laureta had been and is still 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. 4
On May 5, 1947, the same land covered by Original Certificate of Title 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 May 22,
1947, Marcos Mata, through Attys. Abelardo Aportadera and Gumercindo Arcilla, filed
with the Court of First Instance of Davao a petition for the issuance of a new Owner's
Duplicate of Original Certificate of Title No. 3019, alleging as ground therefor the loss of
said title in the evacuation place of defendant Marcos Mata in Magugpo, Tagum, Davao.
On June 5, 1947, the Court of First Instance of Davao issued an order directing the
Register of Deeds of Davao to issue a new Owner's Duplicate Certificate of Title No.
3019 in favor of Marcos Mata and declaring the lost title as null and void. 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. 5
On August 29, 1959, the defendants Marcos Mata and Codidi Mata filed their answer
with counterclaim admitting the existence of a private absolute deed of sale of his only
property in favor of Claro L. Laureta but alleging that he signed the same as he was
subjected to duress, threat and intimidation for the plaintiff was the commanding officer
of the 10th division USFIP, operating in the unoccupied areas of Northern Davao with its
headquarters at Project No. 7 (Km. 60 Davao-Agusan Highways), in the Municipality of
Tagum, Province of Davao; that Laureta's words and requests were laws; that although
the defendant Mata did not like to sell his property or sign the document without even
understanding the same, he was ordered to accept P650.00 Mindanao Emergency Notes;
and that due to his fear of harm or danger that will happen to him or to his family, if he
refused, he had no other alternative but to sign the document. 6
The defendants Marcos Mata and Codidi Mata also admit the existence of a record in the
Registry of Deeds regarding a document allegedly signed by him in favor of his co-
defendant Fermin Caram Jr. but denies that he ever signed the document for he knew
before hand that he had signed a deed of sale in favor of the plaintiff and that the plaintiff
was in possession of the certificate of title; that if ever his thumb mark appeared in the
document purportedly alienating the property to Fermin Caram Jr., his consent was
obtained through fraud and misrepresentation for the defendant Mata is illiterate and
ignorant and did not know what he was signing; and that he did not receive a
consideration for the said sale. 7
The defendant Fermin Caram Jr. filed his answer on October 23, 1959 alleging that he
has no knowledge or information about the previous encumbrances, transactions, and
alienations in favor of plaintiff until the filing of the complaints. 8
The trial court rendered a decision dated February 29, 1964, the dispositive portion of
which reads: 9
"1. Declaring that the deed of sale, Exhibit A, executed by Marcos Mata in
favor of Claro L. Laureta stands and prevails over the deed of sale, Exhibit F, in
favor of Fermin Caram Jr.;
"2. Declaring as null and void the deed of sale Exhibit F, in favor of Fermin
Caram Jr.;
"3. Directing Marcos Mata to acknowledge the deed of sale, Exhibit A, in favor
of Claro L. Laureta;.
"4. Directing Claro L. Laureta to secure the approval of the Secretary of
Agriculture and Natural Resources on the deed, Exhibit A, after Marcos Mata
shall have acknowledged the same before a notary public;.
"5. Directing Claro L. Laureta to surrender to the Register of Deeds for the City
and Province of Davao the Owner's Duplicate of Original Certificate of Title
No. 3019 and the latter to cancel the same;.
"6. Ordering the Register of Deeds for the City and Province of Davao to cancel
Transfer Certificate of Title No. T-140 in the name of Fermin Caram Jr.;
"7. Directing the Register of Deeds for the City and Province of Davao to issue
a title in favor of Claro L. Laureta, Filipino, resident of Quezon City, upon
presentation of the deed executed by Marcos Mata in his favor, Exhibit A, duly
acknowledged by him and approved by the Secretary of Agriculture and Natural
Resources, and.
"8. Dismissing the counterclaim and cross claim of Marcos Mata and Codidi
Mata, the counterclaim of Caram, Jr., the answer in intervention, counterclaim
and cross-claim of the Mansacas.
"The Court makes no pronouncement as to costs.
"SO ORDERED."
The defendants appealed from the judgment to the Court of Appeals. 10 The appeal was
docketed as CA-G.R. NO. 35721-R.
The Court of Appeals promulgated its decision on January 29, 1968 affirming the
judgment of the trial court. LexLib
In his brief, the petitioner assigns the following errors. 11
"I
"THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING
THAT IRESPE AND APORTADERA WERE ATTORNEYS-IN-FACT OF
PETITIONER CARAM FOR THE PURPOSE OF BUYING THE PROPERTY
IN QUESTION.
"II
"THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING
THAT THE EVIDENCE ADDUCED IN THE TRIAL COURT CONSTITUTE
LEGAL EVIDENCE OF FRAUD ON THE PART OF IRESPE AND
APORTADERA ATTRIBUTABLE TO PETITIONER.
"III
"THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE
ERROR OF LAW IN HOLDING THAT KNOWLEDGE OF IRESPE AND
APORTADERA OF A PRIOR UNREGISTERED SALE OF A TITLED
PROPERTY ATTRIBUTABLE TO PETITIONER AND EQUIVALENT IN
LAW OF REGISTRATION OF SAID SALE.
"IV
"THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING
THAT AN ACTION FOR RECONVEYANCE ON THE GROUND OF
FRAUD PRESCRIBES WITHIN FOUR (4) YEARS."
The petitioner assails the finding of the trial court that the second sale of the property was
made through his representatives, Pedro Irespe and Atty. Abelardo Aportadera. He argues
that Pedro Irespe was acting merely as broker or intermediary with the specific task and
duty to pay Marcos Mata the sum of P1,000.00 for the latter's property and to see to it
that the requisite deed of sale covering the purchase was properly executed by Marcos
Mata; that the identity of the property to be bought and the price of the purchase had
already been agreed upon by the parties; and that the other alleged representative, Atty.
Aportadera, merely acted as a notary public in the execution of the deed of sale.
The contention of the petitioner has no merit. The facts of record show that Mata, the
vendor, and Caram, the second vendee had never met. During the trial, Marcos Mata
testified that he knows Atty. Aportadera but did not know Caram. 12 Thus, the sale of the
property could have only been through Caram's representatives, Irespe and Aportadera.
The petitioner, in his answer, admitted that Atty. Aportadera acted as his notary public
and attorney-in-fact at the same time in the purchase of the property. 13
The petitioner contends that he cannot be considered to have acted in bad faith because
there is no direct proof showing that Irespe and Aportadera, his alleged agents, had
knowledge of the first sale to Laureta. This contention is also without merit.
The Court of Appeals, in affirming the decision of the trial court, said: 14
"The trial court, in holding that appellant Caram, Jr. was not a purchaser in good
faith, at the time he bought the same property from appellant Mata, on May 5,
1947, entirely discredited the testimony of Aportadera. Thus it stated in its
decision:
'The testimony of Atty. Aportadera quoted elsewhere in this decision is hollow.
There is every reason to believe that Irespe and he had known of the sale of the
property in question to Laureta on the day Mata and Irespe, accompanied by
Leoning Mansaca, went to the office of Atty. Aportadera for the sale of the
same property to Caram, Jr., represented by Irespe as attorney-in-fact. Leoning
Mansaca was with the two Irespe and Mata to engage the services of Atty.
Aportadera in the annulment of the sale of his land to Laureta. When Leoning
Mansaca narrated to Atty. Aportadera the circumstances under which his
property had been sold to Laureta, he must have included in the narration the
sale of the land of Mata, for the two properties had been sold on the same
occasion and under the same circumstances. Even as early as immediately after
liberation, Irespe, who was the witness in most of the cases filed by Atty.
Aportadera in his capacity as Provincial Fiscal of Davao against Laureta, must
have known on the purchases of lands made by Laureta when he was regimental
commander, one of which was the sale made by Mata. It was not a mere
coincidence that Irespe was made guardian ad litem of Leoning Mansaca, at the
suggestion of Atty. Aportadera and attorney-in-fact of Caram, Jr.

'The Court cannot help being convinced that Irespe, attorney-in-fact of Caram,
Jr., had knowledge of the prior existing transaction, Exhibit A, between Mata
and Laureta over the land, subject matter of this litigation, when the deed,
Exhibit F, was executed by Mata in favor of Caram, Jr. And this knowledge has
the effect of registration as to Caram, Jr.' (R.A. pp. 123-124).
"We agree with His Honor's conclusion on this particular point, on two grounds
the first, the same concerns matters affecting the credibility of a witness of
which the findings of the trial court command great weight, and second, the
same is borne out by the testimony of Atty. Aportadera himself. (t.s.n. pp. 187-
190, 213-215, Restauro)."
Even if Irespe and Aportadera did not have actual knowledge of the first sale,
still, their actions have not satisfied the requirement of good faith. Bad faith is not
based solely on the fact that a vendee had knowledge of the defect or lack of title of
his vendor. In the case of Leung Yee vs. F.L. Strong Machinery Co. and Williamson,
this Court held: 15
"One who purchases real estate with knowledge of a defect or lack of title in his
vendor can not 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."
In the instant case, Irespe and Aportadera had knowledge of circumstances which ought
to have put them on inquiry. Both of them knew that Mata's certificate of title together
with other papers pertaining to the land was taken by soldiers under the command of Col.
Claro L. Laureta. 16 Added to this is the fact that at the time of the second sale Laureta
was already in possession of the land. Irespe and Aportadera should have investigated the
nature of Laureta's possession. If they failed to exercise the ordinary care expected of a
buyer of real estate they must suffer the consequences. The rule of caveat emptor requires
the purchaser to be aware of the supposed title of the vendor and one who buys without
checking the vendor's title takes all the risks and losses consequent to such failure. 17
The principle that a person dealing with the owner of the registered land is not bound to
go behind the certificate and inquire into transactions the existence of which is not there
intimated 18 should not apply in this case. It was of common knowledge that at the time
the soldiers of Laureta took the documents from Mata, the civil government of Tagum
was not yet established and that there were no officials to ratify contracts of sale and
make them registrable. Obviously, Aportadera and Irespe knew that even if Mata
previously had sold the disputed property such sale could not have been registered. cdrep
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.
Article 1544 of the New Civil Code provides that:
"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. (1973)".
Since Caram was a registrant in bad faith, the situation is as if there was no registration at
all. 19
The question to be determined now is, who was first in possession in good faith? 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. 20 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. 21 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.
Anent the fourth error assigned, the petitioner contends that the second deed of sale,
Exhibit "F" is a voidable contract. Being a voidable contract, the action for annulment of
the same on the ground of fraud must be brought within four (4) years from the discovery
of the fraud. In the case at bar, Laureta is deemed to have discovered that the land in
question has been sold to Caram to his prejudice on December 9, 1947, when the Deed of
Sale, Exhibit "F" was recorded and entered in the Original Certificate of Title by the
Register of Deeds and a new Certificate of Title No. 140 was issued in the name of
Caram. Therefore, when the present case was filed on June 29, 1959, plaintiff's cause of
action had long prescribed.
The petitioner's conclusion that the second deed of sale, "Exhibit F", is a voidable
contract is not correct. In order that fraud can be a ground for the annulment of a contract,
it must be employed prior to or simultaneous to the consent or creation of the contract.
The fraud or dolo causante must be that which determines or is the essential cause of the
contract. Dolo causante as a ground for the annulment of contract is specifically
described in Article 1338 of the New Civil Code of the Philippines as "insidious words or
machinations of one of the contracting parties" which induced the other to enter into a
contract, and "without them, he would not have agreed to."
The second deed of sale in favor of Caram is not a voidable contract. No evidence
whatsoever was shown that through insidious words or machinations, the representatives
of Caram, Irespe and Aportadera had induced Mata to enter into the contract.
Since the second deed of sale is not a voidable contract, Article 1391, Civil Code of the
Philippines which provides that the action for annulment shall be brought within four (4)
years from the time of the discovery of fraud does not apply.
Moreover, Laureta has been in continuous possession of the land since he bought it in
June 1945.
A more important reason why Laureta's action could not have prescribed is that the
second contract of sale, having been registered in bad faith, is null and void. Article 1410
of the Civil Code of the Philippines provides that any action or defense for the
declaration of the inexistence of a contract does not prescribe.
In a memorandum of Authorities 22 submitted to this Court on March 13, 1978, the
petitioner insists that the action of Laureta against Caram has prescribed because the
second contract of sale is not void under Article 1409 23 of the Civil Code of the
Philippines which enumerates the kinds of contracts which are considered void.
Moreover, Article 1544 of the New Civil Code of the Philippines does not declare void a
second sale of immovable registered in bad faith.
The fact that the second contract is not considered void under Article 1409 and that
Article 1544 does not declare void a deed of sale registered in bad faith does not mean
that said contract is not void. Article 1544 specifically provides who shall be the owner in
case of a double sale of an immovable property. To give full effect to this provision, the
status of the two contracts must be determined and clarified. One contract must be
declared valid so that one vendee may exercise all the rights of an owner, while the other
contract must be declared void to cut off all rights which may arise from said contract.
Otherwise, Article 1544 will be meaningless. llcd
The first sale in favor of Laureta prevails over the sale in favor of Caram.
WHEREFORE, the petition is hereby denied and the decision of the Court of Appeals
sought to be reviewed is affirmed, without pronouncement as to costs.
SO ORDERED.
Makasiar, Guerrero, De Castro and Melencio-Herrera, JJ., concur.
Teehankee (Chairman), J., took no part.
||| (Caram, Jr. v. Laureta, G.R. No. L-28740, February 24, 1981)

THIRD DIVISION
[G.R. No. 170405. February 2, 2010.]
RAYMUNDO S. DE LEON, petitioner, vs. BENITA T. ONG, 1
respondent.
DECISION
CORONA, J p:
On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land 2 with
improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these
properties were mortgaged to Real Savings and Loan Association, Incorporated (RSLAI),
petitioner and respondent executed a notarized deed of absolute sale with assumption of
mortgage 3 stating:
xxx xxx xxx
That for and in consideration of the sum of ONE MILLION ONE HUNDRED
THOUSAND PESOS (P1.1 million), Philippine currency, the receipt whereof is
hereby acknowledged from [RESPONDENT] to the entire satisfaction of
[PETITIONER], said [PETITIONER] does hereby sell, transfer and convey
in a manner absolute and irrevocable, unto said [RESPONDENT], his heirs
and assigns that certain real estate together with the buildings and other
improvements existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal
under the following terms and conditions:
1. That upon full payment of [respondent] of the amount of FOUR
HUNDRED FIFTEEN THOUSAND FIVE HUNDRED
(P415,000), [petitioner] shall execute and sign a deed of
assumption of mortgage in favor of [respondent] without any
further cost whatsoever;
2. That [respondent] shall assume payment of the outstanding loan of
SIX HUNDRED EIGHTY FOUR THOUSAND FIVE
HUNDRED PESOS (P684,500) with REAL SAVINGS AND
LOAN, 4 Cainta, Rizal . . . (emphasis supplied) cTACIa
xxx xxx xxx
Pursuant to this deed, respondent gave petitioner P415,500 as partial payment. Petitioner,
on the other hand, handed the keys to the properties and wrote a letter informing RSLAI
of the sale and authorizing it to accept payment from respondent and release the
certificates of title.
Thereafter, respondent undertook repairs and made improvements on the properties. 5
Respondent likewise informed RSLAI of her agreement with petitioner for her to assume
petitioner's outstanding loan. RSLAI required her to undergo credit investigation.
Subsequently, respondent learned that petitioner again sold the same properties to one
Leona Viloria after March 10, 1993 and changed the locks, rendering the keys he gave
her useless. Respondent thus proceeded to RSLAI to inquire about the credit
investigation. However, she was informed that petitioner had already paid the amount due
and had taken back the certificates of title.
Respondent persistently contacted petitioner but her efforts proved futile.
On June 18, 1993, respondent filed a complaint for specific performance, declaration of
nullity of the second sale and damages 6 against petitioner and Viloria in the Regional
Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that since petitioner had
previously sold the properties to her on March 10, 1993, he no longer had the right to sell
the same to Viloria. Thus, petitioner fraudulently deprived her of the properties. AcSEHT
Petitioner, on the other hand, insisted that respondent did not have a cause of action
against him and consequently prayed for the dismissal of the complaint. He claimed that
since the transaction was subject to a condition (i.e., that RSLAI approve the assumption
of mortgage), they only entered into a contract to sell. Inasmuch as respondent did apply
for a loan from RSLAI, the condition did not arise. Consequently, the sale was not
perfected and he could freely dispose of the properties. Furthermore, he made a counter-
claim for damages as respondent filed the complaint allegedly with gross and evident bad
faith.
Because respondent was a licensed real estate broker, the RTC concluded that she knew
that the validity of the sale was subject to a condition. The perfection of a contract of sale
depended on RSLAI's approval of the assumption of mortgage. Since RSLAI did not
allow respondent to assume petitioner's obligation, the RTC held that the sale was never
perfected.
In a decision dated August 27, 1999, 7 the RTC dismissed the complaint for lack of cause
of action and ordered respondent to pay petitioner P100,000 moral damages, P20,000
attorney's fees and the cost of suit.
Aggrieved, respondent appealed to the Court of Appeals (CA), 8 asserting that the court a
quo erred in dismissing the complaint.
The CA found that the March 10, 2003 contract executed by the parties did not impose
any condition on the sale and held that the parties entered into a contract of sale.
Consequently, because petitioner no longer owned the properties when he sold them to
Viloria, it declared the second sale void. Moreover, it found petitioner liable for moral
and exemplary damages for fraudulently depriving respondent of the properties.
In a decision dated July 22, 2005, 9 the CA upheld the sale to respondent and nullified
the sale to Viloria. It likewise ordered respondent to reimburse petitioner P715,250 (or
the amount he paid to RSLAI). Petitioner, on the other hand, was ordered to deliver the
certificates of titles to respondent and pay her P50,000 moral damages and P15,000
exemplary damages.
Petitioner moved for reconsideration but it was denied in a resolution dated November
11, 2005. 10 Hence, this petition, 11 with the sole issue being whether the parties entered
into a contract of sale or a contract to sell.
Petitioner insists that he entered into a contract to sell since the validity of the transaction
was subject to a suspensive condition, that is, the approval by RSLAI of respondent's
assumption of mortgage. Because RSLAI did not allow respondent to assume his
(petitioner's) obligation, the condition never materialized. Consequently, there was no
sale.
Respondent, on the other hand, asserts that they entered into a contract of sale as
petitioner already conveyed full ownership of the subject properties upon the execution of
the deed.
We modify the decision of the CA.
CONTRACT OF SALE OR CONTRACT TO SELL?
The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The
RTC ruled that it was a contract to sell while the CA held that it was a contract of sale. DTSaHI
In a contract of sale, the seller conveys ownership of the property to the buyer upon the
perfection of the contract. Should the buyer default in the payment of the purchase price,
the seller may either sue for the collection thereof or have the contract judicially resolved
and set aside. The non-payment of the price is therefore a negative resolutory condition.
12
On the other hand, a contract to sell is subject to a positive suspensive condition. The
buyer does not acquire ownership of the property until he fully pays the purchase price.
For this reason, if the buyer defaults in the payment thereof, the seller can only sue for
damages. 13
The deed executed by the parties (as previously quoted) stated that petitioner sold the
properties to respondent "in a manner absolute and irrevocable" for a sum of P1.1
million. 14 With regard to the manner of payment, it required respondent to pay
P415,500 in cash to petitioner upon the execution of the deed, with the balance 15
payable directly to RSLAI (on behalf of petitioner) within a reasonable time. 16 Nothing
in said instrument implied that petitioner reserved ownership of the properties until the
full payment of the purchase price. 17 On the contrary, the terms and conditions of the
deed only affected the manner of payment, not the immediate transfer of ownership (upon
the execution of the notarized contract) from petitioner as seller to respondent as buyer.
Otherwise stated, the said terms and conditions pertained to the performance of the
contract, not the perfection thereof nor the transfer of ownership.
Settled is the rule that the seller is obliged to transfer title over the properties and deliver
the same to the buyer. 18 In this regard, Article 1498 of the Civil Code 19 provides that,
as a rule, the execution of a notarized deed of sale is equivalent to the delivery of a thing
sold.
In this instance, petitioner executed a notarized deed of absolute sale in favor of
respondent. Moreover, not only did petitioner turn over the keys to the properties to
respondent, he also authorized RSLAI to receive payment from respondent and release
his certificates of title to her. The totality of petitioner's acts clearly indicates that he had
unqualifiedly delivered and transferred ownership of the properties to respondent.
Clearly, it was a contract of sale the parties entered into.
Furthermore, even assuming arguendo that the agreement of the parties was subject to the
condition that RSLAI had to approve the assumption of mortgage, the said condition was
considered fulfilled as petitioner prevented its fulfillment by paying his outstanding
obligation and taking back the certificates of title without even notifying respondent. In
this connection, Article 1186 of the Civil Code provides:
Article 1186. The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
VOID SALE OR DOUBLE SALE?
Petitioner sold the same properties to two buyers, first to respondent and then to Viloria
on two separate occasions. 20 However, the second sale was not void for the sole reason
that petitioner had previously sold the same properties to respondent. On this account, the
CA erred. aTcSID
This case involves a double sale as the disputed properties were sold validly on two
separate occasions by the same seller to the two different buyers in good faith.
Article 1544 of the Civil Code provides:
Article 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person
who in good faith was first in the possession; and, in the absence thereof, to
the person who presents the oldest title, provided there is good faith.
(emphasis supplied)
This provision clearly states that the rules on double or multiple sales apply only to
purchasers in good faith. Needless to say, it disqualifies any purchaser in bad faith.
A purchaser in good faith is one who buys the property of another without notice that
some other person has a right to, or an interest in, such property and pays a full and fair
price for the same at the time of such purchase, or before he has notice of some other
person's claim or interest in the property. 21 The law requires, on the part of the buyer,
lack of notice of a defect in the title of the seller and payment in full of the fair price at
the time of the sale or prior to having notice of any defect in the seller's title.
Was respondent a purchaser in good faith? Yes.
Respondent purchased the properties, knowing they were encumbered only by the
mortgage to RSLAI. According to her agreement with petitioner, respondent had the
obligation to assume the balance of petitioner's outstanding obligation to RSLAI.
Consequently, respondent informed RSLAI of the sale and of her assumption of
petitioner's obligation. However, because petitioner surreptitiously paid his outstanding
obligation and took back her certificates of title, petitioner himself rendered respondent's
obligation to assume petitioner's indebtedness to RSLAI impossible to perform.
Article 1266 of the Civil Code provides:
Article 1266. The debtor in obligations to do shall be released when the
prestation become legally or physically impossible without the fault of the
obligor.
Since respondent's obligation to assume petitioner's outstanding balance with RSLAI
became impossible without her fault, she was released from the said obligation.
Moreover, because petitioner himself willfully prevented the condition vis--vis the
payment of the remainder of the purchase price, the said condition is considered
fulfilled pursuant to Article 1186 of the Civil Code. For purposes, therefore, of
determining whether respondent was a purchaser in good faith, she is deemed to have
fully complied with the condition of the payment of the remainder of the purchase
price.
Respondent was not aware of any interest in or a claim on the properties other than the
mortgage to RSLAI which she undertook to assume. Moreover, Viloria bought the
properties from petitioner after the latter sold them to respondent. Respondent was
therefore a purchaser in good faith. Hence, the rules on double sale are applicable.
Article 1544 of the Civil Code provides that when neither buyer registered the sale of the
properties with the registrar of deeds, the one who took prior possession of the properties
shall be the lawful owner thereof.
In this instance, petitioner delivered the properties to respondent when he executed the
notarized deed 22 and handed over to respondent the keys to the properties. For this
reason, respondent took actual possession and exercised control thereof by making
repairs and improvements thereon. Clearly, the sale was perfected and consummated on
March 10, 1993. Thus, respondent became the lawful owner of the properties.
Nonetheless, while the condition as to the payment of the balance of the purchase price
was deemed fulfilled, respondent's obligation to pay it subsisted. Otherwise, she would be
unjustly enriched at the expense of petitioner.
Therefore, respondent must pay petitioner P684,500, the amount stated in the deed. This
is because the provisions, terms and conditions of the contract constitute the law between
the parties. Moreover, the deed itself provided that the assumption of mortgage "was
without any further cost whatsoever." Petitioner, on the other hand, must deliver the
certificates of title to respondent. We likewise affirm the award of damages. cECaHA
WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the
Court of Appeals in CA-G.R. CV No. 59748 are hereby AFFIRMED with
MODIFICATION insofar as respondent Benita T. Ong is ordered to pay petitioner
Raymundo de Leon P684,500 representing the balance of the purchase price as provided
in their March 10, 1993 agreement.
Costs against petitioner.
SO ORDERED.
Carpio, * Velasco, Jr., Nachura and Peralta, JJ., concur.
||| (de Leon v. Ong, G.R. No. 170405, February 02, 2010)