G.R.

No. L-19545
April 18, 1975

PHILIPPINE SUBURBAN DEVELOPMENT CORPORATION, petitioner,
vs.
THE AUDITOR GENERAL, PEDRO M. GIMENEZ, respondent.

ANTONIO, J.:

Appeal by certiorari from the decision dated December 11, 1961, of then Auditor General Pedro M. Gimenez,
disallowing the request of petitioner for the refund of real estate tax in the amount of P30,460.90 paid to the Provincial
Treasurer of Bulacan.

The facts of the case are as follows:

On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting on the reports of the Committee
created to survey suitable lots for relocating squatters in Manila and suburbs, and of the Social Welfare Administrator
together with the recommendation of the Manager of the Government Service Insurance System, approved in principle
the acquisition by the People's Homesite and Housing Corporation of the unoccupied portion of the Sapang Palay Estate
in Sta. Maria, Bulacan for relocating the squatters who desire to settle north of Manila, and of another area either in Las
Pias or Paraaque, Rizal, or Bacoor, Cavite for those who desire to settle south of Manila. The project was to be
financed through the flotation of bonds under the charter of the PHHC in the amount of P4.5 million, the same to be
absorbed by the Government Service Insurance System. The President, through the Executive Secretary, informed the
PHHC of such approval by letter bearing the same date (Annex "B").

On June 10, 1960, the Board of Directors of the PHHC passed Resolution No. 700 (Annex "C") authorizing the purchase of
the unoccupied portion of the Sapang Palay Estate at P0.45 per square meter "subject to the following conditions
precedent: t.hqw

1.
That the confirmation by the OEC and the President of the purchase price of P0.45 per sq. m. shall first be
secured, pursuant to OEC Memorandum Circular No. 114, dated May 6, 1957.

2.
That the portion of the estate to be acquired shall first be defined and delineated.

3.
That the President of the Philippines shall first provide the PHHC with the necessary funds to effect the purchase
and development of this property from the proposed P4.5 million bond issue to be absorbed by the GSIS.

4.
That the contract of sale shall first be approved by the Auditor General pursuant to Executive Order dated
February 3, 1959.

5.
The vendor shall agree to the dismissal with prejudice of Civil Case No. Q-3332 C.F.I. Quezon City, entitled "Phil.
Suburban Dev. Corp. V. Ortiz, et al."

On July 13, 1960, the President authorized the floating of bonds under Republic Act Nos. 1000 and 1322 in the amount
of P7,500,000.00 to be absorbed by the GSIS, in order to finance the acquisition by the PHHC of the entire Sapang Palay
Estate at a price not to exceed P0.45 per sq. meter.

On December 29,1960, after an exchange of communications, Petitioner Philippine Suburban Development Corporation,
as owner of the unoccupied portion of the Sapang Palay Estate (specifically two parcels covered by TCT Nos. T-23807
and T-23808), and the People's Homesite and Housing Corporation, entered into a contract embodied in a public
instrument entitled "Deed of Absolute Sale" (Annex "F") whereby the former conveyed unto the latter the two parcels of
land abovementioned, under the following terms and conditions, among others: t.hqw

1.
That for and in consideration of the sum of THREE MILLION THREE HUNDRED EIGHTY-SIX THOUSAND TWO
HUNDRED TWENTY THREE (P3,386,223.00) PESOS, Philippine currency, to be paid by the VENDEE to the herein VENDOR
in the manner outlined hereinbelow, the VENDOR by these presents does hereby sell, transfer and convey by way of
absolute sale unto the VENDEE, its successors, administrators or assigns, the above described two (2) parcels of land,
together with all the improvements existing thereon;

2.
That the payment of the consideration mentioned in paragraph 1 above shall be made as follows:

(a)
The vendee is presently negotiating or securing from the GOVERNMENT SERVICE INSURANCE SYSTEM, by virtue
of a directive of the President of the Philippines, a loan for the purchase of the above described two (2) parcels of land in
anticipation of the purchase by the said GOVERNMENT SERVICE INSURANCE SYSTEM of the bonds to be floated by the
National Government to enable the VENDEE to make this purchase, and from whatever amount may be granted as loan
by the GOVERNMENT SERVICE INSURANCE SYSTEM to the VENDEE, ONE MILLION SEVEN HUNDRED TEN THOUSAND
(P1,710,000.00) PESOS shall be retained by the said VENDEE for the purpose of paying and clearing the existing lien
annotated at the back of the aforesaid Transfer Certificates of Title Nos. T-23807 and T-23808, said payment to be made
directly to the MORTGAGEES and the difference shall be paid to the VENDOR, provided that this first payment shall not
be less than ONE MILLION SEVEN HUNDRED TEN THOUSAND (P1,710,000.00) PESOS and the VENDOR is hereby

constituted as Attorney-in-fact and authorized to receive from, and the GOVERNMENT SERVICE INSURANCE SYSTEM is
directed to pay the balance of the loan direct to the herein VENDOR chargeable against VENDEE's loan from the
GOVERNMENT SERVICE INSURANCE SYSTEM; provided, however, That should this amount be more than sufficient to
cover the said mortgage lien, the VENDEE shall pay the difference to the VENDOR; and provided, further, That the
VENDOR shall take charge of the preparation and registration of the documents necessary in clearing the above referred
to mortgage lien, with the understanding that the expenses for preparation, notarization, registration, including
documentary stamps, and other expenses for the cancellation of said mortgage lien shall be for the account of the
VENDOR and shall be advanced by the VENDEE to the VENDOR;

(b)
That out of the sum of P1,710,000.00 to be retained by the VENDEE mentioned in the immediately preceding
paragraph 2(a) for the purpose of discharging the said mortgage lien, the VENDEE shall deduct and further retain or keep
as a trust fund the amount of FORTY THOUSAND (P40,000) PESOS, Philippine Currency, to answer for the remaining
Notice of Lis Pendens annotated at the back of Transfer Certificate of Title Nos. T-23807 and T-23808 until such lien shall
have been discharged or cancelled, the VENDEE binding itself to deliver forthwith the said amount of P40,000.00 unto
the successful party involved in said Notice of Lis Pendens;

(c)
The remaining balance of the total consideration in the amount of ONE MILLION SIX HUNDRED SEVENTY-SIX
THOUSAND TWO HUNDRED TWENTY-THREE PESOS (P1,676,223.00), Philippine Currency, or whatever amount is not
paid by virtue of the first payment mentioned in paragraph (a) above, shall be paid by the VENDEE unto the VENDOR
immediately upon the VENDEE's obtaining sufficient funds from proceeds of bonds floated by the VENDEE or the
Government for the purchase of the properties subject of this transaction; provided, however, That full and complete
payment of the balance mentioned in this particular paragraph 2(c) shall be made or paid by the VENDEE within a period
of sixty (60) days from date of delivery of title by the VENDOR in the name of the VENDEE; and provided, further, That
this sixty (60) days period may be extended for another period of sixty (60) days upon written request by the VENDEE at
least five (5) days prior to the expiration of the said sixty (60) days period. Should there be instituted any legal action,
however, for the collection of any amounts due from the VENDEE in favor of the VENDOR, the VENDEE binds itself to pay
unto the VENDOR a sum equivalent to twenty-five (25%) per centum of the total balance due from the, VENDEE in favor
of the VENDOR as and by way of attorney's fees, and the costs of suit;

3.
That the VENDOR hereby warrants to defend the title and ownership of the VENDEE to the two (2) parcels of
land above described from any claim or claims of third parties whomsoever;

(4.)
That all expenses for the preparation and notarization of this document shall be for the account of the VENDOR;
provided, however, That registration and issuance of certificates of title in the name of the VENDEE shall be for the
account of the VENDEE." (Annex "F")

The above document was not registered in the Office of the Register of Deeds until March 14, 1961, due to the fact,
petitioner claims, that the PHHC could not at once advance the money needed for registration expenses. In the
meantime, the Auditor General, to whom a copy of the contract had been submitted for approval in conformity with
Executive Order No. 290, expressed objections thereto and requested a re-examination of the contract, in view of the
fact that from 1948 to December 20, 1960, the entire hacienda was assessed at P131,590.00, and reassessed beginning
December 21, 1960 in the greatly increased amount of P4,898,110.00. Said objections were embodied in a letter to the
President, dated January 9, 1961, but this notwithstanding, the President, through the Executive Secretary, approved
the Deed of Absolute Sale on February 1, 1961.

It appears that as early as the first week of June, 1960, prior to the signing of the deed by the parties, the PHHC acquired
possession of the property, with the consent of petitioner, to enable the said PHHC to proceed immediately with the
construction of roads in the new settlement and to resettle the squatters and flood victims in Manila who were
rendered homeless by the floods or ejected from the lots which they were then occupying (Annexes "D" and "D-1").

On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold the amount of P30,099.79 from
the purchase price to be paid by it to the Philippine Suburban Development Corporation. Said amount represented the
realty tax due on the property involved for the calendar year 1961 (Annex "G").

Petitioner, through the PHHC, paid under protest the abovementioned amount to the Provincial Treasurer of Bulacan
and thereafter, or on June 13, 1961, by letter, requested then Secretary of Finance Dominador Aytona to order a refund
of the amount so paid. Petitioner claimed that it ceased to be the owner of the land in question upon the execution of
the Deed of Absolute Sale on December 29, 1960. Upon recommendation of the Provincial Treasurer of Bulacan, said
request was denied by the Secretary of Finance in a letter-decision dated August 22, 1961. Pertinent portions of this
decision are quoted hereunder: t.hqw

.... the records show that the deed of sale executed on December 29, 1960 ... was approved by the President upon
favorable recommendation of the Cabinet and the Committee created for the purpose of surveying suitable lots which
may be acquired for relocating squatters in Manila on February 1, 1961 only and that said instrument of sale was
registered with the Register of Deeds on March 14, 1961.

That Corporation, as vendor, maintains that in view of the execution of the deed of sale on December 29, 1960 it ceased
to be the owner of the property involved and that consequently it was under no obligation to pay the real property tax
thereon effective January 1, 1961. In support of its stand, that Corporation cites Article 1498 of the New Civil Code of the

Philippines which provides that "when the sale is made through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear
or cannot clearly be inferred" and Article 1496 of the same Code which states that "the ownership of the thing sold is
acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or
in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee." On the
other hand, the Provincial Treasurer contends that, as under the Land Registration Act (Act No. 496) the Philippine
Suburban Development Corporation is still the owner of the property until the deed of sale covering the same has been
actually registered, the vendor is still liable to the payment of real property tax for the calendar year 1961.

It is now claimed in this appeal that the Auditor General erred in disallowing the refund of the real estate tax in the
amount of P30,460.90 because aside from the presumptive delivery of the property by the execution of the deed of sale
on December 29, 1960, the possession of the property was actually delivered to the vendee prior to the sale, and,
therefore, by the transmission of ownership to the vendee, petitioner has ceased to be the owner of the property
involved, and, consequently, under no obligation to pay the real property tax for the year 1961.

Respondent, however, argues that the presumptive delivery of the property under Article 1498 of the Civil Code does
not apply because of the requirement in the contract that the sale shall first be approved by the Auditor General,
pursuant to the Executive Order dated February 3, 1959 and later by the President, and that the petitioner should
register the deed and secure a new title in the name of the vendee before the government can be compelled to pay the
balance of P1,676,223.00 of the purchase price. Respondent further contends that since the property involved is a land
registered under the Land Registration Act (Act No. 496), until the deed of sale has been actually registered, the vendor
remains as the owner of the said property, and, therefore, liable for the payment of real property tax.

We find the petition meritorious.

I .

It cannot be denied that the President of the Philippines, on June 8, 1960, at his Cabinet meeting, approved and
authorized the purchase by the national government, through the PHHC, of the unoccupied portion of the property of
petitioner; that on June 10, 1960, the PHHC, acting pursuant to the aforecited approval of the President, passed its
Resolution No. 700 approving and authorizing the purchase of the unoccupied portion of said property; and that after
the PHHC took possession of the aforementioned property on the first week of June, 1960 to use it as a resettlement
area for squatters and flood victims from Manila and suburbs, the President of the Philippines at his Cabinet meeting on
June 13, 1960, approved and authorized the purchase by the PHHC of the entire property consisting of 752.4940
hectares, instead of only the unoccupied portion thereof as was previously authorized.

Considering the aforementioned approval and authorization by the President of the Philippines of the specific
transaction in question, and the fact that the contract here involved which is for a special purpose to meet a special
situation was entered into precisely to implement the Presidential directive, the prior approval by the Auditor
General envisioned by Administrative Order No. 290, dated February 3, 1959, would therefore, not be necessary.

As We held in Federation of the United NAMARCO Distributors v. National Marketing Corporation, 1 the approval by the
Auditor General contemplated by Administrative Order No. 290 dated February 3, 1959, refers to contracts in general,
ordinarily entered into by government offices and government-owned or controlled corporations, and not to a contract
for a special purpose, to meet a special situation and entered into in implementation of a Presidential directive to solve
and emergency. In other words, where the contract already bears the approval of the President, the action of the
Auditor General would no longer be necessary because under the said Administrative Order, the President has, at any
rate, the final say.

II

Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe actual (real tradition) or
constructive (constructive tradition). 2 When the sale of real property is made in a public instrument, the execution
thereof is equivalent to the delivery of the thing object of the contract, if from the deed the contrary does not appear or
cannot clearly be inferred. 3

In other words, there is symbolic delivery of the property subject of the sale by the execution of the public instrument,
unless from the express terms of the instrument, or by clear inference therefrom, this was not the intention of the
parties. Such would be the case, for instance, when a certain date is fixed for the purchaser to take possession of the
property subject of the conveyance, or where, in case of sale by installments, it is stipulated that until the last
installment is made, the title to the property should remain with the vendor, or when the vendor reserves the right to
use and enjoy the properties until the gathering of the pending crops, 4 or where the vendor has no control over the
thing sold at the moment of the sale, and, therefore, its material delivery could not have been made. 5

In the case at bar, there is no question that the vendor had actually placed the vendee in possession and control over
the thing sold, even before the date of the sale. The condition that petitioner should first register the deed of sale and
secure a new title in the name of the vendee before the latter shall pay the balance of the purchase price, did not
preclude the transmission of ownership. In the absence of an express stipulation to the contrary, the payment of the

purchase price of the good is not a condition, precedent to the transfer of title to the buyer, but title passes by the
delivery of the goods. 6

III .

We fail to see the merit in respondent's insistence that, although possession was transferred to the vendee and the
deed of sale was executed in a public instrument on December 29, l960, the vendor still remains as owner of the
property until the deed of sale is actually registered with the Office of the Register of Deeds, because the land sold is
registered under the Torrens System. In a long line of cases already decided by this Court, the constant doctrine has
been that, as between the parties to a contract of sale, registration is not necessary to make it valid and effective, for
actual notice is equivalent to registration. 7 Indeed, Section 50 of the Land Registration Act provides that, even without
the act of registration, a deed purporting to convey or affect registered land shall operate as a contract between the
parties. The registration is intended to protect the buyer against claims of third persons arising from subsequent
alienations by the vendor, and is certainly not necessary to give effect to the deed of sale, as between the parties to the
contract. 8

The case of Vargas v. Tancioco, 9 cited by respondent, refers to a case involving conflicting rights over registered
property and those of innocent transferees who relied on the clean titles of the properties in question. It is, therefore,
not relevant to the case at bar.

In the case at bar, no rights of third persons are involved, much less is there any subsequent alienation of the same
property. It is undisputed that the property is in the possession of the vendee, even as early as the first week of June,
1960, or six (6) months prior to the execution of the Deed of Absolute Sale on December 29, 1960. Since the delivery of
possession, coupled with the execution of the Deed of Absolute Sale, had consummated the sale and transferred the
title to the purchaser, 10 We, therefore, hold that the payment of the real estate tax after such transfer is the
responsibility of the purchaser. However, in the case at bar, the purchaser PHHC is a government entity not subject to
real property tax. 11

WHEREFORE, the appealed decision is hereby reversed, and the real property tax paid under protest to the Provincial
Treasurer of Bulacan by petitioner Philippine Suburban Development Corporation, in the amount of P30,460,90, is
hereby ordered refunded. Without any pronouncement as to costs.

G.R. No. L-33397
June 22, 1984

ROMEO F. EDU, in his capacity as Commissioner of Land Transportation, EDUARDO DOMINGO, CARLOS RODRIGUEZ
and PATRICIO YAMBAO in their capacity as ANCAR Agents, petitioners,
vs.
HONORABLE AMADOR E. GOMEZ, in his capacity as Judge of the Court of First Instance of Manila, Branch 1, THE
SHERIFF of Quezon City, and LUCILA ABELLO, respondents.

RELOVA, J.:

Subject matter of this case is a 1968 model Volkswagen, bantam car, Engine No. H-5254416, Chassis No. 118673654,
allegedly owned by Lt. Walter A. Bala of Clark Airbase, Angeles City, under whose name the car was allegedly registered
on May 19, 1970 at the Angeles City Land Transportation Commission Agency, under File No. 2B-7281.

The Office of the Commission on Land Transportation received a report on August 25, 1970 from the Manila Adjustment
Company that the abovementioned car was stolen on June 29, 1970 from the residence of Lt. Bala, at 63 Makiling Street,
Plaridel Subdivision, Angeles City. Petitioners Eduardo Domingo, Carlos Rodriguez, and Patricio Yambao, agents of Anti-
Carnapping Unit (ANCAR) of the Philippine Constabulary, on detail with the Land Transportation Commission, on
February 2, 1971, recognized subject car in the possession of herein private respondent Lucila Abello and immediately
seized and impounded the car as stolen property. Likewise, herein petitioner Romeo F. Edu, then Commissioner of Land
Transportation, seized the car pursuant to Section 60 of Republic Act 4136 which empowers him to seize the motor
vehicle for delinquent registration aside from his implicit power deducible from Sec. 4(5), Sec. 5 and 31 of said Code, "to
seize motor vehicles fraudulently or otherwise not properly registered."

On February 15, 1971, herein private respondent Lucila Abello filed a complaint for replevin with damages in respondent
court, docketed as Civil Case No. 82215, impleading herein petitioners, praying for judgment, among others, to order the
sheriff or other proper officer of the court to take the said property (motor vehicle) into his custody and to dispose of it
in accordance with law.

On February 18, 1971, respondent judge of the then Court of First Instance of Manila issued the order for the seizure of
the personal property. Solicitor Vicente Torres, appearing for the herein petitioners, submits that the car in question
legally belongs to Lt. Walter A. Bala under whose name it is originally registered at Angeles City Land Transportation
Commission Agency; that it was stolen from him and, upon receipt by the Land Transportation Commissioner of the
report on the theft case and that the car upon being recognized by the agents of the ANCAR in the possession of private
respondent Lucila Abello, said agents seized the car and impounded it as stolen vehicle. With respect to the replevin
filed by private respondent Lucila Abello, respondent Court of First Instance Judge found that the car in question was
acquired by Lucila Abello by purchase from its registered owner, Marcelino Guansing, for the valuable consideration of

P9,000.00, under the notarial deed of absolute sale, dated August 11, 1970; that she has been in possession thereof
since then until February 3, 1971 when the car was seized from her by the petitioners who acted in the belief that it is
the car which was originally registered in the name of Lt. Walter A. Bala and from whom it was allegedly stolen
sometime in June 1970.

Finding for the private respondent, respondent judge held that

The complaint at bar is for replevin, or for the delivery of personal property, based on the provisions of Rule 60, Sections
1 and 2 of the Rules of Court. All the requirements of the law are present in the verified averments in the complaint, viz:

1.
That plaintiff is the owner of the automobile in question.- petition.

2.
That the aforesaid property was seized from her against her will not for a tax assessment or fine pursuant to
law, not under a writ of execution or attachment against her properties;

3.
That the property is wrongfully detained by the defendants, who allegedly seized it from her on February 3,
1971, "allegedly for the purpose of verifying the same" (see par. 3, Complaint), but have refused since then until now to
return the same to the plaintiff.

4.
That plaintiff was ready to put up a bond in double the value of the car, and has in fact already put up an
P18,000.00 bond to the defendants for the return thereof to the latter, if that shall be the ultimate judgment of the
court, and to pay defendants damages that they may incur.

The issuance therefore, by this Court of the order of seizure of the said chattel by the sheriff and for the latter to take it
into his custody, is precisely pursuant to the existing law, governing the subject.

If defendants object to the seizure, the remedy provided for by law is set out in Section 5 of Rule 60 and that is for them
to put up a counter-bond for the same amount of P18,000.00, which is double the value of the car in question.
Defendants may not ignore the law under the claim that, on complaint of a certain party, the Manila Adjustment
Company, they have a right to seize the same as it appears to be the property that was stolen from Lt. Walter A. Bala
several months ago. (p. 19, Rollo)

There is no merit in the petition considering that the acquirer or the purchaser in good faith of a chattel of movable
property is entitled to be respected and protected in his possession as if he were the true owner thereof until a
competent court rules otherwise. In the meantime, as the true owner, the possessor in good faith cannot be compelled
to surrender possession nor to be required to institute an action for the recovery of the chattel, whether or not an
indemnity bond is issued in his favor. The filing of an information charging that the chattel was illegally obtained through
estafa from its true owner by the transferor of the bona fide possessor does not warrant disturbing the possession of
the chattel against the will of the possessor.

Finally, the claim of petitioners that the Commission has the right to seize and impound the car under Section 60 of
Republic Act 4136 which reads:

Sec. 60. The lien upon motor vehicles. Any balance of fees for registration, re-registration or delinquent registration of a
motor vehicle, remaining unpaid and all fines imposed upon any vehicle owner, shall constitute a first lien upon the
motor vehicle concerned.

is untenable. it is clear from the provision of said Section 60 of Republic Act 4136 that the Commissioner's right to seize
and impound subject property is only good for the proper enforcement of lien upon motor vehicles. The Land
Transportation Commission may issue a warrant of constructive or actual distraint against motor vehicle for collection of
unpaid fees for registration, re-registration or delinquent registration of vehicles.

ACCORDINGLY, the petition is hereby DENIED.

G.R. No. L-64159
September 10, 1985

CIRCE S. DURAN and ANTERO S. GASPAR, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, ERLINDA B. MARCELO TIANGCO and RESTITUTO TIANGCO, respondents.


RELOVA, J.:

The respondent then Court of Appeals rendered judgment, modifying the decision of the then Court of First Instance of
Rizal, which reads as follows:

(1)
the complaint of the plaintiffs (herein petitioners) is hereby DISMISSED;

(2)
the defendants-appellants spouses Erlinda B. Marcelo Tiangco and Restituto Tiangco (herein private
respondents) are hereby declared the lawful owners of the two (2) parcels of land and all the improvements thereon
including the 12-door apartment thereon described in the complaint, in the counterclaim, in the cross-claim, and in the
Sheriff's Certificate of Sale;

(3)
the plaintiffs-appellants and the defendant-appellee Fe S. Duran are hereby ordered to deliver to (the Tiangcos)
the two parcels of land and all the improvements thereon including the 12-door apartment thereon, subject matter of
the complaint, counterclaim, and cross-claim, and in the Sheriff's Certificate of Sale;

(4)
the plaintiffs-appellants and the defendant-appellee Fe S. Duran are hereby ordered to pay solidarily to the
Tiangcos the sum of Two Thousand Four Hundred Pesos (P2,400) a month from May 16, 1972 until delivery of
possession of the properties in question to said Tiangco spouses, representing rentals collected by plaintiffs-appellants
and defendant- appellee Fe S. Duran;

(5)
the plaintiffs-appellants and defendant-appellee Fe S. Duran are hereby ordered to pay solidarily to the spouses
Tiangco the sum of Twenty Thousand Pesos (P20,000) as damages for attorney's fees, and the sum of Twenty-Five
Thousand Pesos (P25,000) for moral damages, and the costs. (pp. 149-150, Rollo)

The antecedent facts showed that petitioner Circe S. Duran owned two (2) parcels of land (Lots 5 and 6, Block A, Psd
32780) covered by Transfer Certificate of Title No. 1647 of the Register of Deeds of Caloocan City which she had
purchased from the Moja Estate. She left the Philippines in June 1954 and returned in May 1966.

On May 13, 1963, a Deed of Sale of the two lots mentioned above was made in favor of Circe's mother, Fe S. Duran who,
on December 3, 1965, mortgaged the same property to private respondent Erlinda B. Marcelo-Tiangco. When petitioner
Circe S. Duran came to know about the mortgage made by her mother, she wrote the Register of Deeds of Caloocan City
informing the latter that she had not given her mother any authority to sell or mortgage any of her properties in the
Philippines. Failing to get an answer from the registrar, she returned to the Philippines. Meanwhile, when her mother,
Fe S. Duran, failed to redeem the mortgage properties, foreclosure proceedings were initiated by private respondent
Erlinda B. Marcelo Tiangco and, ultimately, the sale by the sheriff and the issuance of Certificate of Sale in favor of the
latter.

Petitioner Circe S. Duran claims that the Deed of Sale in favor of her mother Fe S. Duran is a forgery, saying that at the
time of its execution in 1963 she was in the United States. On the other hand, the adverse party alleges that the
signatures of Circe S. Duran in the said Deed are genuine and, consequently, the mortgage made by Fe S. Duran in favor
of private respondent is valid.

With respect to the issue as to whether the signature of petitioner Circe S. Duran in the Deed of Sale is a forgery or not,
respondent appellate court held the same to be genuine because there is the presumption of regularity in the case of a
public document and "the fact that Circe has not been able to satisfactorily prove that she was in the United States at
the time the deed was executed in 1963. Her return in 1966 does not prove she was not here also in 1963, and that she
did not leave shortly after 1963. She should have presented her old passport, not her new one. But even if the
signatures were a forgery, and the sale would be regarded as void, still it is Our opinion that the Deed of Mortgage is
VALID, with respect to the mortgagees, the defendants-appellants. While it is true that under Art. 2085 of the Civil Code,
it is essential that the mortgagor be the absolute owner of the property mortgaged, and while as between the daughter
and the mother, it was the daughter who still owned the lots, STILL insofar as innocent third persons are concerned the
owner was already the mother (Fe S. Duran) inasmuch as she had already become the registered owner (Transfer
Certificates of Title Nos. 2418 and 2419). The mortgagee had the right to rely upon what appeared in the certificate of
title, and did not have to inquire further. If the rule were otherwise, the efficacy and conclusiveness of Torrens
Certificate of Titles would be futile and nugatory. Thus the rule is simple: the fraudulent and forged document of sale
may become the root of a valid title if the certificate has already been transferred from the name of the true owner to
the name indicated by the forger (See De la Cruz v. Fable, 35 Phil. 144; Blondeau et al. v. Nano et al., 61 Phil. 625; Fule et
al. v. Legare et al., 7 SCRA 351; see also Sec. 55 of Act No. 496, the Land Registration Act). The fact that at the time of the
foreclosure sale proceedings (1970-72) the mortgagees may have already known of the plaintiffs' claim is immaterial.
What is important is that at the time the mortgage was executed, the mortgagees in good faith actually believed Fe S.
Duran to be the owner, as evidenced by the registration of the property in the name of said Fe S. Duran (pp. 146-147,
Rollo)."

In elevating the judgment of the respondent appellate court to Us for review, petitioners discussed questions of law
which, in effect and substance, raised only one issue and that is whether private respondent Erlinda B. Marcelo-Tiangco
was a buyer in good faith and for value.

Guided by previous decisions of this Court, 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 (Arriola vs. Gomez dela Serna, 14 Phil. 627).
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 (Santiago vs.
Cruz, 19 Phil. 148). There is good faith where there is an honest intention to abstain from taking any unconscientious
advantage from another (Fule vs. Legare, 7 SCRA 351). 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. In the case at bar, private respondents,
in good faith relied on the certificate of title in the name of Fe S. Duran and as aptly stated by respondent appellate

court "[e]ven on the supposition that the sale was void, the general rule that the direct result of a previous illegal
contract cannot be valid (on the theory that the spring cannot rise higher than its source) cannot apply here for We are
confronted with the functionings of the Torrens System of Registration. The doctrine to follow is simple enough: a
fraudulent or forged document of sale may become the ROOT of a valid title if the certificate of title has already been
transferred from the name of the true owner to the name of the forger or the name indicated by the forger." (p. 147,
Rollo)

Thus, where innocent third persons relying on the correctness of the certificate of title issued, acquire rights over the
property, the court cannot disregard such rights and order the total cancellation of the certificate for that would impair
public confidence in the certificate of title; otherwise everyone dealing with property registered under the torrens
system would have to inquire in every instance as to whether the title had been regularly or irregularly issued by the
court. Indeed, this is contrary to the evident purpose of the law. 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. Stated differently, an innocent purchaser for value relying on a
torrens title issued is protected. A mortgagee has the right to rely on what appears in the certificate of title and, in the
absence of anything to excite suspicion, he is under no obligation to look beyond the certificate and investigate the title
of the mortgagor appearing on the face of said certificate.

Likewise, We take note of the finding and observation of respondent appellate court in that petitioners were guilty of
estoppel by laches "in not bringing the case to court within a reasonable period. Antero Gaspar, husband of Circe, was in
the Philippines in 1964 to construct the apartment on the disputed lots. This was testified to by Circe herself (tsn., p. 41,
Nov. 27, 1973). In the process of construction, specifically in the matter of obtaining a building permit, he could have
discovered that the deed of sale sought to be set aside had been executed on May 13, 1963 (the building permit needed
an application by the apparent owner of the land, namely, Circe's mother, Fe S. Duran). And then again both plaintiffs
could have intervened in the foreclosure suit but they did not. They kept silent until almost the last moment when they
finally decided, shortly before the sheriff's sale, to file a third-party claim. Clearly, the plaintiffs can be faulted for their
estoppel by laches." (p. 148, Rollo)

IN VIEW OF THE FOREGOING, We find the petition without merit and hereby AFFIRMED in toto the decision of
respondent appellate court promulgated on August 12, 1981.

G.R. No. L-12342 August 3, 1918

A. A. ADDISON, plaintiff-appellant,
vs.
MARCIANA FELIX and BALBINO TIOCO, defendants-appellees.

FISHER, J.:

By a public instrument dated June 11, 1914, the plaintiff sold to the defendant Marciana Felix, with the consent of her
husband, the defendant Balbino Tioco, four parcels of land, described in the instrument. The defendant Felix paid, at the
time of the execution of the deed, the sum of P3,000 on account of the purchase price, and bound herself to pay the
remainder in installments, the first of P2,000 on July 15, 1914, and the second of P5,000 thirty days after the issuance to
her of a certificate of title under the Land Registration Act, and further, within ten years from the date of such title P10,
for each coconut tree in bearing and P5 for each such tree not in bearing, that might be growing on said four parcels of
land on the date of the issuance of title to her, with the condition that the total price should not exceed P85,000. It was
further stipulated that the purchaser was to deliver to the vendor 25 per centum of the value of the products that she
might obtain from the four parcels "from the moment she takes possession of them until the Torrens certificate of title
be issued in her favor."

It was also covenanted that "within one year from the date of the certificate of title in favor of Marciana Felix, this latter
may rescind the present contract of purchase and sale, in which case Marciana Felix shall be obliged to return to me, A.
A. Addison, the net value of all the products of the four parcels sold, and I shall obliged to return to her, Marciana Felix,
all the sums that she may have paid me, together with interest at the rate of 10 per cent per annum."

In January, 1915, the vendor, A. A. Addison, filed suit in Court of First Instance of Manila to compel Marciana Felix to
make payment of the first installment of P2,000, demandable in accordance with the terms of the contract of sale
aforementioned, on July 15, 1914, and of the interest in arrears, at the stipulated rate of 8 per cent per annum. The
defendant, jointly with her husband, answered the complaint and alleged by way of special defense that the plaintiff had
absolutely failed to deliver to the defendant the lands that were the subject matter of the sale, notwithstanding the
demands made upon him for this purpose. She therefore asked that she be absolved from the complaint, and that, after
a declaration of the rescission of the contract of the purchase and sale of said lands, the plaintiff be ordered to refund
the P3,000 that had been paid to him on account, together with the interest agreed upon, and to pay an indemnity for
the losses and damages which the defendant alleged she had suffered through the plaintiff's non-fulfillment of the
contract.

The evidence adduced shows that after the execution of the deed of the sale the plaintiff, at the request of the
purchaser, went to Lucena, accompanied by a representative of the latter, for the purpose of designating and delivering
the lands sold. He was able to designate only two of the four parcels, and more than two-thirds of these two were found

to be in the possession of one Juan Villafuerte, who claimed to be the owner of the parts so occupied by him. The
plaintiff admitted that the purchaser would have to bring suit to obtain possession of the land (sten. notes, record, p. 5).
In August, 1914, the surveyor Santamaria went to Lucena, at the request of the plaintiff and accompanied by him, in
order to survey the land sold to the defendant; but he surveyed only two parcels, which are those occupied mainly by
the brothers Leon and Julio Villafuerte. He did not survey the other parcels, as they were not designated to him by the
plaintiff. In order to make this survey it was necessary to obtain from the Land Court a writ of injunction against the
occupants, and for the purpose of the issuance of this writ the defendant, in June, 1914, filed an application with the
Land Court for the registration in her name of four parcels of land described in the deed of sale executed in her favor by
the plaintiff. The proceedings in the matter of this application were subsequently dismissed, for failure to present the
required plans within the period of the time allowed for the purpose.

The trial court rendered judgment in behalf of the defendant, holding the contract of sale to be rescinded and ordering
the return to the plaintiff the P3,000 paid on account of the price, together with interest thereon at the rate of 10 per
cent per annum. From this judgment the plaintiff appealed.

In decreeing the rescission of the contract, the trial judge rested his conclusion solely on the indisputable fact that up to
that time the lands sold had not been registered in accordance with the Torrens system, and on the terms of the second
paragraph of clause (h) of the contract, whereby it is stipulated that ". . . within one year from the date of the certificate
of title in favor of Marciana Felix, this latter may rescind the present contract of purchase and sale . . . ."

The appellant objects, and rightly, that the cross-complaint is not founded on the hypothesis of the conventional
rescission relied upon by the court, but on the failure to deliver the land sold. He argues that the right to rescind the
contract by virtue of the special agreement not only did not exist from the moment of the execution of the contract up
to one year after the registration of the land, but does not accrue until the land is registered. The wording of the clause,
in fact, substantiates the contention. The one year's deliberation granted to the purchaser was to be counted "from the
date of the certificate of title ... ." Therefore the right to elect to rescind the contract was subject to a condition, namely,
the issuance of the title. The record show that up to the present time that condition has not been fulfilled; consequently
the defendant cannot be heard to invoke a right which depends on the existence of that condition. If in the cross-
complaint it had been alleged that the fulfillment of the condition was impossible for reasons imputable to the plaintiff,
and if this allegation had been proven, perhaps the condition would have been considered as fulfilled (arts. 1117, 1118,
and 1119, Civ. Code); but this issue was not presented in the defendant's answer.

However, although we are not in agreement with the reasoning found in the decision appealed from, we consider it to
be correct in its result. The record shows that the plaintiff did not deliver the thing sold. With respect to two of the
parcels of land, he was not even able to show them to the purchaser; and as regards the other two, more than two-
thirds of their area was in the hostile and adverse possession of a third person.

The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when
it is placed "in the hands and possession of the vendee." (Civ. Code, art. 1462.) It is true that the same article declares
that the execution of a public instruments is equivalent to the delivery of the thing which is the object of the contract,
but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have
had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not
enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his
control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by
the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the
thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by
the interposition of another will, then fiction yields to reality the delivery has not been effected.

As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on article 1604 of the French Civil code, "the word
"delivery" expresses a complex idea . . . the abandonment of the thing by the person who makes the delivery and the
taking control of it by the person to whom the delivery is made."

The execution of a public instrument is sufficient for the purposes of the abandonment made by the vendor; but it is not
always sufficient to permit of the apprehension of the thing by the purchaser.

The supreme court of Spain, interpreting article 1462 of the Civil Code, held in its decision of November 10, 1903, (Civ.
Rep., vol. 96, p. 560) that this article "merely declares that when the sale is made through the means of a public
instrument, the execution of this latter is equivalent to the delivery of the thing sold: which does not and cannot mean
that this fictitious tradition necessarily implies the real tradition of the thing sold, for it is incontrovertible that, while its
ownership still pertains to the vendor (and with greater reason if it does not), a third person may be in possession of the
same thing; wherefore, though, as a general rule, he who purchases by means of a public instrument should be deemed
. . . to be the possessor in fact, yet this presumption gives way before proof to the contrary."

It is evident, then, in the case at bar, that the mere execution of the instrument was not a fulfillment of the vendors'
obligation to deliver the thing sold, and that from such non-fulfillment arises the purchaser's right to demand, as she has
demanded, the rescission of the sale and the return of the price. (Civ. Code, arts. 1506 and 1124.)

Of course if the sale had been made under the express agreement of imposing upon the purchaser the obligation to take
the necessary steps to obtain the material possession of the thing sold, and it were proven that she knew that the thing
was in the possession of a third person claiming to have property rights therein, such agreement would be perfectly
valid. But there is nothing in the instrument which would indicate, even implicitly, that such was the agreement. It is
true, as the appellant argues, that the obligation was incumbent upon the defendant Marciana Felix to apply for and
obtain the registration of the land in the new registry of property; but from this it cannot be concluded that she had to
await the final decision of the Court of Land Registration, in order to be able to enjoy the property sold. On the contrary,
it was expressly stipulated in the contract that the purchaser should deliver to the vendor one-fourth "of the products ...
of the aforesaid four parcels from the moment when she takes possession of them until the Torrens certificate of title be
issued in her favor." This obviously shows that it was not forseen that the purchaser might be deprived of her possession
during the course of the registration proceedings, but that the transaction rested on the assumption that she was to
have, during said period, the material possession and enjoyment of the four parcels of land.

Inasmuch as the rescission is made by virtue of the provisions of law and not by contractual agreement, it is not the
conventional but the legal interest that is demandable.

It is therefore held that the contract of purchase and sale entered into by and between the plaintiff and the defendant
on June 11, 1914, is rescinded, and the plaintiff is ordered to make restitution of the sum of P3,000 received by him on
account of the price of the sale, together with interest thereon at the legal rate of 6 per annum from the date of the
filing of the complaint until payment, with the costs of both instances against the appellant. So ordered.

G.R. No. L-21998
November 10, 1975

CALIXTO PASAGUI and FAUSTA MOSAR, plaintiffs-appellants,
vs.
ESTER T. VILLABLANCA, ZOSIMO VILLABLANCA, EUSTAQUIA BOCAR and CATALINA BOCAR defendants-appellees.

ANTONIO, J.:

The only issue posed by this appeal is whether or not, from the nature of the action pleaded as appears in the
allegations of the complaint, the aforesaid action is one of forcible entry, within the exclusive jurisdiction of the
municipal court. .

On February 4, 1963, appellants Calixto Pasagui and Fausta Mosar filed a complaint with the Court of First Instance at
Tacloban City, alleging that onNovember 15, 1962, for and in consideration of Two Thousand Eight Hundred Pesos
(P2,800.00), they bought from appellees Eustaquia Bocar and Catalina Bocar a parcel of agricultural land with an area of
2.6814 hectares, situated in Hamindangon, Pastrana, Leyte; that the corresponding document of sale was executed,
notarized on the same date, and recorded in the Registry of Deeds of Tacloban, Leyte on November 16, 1962; that
during the first week of February, 1963, defendant spouses Ester T. Villablanca and Zosimo Villablanca, "illegally and
without any right, whatsoever, took possession of the above property harvesting coconuts from the coconut plantation
thereon, thus depriving plaintiffs" of its possession; that despite demands made by the plaintiffs upon the above-
mentioned defendants "to surrender to them the above-described property and its possession" the latter failed or
refused to return said parcel of land to the former, causing them damage; and that Eustaquia and Catalina Bocar,
vendors of the property, are included defendants in the complaint by virtue of the warranty clause contained in the
document of sale. Plaintiffs prayed for a decision ordering defendants to surrender the possession of the parcel of land
above-described to them and to pay damages in the amounts specified. .

On February 21, 1963, appellees moved to dismiss the complaint on the ground that the Court of First Instance had no
jurisdiction over the subject matter, the action being one of forcible entry. Appellants opposed the Motion to Dismiss
asserting that the action is not one for forcible entry inasmuch as in the complaint, there is no allegation that the
deprivation of possession was effected through "force, intimidation, threat, strategy or stealth." .

On May 13, 1963, the trial court issued an order dismissing the complaint for lack of jurisdiction, it appearing from the
allegations in the complaint that the case is one for forcible entry which belongs to the exclusive jurisdiction of the
Justice of the Peace (now Municipal Court) of Pastrana, Leyte. The first Motion for Reconsideration was denied on May
27, 1963 and the second was likewise denied on July 5, 1963. From the aforementioned orders, appeal on a pure
question of law was interposed to this Court. .

It is well-settled that what determines the jurisdiction of the municipal court in a forcible entry case is the nature of the
action pleaded as appears from the allegations in the complaint. In ascertaining whether or not the action is one of
forcible entry within the original exclusive jurisdiction of the municipal court, the averments of the complaint and the
character of the relief sought are the ones to be consulted.. 1 .

In the case at bar, the complaint does not allege that the plaintiffs were in physical possession of the land and have been
deprived of that possession through force, intimidation, threat, strategy, or stealth. It simply avers that plaintiffs-
appellants bought on November 12, 1962 from defendants-appellees Eustaquia Bocar and Catalina Bocar the parcel of
land in question for the amount of P2,800.00; that a deed of sale was executed, notarized and registered;that "during
this first week of February, 1963, defendants Ester T. Villablanca and her husband, Zosimo Villablanca, illegally and
without any right whatsoever, took possession of the above described property, harvesting coconuts from the coconut

plantation therein, thus depriving of its possession herein plaintiffs, and causing them damages for the amount of EIGHT
HUNDRED PESOS (P800.00)"; that for the purpose of enforcing the vendors' warranty in case of eviction, Eustaquia
Bocar and Catalina Bocar were also included as defendants; and, therefore, plaintiffs-appellants pray that a decision be
rendered, ordering (a) defendants Ester T. Villablanca and her husband, Zosimo Villablanca, "to surrender the possession
of the above described property to said plaintiffs"; (b) defendants Ester T. Villablanca and her husband, Zosimo
Villablanca, "to pay to said plaintiffs the amount of EIGHT HUNDRED PESOS (P800.00) as damages for the usurpation by
them of said property"; and (c) defendants Eustaquia Bocar and Catalina Bocar "to pay the plaintiffs the amount of
P2,800.00, plus incidental expenses, as provided for by Art. 1555 of the Civil Code, in case of eviction or loss of
ownership to said above described property on the part of plaintiffs." .

It is true that the execution of the deed of absolute sale in a public instrument is equivalent to delivery of the land
subject of the sale. 2 This presumptive delivery only holds true when there is no impediment that may prevent the
passing of the property from the hands of the vendor into those of the vendee. It can be negated by the reality that the
vendees actually failed to obtain material possession of the land subject of the sale.. 3 It appears from the records of the
case at bar that plaintiffs-appellants had not acquired physical possession of the land since its purchase on November
12, 1962. As a matter of fact, their purpose in filing the complaint in Civil Case No. 3285 is precisely to "get the
possession of the property." 4 In order that an action may be considered as one for forcible entry, it is not only
necessary that the plaintiff should allege his prior physical possession of the property but also that he was deprived of
his possession by any of the means provided in section 1, Rule 70 of the Revised Rules of Court, namely: force,
intimidation, threats, strategy and stealth. For, if the dispossession did not take place by any of these means, the courts
of first instance, not the municipal courts, have jurisdictions.. 5 The bare allegation in the complaint that the plaintiff has
been "deprived" of the land of which he is and has been the legal owner for a long period has been held to be
insufficient. 6 It is true that the mere act of a trespasser in unlawfully entering the land, planting himself on the ground
and excluding therefrom the prior possessor would imply the use of force. In the case at bar, no such inference could be
made as plaintiffs-appellants had not claimed that they were in actual physical possession of the property prior to the
entry of the Villablancas. Moreover, it is evident that plaintiffs-appellants are not only seeking to get the possession of
the property, but as an alternative cause of action, they seek the return of the price and payment of damages by the
vendors "in case of eviction or loss of ownership" of the said property. It is, therefore, not the summary action of
forcible entry within the context of the Rules. .

WHEREFORE, the order of dismissal is hereby set aside, and the case remanded to the court a quo for further
proceedings. Costs against defendants-appellees. .

G.R. No. L-31789
June 29, 1972

ANTONIO R. BANZON and ROSA BALMACEDA, petitioners,
vs.
HON. FERNANDO CRUZ, Spouses PEDRO CARDENAS and LEONILA BALUYOT and ASSOCIATED INSURANCE & SURETY
COMPANY, INC. represented by INSURANCE COMMISSIONER in her capacity as LIQUIDATOR OF ASSOCIATED
INSURANCE & SURETY COMPANY, INC., respondents.

TEEHANKEE, J.:p

An original action to enjoin respondent court from forcing a writ of possession and order of demolition over one of two
Caloocan City lots originally owned by petitioners- spouses pending the outcome of their suit for reconveyance of said
lots from private respondents.

Sometime in 1952, Maximo Sta. Maria obtained crop loans from the Philippine National Bank (hereinafter referred as
the bank). Respondent Associated Insurance & Surety Co., Inc. (hereinafter referred to as Associated) acted as surety of
Sta. Maria, filing surety bonds in favor of the bank to answer for prompt repayment of the loans. Petitioner Antonio R.
Banzon and Emilio Ma. Naval in turn acted as indemnitors of Associated and were obligated to indemnify and hold
harmless Associated from any liability thus acting as surety of the loan. Sta. Maria failed to pay his obligations to the
bank, which accordingly demanded payment from Associated as surety.

Instead of paying the bank, Associated filed a complaint dated November 19, 1956 with the Court of First Instance of
Manila 1 against debtor Sta. Maria and indemnitors Banzon and Naval, alleging that the outstanding obligations of Sta.
Maria with the bank guaranteed by it amounted to P6,100.00, P9,346.44 and P14,811.32, or a total of P30,257.86,
excluding interest. On December 11, 1957, the said court rendered judgment ordering Sta. Maria, Banzon and Naval "to
pay jointly and severally unto plaintiff for the benefit of the Philippine National Bank" the amounts mentioned above,
with interest thereon at 12% per annum, P593.76 for premiums and documentary stamps due, and 15% attorney's fees,
"the 15% and the interest to be paid for the benefit only of the plaintiff."

What happened thereafter is narrated in the decision of this Court rendered on November 29, 1968 in the appeal
instituted by petitioner Banzon and his spouse, co- petitioner Rosa Balmaceda, from a subsequent action of Associated
in the Court of First Instance of Rizal wherein the Rizal court ordered Banzon to surrender for cancellation his owner's
duplicates of titles to his two Caloocan City lots which had been levied upon and purchased at the execution sale by
Associated in supposed satisfaction of the Manila court's judgment, docketed as Case L-23971 of this Court, entitled
Associated Ins. & Surety Co. Inc. plaintiff-appellee vs. Antonio Banzon and Rosa Balmaceda, defendants-appellants, 2 as
follows:


As the above decision 3 became final and executory, the corresponding writ of execution was issued and levy was made
upon the properties of the judgment debtor Antonio R. Banzon covered by Transfer Certificates of Title Nos. 39685 and
53759 issued in his name by the Register of Deeds of Rizal. The first covered a parcel of land containing an area of 650
square meters situated in Barrio Calaanan, Caloocan, Rizal, and the second, another parcel of 650 square meters
situated in the same barrio of the same municipality. After the proceedings required by law in connection with
execution sales, the aforesaid properties were sold, the judgment creditor, Associated Insurance and Surety Co., Inc.,
having been the highest bidder, for the total sum of P41,000.00. The Sheriff of Rizal issued in its favor the corresponding
certificate of sale dated June 27, 1957, which was duly registered on June 30, 1959. As the period of redemption expired
on June 20, 1960 without the judgment debtor or any proper party having exercised it, the judgment creditor and
purchaser obtained in due time the corresponding final certificate of sale, which was likewise duly registered.

In view of the foregoing, herein petitioner-appellee made demands upon Antonio R. Banzon to deliver to it the owner's
duplicate of Certificate of Title Nos. 39685 and 53759 mentioned heretofore, but the latter refused to do so. As a result
it filed in the Court of First Instance of Rizal in Case No. 3885, G.L.R.O. Record No. 11267, a petition for an order directing
Antonio R. Banzon to present his owner's duplicate of Certificae of Title Nos. 89685 and 53759 to the Register of Deeds
of Rizal for cancellation, and for another order directing the Register of Deeds of Rizal to cancel said duplicates and to
issue new transfer certificates of title covering the properties in the name of petitioner.

Banzon filed his opposition to the petition claiming mainly that (1) the decision of the Court of First Instance of Manila in
Civil Case No. 31237 was void as far as he was concerned because he had never been summoned in connection
therewith, an that (2) the levy and sale of the properties covered by the petition were likewise void because they were
conjugal properties belonging to him and his wife, Rosa Balmaceda.

After a hearing on the motion and opposition mentioned above, the lower court, on February 7, 1961, rendered a
decision whose dispositive portion is as follows:

"In view of the foregoing, judgment is hereby rendered in favor of the petitioner granting the relief prayed for. The
oppositors are hereby ordered to surrender to the Register of Deeds of Rizal the Certificate of Title in question for
cancellation and let a new one be issued in the name of the petitioner."

In this appeal interposed by them, the Banzons seek a reversal of the above decision upon the same grounds relied upon
in their opposition filed in the lower court. 4

This Court in its decision of November 29, 1968 affirmed the decision of the trial court, relying upon the lower court's
findings on Banzon's failure to substantiate his claims which "would amount to a deprivation of (Banzon's) property
without due process of law" had he but discharged his burden of proof, thus:

With respect to appellant's contention that Antonio R. Banzon had not been duly served with summons in connection
with Civil Case No. 31237 of the Court of First Instance of Manila, it is enough for us to quote here the pertinent portions
of the well-considered decision of the lower court

"With respect to the first contention of oppositors, the latter in effect contends that not having been served by
summons, Antonio Banzon never became a party defendant to the aforesaid civil case and hence not bound by any
judgment rendered therein. It is erroneous on the part of the petitioner to contend that the objection as to lack of
jurisdiction on the defendant's person has been waived for said waiver applies only when summons has been served
although defectively, such as one not served by the proper officer. If the contention of the oppositor were true, that is,
no summons was ever served upon him and that he was completely unaware of the proceedings in the civil case
aforementioned, the properties in question could not be levied upon for that would amount to a deprivation of
oppositor's property without due process of law.

"The burden, however, rests upon the oppositors to prove that there was in fact no service of summons and this, the
court believes, the oppositors have failed to substantiate with sufficient evidence. It is a fundamental rule that the
regularity of all official actions and proceedings will be presumed until the contrary is proved. In said civil case No.
31237, the records show, particularly the answer and the motion to dismiss, that the proceedings were conducted by
counsel in behalf of all the defendants therein including the oppositor, Antonio Banzon. The presumption therefore, of
the regularity of the proceedings as against said defendant will be maintained including the fact that either summons
was duly served or that the defendant Banzon voluntarily appeared in court without such summons. It is therefore
incumbent upon the oppositors to rebut this presumption with competent and proper evidence such as the return made
by the sheriff who served the summons in question. This, however, the oppositors have not met.

"Moreover, the circumstances of the case all the more bear out the strength of this presumption when it considered
that the oppositor Antonio Banzon received a notice of execution and levy of these properties and notice of the sale of
the same at public auction. Had the oppositors have been prejudiced by being deprived of due process, they should have
filed either a third party claim upon the property levied or an injunction proceeding to prevent its sale at public auction,
nor would they have allowed the consummation of the sale and the lapse of one year within which the redemption
would have been exercised. These facts gravely militate against the merits of the opposition, not only insofar as it
strengthens the aforesaid presumption of regularity, but also insofar as they are indicative of the fact that the properties

levied upon are not conjugal property or even if they were that the debt involved was one which redound to the benefit
of the family for which the conjugal partnership may be held liable."

Appellants' second contention namely, that the properties now in question are their conjugal properties, is belied by the
record before us which shows that Transfer Certificate of Title Nos. 39685 and 53759 were issued in the name of
Antonio R. Banzon. Moreover, there is no sufficient evidence in the record to show that the properties were acquired
during appellants' marriage.

IN VIEW OF ALL THE FOREGOING, the decision appealed from is hereby affirmed, with costs. 5

It has now been exposed that notwithstanding the judgment of December 11, 1957 obtained from the Manila court by
Associated and executed by it against petitioner Banzon as indemnitor " for the benefit of the Philippine National Bank,"
and which judgment it obtained and executed on the representation to the said court that the bank was exacting
payment from it as surety of the debtor Sta. Maria's loans, and that it was therefore enforcing Banzon's undertaking as
indemnitor in turn to indemnify it, that it never discharged its liability as surety to the bank nor ever made any payment
to the bank, whether in money or property, to discharge Sta. Maria's outstanding obligations as guaranteed by it.

As will be shown later, this suit of Associated against Banzon as indemnitor and the execution against him of the
judgment obtained in trust "for the benefit of the PhiIippine National Bank" were absolutely premature and uncalled for,
since Article 2071 of the Civil Code permits the surety, even before having paid, to proceed only "against the principal
debtor ... (4) when the debt has become demandable, by reason of the expiration of the period for payment" and that
"the action of the guarantor is to obtain release from the guaranty, or to demand a security that shall protect him from
any proceedings by the creditor and from the danger of insolvency of the debtor."

In fact, since the bank failed to exact payment from Associated as surety of the debtor Maximo Sta. Maria's matured
obligations, the bank itself filed on February 10, 1961, its own complaint with the Court of First Instance of Pampanga
against principal debtor Maximo Sta. Maria, his six brothers and sisters (who had executed a special power of attorney in
Sta. Maria's favor to mortgage a 16-hectare parcel of land jointly owned by all of them as security also for the bank's
loans), and Associated itself, surety, as defendants, for the collection of the outstanding obligations due from the
principal debtor, Maximo Sta. Maria.

After trial, the court ordered all the defendants jointly and severally to pay the bank the outstanding amounts due on
the crop loans to Sta. Maria, which as of that much later date, August 20, 1963, amounted only to P6,100.00 and
P9,346.44 or a total of P15,446.44, exclusive of interests. It should be noted therefore, that the debtor Sta. Maria had
been making payments all along to the bank on account of his crop loans so much so that by 1963, the total principal
due and amount outstanding thereon amounted only to P15,446.44. This amounts to practically one-half of the advance
judgment for the total amount of P30,257.86, excluding interests, obtained by Associated six (6) years earlier in 1957
against Banzon " for the benefit of the Philippine National Bank" allegedly as the amount due from Sta. Maria and which
Associated as surety would have to pay the bank, and which as it turns out, Associated never paid to the bank.

These facts and figures are of record in this Court's decision of August 29, 1969, in Philippine National Bank vs. Sta.
Maria, et al.," wherein it is further recorded that "(D)efendant Maximo Sta. Maria and his surety, defendant Associated
Insurance & Surety Co., Inc. who did not resist the action, did not appeal the judgment (sentencing all defendants jointly
and severally to pay the bank the above referred to principal amount of P15,446.44, excluding interests)."

This Court sustained the appeal taken by the debtor Maximo Sta. Maria's brothers and sisters, and reversed the lower
court's judgment against them, as follows:

... This appeal has been taken by his six brothers and sisters, defendants-appellants who reiterate in their brief their
main contention in their Answer to the complaint that under the special power of attorney, Exh. E, they had not given
their brother, Maximo, the authority to borrow money but only to mortgage the real estate jointly owned by them; and
that if they are liable at all, their liability should not go beyond the value of the property which they had authorized to
be given as security for the loans obtained by Maximo. In their answer, defendants-appellants had further contended
that they did not benefit whatsoever from the loans, and that the plaintiff bank's only recourse against them is to
foreclose on the property which they had authorized Maximo to mortgage.

We find the appeal of defendants-appellants, except for defendant Valeriana Sta. Maria who had executed another
special power of attorney, Exh. E-1, expressly authorizing Maximo to borrow money on her behalf, to be well taken.

1.
Plaintiff bank has not made out a cause of action against defendants-appellants (except Valeriana), so as to hold
them liable for the unpaid balances of the loans obtained by Maximo under the chattel mortgages executed by him in
his own name alone.

xxx
xxx
xxx

6.
Finally, as to the 10% award of attorney's fees, this Court believes that considering the resources of plaintiff
bank and the fact that the principal debtor, Maximo Sta. Maria, had not contested the suit, an award of five (5%) per
cent of the balance due on the principal, exclusive of interests, i.e., a balance of P6,100.00 on the first cause of action

and a balance of P9,846.44 on the second cause of action, per the bank's statements of August 20, 1968, (Exhs. Q-1 and
BB-1 respectively) should be sufficient.

WHEREFORE, the judgment of the trial court against defendant-appellants Emeteria, Teofilo, Quintin, Rosario and
Leonila, all surnamed Sta. Maria is hereby reversed and set aside, with costs in both instances against plaintiff. The
judgment against defendant-appellant Valeriana Sta. Maria is modified in that her liability is held to be joint and not
solidary, and the award of attorney's fees is reduced as set forth in the preceding paragraph, without costs in this
instance.

The bank thus collected directly from its debtor Sta. Maria the amounts owing to it, with Associated never having put in
one centavo. Per the bank's letter dated February 20, 1970 to Associated, it informed Associated that the amounts of its
judgment credit against judgment defendants in the aforementioned case terminated by this Court's decision of August
29, 1969, "had already been satisfied as of February 16, 1970 by virtue of the payment made by and thru the Provincial
Sheriff of Bataan on the proceeds of the extra-judicial sale of the mortgaged properties of defendants Sta. Marias," in
view of which "we (Philippine National Bank) have now released the Associated Insurance & Surety Co., Inc. of its joint
obligation with Maximo Sta. Maria et al. in the aforementioned case." 7

This should have put an end to the matter and Banzon's two lots therefore restored fully to his ownership, but for
certain complications involving the intervention of the other private respondents, the spouses Pedro Cardenas and
Leonila Baluyot, and Associated's own unjustifiable actions, as shall presently be seen.

According to the Banzons' petition at bar, sometime in 1965, even before ownership over the two parcels of land
belonging to the Banzons could be consolidated in the name of Associated (since the judgment was " for the benefit of
the Philippine National Bank" and it had not discharged its surety's liability to the bank), Associated "in clear collusion
and confederation with (respondent) Pedro Cardenas, allowed and permitted the latter to execute and levy one of the
two parcels of land (that covered by T.C.T. No. 39685-Rizal, Lot 6, Block No. 176 of subdivision plan Psd-2896, G.L.R.O.
Rec. No. 11267) for a judgment debt of P5,100.00 (of Associated in favor of Cardenas) 8 notwithstanding that the
property in question was worth P130,000.00 more or less, and further notwithstanding the fact that said respondent
(Associated) knew the property was merely being held in trust by it for the benefit of the Philippine National Bank and
therefore, not being the legal owner thereof, it cannot validly dispose of it in any manner." 9 Respondent Cardenas
being allegedly the lone bidder in the auction sale for execution of his P5,100.00-judgment against Associated was
awarded the property in full satisfaction of his judgment, and eventually succeeded in having Banzon's title cancelled
and a new one, T.C.T. No. 8567-Caloocan City issued thereto in his name, notwithstanding that Associated's right thereto
was still sub-judice in Associated vs. Banzon, to be resolved much later yet by this Court's decision of November 29,
1968. Associated made no move to question or challenge this action of Cardenas, notwithstanding an order for its
liquidation and dissolution issued on December 31, 1965 by the Court of First Instance of Manila and eventually affirmed
by this Court per resolution of June 20, 1968 in G.R. No. L-38934. Nor did Associated make any effort to resist execution
on said property of Banzon's, knowing as it did that its interest in said property was impressed with a trust character
since the clear tenor and intent of the judgment granted against Banzon nominally in its favor but expressly " for the
benefit of the Philippine National Bank" was to make the execution and operation of the judgment contingent or
conditioned upon Associated's being made or compelled to pay the bank, which contingency never materialized.

The Cardenas spouses thereafter filed with the Court of First Instance of Rizal, Caloocan City Branch XII, Reg. Case No. C-
211 (LRC Case No. 112167) entitled "Pedro Cardenas, et al., petitioners vs. Antonio Banzon, et al., respondents," to
secure possession from the Banzons of the lot covered by T.C.T. No. 8567. A writ of possession was issued in said case on
May 21, 1965, but the enforcement thereof was held in abeyance in view of the filing with the same court of Civil Case
No. C-531 entitled "Antonio Banzon, et al. vs. Pedro Cardenas and Leonila Baluyot, Associated Insurance and Surety Co.,
Inc. and Benito Macrohon." Banzon's complaint in Civil Case No. C-531 was, however, dismissed on August 6, 1969, on
the ground that "the matter of the legality of the transfer of ownership of the property in question from the plaintiff to
the Associated Insurance & Surety Co., Inc., has been upheld by the Supreme Court in its decision promulgated on
November 29, 1968, and consequently the transfer to the spouses Pedro Cardenas and Leonila Baluyot must perforce be
considered also as valid and legal."

Consequently, respondent Cardenas filed a motion on October 13, 1969, in Case No. C-211 for the issuance of an alias
writ of possession; this was granted on October 23, 1969. The alias writ was served on Banzon, who refused to vacate
the premises and to remove the improvements thereon. In view of this, an order was issued on December 9, 1969, for
the issuance of a writ of demolition, but its enforcement was held in abeyance because a temporary restraining order,
later changed to a writ of preliminary injunction, was issued by the Court of Appeals on December 13, 1969, in view of
the filing by the Banzons with the said appellate court of a petition for injunction. 10

On February 28, 1970 the Court of Appeals rendered judgment dismissing the petition because it found the same to be
allegedly "merely a device to prevent the execution of a final judgment by the filing of a new suit based upon the same
grounds which have already been interposed and passed upon in the case where the final judgment had already been
rendered ... ." Cardenas thereafter filed a motion for the enforcement of the order of demolition and writ of possession
previously issued in Reg. Case No. C-211. On March 13, 1970, Judge Fernando A. Cruz of the Court of First Instance of
Rizal, Caloocan City Branch XII, issued an order granting the motion. 11

On March 13, 1970, the Banzons having learned of the bank's release of Associated as of February 20,1970, supra,
accordingly filed a complaint for reconveyance and damages with the Court of First Instance of Manila against

respondents Associated and the Cardenas spouses. 12 In their complaint, the Banzons impute bad faith, collusion and
confederation between Associated and the Cardenases with regard to the latter's prematurely obtaining T.C.T. No. 8567
covering one of Banzon's lots in their name. The Banzons therein alleged for the first time their new cause of action
based on the subsequent development that the Philippine National Bank had collected directly on February 16, 1970
from the principal debtor Sta. Maria the loan guaranteed by Associated (which amounted only to a principal of
P15,446.44 as of August, 1963, excluding interests or just one-half of the premature judgment for P30,257.88 excluding
interests obtained by Associated six (6) years earlier in 1957 against Banzon in trust and for the benefit of the bank
allegedly as the amount owed by Sta. Maria and to be discharged by Associated, which Associated never discharged);
12a and that the bank, per its letter of February 20, 1970 had therefore absolutely released Associated of any liability on
its surety undertaking. 12b The Banzons therefore prayed for the return and reconveyance of their two parcels of land
covered by T.C.T. No. 8567 (in Cardenas' name) and No. 53759 (still in Banzon's name), in discharge of Associated's
implied trust not to unjustly enrich itself and appropriate Banzon's properties at absolutely no cost to itself.

On March 16, 1970, the Sheriff of Caloocan City served upon the Banzons copy of the aforesaid order giving them until
March 20, 1970, within which to deliver possession of the parcel of land covered by T.C.T. No. 8567, and to remove the
improvements thereon; otherwise, the said sheriff would proceed to enforce the same.

Petitioners Banzons therefore came to this Court on March 20, 1970, by means of the present petition for injunction. At
petitioners' instance, the Court on March 24, 1970 restrained respondents and their representatives from enforcing the
questioned writ of execution and order of demolition, and respondent Associated from disposing in any manner of its
alleged rights and interests over the two lots in question.

Respondents Cardenas spouses filed in due course their Answer dated April 2, 1970, admitting in effect the antecedents
of the case as recited above, citing even this Court's decision of November 29, 1968 in Associated vs. Banzon, supra,
which affirmed the money judgment in favor of Associated " for the benefit of the Philippine National Bank" 13 but
alleging that ownership to one parcel (Lot 6, Block 176 covered by T.C.T. No. 8567) "has already absolutely and
irrevocably vested in herein respondent Pedro Cardenas." 14 Said respondents further averred that "there is no longer
anything that may be restrained," since per the sheriff's return of March 23, 1970, he enforced on said date respondent
court's writ of possession and demolition order and demolished all the improvements erected in the premises. 15

To this petitioners countered that "the special deputy sheriff of Rizal did succeed in demolishing the building erected on
that lot in question. This he did notwithstanding the fact that he has been duly informed by petitioner Banzon of the
existence of a restraining order in this case. However, after accomplishing his purpose, he and his men left the
premises." 16

Most relevant, however, was a pleading entitled "Explanation and Manifestation" dated April 25, 1970 filed by Atty.
Feliberto Castillo, as former counsel for Associated "in the interest of justice and in the name of truth and as an officer of
the Court," wherein with respect to the summons for Associated received by his law office, he manifests:

3.
That he is entertaining a serious doubt whether he could still represent the Associated Insurance & Surety Co.,
Inc. in view of the fact that in Civil Case No. 56995 of the Court of First Instance of Manila, entitled "Republic of the
Philippines, represented by the Insurance Commissioner vs. Associated Insurance Surety Co., Inc." the said Court of First
Instance of Manila ordered the liquidation and dissolution of this surety company, which was appealed to the Court of
Appeals, CA-G. R. No. 37985-R but affirmed the decision of the Court of First Instance of Manila in a decision
promulgated on January 3, 1968, which was appealed again by the Associated Insurance & Surety Co., Inc to the
Honorable Tribunal, G.R. No. L-29834, also affirming the decision of the Court of Appeals by denying the petition for writ
of certiorari in its resolution of June 20, 1968, and therefore, since then, the decision of the Court of First Instance of
Manila ordering the liquidation and dissolution of the Associate Insurance & Surety Co., Inc. became final and executory,
an thereafter, the Insurance Commissioner demanded the surrender of books, documents and other papers of this
surety company, an as a matter of fact, books, documents and other papers salvaged were already surrendered to the
Insurance Commissioner for liquidation of this company, so that by virtue thereof, the Insurance Commissioner being
the liquidator appointed by the court to liquidate the Associated Insurance & Surety Co., Inc., is now the legal
representative of this surety company to whom a copy of this paper will be furnished." 17

In his "Explanation and Manifestation," Atty. Castillo further states that his law office was the counsel for Associated in
the cases involved in these proceedings, viz., Civil Case No. 31237 of the Court of First Instance of Manila, Case No. 3885,
G.L.R.O. Record No. 11267 of the Court of First Instance of Rizal, for consolidation in Associated's favor of T.C.T. No.
29685-Rizal and T.C.T. No. 53759-Rizal, and in G.R. No. L-23971 of the Supreme Court, Associated vs. Banzon, supra,
affirming on November 29, 1968 the Rizal court's judgment for consolidation; and

That since Associated was ordered liquidated and dissolved by the Manila court of first instance in Civil Case No.
56995, as affirmed by the Court of Appeals in CA-G.R. No. 37985-R, which became final upon this Court's denial of
review per its resolution of June 20, 1968 in G.R. No. L-28934, the Insurance Commissioner as the appointed liquidator
of Associated is the legal representative thereof who may duly act for Associated and upon whom summons should be
served;

That even before the promulgation of the Supreme Court decision on November 29, 1968 in Associated vs. Banzon
he, as counsel for Associated, never attempted to secure new titles for his said client, considering that its ownership
over the parcel of land covered by them was then "still sub judice;"


That even after the promulgation of the said Supreme Court decision, he never attempted to secure new titles for his
client, because by that time Associated had already been ordered dissolved and liquidated, hence, to be represented in
all instances by the Insurance Commissioner as liquidator;

That he wonders how respondent Pedro Cardenas was able to secure T.C.T. No. 8567 (formerly T.C.T. No. 39685-
Rizal) in his name in 1965, when Associated, which really owed Cardenas a certain sum, could only secure new titles over
the parcels of land after not before November 29, 1968, when the Supreme Court's decision in G.R. No. L-23971
was promulgated; and that in his opinion, the issuance to respondent Cardenas of T.C.T. No. 8567 was "fraudulent and
irregular for being without basis when the same was issued, so that the register of deeds of Caloocan City committed
some sort of mistakes or negligence in issuing this title to respondent Pedro Cardenas, and as such, this T.C.T. No. 8567
is null and void and without force and effect and calls for an investigation of the guilty parties responsible for the
issuance of this T.C.T. No. 8567 in the name of respondent Pedro Cardenas, who might have committed some
falsifications;" (for indeed how could Cardenas cause title to said lot to be transferred to Associated for him in turn levy
against it for his P5,100.00 judgment against Associated when Associated's case against Banzon for such transfer and
consolidation of title was then still pending appeal before this Court, and Associated's judgment against Banzon was one
of trust, expressly therein declared to be "for the benefit of the Philippine National Bank?") 18 and

That "anybody who will attempt to offer the said parcel of land for sale would be committing a crime as the position
of the same belongs exclusively to the Insurance Commissioner who is the liquidator of the Associated Instance &
Security Co., Inc.; consequently, the petitioner should not entertain any worry as said parcel of land is not being
disposed of not only because the power to sell the same exclusively belongs to the Insurance Commissioner but also
because the Associated Insurance & Surety Co., has no titles yet over these parcels of land as it did not attempt to
secure any even before and after the promulgation of the decision of the Honorable Tribunal in G.R. No. 23971 in view
of the circumstances earlier explained."

On May 11, 1970, we issued summons on the Insurance Commissioner as liquidator of Associated to answer the
petition. In her answer filed on May 29, 1970, the Acting Insurance Commissioner through the Solicitor General
disclaimed knowledge of practically all the allegations of the petition for lack of knowledge or information sufficient to
form a belief as to their truth, manifesting that she first learned of the material facts averred in the petition when she
received copy of Atty. Castillo's "Explanation and Manifestation", because the records and documents pertinent to this
case were not among those surrendered to her, and affirming she is the liquidator of Associated by virtue of the Manila
court's order dated December 31, 1965 of liquidation and dissolution of said corporation, as follows:

3.
That the herein Acting Insurance Commissioner is liquidator of Associated Insurance & Surety Co., Inc. by virtue
of an order of liquidation and dissolution of said corporation dated December 31, 1965, by the Court of First Instance of
Manila in Civil Case No. 56995, which decision was affirmed on appeal by the Court of Appeals in its decision (CA-G.R.
No. 37895) dated January 3, 1968, which decision was again affirmed on appeal by this Honorable Tribunal when it
denied the petition for a writ of certiorari in its Resolution of June 20, 1968 (G.R. No. L-38934) and which on July 9, 1968,
became final and executory;

4.
That by virtue of the aforesaid decision, the Insurance Commissioner as liquidator of Associated Insurance &
Surety Co., Inc., is vested by authority of law with the title to all of the property, contracts, and rights of action of said
corporation as of the date of the order of liquidation (Sec. 175-C, par. 3 of the Insurance Act, as amended);

5.
That any subsequent sale or disposition of the property of said corporation without the knowledge and consent
of the herein Acting Insurance Commissioner and approval but the Liquidation Court is contrary to law and null and void;

6.
That after the aforesaid order of liquidation and dissolution became final and executory, the Acting Insurance
Commissioner demanded for the surrender of all the books, documents and properties of Associated Insurance & Surety
Co., Inc. However, the records and documents pertinent to the above-entitled case were not among those surrendered
to the Insurance Commissioner and it was only upon receipt of the "Explanation and Manifestation" of Atty. Feliberto
Castillo, dated April 25, 1970, and the present "Petition" that she came to know for the first time of the alleged facts
averred in this case." 19

A "Motion to Dissolve Temporary Restraining Order and to Dismiss Petition" was filed on February 12, 1971, by
respondents spouses Cardenas and Baluyot. They contend that the restraining order issued by this Court should be
dissolved, and the petition itself, insofar as they are concerned, be dismissed, because the petition is predicated on
petitioners' complaint for reconveyance and damages in Civil Case No. 79244 before Branch VIII of the Court of First
Instance of Manila, and the said court issued an order on October 28, 1970, dismissing the said complaint with respect
to defendants therein Cardenas and Baluyot, which dismissal was not appealed and became final and executory on
January 5, 1971, per entry of judgment attached to the motion. Consequently, according to these respondents, the
temporary restraining order issued by this Court enjoining the enforcement of the writ of execution and the order of
demolition in Reg. Case No. C-211 of the Court of First Instance of Rizal, has become inoperative and without any legal
basis, the present petition has lost its legal basis, and petitioners have no more cause of action against respondents
Cardenas and Baluyot. The said order of dismissal of the complaint against these respondents was issued pursuant to
Section 5, Rule 16 of the Rules of Court, after a preliminary hearing on the affirmative defenses of bar by prior judgment
and lack of cause of action set up by said respondents in their answer, with the lower court opinion that petitioners'

action was already barred by the prior judgments of this Court of November 29, 1968 in Associated vs. Banzon and of
the Court of Appeals of February 28, 1970 in Banzon vs. Hon. Fernando Cruz, supra. 20

The Solicitor General filed on March 29, 1971 on behalf of the Insurance Commissioner as liquidator of Associated a
strong opposition to the motion to dissolve the restraining order and dismiss the petition. 21 The commissioner-
liquidator after complaining that "she is still demanding for the surrender of all the books, documents and properties of
Associated" and that "it was only upon receipt on March 11, 1971 of the voluminous records of the cases handled by
counsel Feliberto V. Castillo for (Associated) that (her) undersigned counsel have verified and confirmed the truth of the
status of the different cases," contends inter alia as follows:

18. That, however, during the pendency of the aforesaid appeal of petitioner Antonio R. Banzon with this Honorable
Tribunal and while the case was still sub-judice, particularly on February 8, 1964, the herein respondent Pedro Cardenas
as winning party in a case entitled "Pedro Cardenas vs. Victoria Vda. de Tengco and Pablo Tuazon," Civil Case No. 36174,
Court of First Instance of Manila, and where the Associated Insurance and Surety Co., Inc. was surety for the defendants
therein, executed and levied upon one of the parcels of lands involved in the aforesaid appeal. Ultimately, Pedro
Cardenas was able to acquire the land in question (Lot No. 6, Block No. 176, then covered by T.C.T. No. 39685) as highest
bidder, for the judgment debt of defendants in said action, plus incidental expenses for the sum of P5,100.00 only;

19.
That subsequently thereafter, said respondents Cardenas, thru some scheme and devise, succeeded in having
the title of said parcel of land transferred in their names under T.C.T. No. 8567, Registry of Deeds of Caloocan City, on
May 5, 1965, at a time when the Associated Insurance & Surety Co., Inc. had not yet earned the authority to consolidate
in its name said property, as the case was then pending with this Honorable Tribunal. As alleged in paragraph 18 hereof,
the question of consolidation was resolved by this Honorable Tribunal on February 28, 1968; 21a

20.
That by the nature of the decision in Civil Case No. 31237, CFI, Manila, as alleged in paragraph 15 hereof, the
property or sums of money recovered from defendants therein shall be reserved for the benefit of the Philippine
National Bank for the purpose of paying the principal debtor's (Maximo Sta. Maria's) obligation therein, and
consequently, the Associated Insurance & Surety Co., Inc. shall hold the property in question or the sums recovered in
said action, in trust and for the purpose of paying the aforesaid obligation of Maximo Sta. Maria. 22

21.
That the Associated Insurance & Surety Co., Inc. failed to pay from its own funds under its surety undertaking,
nor from funds realized from the property levied upon by virtue of the decision in Civil Case No. 31237, CFI, Manila, but
on the other hand, the principal debtor Sta. Maria paid his own obligation the Philippine National Bank thus, releasing it
(Associated Insurance & Surety Co., Inc.) from its obligation under the suretyship undertaking with respect to said
obligation of Maximo Sta. Maria, and similarly herein petitioner Antonio R. Banzon was released from this obligation as
co-indemnitor in said undertaking;

22.
That in fairness to petitioners Antonio R. Banzon and Rosa Balmaceda, the two parcels of land executed and
levied upon by virtue of the decision in Civil Case No. 31237, Court of First Instance of Manila, deserve to be reconveyed
to them;

23.
That one of the lots involved, namely, Lot No. 6, Block No. 176 covered by T.C.T. No. 8567, Registry of Deeds of
Caloocan City, in the names of the present respondents Pedro Cardenas and Leonila Baluyot, being one of the two
parcels of lands levied upon in Civil Case No. 31237 but transferred to respondents under dubious circumstances and
patently unauthorized by law, should be ordered reconveyed to the Associated Insurance Co., Inc. through the Insurance
Commissioner for the purpose stated in the next preceding paragraph, as the transaction on the transfer of said parcel
of land to them is null and void from the very beginning." 23

Petitioners likewise oppose the motion of the Cardenases. They contend that the present petition is not solely
predicated on their complaint for reconveyance and damages in Civil Case No. 79244 for, as admitted by the Insurance
Commissioner, they are entitled to the reconveyance of the lot covered by T.C.T. No. 8567 and for contribution or
indemnification for damages which they may recover from Associated; that respondents Cardenases secured said title
fraudulently and irregularly without any legal basis, hence, said title having been anomalously issued, is null and void
and without force and effect, and, that, as stated by Insurance Commissioner-liquidator, in fairness and justice to
petitioners, the two parcels of land levied in favor of Associated by virtue of the decision on Civil Case No. 31237 should
be reconveyed to them; and that to dissolve the temporary restraining order and to dismiss the present petition would
leave petitioners without a legal remedy.

In a minute resolution dated April 19, 1971, the Court denied the said motion of respondents Cardenas and Baluyot "to
dissolve temporary restraining order and to dismiss petition."

1.
The immediate objectives of this petition are: (a) to enjoin respondent Judge Fernando Cruz of the Court First
Instance of Rizal, Caloocan City Branch, and respondents Pedro Cardenas and Leonila Baluyot, and their representatives,
from enforcing the writ of execution and of demolition issued by said respondent Judge in Reg. Case No. C-211 in
relation to the lot covered by T.C.T. No 8567; and (b) to enjoin respondent Associated from disposing its alleged rights
and interests in the two lots covered by T.C.T. No. 8567 and T.C.T. No. 53759, the injunction in both cases to be made
effective during the pendency of the reconveyance case, Civil Case No. 79244, filed by petitioners as plaintiffs before the
Manila court of first instance.

The real and substantive objectives of the petition are to seek the rightful restoration and reconveyance to petitioners
Banzons of their two Caloocan city lots, covered by T.C.T. No. 53759 (still in Banzon's name, but on the back whereof is
annotated the sheriff's final deed of sale in favor of Associated) and by T.C.T. No. 8567 (in the name of respondents
Cardenases) on the fundamental ground that Associated's levy in execution of said lots was in trust for the benefit of the
Philippine National Bank for the purpose of paying the bank the loan obligation of Maximo Sta. Maria which Associated
had guaranteed as surety and against which liability Banzon in turn as indemnitor had undertaken to indemnify and hold
harmless Associated.

Now, the basic 1957 judgment of the Manila court sentencing Banzon to pay Associated a total of P30,257.86 excluding
interest, " for the benefit of the Philippine National Bank" expressly made of record the said court's intent and
disposition that the execution and operation of its judgment against Banzon were contingent and conditioned upon
Associated as plaintiff-surety actually paying or being made or compelled to pay the bank-creditor an equivalent amount
as guaranteed by it. That this is so is made more evident when we consider the provisions of Article 2071 of the Civil
Code which permit the surety to file such an advance suit against the principal debtor (not against an indemnitor such as
Banzon) only to obtain release from the guaranty or security against the danger of the debtor's insolvency. Where the
debtor directly discharged his loan obligation to the bank which in turn released Associated from its suretyship liability
without Associated having incurred a centavo of liability, it is indisputable that Associated in turn would necessarily
release Banzon as indemnitor and the basic 1957 judgment would be inoperable and unenforceable against Banzon.

When Associated nevertheless prematurely and contary to the intent and condition of the basic 1957 judgment levied in
execution on the two Caloocan City lots of Banzon the interest it acquired was clearly impressed with a trust character.
Such acquisition of Banzon's properties by Associated was effected, if not through fraud 23a on Associated's part,
certainly through mistake 23b and there Associated was "by force of law, considered a trustee of implied trust for the
benefit of the person from whom the property comes" by virtue of Article 1456 of the Code 23c since Associated not
having paid nor having been compelled to pay the bank had no right in law or equity to so execute the judgment against
Banzon as indemnitor. Had there been no fraudulent concealment or suppression of the fact of such non-payment by
Associated or a mistaken notion just assumed without factual basis that Associted had paid the bank and was thus
entitled to enforce its judgement against Banzon as indemnitor, the writ for execution of the judgment against Banzon's
properties would not been issued. 23d

Furthermore, Associated's conduct, upon being sued by the Philippine National Bank directly with the principal debtor
Sta. Maria for collection of the debt 23e and sentenced by the Pampanga court of first instance in 1963 (which it did not
appeal) to pay the debt in the much lesser amount of only P15,446.44, excluding interests, in not so discharging its
liability notwithstanding that it had already executed its 1957 judgment against Banzon as indemnitor and taken in
execution Banzon's two properties, was indeed rank fraud. Associated therefore stands legally bound by force of law to
now discharge its implied trust and return Banzon's properties to him as their true and rightful owner.

The obligation imposed upon Associated as implied trustee to so restore Banzon's properties becomes even more
compelling when it is considered that in the premature execution sale by virtue of the basic 1957 judgment, Associated
ostensibly was the highest bidder therefor applying its purported judgment credit of P41,000.00 when in law such
judgment was not subject to execution since the condition of Associated as surety being made to pay the bank to make
the judgment operable and enforceable had not materialized and in fact Associated not having paid anything to the
bank did not possess such purported judgment credit of P41,000.00, nor did it put out a single centavo for which it could
hold Banzon answerable and therefore take Banzon's properties in execution and satisfaction thereof. Actually, as
already indicated above, the principal debt of the bank's debtor, when directly collected by the bank six (6) years later,
amounted merely to 1/2 the amount or P15,446.44 as of August, 1963, excluding interests. 23f As already stated above,
Associated did not pay even this much lesser amount, notwithstanding the Pampanga court's judgment against it in the
suit directly filed by the bank.

Finally, it would be an outrage on simple justice and iniquitous unjust enrichment if a surety such as Associated, after
taking title in execution to the indemnitor's properties in order to protect or reimburse itself from liability to the creditor
for the debt guaranteed by it, were to be allowed to retain ownership of the properties even though it did not incur or
discharge its liability at all, since it succeeded in evading payment to the creditor who thereafter collect the debt directly
from the debtor. Thus, the law (Article 1456, Civil Code) impresses properties thus acquired with trust character and
constitutes the erring surety as "trustee of an implied trust for the benefit of the person from who the property comes,"
in this case, Banzon as the true and rightful owner of the properties.

2.
As Cardenas in levying in turn for satisfaction of his P5,100.00 judgment against Associated on one of Banzon's
lots acquired only whatever interest Associated had in the lot, and with the knowledge that Associated's basic 1957
judgment against Banzon was "for the benefit of the Philippine National Bank" and hence Associated's interest in the
Banzon properties was impressed with a trust character, subject to the obligation of Associated as implied trustee to
return the properties to Banzon, the trust character of the lot titled by Cardenas necessarily passed to him. Cardenas
could not claim actual or absolute ownership of the lot so titled but could only hold the same as trustee, like Associated
as his causante or predecessor.

The respondents Cardenases' pleadings of record should clearly that they were fully aware of these vital antecedents
and premises of the suits between Associated and the Banzons. In their memorandum, they cite the Manila court of first
instance's basic decision in Civil Case No. 31237 "condemning defendants to pay jointly and severally upon (sic) plaintiff
(Associated) but for the benefit of the Philippine National Bank" 24 the several amounts sought by Associated, as surety,

totalling P30,257.86. As far as their own claim against Associated is concerned, they likewise recite in their
memorandum that:

On April 29, 1959, then Judge (now Justice) Jesus Perez of the Court of First Instance of Manila rendered a decision in
Civil Case No. 36194, entitled "Pedro Cardenas vs. Victoria Vda. de Tengco, et al." ordering the defendants, including
Associated Insurance & Surety Co., Inc., as surety, to pay certain sums of money to Pedro Cardenas. The liability of the
Associated Insurance & Surety Co., Inc., was affirmed by the Court of Appeals in a Decision promulgated on October 30,
1963, in CA-G.R. No. 25227-R. Consequently, pursuant to a Writ of Execution issued on February 8, 1964, the City Sheriff
of Caloocan sold on March 23, 1964 at a public auction to Pedro Cardenas, the highest and only bidder, all the "rights,
interests, claims and title" of the judgment-debtor Associated Insurance & Surety Co. Inc., over the property plus the
improvements thereon covered by Transfer Certificate of Title No. 39685 (one on the properties acquired from Antonio
Banzon). The property not having been redeemed within the one year period, a Deed of Absolute Sale was issued in
favor of Pedro Cardenas on April 2, 1965. On April 23, 1965, Pedro Cardenas filed a petition with the Court of First
Instance of Rizal, Branch XII, Caloocan City, in Registration Case No. C-211 (LRC Rec. No. 11267), entitled "Pedro
Cardenas, Petitioner," for the issuance of a new transfer certificate of title over the property in question and to declare
null and void the one previously issued. On May 5, 1965, a Transfer Certificate of Title was issued by the Register of
Deeds of Caloocan City in the name of Pedro Cardenas pursuant to the order of the court in aforecited Registration Case
No. C-211, dated May 3, 1965, as amended. 25

It is obvious that since what Cardenas acquired in his execution for his P5,100.00 judgment against Associated was only
"all the rights, interests, claims and title of the judgment-debtor (Associated) over the property ... (one of the properties
acquired from Antonio Banzon)" and Associated's rights, if they could be so denominated, over Banzon's properties
were merely those of a trustee, supra, and Cardenas thereby acquired no absolute "rights, interests, claim and title" at
all but Associated's obligation as trustee to restore Banzon's lawful properties to him.

3.
As a point of law, even though under Associated's suretyship agreement guaranteeing Sta. Maria's crop loans
with the bank, it was permitted, supposedly for its protection, to proceed judicially against the principal debtor and
indemnitors even prior to the surety's making payment to the creditor bank, Article 2071 of the Civil Code regulates such
relations and provides that in such cases, the surety's right is against the principal debtor and that "in all these cases, the
action of the guarantor is to obtain release from the guaranty, or to demand a security that shall protect him from any
proceedings by the creditor and from the danger of insolvency of the debtor."

Associated thus did not even have any valid cause of action against Banzon as its indemnitor, but could proceed only
against Sta. Maria as the principal debtor. And even as against such principal debtor, it could not prematurely demand
payment even before it had paid the creditor, its action being limited only for the purpose of obtaining release from the
guaranty or a security against an eventual insolvency of the debtor. As was emphasized by Mr. Justice Reyes for the
Court in General Indemnity Co., Inc. vs. Alvarez, 26 while a guarantor may under Article 2071 of the Civil Code proceed
against the principal debtor, even before having paid, when the debt has become demandable, "(T)he last paragraph of
this same article, however, provides that in such instance, the only action the guarantor can file against the debtor is 'to
obtain release from the guaranty, or to demand a security that shall protect him from any proceeding by the creditor
and from the danger of insolvency of the debtor.' An action by the guarantor against the principal debtor for payment,
before the former has paid the creditor, is premature."

4.
The realization of the Banzon's rightful objectives in law and equity as thus restated has somewhat been
hampered and beclouded by the ineptitude and sorry neglect with which they and/or their counsel have pursued their
remedies in the various suits brought by them. To cite the latest instance, the pending suit filed by them in the Manila
court of first instance, Civil Case No. 79244, is from the record the first real case that they have properly filed for
reconveyance of their two Caloocan City lots based on their new cause of action that with the debtor's direct payment
to the bank, Associated had been released as surety and Banzon consequently likewise released as Associated's
indemnitor, and therefore Associated in discharge of the implied trust under which it executed the basic 1957 judgment
" for the benefit of the Philippine National Bank" against Banzon was now called upon to discharge such trust and
reconvey and restore Banzon's properties to him.

Yet Banzon filed no appeal from the Manila Court's dismissal of his complaint against the Cardenas spouses for
reconveyance of the lot wrongfully titled by the latter on the lower court's mistaken concept that this Court's decision of
November 29, 1968 in Associated vs. Banzon, supra, constituted res judicata and apparently allowed such dismissal to
become final. In reality, since Associated never had to pay the bank, Banzon's two lots, which had been levied upon
prematurely under Associated's judgment against Banzon and were therefore held by it in implied trust for Banzon by
force of law, "deserve to be reconveyed to them" in the very words of the insurance commissioner, who alone and
officially represents and acts for Associated as liquidator.

As manifested by Associated's former counsel even when Associated was acting on its own unauthorizedly and in
violation of law, since an order for its liquidation and dissolution had already been issued by the Manila court since
December 31, 1965, he, as Associated's counsel, never attempted to transfer Banzon's titles to Associated since the
question was sub-judice before this Court and resolved only per its decision in Associated vs. Banzon of November 29,
1968, as of which time, this Court had already previously affirmed on June 20,1968 in G.R. No. L-28934, the Manila
court's dissolution and liquidation order against Associated thus removing all doubt that only the Insurance
Commissioner as liquidator could act in any and all matters for Associated. 27

5.
Under Sec. 175-C, paragraph 3 of the Insurance Act as amended, 28 the Insurance Commissioner as liquidator of
Associated was vested by authority of law with the title to all of the property, contracts and rights of action of
Associated as of the date of the judicial order of liquidation, and any sale or disposition of Associated's properties or
rights without the knowledge and consent of the insurance commissioner as liquidator and without the approval by the
liquidation court is contrary to law and null and void.

Accordingly, petitioners Banzons are, as against their and their counsel's neglect and inattention, nevertheless saved
from the otherwise fatal consequences of the invoked final dismissal of their complaint against the Cardenases in Civil
Case No. 79244 of the Manila court for recovery of the lot wrongfully titled in the Cardenases' name per T.C.T. No. 8567.
Since in all the litigations subsequent to Associated's prematurely obtaining in the Manila court of first instance in Civil
Case 31237 the basic 1957 judgment as surety against Banzon as a mere indemnitor to cover the principal debtor Sta.
Maria's demandable loans to the bank and thereafter levying in execution on Banzon's two Caloocan City lots,
notwithstanding that such judgment was expressly held to be in trust and for the benefit of the bank, the insurance
commissioner, as liquidator of Associated and therefore an indispensable party was never impleaded and therefore
there could be no final determination of said actions. Under Rule 3, section 7, indispensable parties must always be
joined either as plaintiffs or defendants, for the court cannot proceed without them, and hence all judgments and
proceedings held after the liquidation and dissolution order against Associated became void for lack of an indispensable
party in the person of the insurance commissioner-liquidator. The insurance commissioner as liquidator of Associated by
authority of law was indisputably an indispensable party with such an interest in the controversies affecting the
judgment for Associated (against Banzon) and against Associated (in favor of Cardenas) that a final decree would
necessarily affect its rights (administered by the Commissioner in the public interest and for the public's protection) so
that the courts could not proceed therein without the commissioner-liquidator's official presence.

6.
The wrongful dismissal by the Manila court of the Banzons' reconveyance suit, Civil Case No. 79244, as against
the Cardenases thus does not produce what would otherwise have been fatal consequences due to the Banzons' failure
to appeal from such dismissal.

Their reconveyance case as against Associated as principal defendant remains pending in court. And the insurance
commissioner as liquidator of Associated, now that she is fully aware of the status of these antecedent cases after she
finally received on March 11, 1971 the voluminous records thereof which had hitherto not been surrendered to her
office despite demands therefor, is called upon to appear for Associated in the said case, if she has not as yet been duly
impleaded as such liquidator. With the insurance commissioner, as liquidator of Associated and an indispensable party
now in the case, the said reconveyance suit may now proceed anew and the Cardenas spouses caused by the liquidator
to be duly impleaded anew for they are also indispensable parties insofar as the insurance commissioner-liquidator's
claim on behalf of Associated to the lot covered by T.C.T. No. 8567 issued in their name is concerned. Herein petitioners
seek principally in the said case the reconveyance to them by Associated of their two parcels of land covered by T.C.T.
No. 8567 and T.C.T. No. 53759, as acquired in execution by Associated, and thereafter, with respect to the lot covered by
T.C.T. No. 8567, by the Cardenases, by virtue of the trust character impressed upon them and Associated's duty as
implied trustee to restore said properties to the Banzons.

Considering that the insurance commissioner herself , who now legally can alone represent Associated as liquidator, has
herein recognized such trust character and has expressed the belief that the said lot, no less than the other lot covered
by T.C.T. No. 8567, should, in justice to petitioners, be reconveyed to them on account, among others, of petitioner
Banzon's release from his obligation as indemnitor by virtue of the principal debtor's subsequent payment of his
obligation with the Philippine National Bank which likewise released Associated from any liability as surety, the present
petition should therefore be granted in the interest of justice and equity so as to enable the insurance commissioner-
liquidator in due course to discharge the trust of reconveying Banzons' properties to them.

7.
The circumstances that respondents Cardenases, insofar as the lot wrongfully claimed by them, caused the
Caloocan City special deputy sheriff to enforce on March 23, 1970 respondent court's challenged order of demolition
and writ of possession on the very day that this Court ordered the issuance of a restraining order against the
enforcement of said challenged order and writ, and notwithstanding that said sheriff was duly advised by Banzon of the
petition at bar having been filed on March 20, 1970, does not make the restraining order in any manner moot. The Court
does not look with favor upon parties "racing to beat an injunction or restraining order" which they have reason to
believe might be forthcoming from the Court by virtue of the filing and pendency of the appropriate petition therefor.
Where the restraining order or preliminary injunction are found to have been properly issued, as in the case at bar,
mandatory writs shall be issued by the Court to restore matters to the status quo ante. 29

In the case at bar, with the insurance commissioner as liquidator of Associated, recognizing through the Solicitor General
that the Banzons' two lots wrongfully taken from them by Associated's premature actions should be reconveyed to
them, there is established a clear and indubitable showing on the record that the petitioners are entitled to a writ
restoring the status quo ante. A mandatory writ shall therefore issue commanding respondent court to forthwith restore
petitioners to their possession of Lot 6, Block 176, covered by T.C.T. 8567 from which they have been removed by
enforcement of said respondent court's enjoined order of demolition and writ of possession dated March 13, 1970,
Annex "F" of the petition. As to petitioners' building thereon claimed to be worth P10,000.00 (but countered by
Cardenas to be a "mere barong-barong" 30), respondent court shall at Banzon's petition cause respondents Cardenases
to restore the demolished building or pay Banzon the determined value thereof. As to the fruits of possession of the
land, with Cardenas acknowledging that he has been leasing the same to a third person at P200.00 a month, 31
respondents Cardenases shall forthwith pay to petitioners Banzons the whole amount of rentals so received by them to

the time that possession of the lot is effectively restored to petitioners. By the very nature of this mandatory writ, the
same shall be immediately executory upon promulgation of this decision.

WHEREFORE, the petition for a permanent injunction, during the pendency of Civil Case No. 79244 of the Court of First
Instance of Manila against the disposition in any manner of the two parcels of land subject of said case other than their
reconveyance to petitioners as the true and rightful owners thereof as expressly recognized by the insurance
commissioner as liquidator of Associated is hereby granted. In lieu of the permanent injunction against enforcement of
respondent court's order dated March 13, 1970 in Case No. C-211 thereof ordering the delivery of possession of the
property covered by T.C.T. No. 8567 to respondents Cardenases and demolition of petitioners Banzons' improvements
thereon, (which were prematurely carried out by respondent court's sheriff on March 23, 1970) a writ of mandatory
injunction commanding respondent court to forthwith restore the status ante quo and to restore petitioners Banzons to
full possession of the property and enjoyment of the fruits and rentals thereof under the terms and conditions stated in
the next preceding paragraph is hereby issued, which shall be immediately executory upon promulgation of this
decision. With costs against respondents Pedro Cardenas and Leonila Baluyot.

This decision is without prejudice to such civil and criminal liability as the officers of the defunct Associated Insurance &
Surety Co., Inc. may have incurred by virtue of their acts of commission and omission which have resuited in grave
prejudice and damage to petitioners as well as to the public interest, as in the suppression from and non-surrender to
the Insurance Commissioner as liquidator of the records of the relevant antecedent cases, and in the possible
misrepresentation to the courts therein that Associated had duly discharged to the bank its liability as surety and could
therefore lawfully levy on the properties of Banzon as indemnitor, which would have resulted in the respondents' unjust
enrichment at Banzon's expense. The insurance commissioner is directed to conduct the corresponding investigation for
the purpose of filing such criminal and other appropriate actions as may be warranted agains the responsible parties. So
ordered.

G.R. No. 80298 April 26, 1990

EDCA PUBLISHING & DISTRIBUTING CORP., petitioner,
vs.
THE SPOUSES LEONOR and GERARDO SANTOS, doing business under the name and style of "SANTOS BOOKSTORE,"
and THE COURT OF APPEALS, respondents.

CRUZ, J.:

The case before us calls for the interpretation of Article 559 of the Civil Code and raises the particular question of when
a person may be deemed to have been "unlawfully deprived" of movable property in the hands of another. The article
runs in full as follows:

Art. 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has
lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived has acquired it in good faith at a
public sale, the owner cannot obtain its return without reimbursing the price paid therefor.

The movable property in this case consists of books, which were bought from the petitioner by an impostor who sold it
to the private respondents. Ownership of the books was recognized in the private respondents by the Municipal Trial
Court, 1 which was sustained by the Regional Trial Court, 2 which was in turn sustained by the Court of Appeals. 3 The
petitioner asks us to declare that all these courts have erred and should be reversed.

This case arose when on October 5, 1981, a person identifying himself as Professor Jose Cruz placed an order by
telephone with the petitioner company for 406 books, payable on delivery. 4 EDCA prepared the corresponding invoice
and delivered the books as ordered, for which Cruz issued a personal check covering the purchase price of P8,995.65. 5
On October 7, 1981, Cruz sold 120 of the books to private respondent Leonor Santos who, after verifying the seller's
ownership from the invoice he showed her, paid him P1,700.00. 6

Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before clearing of his first check,
made inquiries with the De la Salle College where he had claimed to be a dean and was informed that there was no such
person in its employ. Further verification revealed that Cruz had no more account or deposit with the Philippine Amanah
Bank, against which he had drawn the payment check. 7 EDCA then went to the police, which set a trap and arrested
Cruz on October 7, 1981. Investigation disclosed his real name as Tomas de la Pea and his sale of 120 of the books he
had ordered from EDCA to the private respondents. 8

On the night of the same date, EDCA sought the assistance of the police in Precinct 5 at the UN Avenue, which forced
their way into the store of the private respondents and threatened Leonor Santos with prosecution for buying stolen
property. They seized the 120 books without warrant, loading them in a van belonging to EDCA, and thereafter turned
them over to the petitioner. 9

Protesting this high-handed action, the private respondents sued for recovery of the books after demand for their return
was rejected by EDCA. A writ of preliminary attachment was issued and the petitioner, after initial refusal, finally

surrendered the books to the private respondents. 10 As previously stated, the petitioner was successively rebuffed in
the three courts below and now hopes to secure relief from us.

To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner in taking the law into its own
hands and forcibly recovering the disputed books from the private respondents. The circumstance that it did so with the
assistance of the police, which should have been the first to uphold legal and peaceful processes, has compounded the
wrong even more deplorably. Questions like the one at bar are decided not by policemen but by judges and with the use
not of brute force but of lawful writs.

Now to the merits

It is the contention of the petitioner that the private respondents have not established their ownership of the disputed
books because they have not even produced a receipt to prove they had bought the stock. This is unacceptable.
Precisely, the first sentence of Article 559 provides that "the possession of movable property acquired in good faith is
equivalent to a title," thus dispensing with further proof.

The argument that the private respondents did not acquire the books in good faith has been dismissed by the lower
courts, and we agree. Leonor Santos first ascertained the ownership of the books from the EDCA invoice showing that
they had been sold to Cruz, who said he was selling them for a discount because he was in financial need. Private
respondents are in the business of buying and selling books and often deal with hard-up sellers who urgently have to
part with their books at reduced prices. To Leonor Santos, Cruz must have been only one of the many such sellers she
was accustomed to dealing with. It is hardly bad faith for any one in the business of buying and selling books to buy
them at a discount and resell them for a profit.

But the real issue here is whether the petitioner has been unlawfully deprived of the books because the check issued by
the impostor in payment therefor was dishonored.

In its extended memorandum, EDCA cites numerous cases holding that the owner who has been unlawfully deprived of
personal property is entitled to its recovery except only where the property was purchased at a public sale, in which
event its return is subject to reimbursement of the purchase price. The petitioner is begging the question. It is putting
the cart before the horse. Unlike in the cases invoked, it has yet to be established in the case at bar that EDCA has been
unlawfully deprived of the books.

The petitioner argues that it was, because the impostor acquired no title to the books that he could have validly
transferred to the private respondents. Its reason is that as the payment check bounced for lack of funds, there was a
failure of consideration that nullified the contract of sale between it and Cruz.

The contract of sale is consensual and is perfected once agreement is reached between the parties on the subject
matter and the consideration. According to the Civil Code:

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object
of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing
the form of contracts.

x x x x x x x x x

Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery
thereof.

Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the
price.

It is clear from the above provisions, particularly the last one quoted, that ownership in the thing sold shall not pass to
the buyer until full payment of the purchase only if there is a stipulation to that effect. Otherwise, the rule is that such
ownership shall pass from the vendor to the vendee upon the actual or constructive delivery of the thing sold even if the
purchase price has not yet been paid.

Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case
of bouncing checks. But absent the stipulation above noted, delivery of the thing sold will effectively transfer ownership
to the buyer who can in turn transfer it to another.

In Asiatic Commercial Corporation v. Ang,11 the plaintiff sold some cosmetics to Francisco Ang, who in turn sold them to
Tan Sit Bin. Asiatic not having been paid by Ang, it sued for the recovery of the articles from Tan, who claimed he had
validly bought them from Ang, paying for the same in cash. Finding that there was no conspiracy between Tan and Ang
to deceive Asiatic the Court of Appeals declared:

Yet the defendant invoked Article 464 12 of the Civil Code providing, among other things that "one who has been
unlawfully deprived of personal property may recover it from any person possessing it." We do not believe that the
plaintiff has been unlawfully deprived of the cartons of Gloco Tonic within the scope of this legal provision. It has
voluntarily parted with them pursuant to a contract of purchase and sale. The circumstance that the price was not
subsequently paid did not render illegal a transaction which was valid and legal at the beginning.

In Tagatac v. Jimenez,13 the plaintiff sold her car to Feist, who sold it to Sanchez, who sold it to Jimenez. When the
payment check issued to Tagatac by Feist was dishonored, the plaintiff sued to recover the vehicle from Jimenez on the
ground that she had been unlawfully deprived of it by reason of Feist's deception. In ruling for Jimenez, the Court of
Appeals held:

The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has been unlawfully deprived of her car. At first
blush, it would seem that she was unlawfully deprived thereof, considering that she was induced to part with it by
reason of the chicanery practiced on her by Warner L. Feist. Certainly, swindling, like robbery, is an illegal method of
deprivation of property. In a manner of speaking, plaintiff-appellant was "illegally deprived" of her car, for the way by
which Warner L. Feist induced her to part with it is illegal and is punished by law. But does this "unlawful deprivation"
come within the scope of Article 559 of the New Civil Code?

x x x x x x x x x

. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a voidable contract (Article 1390 N.C.C.).
Being a voidable contract, it is susceptible of either ratification or annulment. If the contract is ratified, the action to
annul it is extinguished (Article 1392, N.C.C.) and the contract is cleansed from all its defects (Article 1396, N.C.C.); if the
contract is annulled, the contracting parties are restored to their respective situations before the contract and mutual
restitution follows as a consequence (Article 1398, N.C.C.).

However, as long as no action is taken by the party entitled, either that of annulment or of ratification, the contract of
sale remains valid and binding. When plaintiff-appellant Trinidad C. Tagatac delivered the car to Feist by virtue of said
voidable contract of sale, the title to the car passed to Feist. Of course, the title that Feist acquired was defective and
voidable. Nevertheless, at the time he sold the car to Felix Sanchez, his title thereto had not been avoided and he
therefore conferred a good title on the latter, provided he bought the car in good faith, for value and without notice of
the defect in Feist's title (Article 1506, N.C.C.). There being no proof on record that Felix Sanchez acted in bad faith, it is
safe to assume that he acted in good faith.

The above rulings are sound doctrine and reflect our own interpretation of Article 559 as applied to the case before us.

Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly
transfer to the private respondents. The fact that he had not yet paid for them to EDCA was a matter between him and
EDCA and did not impair the title acquired by the private respondents to the books.

One may well imagine the adverse consequences if the phrase "unlawfully deprived" were to be interpreted in the
manner suggested by the petitioner. A person relying on the seller's title who buys a movable property from him would
have to surrender it to another person claiming to be the original owner who had not yet been paid the purchase price
therefor. The buyer in the second sale would be left holding the bag, so to speak, and would be compelled to return the
thing bought by him in good faith without even the right to reimbursement of the amount he had paid for it.

It bears repeating that in the case before us, Leonor Santos took care to ascertain first that the books belonged to Cruz
before she agreed to purchase them. The EDCA invoice Cruz showed her assured her that the books had been paid for
on delivery. By contrast, EDCA was less than cautious in fact, too trusting in dealing with the impostor. Although it
had never transacted with him before, it readily delivered the books he had ordered (by telephone) and as readily
accepted his personal check in payment. It did not verify his identity although it was easy enough to do this. It did not
wait to clear the check of this unknown drawer. Worse, it indicated in the sales invoice issued to him, by the printed
terms thereon, that the books had been paid for on delivery, thereby vesting ownership in the buyer.

Surely, the private respondent did not have to go beyond that invoice to satisfy herself that the books being offered for
sale by Cruz belonged to him; yet she did. Although the title of Cruz was presumed under Article 559 by his mere
possession of the books, these being movable property, Leonor Santos nevertheless demanded more proof before
deciding to buy them.

It would certainly be unfair now to make the private respondents bear the prejudice sustained by EDCA as a result of its
own negligence.1wphi1 We cannot see the justice in transferring EDCA's loss to the Santoses who had acted in good
faith, and with proper care, when they bought the books from Cruz.

While we sympathize with the petitioner for its plight, it is clear that its remedy is not against the private respondents
but against Tomas de la Pea, who has apparently caused all this trouble. The private respondents have themselves
been unduly inconvenienced, and for merely transacting a customary deal not really unusual in their kind of business. It
is they and not EDCA who have a right to complain.

WHEREFORE, the challenged decision is AFFIRMED and the petition is DENIED, with costs against the petitioner.


G.R. No. L-66944 November 13, 1989

ALLIANCE TOBACCO CORPORATION, INC., petitioner,
vs.
PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, FARMER'S 'VIRGlNlA TOBACCO REDRYING COMPANY, INC. and
INTERMEDIATE APPELLATE COURT, respondents.

FERNAN, C.J.:

The issue in the instant petition for review on certiorari of the decision of the then Intermediate Appellate Court is
whether or not petitioner's delivery of 174 bales of tobacco to the Farmer's Virginia Tobacco Redrying Company, Inc.
(FVTR), a contractee of the Philippine Virginia Tobacco Administration (PVTA) perfected the contract of sale between
petitioner and the (PVTA) so as to hold the latter liable for the loss of said bales while in the possession of the FVTR.

The PVTA a government corporation created under Republic Act No. 2265 to promote the tobacco industry, entered into
a contract of procuring, redrying and servicing with the FVTR for the1963 tobacco trading operation. 1 In June of that
year, the PVTA also entered into a merchandising loan agreement with the petitioner, a duly incorporated and
authorized tobacco trading entity, whereby the PVTA agreed to lend P25,500 to the petitioner for the purchase of flue-
cured Virginia tobacco from bona fide Virginia tobacco former-producers. 2

The following month, petitioner shipped to the FVTR 96 bales of tobacco weighing 4,800 kilos covered by Guia No. 1 and
167 bales weighing 8,350 kilos covered by Guia No. 2. In the words of the lower court, the following transpired:

... Before shipping the tobacco to the Redrying Plant, the plaintiff (petitioner herein) obtained a Clearance issued by the
Tobacco Inspector, authorizing the tobacco shipment to proceed to the Redrying Plant. Upon the arrival of the tobacco
shipments in the Redrying Plant, defendant FVTR at Bauang, La Union (Bauang for short), they were listed in the Log
Book, after which the tobacco were brought inside the Redying Compound. The Log Book was then submitted to the
Marketing Department, formerly the Trading Department and kept by the Branch Manager, Bauang, Mr. Jovencio
Pimentel, assisted by Mr. Pio Balagot. The documents submitted accompanying the tobacco shipments were the BIR
clearance, Clearance from the Regional Tobacco Inspector at San Fernando, La Union (San Fernando for short) and Guias
Nos. 1 and 2. After several days, the grading of the plaintiffs tobacco took place but only 89 bales from Guia No. 2 were
graded, weighed and accepted. The remaining bales of tobacco in Guia No. 2 and the whole of Guia No. I were not
graded and weighed because after grading and weighing 89 bales of Guia No. 2, some officers and employees in the
premises of defendant FVTR asked money for the separate grading and weighed of the un-graded and un-weighed
tobacco bales. Because the rest of the plaintiffs tobacco were not graded and weighed, Aldegunda Villanueva, Business
Manager of the plaintiff, saw the Branch Manager of the defendant FVTR and asked him to have their tobacco graded
and weighed. Since the grading and weighing of the plaintiffs tobacco was (sic) not resumed, in 1965, said Business
Manager personally called on Atty. Eduardo Bananal, Manager of the defendant PVTA in Manila and told the latter that
some tobacco of the plaintiff were not graded and weighed and were no longer in the premises of defendant FVTR's
Redrying Plant, Manager Bananal told her that the plaintiffs tobacco in question were considered accepted.

The operations of defendant FVTR in Bauang, stopped in October 1963. The plaintiff asked that its ungraded and un-
weighed tobacco be withdrawn from the Redrying Plant. The defendants PVTA and FVTR refused to allow the plaintiffs
request because according to them the tobacco sought to be withdrawn were subject of a merchandising loan and
owned by defendant, PVTA. 3

Unfortunately, the remaining un-graded and un-weighed 174 bales with a total value of P28,382 were lost while they
were in the possession of the FVTR Having learned of such loss in 1965, petitioner demanded for its value and the
application of the same to its merchandising loan with PVTA but both the latter and the FVTR refused to heed said
demands. 4

Consequently, petitioner filed in the then Court of First Instance of La Union a complaint against PVTA and FVTR praying
that the two defendants be ordered to pay it P4,443 representing the value of the 89 bales which were weighed, graded
and accepted by the defendants, P28,382.00 representing the value of the lost bales of tobacco and/or that the said
amount be applied to its loan with PVTA and P4,000 as attorney's fees and litigation expenses. 5 They prayed that
interest be charged on the first two amounts.

FVTR was declared in default. 6 Thereafter, petitioner and the PVTA submitted a stipulation of facts and agreed that a
partial judgment be rendered as to the 89 bales of tobacco which had been weighed and graded. 7

In its decision, 8 the lower court, citing Santiago Virginia Tobacco Planters Association vs. PVTA ruled that the PVTA, 9
should not be held responsible for the lost bales of tobacco because they were not yet properly graded and weighed and
that petitioner failed to present the weigher's tally sheets and warehouse receipts or quedans. The dispositive portion of
the decision states:

WHEREFORE, judgment is hereby rendered as follows:

1.
Ordering the defendant PVTA to pay the plantiff the amount of P9,323.11 which is the agreed value of the
plaintiffs uncontested 89 bales of tobacco, with interest at the legal rate, from the filing of the Complaint on December
27, 1968, up to its full payment;

2.
Ordering the defendant PVTA to pay the plaintiff the amount of P1,000 as attorney's fee;

Since the plaintiff admitted that it has a merchandising loan of P20,000 from defendant PVTA the amounts to be paid to
the former may be applied by the latter to the payment of said loan and its interest at the agreed rate.

3.
Dismissing the plaintiffs complaint regarding the 96 bales and 78 bales of tobacco under Guias Nos. 1 and 2,
respectively.

There is no pronouncement as to costs.

SO ORDERED. 10

Petitioner appealed to the then Intermediate Appellate Court which, in its decision of March 20, 1984, 11 affirmed in
toto the lower court's decision. Hence, petitioner interposed the instant petition for review on certiorari of the appellate
court decision. It contends that the question of substance decided by the said court is not in accord with the decision of
this Court in Philippine Virginia Tobacco Administration vs. De los Angeles, 12 and that the said "question of substance
boils down (to) whether or not there is a perfected contract of sale between petitioner and respondent PVTA with
respect to the aforesaid remaining bales of tobacco." 13

On the other hand, the herein respondent alleges that, without having been weighed or graded, the tobacco shipment
could not be deemed to have been accepted by FVTR much less the PVTA It insists that the Santiago Virginia Tobacco
Planters Association, Inc. vs. PVTA case (Santiago case for brevity) should be applied. Furthermore, the petition having
presented only the factual question of whether or not the tobacco shipment was indeed weighed and graded at the
redrying plant, the same must be denied. 14

On January 13, 1986, this Court denied the petition for lack of merit, However upon petitioner's motion for
reconsideration of the resolution denying the petition, the Court set aside said resolution of January 13, 1986 and gave
due course to the petition. 15

At the outset, it should be emphasized that the lower court made a definitive factual finding on the actual and physical
delivery of the lost bales of tobacco from the petitioner to the FVTR. 16 The parties, however, disagree as to the legal
implications of such delivery. Petitioner contends that it bound not only FVTR but also the PVTA and perfected the
contract of sale between petitioner and the PVTA On the other hand, the PVTA argues that the delivery was not valid
and binding on it considering that, not having been weighed and graded by its agents, it had not duly accepted the
shipments so as to perfect the contract of sale.

Under the Santiago case, shipping documents and check-lists which are accomplished prior to delivery do not prove
actual delivery. To prove such delivery, documents such as the weigher's tally sheet and the warehouse receipts which
are accomplished when the actual delivery is made are necessary. It should be noted, however, that the factual
circumstances extant in this case are different from those in the Santiago case.

In said case, there was a need to prove actual delivery because the petitioner therein demanded for the payment of
tobacco shipments which were allegedly delivered to the FVTR. 17 In other words, the actual, physical delivery of the
shipments was not proven. On the other hand, in this case, the lower court established from the testimonies of
witnesses the fact that petitioner entrusted to the FVTR a total of 263 bales of tobacco 89 bales of which were even
actually weighed and graded in the redrying plant. 18 However, for reasons beyond the control of the petitioner, the
FVTR refused to weigh and grade the remaining 174 bales. On top of this, the FVTR also refused to grant petitioner's
request to withdraw the un-weighed and un-graded shipments. As it turned out later, said shipments were lost while in
the custody of FVTR thereby placing the petitioner in a "no win" situation.

The Civil Code provides that ownerhip of the thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof. 19 There is delivery when the thing sold is placed in the control and possession of the
vendee. 20 Indeed, in tobacco trading, actual delivery plays a pivotal role. The peculiar procedure undergone in trading,
which procedure was set out at length in both the Santiago and the PVTA vs. De los Angeles cases, reveals that delivery
seals the contract of sale because the trader loses not only possession but also control over the shipment. Outlined by
the PVTA pursuant to its power "to take over and assume, and therefore exclusively direct, supervise and control, all
functions and operations with respect to the processing, warehousing, and trading of Virginia tobacco, the provisions of
ally existing law to the contrary notwithstanding," 21 the procedure is observed by everyone involved in the trade.

Verily, the tobacco trading procedure conceived and formulated by the PVTA is akin to a contract of adhesion wherein
only one party has a hand in the determination of the terms. But observance of the procedure more often than not
renders a trader at a disadvantage. The moment the shipment is placed in the hands of the PVTA or its representative
and it is lost, the trader is left empty-handed. While the flaw may not really be in the procedure itself, the same may be
found in the persons charged with the implementation of the procedure. Some personnel mishandle the shipment to

the detriment of the trader. Some demand grease money to facilitate the trading process. Sadly, this is what happened
in this case.

Hence, while under an Ideal situation, we would have found merit in respondent PVTA's contention that the contract of
sale could not have been perfected pursuant to Article 1475 22 of the Civil Code because to determine the price of the
tobacco traded, the shipment should first be inspected, graded and weighed, we find said contention misplaced herein.
A strict interpretation of the provision of Article 1475 may result in adverse effects to small planters who would not be
paid for the lost products of their toil. Such situation was what the ruling in PVTA vs. De los Angeles sought to avoid.

Equity and fair dealing, the anchor of said case, must once more prevail. Since PVTA had virtual control over the lost
tobacco bales, delivery thereof to the FVTR should also be considered effective delivery to the PVTA.

WHEREFORE, the decision of the appellate court insofar as lt affirms the decision of the lower court directing the PVTA
to pay petitioner the amount of P9,823.11 for the 89 bales of tobacco is hereby affirmed.

Respondent PVTA is likewise ordered to pay petitioner's claim of P28,382.00 for the lost 174 bales of tobacco. Both
amounts are subject to interest at the legal rate from the filing of the complaint on December 27, 1968 up to their full
payment.

Should the petitioner still owe respondent PVTA pursuant to the merchandising loan agreement between them, the
same shall be offset by whatever amount the petitioner would receive from the respondent PVTA by virtue of this
decision. No costs.

G.R. No. L-16394 December 17, 1966

JOSE SANTA ANA, JR. and LOURDES STO. DOMINGO, petitioners,
vs.
ROSA HERNANDEZ, respondent.

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

Appeal from the decision of the Court of Appeals in its Case CA-G.R. No. 20582-R, in effect reversing the decision of the
Court of First Instance of Bulacan in its Civil Case No. 1036.

The petitioners herein, spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo, owned a 115,850-square meter parcel of
land situated in barrio Balasing, Sta. Maria, Bulacan, and covered by Transfer Certificate of Title No. T-3598. On 28 May
1954, they sold two (2) separate portions of the land for P11,000.00 to the herein respondent Rosa Hernandez. These
portions were described in the deed of sale as follows:

Bahaguing nasa gawing Hilagaan. Humahanga sa Hilaga, kina Maria Perez, at Aurelio Perez; sa Timugan, sa lupang
kasanib; sa Silanganan, kay Mariano Flores at Emilio Ignacio; sa Kanluran, kay Cornelio Ignacio; Mayroong (12,500), m.c.
humigit kumulang.

Bahaguing nasa gawing Silanganan Humahanga sa Hilagaan, sa kay Rosa Hernandez; sa Silanganan, kay Domingo
Hernandez at Antonio Hernandez; sa Timugan, sa Sta. Maria-Tigbi Road; at sa Kanluran, sa lupang kasanib (Jose Sta. Ana,
Jr.), mayroong (26,500) metros cuadrados, humigit kumulang.

After the sale (there were two other previous sales to different vendees of other portions of the land), the petitioners-
spouses caused the preparation of a subdivision plan, Psd-43187, was approved on 13 January 1955 by the Director of
Lands. Rosa Hernandez, however, unlike the previous vendees, did not conform to the plan and refused to execute an
agreement of subdivision and partition for registration with the Register of Deeds of Bulacan; and she, likewise, refused
to vacate the areas that she had occupied. Instead, she caused the preparation of a different subdivision plan, which was
approved by the Director of Lands on 24 February 1955. This plan, Psd-42844, tallied with the areas that the defendant,
Rosa Hernandez, had actually occupied.

On 28 February 1955, herein petitioners-spouses filed suit against respondent Rosa Hernandez in the Court of First
Instance of Bulacan, claiming that said defendant was occupying an excess of 17,000 square meters in area of what she
had bought from them. Defendant Rosa Hernandez, on the other hand, claimed that the alleged excess, was part of the
areas that she bought.

The trial court observed:

The only question, therefore, to be determined by the Court is whether or not the plaintiffs had sold two portions
without clear boundaries but with exact areas (12,500 sq. m. and 26,000 sq. m.) at the rate of P.29 per square meter or,
as defendant Rosa Hernandez claimed, two portions, the areas of which were not definite but which were well defined
on the land and with definite boundaries and sold for the lump sum of P11,000.00.

Finding for the plaintiffs, the said court ordered the defendant, among other things, to vacate "the excess portions
actually occupied by her and to confine her occupation only to Lots 4-a and 4-b as shown in the plan, Exhibit E, of the
plaintiffs . . .," referring to Psd-43187.

Not satisfied with the judgment, defendant Hernandez appealed to the Court of Appeals.

The Court of Appeals dismissed the complaint and declared Rosa Hernandez the owner of lots 4-a and 4-b in her plan,
Psd-42844, upon the following findings:

The contract between appellees and appellant (Exhibit D) provided for the sale of two separate portions of the same
land for the single consideration of P11,000.00. Appellee Jose Santa Ana, Jr. said the transaction was by a unit of
measure or per square meter, and that although the actual total purchase price of the two parcels of land was
P11,300.00 at P0.29 per square meter the parties agreed to the sale at the reduced price of P11,000.00. The appellant
denied this claim of appellees. Gonzalo V. Ignacio, the notarial officer before the contract of sale was executed, failed to
corroborate Sta. Ana upon this point. Upon the contrary, Ignacio testified that appellant complained to him and the
appellees to the effect that the areas stated in the contract were less than the actual areas of the parcels of land being
sold and here we quote the notarial officer's own words:

"That the area stated in the document will not be the one to prevail but the one to prevail is the boundary of the land
which you already know." (p. 74, Innocencio).

Sta. Ana is the nephew of the appellant, and the former's assurance probably appeased the latter against insisting in the
correction of the areas stated in the contract of sale.

Two witnesses testified for the appellant. Jesus Policarpio divulged that the same parcels of land involved in this case
were previously offered to him by the appellees for the single purchase price of P12,000.00. Julio Hernandez stated that
his sister, the herein appellant, had offered P10,000.00 as against the appellees' price of P12,000.00, and that he was
able to persuade the parties to meet halfway on the price. Furthermore the previous conveyances made by the
appellees for other portions of the same property (Exhibits B and C) are also for lump sums.

The difference in area of 17,000 square meters is about one-half of the total area of the two parcels of land stated in the
document, but not for this alone may we infer gross mistake on the part of appellees. The appellees admit the lands in
question were separated from the rest of their property by a long and continuous "pilapil" or dike, and there is
convincing proof to show that the bigger lot (Lot 4-a) was wholly tenanted for appellees by Ciriaco Nicolas and Santiago
Castillo and the smaller lot (Lot 4-b) was wholly tenanted for said appellees by Gregorio Gatchalian. These facts support
the theory that the two parcels of land sold to the appellant were identified by the conspicuous boundaries and the
extent or area each tenant used to till for the vendors. Again, appellees should not be heard to complain about the
deficiency in the area because as registered owners and possessors of the entire land since 1949 they can rightly be
presumed to have acquired a good estimate of the value and areas of the portions they subsequently sold.

The Court of Appeals concluded by applying to the case Article 1542 of the new Civil Code:

In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number,
there shall be no increase or decrease of the price, although there be greater or less area or number than that stated in
the contract.

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

and declared Rosa Hernandez the owner of the whole of lots 4-a and 4-b of her own subdivision Plan Psd-42844,
notwithstanding their increased area as compared to that specified in the deed of sale.

In turn, the Sta. Ana spouses appealed to this Court, assigning the following errors:

The Court of Appeals committed a grave error of law when it departed from the accepted and usual course of judicial
proceedings, by disturbing the findings of fact of the trial court, made upon conflicting testimonies of the witnesses for
the plaintiffs, now in the petitioners, and the defendant, now the respondent, Rosa Hernandez.

The Court of Appeals committed a grave error of law when it held that the deed of sale, Exhibit D, was for a lump sum,
despite the fact that the boundaries given therein were not sufficiently certain and the boundaries indicated did not
clearly identify the land, thereby erroneously deciding a question of substance in a way not in accord with law and the
applicable decisions of this Honorable Court.

On the face of the foregoing assignments of error and the petitioners' discussions thereabout, their position can be
summarized as follows: that the Court of Appeals erred in substituting its own findings of fact for that of the trial court's,

without strong and cogent reasons for the substitution, contrary to the rule that appellate courts shall not disturb the
findings of fact of trial courts in the absence of such strong and cogent reasons; and that Article 1542 of the Civil Code of
the Philippines does not apply, allegedly because the boundaries, as shown in the deed of sale, are not definite.

In the first assignment of error, the petitioner spouses complain against the failure of the Court of Appeals to accept the
findings of fact made by the Court of First Instance. The credibility of witnesses and the weighing of conflicting evidence
are matters within the exclusive authority of the Court of Appeals, and it is not necessarily bound by the conclusions of
the trial court. Both the Judiciary Act (R.A. 296, section 29) and the Rules of Court (Rule 45, section 2) only allow a
review of decisions of the Court of Appeals on questions of law; and numerous decisions of this Court have invariably
and repeatedly held that findings of fact by the Court of Appeals are conclusive and not reviewable by the Supreme
Court (Galang vs. Court of Appeals, L-17248, 29 January 1962; Fonacier vs. Court of Appeals, 96 Phil. 418, 421; and cases
therein cited; Onglengco vs. Ozaeta, 70 Phil. 43; Nazareno vs. Magwagi, 71 Phil. 101). Barring, therefore, a showing that
the findings complained of are totally devoid of support in the record, or that they are so glaringly erroneous as to
constitute serious abuse of discretion, such findings must stand, for this Court is not expected or required to examine
and contrast the oral and documentary evidence submitted by the parties. As pointed out by former Chief Justice Moran
in his Comments on the Rules of Court (1963 Ed., Vol. 2, p. 412), the law creating the Court of Appeals was intended
mainly to take away from the Supreme Court the work of examining the evidence, and confine its task for the
determination of questions which do not call for the reading and study of transcripts containing the testimony of
witnesses.

The first assignment of error must, therefore, be overruled. We now turn to the second.

Despite the incontestable fact that the deed of sale in favor of Rosa Hernandez recites a price in a lump sum
(P11,000.00) for both lots (Annex "C", Complaint, Rec. on App., p. 21), appellants insist that the recited area should be
taken as controlling. They combat the application of Article 1542 of the Civil Code, on the ground that the boundaries
given in the deed are indefinite. They point out that the southern boundary of the small parcel is merely given as
"lupang kasanib" and that the same occurs with the western boundary of the bigger lot, which is recited as "lupang
kasanib (Jose Sta. Ana, Jr.)". The Court of Appeals, however, found as a fact that

the two parcels of land sold to appellant (i.e., appellee herein, Rosa Hernandez) were identified by the conspicuous
boundaries. (Emphasis supplied)

consisting in a long and continuous pilapil or dike that separated the lands in question from the rest of the property. On
the basis of such findings, that can not be questioned at this stage, for reasons already shown, it is unquestionable that
the sale made was of a definite and identified tract, a corpus certum, that obligated the vendors to deliver to the buyer
all the land within the boundaries, irrespective of whether its real area should be greater or smaller than what is recited
in the deed (Goyena vs. Tambunting, 1 Phil. 490; Teran vs. Villanueva, 56 Phil. 677; Azarraga vs. Gay, 52 Phil. 599;
Mondragon vs. Santos, 87 Phil. 471). And this is particularly true where, as in the case now before this Court, the area
given is qualified to be approximate only ("humigit kumulang", i.e., more or less Rec. on App., p. 22).

To hold the buyer to no more than the area recited on the deed, it must be made clear therein that the sale was made
by unit of measure at a definite price for each unit.

If the defendant intended to buy by the meter be should have so stated in the contract (Goyena vs. Tambunting, supra).

The ruling of the Supreme Court of Spain, in construing Article 1471 of the Spanish Civil Code (copied verbatim in our
Article 1542) is highly persuasive that as between the absence of a recital of a given price per unit of measurement, and
the specification of the total area sold, the former must prevail and determines the applicability of the norms concerning
sales for a lump sum.

La venta a cuerpo cierto indudablemente se verifica cuando en el contrato no solo no es precisado el precio singular por
unidad de medida, sino que tampoco son indicadas los dimensiones globales bales del inmueble, pero tambien se
verifica cuando aun ng habiendo sido indicado un precio singular por unidad de medida, sin embargo es especificada la
dimension total del inmueble, en cuyo ultimo caso entre los dos indices en contraste, constituido uno por la falta de un
precio singular por unidad de medida, y otro por la concrecion de las dimensiones globales del unmueble, la Ley da
prevalencia al mero y presume que aquella individualizacion no habia tenido para las partes valor esencial, que solo
constituia una superabundancia, y no significa que las partes hayan convenido aquel precio global solo en cuanto el
inmueble tuviese efectivamente aquellas dimensiones totales, siendo de estimar que esta es una presuncion absoluta,
contra la cual ni el comprador ni el vendedor pueden articular prueba contraria.

Por tanto, ni el comprador ni el vendedor pueden pretender una disminucicion o, respectivamente un suplemento de
precio, cuando las dimensiones globales del unmueble resulten despues mayores o menores de las indicadas en el
contrato, aunque aduzcan que solo en tanto han convenido el aquel precio en cuanto creian que las dimensiones de la
cosa fueran las precisadas en el contrato. (Tribunal Supreme de Espaa, Sent. de 26 Junio 1956; Rep. Jurisp. Aranzadi,
2.729) (Emphasis supplied)

The Civil Code's rule as to sales "a cuerpo cierto" was not modified by Act 496, section 58, prohibiting the issuance of a
certificate of title to a grantee of part of a registered tract until a subdivision plan and technical description are duly
approved by the Director of Lands, and authorizing only the entry of a memorandum on the grantor's certificate of title

in default of such plan. The latter provision is purely a procedural directive to Registers of Deeds that does not attempt
to govern the rights of vendor and vendee inter se, that remain controlled by the Civil Code of the Philippines. It does
not even bar the registration of the contract itself to bind the land.

WHEREFORE, the decision of the Court of Appeals, in its case No. 20582-R, is hereby affirmed. Costs against the
appellants, Jose Santa Ana, Jr. and Lourdes Sto. Domingo.

G.R. No. L-20046 March 27, 1968

ROMEO PAYLAGO and ROSARIO DIMAANDAL, petitioners,
vs.
INES PASTRANA JARABE and THE HONORABLE COURT OF APPEALS, respondents.

REYES J.B.L.,:

This is an appeal by certiorari from the decision of the Court of Appeals affirming the lower court's decision in the
case of Romeo Paylago, et al. vs. Ines Pastrana Jarabe, CA-G.R. No. 25031-R, promulgated on June 6, 1962. (Civil Case
No. R-709 of the Court of First Instance of Oriental Mindoro).

The entire lot involved in this suit was originally covered by Homestead Patent issued on June 7, 1920 under Act
No. 926 and later under OCT No. 251 of the Registry of Deeds of Mindoro, issued on June 22, 1920 in the name of
Anselmo Lacatan. On May 17, 1948, after the death of Anselmo Lacatan, TCT No. T-728 (which cancelled OCT No. 251)
was issued in the name his two sons and heirs, Vidal and Florentino Lacatan. Vidal Lacatan died on August 27, 1950.

On March 23, 1953, Vidal Lacatan's heirs, namely, Maximo, Tomas and Lucia Lacatan, executed a deed of sale (Exh.
C) in favor of the spouses Romeo Paylago and Rosario Dimaandal, plaintiffs-petitioners herein, over a portion of the
entire lot under TCT No. T-728, which portion is described as follows:

North Provincial Road;
East Property of Romeo Paylago;
South Property of Florentino Lacatan;
West Provincial Road (Nabuslot-Batingan);

containing an area of 3.9500 hectares.

On October 6, 1953, Florentino Lacatan also died, leaving as his heirs his widow and three children, Felipe, Rosita
and Florencia Lacatan. On December 31, 1953, the said children of Florentino Lacatan likewise executed a deed of sale
(Exh. D) in favor of the same vendees over another portion of the same lot described as follows:

North Provincial Road (Calapan-Pinamalayan);
East Heirs of Sotero Mongo;
South Aniceta Lolong;
West Heirs of Vidal Lacatan;

with an area of 2.8408 hectares.

On March 2, 1954, by virtue of the registration of the two deeds of sale (Exhs. C and D), a new TCT No. T-4208
covering the total area of
6.7908 hectares was issued in favor of plaintiffs-petitioners, the Paylago spouses. A subsequent subdivision survey for
the purpose of segregating the two aforementioned portions of land described in the deeds (Exhs. C and D) as well as in
the new TCT No. T-4208, however, disclosed that a portion (one half hectare) of the total area purchased by plaintiffs-
petitioners and indicated in the sketch Exh. B at a point marked Exh. B-1 was being occupied by defendant-respondent.
Hence, the action to recover possession and ownership of the said portion.

Vis-a-vis the foregoing undisputed facts, the trial court and the Court of Appeals found that a portion of land in
question which is described as follows:

North Provincial Road;
East Apolonio Lacatan;
South Anselmo Lacatan;
West Valentin Lastica;

and with an area of one half hectare is indicated in the sketch of subdivision plan marked Exh. B-1 of Exh. B; that
on November 27, 1938, the said portion of land was purchased by Hilario Jarabe, late husband of defendant-respondent,
from one Apolonio Lacatan, which sale is evidenced by an unregistered deed of sale (Exh. 6); that Apolonio Lacatan, in
turn, bought the same in 1936 from Anselmo Lacatan, the original registered owner in whose favor OCT No. 251 and
later TCT No. T-4208 were issued; that the first deed of sale, also unregistered, executed by Anselmo Lacatan in favor of
Apolonio Lacatan was lost during the Japanese occupation; that the herein defendant-respondent has been in
possession of the said portion continuously, publicly, peacefully and adversely as owner thereof from 1938 up to the

present; and, that the herein plaintiffs-petitioners knew, nay, admitted in a deed of lease, paragraph 3 (Exh. 4), that
defendant-respondent has been in possession of the premises since 1945.

After trial, the lower court held that plaintiffs-petitioners were not purchasers in good faith and, accordingly,
rendered judgment in favor of defendant-respondent, declaring the latter as owner of the land in question with the right
to retain possession of the same. The decision was affirmed in toto by the Court of Appeals.

From the evidence adduced by the parties evolved the issue: Who has a better right in case of double sale of real
property, the registered buyer or the prior but unregistered purchaser?

This Court has formulated in no uncertain terms the general principle governing the matter: as between two
purchasers, the one who has registered the sale in his favor, in good faith, has a preferred right over the other who has
not registered his title, even if the latter is in the actual possession of the immovable property (Mendiola v. Pacalda, 10
Phil. 705; Veguillas v. Jaucian, 25 Phil. 315; Po Sun Tun v. Price, 54 Phil. 192). Indeed, the foregoing principle finds
concrete bases in the pertinent provisions of the New Civil Code, Article 1544, providing that if the same immovable
property should have been sold to different vendees, "the ownership shall belong to the person acquiring it who in good
faith first recorded it in the registry of property."

There is no question that the sales made in favor of plaintiffs-petitioners were registered while the alleged sale
executed in favor of defendant-respondent was not. Applying the foregoing principle of law to the instant case, it is now
contended by plaintiffs-petitioners that their certificate of title must prevail over defendant-respondent, and that the
courts below correspondingly committed error in deciding the case to the contrary.

But there is more than meets the eye in the case at bar. While plaintiffs-petitioners have a registered title, it
cannot be denied that their acquisition and subsequent registration were tainted with the vitiating element of bad faith.
It was so found by both the Court of First Instance and the Court of Appeals, and their finding is conclusive upon us.
Thus, in Evangelista vs. Montao, 93 Phil. 275, 279, this Court ruled:

Both the Court of First Instance and the Court of Appeals absolved the defendants, having found and declared after
weighing the evidence that the plaintiff, was not a purchaser in good faith. That this conclusion is a finding of fact and,
being a finding of fact, not subject to review, is too plain to admit of argument.

Both Courts below found that petitioners knew beforehand that the parcel of land in question was owned by
defendant-respondent.1wph1.t

In its decision the Court of Appeals declared that "plaintiffs herein were aware of that peaceful, continuous and
adverse possession of defendant since 1945, because this fact is admitted by said plaintiffs in a deed of lease, paragraph
3 (Exhibit 4) covering a portion of the entire lot, and situated just across the road from the land in question." (Dec., C.
App., p. 4).

Considering that the boundaries of the lands that the petitioners Paylago purchased in 1953 and 1954 were well
defined, they must have known that the portion occupied by the defendant-respondent under claim of ownership and
leased to them by the latter was included in the description. And coupled with their knowledge that defendant-
respondent purchased the same from Apolonio Lacatan, plaintiffs-petitioners should have inquired and made an
investigation as to the possible defects of the title of the Lacatan heirs over the entire lot sold to them, granting that the
latter's certificate of title was clear. This, they failed to do. They cannot now claim complete ignorance of defendant-
respondent's claim over the property. As was well stated in one case, "a purchaser who has knowledge of facts which
should put him upon inquiry and investigation as to possible defects of the title of the vendor and fails to make such
inquiry and investigation, cannot claim that he is a purchaser in good faith and has acquired a valid title thereto".
(Sampilo vs. Court of Appeals, 55 O.G. No. 30, p. 5772). To the same effect is the following doctrine laid down by the
Supreme Court in the case of Leung Yee v. F.L. Strong Machinery Co. & Williamson, 37 Phil. 644. Said the Court:

One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has
acquired title thereto in good faith, as against the true owner of the land or of an interest therein; and the same rule
must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as
might be necessary to acquaint him with the defects of the title of his vendor. A purchaser cannot close his eyes to facts
which should put a reasonable man upon his guard and then claims that he acted in good faith under the belief that
there was no defect in the title of the vendor. His mere refusal to believe that such defect exists, or his willful closing of
his eyes to the possibility of the existence of a defect in his vendor's title, will not make him an innocent purchaser for
value, if it afterwards develops that the title was 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.

The fundamental premise of the preferential rights established by Article 1544 of the New Civil Code is good faith
(Bernas v. Bolo, 81 Phil. 16). To be entitled to the priority, the second vendee must not only show prior recording of his
deed of conveyance or possession of the property sold, but must, above all, have acted in good faith, that is to say,
without knowledge of the existence of another alienation by his vendor to a stranger (Obras Pias v. Ignacio, 17 Phil. 45;
Leung Yee v. F.L. Strong Machinery Co., et al., op. cit.; Emas v. De Zuzuarregui, et al., 53 Phil. 197). Short of this qualifying
circumstance, the mantle of legal protection and the consequential guarantee of indefeasibility of title to the registered

property will not in any way shelter the recording purchaser against known and just claims of a prior though
unregistered buyer. Verily, it is now settled jurisprudence that knowledge of a prior transfer of a registered property by
a subsequent purchaser makes him a purchaser in bad faith and his knowledge of such transfer vitiates his title acquired
by virtue of the later instrument of conveyance which was registered in the Registry of Deeds (Ignacio v. Chua Hong, 52
Phil. 940; Gustilo, et al. v. Maravilla, 48 Phil. 442; Ramos, et al. v. Dueno, et al., 50 Phil. 786). The registration of the later
instrument creates no right as against the first purchaser. For the rights secured under the provisions of Article 1544 of
the New Civil Code to the one of the two purchasers of the same real estate, who has secured and inscribed his title
thereto in the Registry of Deeds, do not accrue, as already mentioned, unless such inscription is done in good faith
(Leung Yee v. F.L. Strong Machinery Co., et al., op. cit.). To hold otherwise would reduce the Torrens system to a shield
for the commission of fraud (Gustilo, et al. v. Maravilla, op. cit.).

Plaintiffs-petitioners cited the case of Bacolod-Murcia Milling Co., Inc. v. De la Rama, et al., G.R. No. L-4526
September 1959, to disprove bad faith ascribed to them. But the citation does not fit with the facts of the present case.
It is to be noted that the second purchaser in the De la Rama case had no knowledge of the previous sale and possession
of the first purchaser at the time he (second purchaser) acquired the property involved therein. "(T)here is nothing in
the complaint which may in any way indicate that he knew such possession and encumbrance when he bought the
property from its owner." Plaintiffs-petitioners in the instant case, however, had knowledge of defendant-respondent's
claim of ownership over the land in question long before they purchased the same from the Lacatan heirs. They were
even told, as previously intimated, that defendant-respondent bought the land from Apolonio Lacatan. Thus, it could
easily be distinguished that the second purchaser in the De la Rama case acted with good faith, i.e., without knowledge
of the anterior sale and claim of ownership of the first vendee, whereas, plaintiffs-petitioners herein acted with manifest
bad faith in buying the land in question, all the while knowing that defendant-respondent owns the same. Such
knowledge of defendant-respondent's ownership of the land is more than enough to overthrow the presumption of
good faith created by law in favor of plaintiffs-petitioners. This being the case, we cannot just close our eyes and blindly
stamp our approval on the argument of plaintiffs-petitioners that they have the better right simply because their title is
registered and as such is indefeasible.

Plaintiffs-petitioners also contend that the identity of the land in question has not been established. Again, we
disagree. Evidence of record, both oral and documentary, unequivocally show that the said portion of land can be
identified and segregated, and has been in fact identified and segregated (Exh. B-1), from the entire lot covered by TCT
No. T-4208 (Exh- A) issued in the names of plaintiffs-petitioners. The boundaries of the same have been clearly indicated
as that planted by madre cacao trees. Even the surveyor hired by plaintiffs-petitioners was able to fix the said
boundaries in such a manner as to definitely and accurately segregate the premises from the adjoining property. How
could plaintiffs-petitioners now argue that the land has not been identified when the Supreme Court itself says that
what really defines a piece of land is not the area mentioned in the description but the boundaries (Sanchez v. Director
of Lands, 63 Phil. 378; Buizer v. Cabrera, etc., 81 Phil. 669; Bayot v. Director of Lands, 98 Phil. 935)? Besides, the area has
been also established as one-half hectare.

Another collateral question raised by plaintiffs-petitioners is the admission by the courts a quo of secondary
evidence to establish the contents of the first unregistered deed of sale executed by Anselmo Lacatan in favor of
Apolonio Lacatan when the loss or destruction of the original document, according to them, has not been established.
Again, the findings of the Court of Appeals destroy this assertion of petitioners (Dec., p. 5):

Undeniably the alleged unregistered document could no longer be examined by the parties in court, because it was
lost but its original, however, upon, the trial court's findings which we have no reason to question has been
sufficiently proved as having existed.

As observed by this Supreme Court, "the destruction of the instrument may be proved by any person knowing the
fact. The loss may be shown by any person who knew the fact of its loss, or by any one who has made, in the judgment
of the court, a sufficient examination of the place or places where the document or papers of similar character are kept
by the person in whose custody the document lost was, and has been unable to find it; or has made any other
investigation which is sufficient to satisfy the court that the instrument is indeed lost." (Michael & Co. v. Enriquez, 33
Phil. 87). And "it is not even necessary to prove its loss beyond all possibility of mistake. A reasonable probability of its
loss is sufficient, and this may be shown by a bona fide and diligent search, fruitlessly made, for it in places where it is
likely to be found." (Government of P.I. v. Martinez, 44 Phil. 817). And after proving the due execution and delivery of
the document, together with the fact that the same has been lost or destroyed, its contents may be proved, among
others, by the recollection of witnesses (Vaguillas v. Jaucian, 25 Phil. 315).

Finding that the facts and the law support the same, it is our opinion, and so hold, that the appealed decision
should be, as it is hereby affirmed. Costs against petitioners spouses Paylago and Dimaandal.

G.R. No. L-19248 February 28, 1963

ILUMINADO HANOPOL, plaintiff-appellant,
vs.
PERFECTO PILAPIL, defendant-appellee.

BARRERA, J.:

This is a case of double sale of the same parcel of unregistered land decided by the Court of First Instance of Leyte (Civil
Case No. 21) in favor of defendant-appellee Perfecto Pilapil, originally appealed by plaintiff-appellant Iluminado Hanopol
to the Court of Appeals, but later certified to this Court for proper adjudication, the issues involved being exclusively of
law.

Appellant Hanopol claims ownership of the land by virtue of a series of purchases effected in 1938 by means of private
instruments, executed by the former owners Teodora, Lucia, Generosa, Sinforosa and Isabelo, all surnamed Siapo.
Additionally, he invokes in his favor a decision rendered by the Court of First Instance of Leyte (in Civil Case No. 412) on
a complaint he filed on June 16, 1948, against the same vendors, who, according to his own averments, took possession
of the said property in December, 1945 through fraud, threat and intimidation, pretending falsely to be the owners
thereof and ejecting the tenants of Hanopol thereon, and since then had continued to possess the land. Decision
declaring him the exclusive owner of the land in question and ordering therein defendants to deliver possession thereof
was rendered on September 21, 1958.

On the other hand, appellee Pilapil asserts title to the property on the strength of a duly notarized deed of sale executed
in his favor by the same owners on December 3, 1945, which deed of sale was registered in the Registry of Deeds of
Leyte on August 20, 1948 under the provisions of Act No. 3344.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this
Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this
stipulation of facts. 1wph1.t

The case was submitted for decision without any testimonial evidence, both parties relying exclusively on their
documentary evidence consisting, on the part of Hanopol, of the private instruments alluded to and a copy of the
decision in the reivindicatory case, and on the part of Pilapil, the notarized deed of sale in his favor bearing annotation
of its registration under Act No. 3344. As thus submitted, the trial court rendered the decision adverted to at the
beginning of this opinion, mainly upon the authority of the second paragraph of Article 15441 of the New Civil Code,
which is a reproduction of Article 1473 of the old Civil Code, the law in force at the time the transaction in this case took
place.

Appellant Hanopol in his appeal from the decision of the trial court presents two questions of law; firstly, whether or not
the judgment in the former case No. 412 against the vendors Siapos is binding upon the defendant-appellee as their
successor-in-interest; and secondly, whether or not the registration of the second deed of sale in favor of appellee
Pilapil affects his right as the first vendee.

Under the first assignment of error, the appellant contends that inasmuch as appellee claims to be the successor-in-
interest of the vendors, he is bound by the judgment rendered against the latter. This contention is without merit,
because it appears from the documentary evidence that appellee Pilapil derived his right to the land from the sale to
him of the said property on December 3, 1945, long before the filing of the complaint against the vendors in 1948. He
was not made a party in the case against the Siapos, and there was not even a claim that he had knowledge of said
litigation. He cannot, therefore, be bound by such judgment in view of the provision of paragraph (b), Section 44 of Rule
39 of the Rules of Court which speaks of the effect of judgment as follows:

... the judgment so ordered is, in respect to the matter directly adjudged, conclusive between the parties and their
successors in interest by title subsequent to commencement of the action or special proceeding, litigating for the same
thing and under the same title and in the same capacity. (Emphasis supplied)

Since Pilapil was not a party to the action and is not a successor-in-interest by title subsequent to the commencement of
the action, having acquired his title in 1945 and the action filed in 1948, the decision in said case cannot be binding on
him.

Appellant argues under the second issue raised by him that the registration of Pilapil's notarized deed of sale in 1948
under Act No. 3344 "shall be understood to be without prejudice to a third party with a better right". He contends that
since at the time the Siapos sold the land in question in 1945 to Pilapil, the former were no longer the owners as they
had already sold the same to appellant since 1938, the first sale to him is a better right which cannot be prejudiced by
the registration of the second sale.

We do not think the quoted proviso in Act No. 3344 justifies appellant's contention. If his theory is correct, then the
second paragraph of Article 1544 of the New Civil Code (formerly Article 1473 of the old Code) would have no
application at all except to lands or real estate registered under the Spanish Mortgage Law or the Land Registration Act.
Such a theory would thus limit the scope of that codal provision. But even if we adopt this latter view, that is, that Article
1544 (formerly Article 1473) only applies to registered land, still we cannot agree with the appellant that by the mere
fact of his having a previous title or deed of sale, he has acquired thereby what is referred to in Act No. 3344 as the
"better right" that would be unaffected by the registration of a second deed of sale under the same law. Under such
theory, there would never be a case of double sale of the same unregistered property.

An example of what could be a better right that is protected against the inscription of a subsequent sale is given in the
case of Lichauco v. Berenguer (39 Phil. 643). The facts in that case are succinctly stated in the syllabus thereof as follows:

.... 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 provision of article 1473 of
the Civil Code, notwithstanding the material and personal possession by the second vendee. (Bautista vs. Sioson, 39 Phil.
Rep., 615)

.... Because L had to receive his possession from B who was a mere lessee of S and as 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..

.... 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 other titles which the other vendee was able to acquire independently as, in this case, the title by
prescription.

It thus appears that the "better right" referred to in Act No. 3344 is much more than the mere prior deed of sale in favor
of the first vendee. In the Lichauco case just mentioned, it was the prescriptive right that had supervened. Or, as also
suggested in that case, other facts and circumstances exist which, in addition to his deed of sale, the first vendee can be
said to have better right than the second purchaser.

In the case at bar, there appears to be no clear evidence of Hanopol's possession of the land in controversy. In fact, in his
complaint against the vendors, Hanopol alleged that the Siapos took possession of the same land under claim of
ownership in 1945 and continued and were in such possession at the time of the filing of the complaint against them in
1948. Consequently, since the Siapos were in actual occupancy of the property under claim of ownership, when they
sold the said land to appellee Pilapil on December 3, 1945, such possession was transmitted to the latter, at least
constructively, with the execution of the notarial deed of sale, if not actually and physically as claimed by Pilapil in his
answer filed in the present case. Thus, even on this score, Hanopol cannot have a better right than appellee Pilapil who,
according to the trial court, "was not shown to be a purchaser in bad faith".

WHEREFORE, finding no error in the decision appealed from, the same is hereby affirmed, with costs against the
appellant. So ordered.

G.R. No. 109410
August 28, 1996

CLARA M. BALATBAT, petitioner,
vs.
COURT OF APPEALS and Spouses JOSE REPUYAN and AURORA REPUYAN, respondents.

TORRES, JR. , J.:p

Petitioner Clara M. Balatbat instituted this petition for review pursuant to Rule 45 of the Revised Rules of Court seeking
to set aside the decision dated August 12, 1992 of the respondent Court of Appeals in CA-GR. CV No. 29994 entitled
"Alexandra Balatbat and Clara Balatbat, plaintiffs-appellants versus Jose Repuyan and Aurora Repuyan, defendants-
appellees", the dispositive portion of which reads: 1

WHEREFORE, the judgment appealed from is affirmed with the modification that the awards of P10,000.00 for
attorney's fees and P5,000.00 as costs of litigation are deleted.

SO ORDERED.

The records show the following factual antecedents:

It appears that on June 15, 1977, Aurelio A. Roque filed a complaint for partition docketed as Civil Case No. 109032
against Corazon Roque, Alberto de los Santos, Feliciano Roque, Severa Roque and Osmundo Roque before the then
Court of First Instance of Manila, Branch IX. 2 Defendants therein were declared in default and plaintiff presented
evidence ex-parte. On March 29, 1979, the trial court rendered a decision in favor of plaintiff Aurelio A. Roque, the
pertinent portion of which reads: 3

From the evidence, it has been clearly established that the lot in question covered by Transfer Certificate of Title No.
51330 was acquired by plaintiff Aurelio Rogue and Maria Mesina during their conjugal union and the house constructed
thereon was likewise built during their marital union. Out of their union, plaintiff and Maria Mesina had four children,
who are the defendants in this case. When Maria Mesina died on August 28, 1966, the only conjugal properties left are

the house and lot above stated of which plaintiff herein, as the legal spouse, is entitled to one-half share pro-indiviso
thereof. With respect to the one-half share pro-indiviso now forming the estate of Maria Mesina, plaintiff and the four
children, the defendants here, are each entitled to one-fifth (1/5) share pro-indiviso. The deceased wife left no debt.

Wherefore, judgment is hereby rendered ordering the partition of the properties, subject matter of this case consisting
of the house and lot, in the following manner:

1.
Of the house and lot forming the conjugal properties, plaintiff is entitled to one-half share pro-indiviso thereof
while the other half forms the estate of the deceased Maria Mesina;

2.
Of the Estate of deceased Maria Mesina, the same is to be divided into five (5) shares and plaintiff and his four
children are entitled each to one-fifth share thereof pro-indiviso.

Plaintiff claim for moral, exemplary and actual damages and attorney's fees not having been established to the
satisfaction of the Court, the same is hereby denied.

Without pronouncement as to costs.

SO ORDERED

On June 2, 1979, the decision became final and executory. The corresponding entry of judgment was made on March 29,
1979. 4

On October 5, 1979, the Register of Deeds of Manila issued a Transfer Certificate of Title No. 135671 in the name of the
following persons in the following proportions: 5

Aurelio A. Roque
6/10 share
Severina M. Roque
1/10 share
Osmundo M. Roque 1/10 share
Feliciano M. Roque
1/10 share
Corazon M. Roque
1/10 share

On April 1, 1980, Aurelio A. Rogue sold his 6/10 share in T.C.T. No. 135671 to spouses Aurora Tuazon-Repuyan and Jose
Repuyan as evidenced by ."Deed of Absolute Sale." 6

On July 21, 1980, Aurora Tuazon Repuyan caused the annotation of her affidavit of adverse claim 7 on the Transfer
Certificate of Title No. 135671, 8 to wit:

Entry No. 5627/T-135671 NOTICE OF ADVERSE CLAIM Filed by Aurora Tuazon Repuyan, married, claiming among
others that she bought 6/10 portion of the property herein described from Aurelio Roque for the amount of P50,000.00
with a down payment of P5,000.00 and the balance of P45,000.00 to be paid after the partition and subdivision of the
property herein described, other claims set forth in Doc. No. 954, page 18, Book 94 of ________________ 64 _______
PEDRO DE CASTRO, Notary Public of Manila.

Date of instrument July 21, 1980
Date of inscription July 21, 1980 at 3:35 p.m.

TERESITA H. NOBLEJAS
Acting Register of Deeds

By:

RAMON D. MACARICAN
Acting Second Deputy

On August 20, 1980, Aurelio A. Roque filed a complaint for "Rescission of Contract" docketed as Civil Case No. 134131
against spouses Aurora Tuazon-Repuyan and Jose Repuyan before Branch IV of the then Court of First Instance of
Manila. The complaint is grounded on spouses Repuyan's failure to pay the balance of P45,000.00 of the purchase price.
9 On September 5, 1980, spouses Repuyan filed their answer with counterclaim. 10

In the meantime, the trial court issued an order in Civil Case No. 109032 (Partition case) dated February 2, 1982, to wit:
11

In view of all the foregoing and finding that the amount of P100,000.00 as purchase price for the sale of the parcel of
land covered by TCT No. 51330 of the Registry of Deeds of Manila consisting of 84 square meters situated in Callejon
Sulu, District of Santa Cruz, Manila, to be reasonable and fair, and considering the opportunities given defendants to sign
the deed of absolute sale voluntarily, the Court has no alternative but to order, as it hereby orders, the Deputy Clerk of
this Court to sign the deed of absolute sale for and in behalf of defendants pursuant to Sec. 10, Rule 39 of the Rules of
Court, in order to effect the partition of the property involved in this case.


SO ORDERED.

A deed of absolute sale was executed on February 4, 1982 between Aurelio S. Roque, Corazon Roque, Feliciano Roque,
Severa Roque and Osmundo Roque and Clara Balatbat, married to Alejandro Balatbat. 12 On April 14, 1982, Clara
Balatbat filed a motion for the issuance of a writ of possession which was granted by the trial court on September 14,
1982 "subject, however, to valid rights and interest of third persons over the same portion thereof, other than vendor or
any other person or persons privy to or claiming any rights or interests under it." The corresponding writ of possession
was issued on September 20, 1982. 13

On May 20, 1982, petitioner Clara Balatbat filed a motion to intervene in Civil Case No. 134131 14 which was granted as
per court's resolution of October 21, 1982. 15 However, Clara Balatbat failed to file her complaint in intervention. 16 On
April 15, 1986, the trial court rendered a decision dismissing the complaint, the pertinent portion of which reads: 17

The rescission of contracts are provided for in the laws and nowhere in the provision of the Civil Code under the title
Rescissible Contracts does the circumstances in the case at bar appear to have occurred, hence, the prayer for rescission
is outside the ambit for which rescissible [sic] could be granted.

The Intervenor Plaintiff, Clara Balatbat, although allowed to intervene, did not file her complaint in intervention.

Consequently, the plaintiff having failed to prove with sufficient preponderance his action, the relief prayed for had to
be denied. The contract of sale denominated as "Deed of Absolute Sale" (Exh. 7 and sub-markings) being valid and
enforceable, the same pursuant to the provisions of Art. 1159 of the Civil Code which says:

Obligations arising from contracts have the force of law between the contracting parties and should be complied with in
good faith.

has the effect of being the law between the parties and should be complied with. The obligation of the plaintiff under
the contract being to have the land covered by TCT No. 135671 partitioned and subdivided, and title issued in the name
of the defendant buyer (see page 2 par. C of Exh. 7-A) plaintiff had to comply thereto to give effect to the contract.

WHEREFORE, judgment is rendered against the plaintiff, Aurelio A. Roque, and the plaintiff in intervention, Clara
Balatbat, and in favor of the defendants, dismissing the complaint for lack of merit, and declaring the Deed of Absolute
Sale dated April 1, 1980 as valid and enforceable and the plaintiff is, as he is hereby ordered, to partition and subdivide
the land covered by T.C.T. No. 135671, and to aggregate therefrom a portion equivalent to 6/10 thereof, and cause the
same to be titled in the name of the defendants, and after which, the defendants, and after which, the defendants, and
after which, the defendants, and after which, the defendants to pay the plaintiff the sum of P45,000.00. Considering
further that the defendants suffered damages since they were forced to litigate unnecessarily, by way of their
counterclaim, plaintiff is hereby ordered to pay defendants the sum of P15,000.00 as moral damages, attorney's fees in
the amount of P5,000.00.

Costs against plaintiff.

SO ORDERED.

On March 3, 1987, petitioner Balatbat filed a notice of lis pendens in Civil Case No. 109032 before the Register of Deeds
of Manila. 18

On December 9, 1988, petitioner Clara Balatbat and her husband, Alejandro Balatbat filed the instant complaint for
delivery of the owners duplicate copy of T.C.T. No. 135671 docketed as Civil Case No. 88-47176 before Branch 24 of the
Regional Trial Court of Manila against private respondents Jose Repuyan and Aurora Repuyan. 19

On January 27, 1989, private respondents filed their answer with affirmative defenses and compulsory counterclaim. 20

On November 13, 1989, private respondents filed their memorandum 21 while petitioners filed their memorandum on
November 23, 1989. 22

On August 2, 1990, the Regional Trial Court of Manila, Branch 24, rendered a decision dismissing the complaint, the
dispositive portion of which reads : 23

Considering all the foregoing, this Court finds that the plaintiffs have not been able to establish their cause of action
against the defendants and have no right to the reliefs demanded in the complaint and the complaint of the plaintiff
against the defendants is hereby DISMISSED. On the counterclaim, the plaintiff are ordered to pay defendants the
amount of Ten Thousand Pesos by way of attorney's fees, Five Thousand Pesos as costs of litigation and further to pay
the costs of the suit.

SO ORDERED.

Dissatisfied, petitioner Balatbat filed an appeal before the respondent Court of Appeals which rendered the assailed
decision on August 12, 1992, to wit: 24

WHEREFORE, the judgment appealed from is affirmed with the modification that the awards of P10,000.00 for
attorney's fees and P5,000.00 as costs of litigation are deleted.

SO ORDERED.

On March 22, 1993, the respondent Court of Appeals denied petitioner's motion for reconsideration. 25

Hence, this petition for review.

Petitioner raised the following issues for this Court's resolution:

I

WHETHER OR NOT THE ALLEGED SALE TO THE PRIVATE RESPONDENTS WAS MERELY EXECUTORY AND NOT A
CONSUMMATED TRANSACTION?

II

WHETHER OR NOT THERE WAS A DOUBLE SALE AS CONTEMPLATED UNDER ART. 1544 OF THE CIVIL CODE?

III

WHETHER OR NOT PETITIONER WAS A BUYER IN GOOD FAITH AND FOR VALUE?

IV

WHETHER OR NOT THE COURT OF APPEALS ERRED IN GIVING WEIGHT AND CONSIDERATION TO THE EVIDENCE OF THE
PRIVATE RESPONDENTS WHICH WERE NOT OFFERED?

Petitioner asseverates that the respondent Court of Appeals committed grave abuse of discretion tantamount to lack or
excess of jurisdiction in affirming the appealed judgment considering (1) that the alleged sale in favor of the private
respondents Repuyan was merely executory; (2) that there is no double sale; (3) that petitioner is a buyer in good faith
and for value; and (4) that private respondents did not offer their evidence during the trial.

Contrary to petitioner's contention that the sale dated April 1, 1980 in favor of private respondents Repuyan was merely
executory for the reason that there was no delivery of the subject property and that consideration/price was not fully
paid, we find the sale as consummated, hence, valid and enforceable. In a decision dated April 15, 1986 of the Regional
Trial Court of Manila Branch IV in Civil Case No. 134131, the Court dismissed vendor's Aurelio Roque complaint for
rescission of the deed of sale and declared that the Sale dated April 1, 1980, as valid and enforceable. No appeal having
been made, the decision became final and executory. It must be noted that herein petitioner Balatbat filed a motion for
intervention in that case but did not file her complaint in intervention. In that case wherein Aurelio Roque sought to
rescind the April 1, 1980 deed of sale in favor of the private respondents for non-payment of the P45,000.00 balance,
the trial court dismissed the complaint for rescission. Examining the terms and conditions of the "Deed of Sale" dated
April 1, 1980, the P45,000.00 balance is payable only "after the property covered by T.C.T. No. 135671 has been
partitioned and subdivided, and title issued in the name of the BUYER" hence, vendor Roque cannot demand payment of
the balance unless and until the property has been subdivided and titled in the name of private respondents. Devoid of
any stipulation that "ownership in the thing shall not pass to the purchaser until he has fully paid the price" 26,
ownership in thing shall pass from the vendor to the vendee upon actual or constructive delivery of the thing sold even
if the purchase price has not yet been fully paid. The failure of the buyer has not yet been fully paid. The failure of the
buyer to make good the price does not, in law, cause the ownership to revest to the seller unless the bilateral contract
of sale is first rescinded or resolved pursuant to Article 1191 of the New Civil Code. 27 Non-payment only creates a right
to demand the fulfillment of the obligation or to rescind the contract.

With respect to the non-delivery of the possession of the subject property to the private respondent, suffice it to say
that ownership of the thing sold is acquired only from the time of delivery thereof, either actual or constructive. 28
Article 1498 of the Civil Code provides that when the sale is made through a public instrument, the execution thereof
shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not
appear or cannot be inferred. 29 The execution of the public instrument, without actual delivery of the thing, transfers
the ownership from the vendor to the vendee, who may thereafter exercise the rights of an owner over the same. 30 In
the instant case, vendor Roque delivered the owner's certificate of title to herein private respondent. It is not necessary
that vendee be physically present at every square inch of the land bought by him, possession of the public instrument of
the land is sufficient to accord him the rights of ownership. Thus, delivery of a parcel of land may be done by placing the
vendee in control and possession of the land (real) or by embodying the sale in a public instrument (constructive). The
provision of Article 1358 on the necessity of a public document is only for convenience, not for validity or enforceability.
It is not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public
instrument. 31


A contract of sale being consensual, it is perfected by the mere consent of the parties. 32 Delivery of the thing bought or
payment of the price is not necessary for the perfection of the contract; and failure of the vendee to pay the price after
the execution of the contract does not make the sale null and void for lack of consideration but results at most in default
on the part of the vendee, for which the vendor may exercise his legal remedies. 33

Article 1544 of the New Civil Code provides:

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 movable 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 present the oldest title, provided there is good faith.

Article 1544 of the Civil Code provides that in case of double sale of an immovable property, ownership shall be
transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default
thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents
the oldest title, provided there is good faith. 34

In the case at bar, vendor Aurelio Roque sold 6/10 portion of his share in TCT No. 135671 to private respondents
Repuyan on April 1, 1980. Subsequently, the same lot was sold again by vendor Aurelio Roque (6/10) and his children
(4/10), represented by the Clerk of Court pursuant to Section 10, Rule 39 of the Rules of Court, on February 4, 1982.
Undoubtedly, this is a case of double sale contemplated under Article 1544 of the New Civil Code.

This is an instance of a double sale of an immovable property hence, the ownership shall vests in the person acquiring it
who in good faith first recorded it in the Registry of Property. Evidently, private respondents Repuyan's caused the
annotation of an adverse claim on the title of the subject property denominated as Entry No. 5627/T-135671 on July 21,
1980. 35 The annotation of the adverse claim on TCT No. 135671 in the Registry of Property is sufficient compliance as
mandated by law and serves notice to the whole world.

On the other hand, petitioner filed a notice of lis pendens only on February 2, 1982. Accordingly, private respondents
who first caused the annotation of the adverse claim in good faith shall have a better right over herein petitioner.
Moreover, the physical possession of herein petitioners by virtue of a writ of possession issued by the trial court on
September 20, 1982 is "subject to the valid rights and interest of third persons over the same portion thereof, other
than vendor or any other person or persons privy to or claiming any rights to interest under it." 36 As between two
purchasers, the one who has registered the sale in his favor, has a preferred right over the other who has not registered
his title even if the latter is in actual possession of the immovable property. 37 Further, even in default of the first
registrant or first in possession, private respondents have presented the oldest title. 38 Thus, private respondents who
acquired the subject property in good faith and for valuable consideration established a superior right as against the
petitioner.

Evidently, petitioner cannot be considered as a buyer in good faith. In the complaint for rescission filed by vendor
Aurelio Roque on August 20, 1980, herein petitioner filed a motion for intervention on May 20, 1982 but did not file her
complaint in intervention, hence, the decision was rendered adversely against her. If petitioner did investigate before
buying the land on February 4, 1982, she should have known that there was a pending case and an annotation of
adverse claim was made in the title of the property before the Register of Deeds and she could have discovered that the
subject property was already sold to the private respondents. It is incumbent upon the vendee of the property to ask for
the delivery of the owner's duplicate copy of the title from the vendor. A purchaser of a valued piece of property cannot
just close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in good faith
and under the belief that there were no defect in the title of the vendor. 39 One who purchases real estate with
knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against
the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of
facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the
defects in the title of his vendor. Good faith, or the want of it is not a visible, tangible fact that can be seen or touched,
but rather a state or condition of mind which can only be judged of by actual or fancied tokens or signs. 40

In fine, petitioner had nobody to blame but herself in dealing with the disputed property for failure to inquire or
discover a flaw in the title to the property, thus, it is axiomatic that culpa lata dolo aequiparatur gross negligence is
equivalent to intentional wrong.

IN VIEW OF THE FOREGOING PREMISES, this petition for review is hereby DISMISSED for lack of merit. No
pronouncement as to costs.

G.R. No. L-28740
February 24, 1981

FERMIN Z. CARAM, JR., petitioner,

vs.
CLARO L. LAURETA, respondent.

FERNANDEZ, J.:

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- appellants; 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 stin 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, did 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.

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 AT TRIBUTABLE 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 a 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
Leaning 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. Ining Mansaca was with the two Irespe and Mata to engage the services 6f Atty.
Aportadera in the annulment of the sale of his land to Laureta. When Leaning 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 occassion 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 of 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 Leaning 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. RA 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 an 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 registerable. Obviously,
Aportadera and Irespe knew that even if Mata previously had sold t he Disputed such sale could not have been
registered.

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
recordered it in the Registry of Property.

Should there be no inscription, the ownership shag 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. (1473)

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. I n 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 declared valid so that one vendee may contract must be declared void to cut off all rights
which may arise from said contract. Otherwise, Article 1544 win be meaningless.

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.

G.R. No. 104482 January 22, 1996

BELINDA TAEDO, for herself and in representation of her brothers and sisters, and TEOFILA CORPUZ TAEDO,
representing her minor daughter VERNA TAEDO, petitioners,
vs.
THE COURT OF APPEALS, SPOUSES RICARDO M. TAEDO AND TERESITA BARERA TAEDO, respondents.

PANGANIBAN, J.:

Is a sale of future inheritance valid? In multiple sales of the same real property, who has preference in ownership? What
is the probative value of the lower court's finding of good faith in registration of such sales in the registry of property?
These are the main questions raised in this Petition for review on certiorari under Rule 45 of the Rules of Court to set
aside and reverse the Decision1 of the Court of Appeals2 in CA-G.R. CV NO. 24987 promulgated on September 26, 1991
affirming the decision of the Regional Trial Court, Branch 63, Third Judicial Region, Tarlac, Tarlac in Civil Case No. 6328,
and its Resolution denying reconsideration thereof, promulgated on May 27, 1992.

By the Court's Resolution on October 25, 1995, this case (along with several others) was transferred from the First to the
Third Division and after due deliberation, the Court assigned it to the undersigned ponente for the writing of this
Decision.

The Facts

On October 20, 1962, Lazardo Taedo executed a notarized deed of absolute sale in favor of his eldest brother, Ricardo
Taedo, and the latter's wife, Teresita Barera, private respondents herein, whereby he conveyed to the latter in
consideration of P1,500.00, "one hectare of whatever share I shall have over Lot No. 191 of the cadastral survey of
Gerona, Province of Tarlac and covered by Title T-13829 of the Register of Deeds of Tarlac", the said property being his

"future inheritance" from his parents (Exh. 1). Upon the death of his father Matias, Lazaro executed an "Affidavit of
Conformity" dated February 28, 1980 (Exh. 3) to "re-affirm, respect, acknowledge and validate the sale I made in 1962."
On January 13, 1981, Lazaro executed another notarized deed of sale in favor of private respondents covering his
"undivided ONE TWELVE (1/12) of a parcel of land known as Lot 191 . . . " (Exh. 4). He acknowledged therein his receipt
of P10,000.00 as consideration therefor. In February 1981, Ricardo learned that Lazaro sold the same property to his
children, petitioners herein, through a deed of sale dated December 29, 1980 (Exh. E). On June 7, 1982, private
respondents recorded the Deed of Sale (Exh. 4) in their favor in the Registry of Deeds and the corresponding entry was
made in Transfer Certificate of Title No. 166451 (Exh. 5).

Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of the deeds of sale executed by Lazaro in
favor of private respondents covering the property inherited by Lazaro from his father.

Petitioners claimed that their father, Lazaro, executed an "Absolute Deed of Sale" dated December 29, 1980 (Exit. E).
Conveying to his ten children his allotted portion tinder the extrajudicial partition executed by the heirs of Matias, which
deed included the land in litigation (Lot 191).

Petitioners also presented in evidence: (1) a private writing purportedly prepared and signed by Matias dated December
28, 1978, stating that it was his desire that whatever inheritance Lazaro would receive from him should be given to his
(Lazaro's) children (Exh. A); (2) a typewritten document dated March 10, 1979 signed by Lazaro in the presence of two
witnesses, wherein he confirmed that he would voluntarily abide by the wishes of his father, Matias, to give to his
(Lazaro's) children all the property he would inherit from the latter (Exh. B); and (3) a letter dated January 1, 1980 of
Lazaro to his daughter, Carmela, stating that his share in the extrajudicial settlement of the estate of his father was
intended for his children, petitioners herein (Exh. C).

Private respondents, however presented in evidence a "Deed of Revocation of a Deed of Sale" dated March 12, 1981
(Exh. 6), wherein Lazaro revoked the sale in favor of petitioners for the reason that it was "simulated or fictitious
without any consideration whatsoever".

Shortly after the case a quo was filed, Lazaro executed a sworn statement (Exh. G) which virtually repudiated the
contents of the Deed of Revocation of a Deed of Sale (Exh. 6) and the Deed of Sale (Exh. 4) in favor of private
respondents. However, Lazaro testified that he sold the property to Ricardo, and that it was a lawyer who induced him
to execute a deed of sale in favor of his children after giving him five pesos (P5.00) to buy a "drink" (TSN September 18,
1985, pp. 204-205).

The trial court decided in favor of private respondents, holding that petitioners failed "to adduce a proponderance of
evidence to support (their) claim." On appeal, the Court of Appeals affirmed the decision of the trial court, ruling that
the Deed of Sale dated January 13, 1981 (Exh. 9) was valid and that its registration in good faith vested title in said
respondents.

The Issues

Petitioners raised the following "errors" in the respondent Court, which they also now allege in the instant Petition:

I.
The trial court erred in concluding that the Contract of Sale of October 20, 1962 (Exhibit 7, Answer) is merely
voidable or annulable and not void ab initio pursuant to paragraph 2 of Article 1347 of the New Civil Code involving as it
does a "future inheritance".

II.
The trial court erred in holding that defendants-appellees acted in good faith in registering the deed of sale of
January 13, 1981 (Exhibit 9) with the Register of Deeds of Tarlac and therefore ownership of the land in question passed
on to defendants-appellees.

III.
The trial court erred in ignoring and failing to consider the testimonial and documentary evidence of plaintiffs-
appellants which clearly established by preponderance of evidence that they are indeed the legitimate and lawful
owners of the property in question.

IV.
The decision is contrary to law and the facts of the case and the conclusions drawn from the established facts
are illogical and off-tangent.

From the foregoing, the issues may be restated as follows:

1.
Is the sale of a future inheritance valid?

2.
Was the subsequent execution on January 13, 1981 (and registration with the Registry of Property) of a deed of
sale covering the same property to the same buyers valid?

3.
May this Court review the findings of the respondent Court (a) holding that the buyers acted in good faith in
registering the said subsequent deed of sale and (b) in "failing to consider petitioners' evidence"? Are the conclusions of
the respondent Court "illogical and off-tangent"?

The Court's Ruling

At the outset, let it be clear that the "errors" which are reviewable by this Court in this petition for review on certiorari
are only those allegedly committed by the respondent Court of Appeals and not directly those of the trial court, which is
not a party here. The "assignment of errors" in the petition quoted above are therefore totally misplaced, and for that
reason, the petition should be dismissed. But in order to give the parties substantial justice we have decided to delve
into the issues as above re-stated. The errors attributed by petitioners to the latter (trial) court will be discussed only
insofar as they are relevant to the appellate court's assailed Decision and Resolution.

The sale made in 1962 involving future inheritance is not really at issue here. In context, the assailed Decision conceded
"it may be legally correct that a contract of sale of anticipated future inheritance is null and void."3

But to remove all doubts, we hereby categorically rule that, pursuant to Article 1347 of the Civil Code, "(n)o contract
may be entered into upon a future inheritance except in cases expressly authorized by law."

Consequently, said contract made in 1962 is not valid and cannot be the source of any right nor the creator of any
obligation between the parties.

Hence, the "affidavit of conformity" dated February 28, 1980, insofar as it sought to validate or ratify the 1962 sale, is
also useless and, in the words of the respondent Court, "suffers from the same infirmity." Even private respondents in
their memorandum4 concede this.

However, the documents that are critical to the resolution of this case are: (a) the deed of sale of January 13, 1981 in
favor of private respondents covering Lazaro's undivided inheritance of one-twelfth (1/12) share in Lot No. 191, which
was subsequently registered on June 7, 1982; and (b) the deed of sale dated December 29, 1980 in favor of petitioners
covering the same property. These two documents were executed after the death of Matias (and his spouse) and after a
deed of extra-judicial settlement of his (Matias') estate was executed, thus vesting in Lazaro actual title over said
property. In other words, these dispositions, though conflicting, were no longer infected with the infirmities of the 1962
sale.

Petitioners contend that what was sold on January 13, 1981 was only one-half hectare out of Lot No. 191, citing as
authority the trial court's decision. As earlier pointed out, what is on review in these proceedings by this Court is the
Court of Appeals' decision which correctly identified the subject matter of the January 13, 1981 sale to be the entire
undivided 1/12 share of Lazaro in Lot No. 191 and which is the same property disposed of on December 29, 1980 in
favor of petitioners.

Critical in determining which of these two deeds should be given effect is the registration of the sale in favor of private
respondents with the register of deeds on June 7, 1982.

Article 1544 of the Civil Code governs the preferential rights of vendees in cases of multiple sales, as follows:

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 property in question is land, an immovable, and following the above-quoted law, ownership shall belong to the
buyer who in good faith registers it first in the registry of property. Thus, although the deed of sale in favor of private
respondents was later than the one in favor of petitioners, ownership would vest in the former because of the
undisputed fact of registration. On the other hand, petitioners have not registered the sale to them at all.

Petitioners contend that they were in possession of the property and that private respondents never took possession
thereof. As between two purchasers, the one who registered the sale in his favor has a preferred right over the other
who has not registered his title, even if the latter is in actual possession of the immovable property.5

As to third issue, while petitioners conceded the fact of registration, they nevertheless contended that it was done in
bad faith. On this issue, the respondent Court ruled;

Under the second assignment of error, plaintiffs-appellants contend that defendants-appellees acted in bad faith when
they registered the Deed of Sale in their favor as appellee Ricardo already knew of the execution of the deed of sale in
favor of the plaintiffs; appellants cite the testimony of plaintiff Belinda Taedo to the effect that defendant Ricardo
Taedo called her up on January 4 or 5, 1981 to tell her that he was already the owner of the land in question "but the
contract of sale between our father and us were (sic) already consumated" (pp. 9-10, tsn, January 6, 1984). This
testimony is obviously self-serving, and because it was a telephone conversation, the deed of sale dated December 29,
1980 was not shown; Belinda merely told her uncle that there was already a document showing that plaintiffs are the

owners (p. 80). Ricardo Taedo controverted this and testified that he learned for the first time of the deed of sale
executed by Lazaro in favor of his children "about a month or sometime in February 1981" (p. 111, tsn, Nov. 28, 1984). . .
.6

The respondent Court, reviewing the trial court's findings, refused to overturn the latter's assessment of the testimonial
evidence, as follows;

We are not prepared to set aside the finding of the lower court upholding Ricardo Taedo's testimony, as it involves a
matter of credibility of witnesses which the trial judge, who presided at the hearing, was in a better position to resolve.
(Court of Appeals' Decision, p. 6.)

In this connection, we note the tenacious allegations made by petitioners, both in their basic petition and in their
memorandum, as follows:

1.
The respondent Court allegedly ignored the claimed fact that respondent Ricardo "by fraud and deceit and with
foreknowledge" that the property in question had already been sold to petitioners, made Lazaro execute the deed of
January 13, 1981;

2.
There is allegedly adequate evidence to show that only 1/2 of the purchase price of P10,000.00 was paid at the
time of the execution of the deed of sale, contrary to the written acknowledgment, thus showing bad faith;

3.
There is allegedly sufficient evidence showing that the deed of revocation of the sale in favor of petitioners "was
tainted with fraud or deceit."

4.
There is allegedly enough evidence to show that private respondents "took undue advantage over the weakness
and unschooled and pitiful situation of Lazaro Taedo . . ." and that respondent Ricardo Taedo "exercised moral
ascendancy over his younger brother he being the eldest brother and who reached fourth year college of law and at one
time a former Vice-Governor of Tarlac, while his younger brother only attained first year high school . . . ;

5.
The respondent Court erred in not giving credence to petitioners' evidence, especially Lazaro Taedo's
Sinumpaang Salaysay dated July 27, 1982 stating that Ricardo Taedo deceived the former in executing the deed of sale
in favor of private respondents.

To be sure, there are indeed many conflicting documents and testimonies as well as arguments over their probative
value and significance. Suffice it to say, however, that all the above contentions involve questions of fact, appreciation of
evidence and credibility of witnesses, which are not proper in this review. It is well-settled that the Supreme Court is not
a trier of facts. In petitions for review under Rule 45 of the Revised Rules of Court, only questions of law may be raised
and passed upon. Absent any whimsical or capricious exercise of judgment, and unless the lack of any basis for the
conclusions made by the lower courts be amply demonstrated, the Supreme Court will not disturb their findings. At
most, it appears that petitioners have shown that their evidence was not believed by both the trial and the appellate
courts, and that the said courts tended to give more credence to the evidence presented by private respondents. But
this in itself is not a reason for setting aside such findings. We are far from convinced that both courts gravely abused
their respective authorities and judicial prerogatives.

As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and Development Corp.7

The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are final and
conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a reassessment of facts
found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation, surmises or
conjectures; when the inference made is manifestly absurd, mistaken or impossible; when there is grave abuse of
discretion in the appreciation of facts; when the judgment is premised on a misapprehension of facts; when the findings
went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. After a
careful study of the case at bench, we find none of the above grounds present to justify the re-evaluation of the findings
of fact made by the courts below.

In the same vein, the ruling in the recent case of South Sea Surety and Insurance Company, Inc. vs. Hon. Court of
Appeals, et al.8 is equally applicable to the present case:

We see no valid reason to discard the factual conclusions of the appellate court. . . . (I)t is not the function of this Court
to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties, particularly
where, such as here, the findings of both the trial court and the appellate court on the matter coincide. (emphasis
supplied)

G.R. No. 140889 May 9, 2002

DOROTEA TANONGON,1 petitioner,
vs.
FELICIDAD SAMSON, CASINO OSIN, ALBERTO BERBES and LUISITO VENUS, respondents.

PANGANIBAN, J.:

The Labor Code grants the National Labor Relations Commission (NLRC) sufficient authority and power to execute final
judgments and awards. Thus, a third-party claim of ownership on a levied property should not necessarily prevent
execution, particularly where -- as in the present case -- the surrounding circumstances point to a fraudulent claim. In
fact, the disputed contract of sale here is not merely rescissible; it is simulated or fictitious and, hence, void ab initio.

The Case

Before us is a Petition for Review on Certiorari challenging the August 31, 1999 Decision2 and the November 19, 1999
Resolution3 of the Court of Appeals4 (CA) in CA-GR No. 51128. The assailed Decision disposed as follows:

"WHEREFORE, the petition is GRANTED. The decision dated March 9, 1998 of the NLRC, including its resolution dated
March 31, 1998 and May 18, 1998 are hereby REVERSED and SET ASIDE. No pronouncement as to costs."5

The challenged Resolution denied the Motion for Reconsideration.

The Facts

The facts of this case are summarized by the CA in this wise:

"Cayco Marine Service ["CAYCO" hereafter] is engaged in the business of hauling oil. It is owned and operated by
Iluminada Cayco Olizon (Olizon). Both are [respondents in the NLRC case]. [Respondents] Felicidad Samson, Casiano A.
Osin, Alberto Belbes and Luisito Venus were among the employees of [CAYCO and/or Olizon].

"On March 9, 1994, [respondents] filed a complaint against [CAYCO and Olizon] for illegal dismissal, [underpayment] of
wages, non-payment of holiday pay, rest day pay and leave pay. The labor arbiter dismissed the complaint for lack of
merit. On appeal, it was reversed by the NLRC. It ruled:

'PREMISES CONSIDERED, the appeal is hereby GRANTED and the decision of the labor arbiter dated 17 April 1995 is
hereby SET ASIDE.

'Accordingly, [CAYCO and Olizon are] directed to pay the complainants the following:

(a) Separation pay equivalent to one (1) month salary for every year of service computed from the dates of hiring of
complainants Luisito Venus, Felicidad Samson, Alberto Belbes and Casiano Osin on the various dates of 01 June 1989, 10
March 1962, 01 January 1982, and 01 February 1980, respectively, up to the date of this Decision;

(b) Backwages from the dates of dismissal of complainants Luisito Venus, Felicidad Samson, Alberto Belbes and Casiano
Osin on 23 June 1991, 31 March 1992, 20 September 1991 and 20 September 1991, respectively, up to the date of this
Decision, less earnings elsewhere;

(c) Five (5) days service incentive leave pay limited to the three (3) years back from the filing of the complaint.

SO RESOLVED.'

"[CAYCO and Olizon] sought reconsideration of the NLRC's decision but it proved futile. On appeal to the Supreme Court,
via a petition for certiorari under Rule 65 of the Rules of Court, the Court resolved to deny the petition for non-
compliance with par. 4, Supreme Court Circular 1-88, x x x and also for the failure of [CAYCO and Olizon] to establish
grave abuse of discretion on the part of the NLRC. Accordingly, the decision of the NLRC became final and executory on
April 29, 1997.

"On June 25, 1997, the NLRC Research and Investigation Unit submitted to the labor arbiter the judgment award for
each [respondent], computed as follows:

1. F. Samson

-

P 401,931.41

2. L. Venus

-

P 259,912.80

3. A. Belbes

-

P 258,854.17

4. C. Osin

-

P 271,724.17

P1,192,422.55

"On June 24, a writ of execution was issued directing the NLRC sheriff to collect from [CAYCO and Olizon] the
aforementioned amount.

"On August 8, 1997, after the notice of levy/sale on execution of personal property was issued, [CAYCO and/or Olizon's]
motor tanker was [seized], to be sold at public auction on August 19, 1997.

"However, on August 15, 1997, a certain Dorotea Tanongon (Tanongon), x x x [petitioner] herein, filed a third party claim
before the labor arbiter, alleging that she was the owner of the subject motor tanker, having acquired the same from
Olizon on July 29, 1997, for and in consideration of P1,100,000.00.

"On October 15, 1997, the labor arbiter issued an order dismissing the third party claim for lack of merit. Tanongon, in
collaboration with Olizon, appealed to the NLRC. In a decision dated March 9, 1998, the NLRC reversed that of the labor
arbiter. The NLRC ruled:

'WHEREFORE, the order appealed from is hereby REVERSED. Let the execution of the third party claimant's subject
property be lifted and its sale restrained.

SO ORDERED.'"6

Ruling of the Labor Arbiter

In his October 15, 1997 Order,7 the labor arbiter dismissed petitioner's third-party claim, because the Deed of Absolute
Sale between Olizon and Tanongon had been executed only on July 29, 1997, after the NLRC Decision became final and
executory on April 29, 1997. The labor arbiter agreed with private respondents that the sale had been entered into to
defraud them as judgment creditors of the Cayco Marine Service (CAYCO). Hence, he directed the sheriff to proceed
with the execution and the sale of the subject property.

Ruling of the NLRC

Upon appeal by petitioner, the NLRC reversed the labor arbiter on two grounds. First, the power of the NLRC sheriff to
execute judgments extended only to properties unquestionably belonging to the judgment debtor. Here, the Certificate
of Ownership over the subject vessel was in petitioner's name. Hence, the vessel was not unquestionably the property
of CAYCO. Second, under Article 1387 of the Civil Code, alienations of property in the fraud of creditors would give rise
only to rescissible contracts. Thus, judicial rescission was required before the third-party claim could be disregarded.
Thus, in its March 9, 1998 Decision,8 the NLRC lifted the Writ of Execution previously imposed on the subject vessel and
restrained its sale.

Ruling of the Court of Appeals

The CA ruled that a judicial rescission was not necessary to determine the legitimacy of the sale between Olizon and
Tanongon. It opined that the Deed of Sale was evidently conceived and executed for the purpose of placing the subject
motor tanker beyond the reach of the Writ of Execution. Based on the circumstances surrounding the sale and
considering Olizon's financial difficulties, the purported transfer of ownership was dubious. It was akin to a simulated or
fictitious transfer, in which no independent judicial action was necessary to invalidate the sale.9

The claim of petitioner that she was a buyer in good faith was debunked by the CA on the ground that purchasers could
not close their eyes to facts that should put reasonable persons on guard. The records show that the sale was hastily
concluded; the tanker and the necessary documents were immediately delivered to the new owner. These facts
confirmed respondents' suspicion that Olizon had intended to overcome the enforcement of the Writ of Execution. They
also revealed that she slowed down, if not stopped, the operation of her business. This fact should have moved
Tanongon to ascertain, before acquiring the property, if the seller had no unsettled obligations.

The power of the NLRC to enforce its final judgment, order or award under Article 224 (a & b) of the Labor Code, as
amended, is not a "knight without might." Paragraph b of the same provision authorizes the NLRC to take such measures
under extant laws as may be necessary to ensure compliance with its decision.

Hence, this Petition.10


The Issues

In her Memorandum,11 petitioner raises the following issues:

"(1) Whether or not Petitioner Dorotea M. Tanongon is a buyer in good faith and for value[;]

"(2) Whether or not the Court of Appeals acted with grave abuse of discretion amounting to lack or in excess of
jurisdiction in deciding against the herein petitioner as per its decision dated August 31, 1999[; and]

"(3) Whether or not [p]etitioner is entitled to equal protection under the Constitution and the law."12

This Court's Ruling

The Petition has no merit.

First Issue:
Good Faith of Petitioner

There is sufficient basis to affirm the CA finding that petitioner was a buyer in bad faith. The judgment favoring
respondents against CAYCO and Olizon (for back wages, separation pay and service incentive leave pay) was rendered
on July 18, 1996, and affirmed by the Second Division of this Court via its January 15, 1997 Resolution. The Writ of
Execution was issued by the labor arbiter on July 24, 1997. The sale of the levied tanker, however, was made only on July
29, 1997.

Hence, the CA correctly ruled that the act of Olizon was a "cavalier attempt to evade payment of the judgment debt."
She obviously got word of the issuance of the Writ and disposed of the tanker to prevent its sale on execution. Despite
knowledge of these antecedents, petitioner bought the tanker barely ten days before it was levied upon on August 8,
1997.

It is not only the proximity in time that supports this finding. Under Article 1387 of the Civil Code, alienations by onerous
title are presumed to be fraudulent when done by persons against whom some judgment has been rendered or some
writ of attachment issued in any instance.13 We stress that in the present case, the Writ of Attachment has been issued,
the levy already made and, as will later be discussed, the property still in the name of Olizon and CAYCO.

It is also more than coincidental that the purchase price for the tanker was P1,100,000.00, while Olizon's judgment debt
to respondents amounted to P1,192,422.55.

A purchaser in good faith or an innocent purchaser for value is one who buys property and pays a full and fair price for it
at the time of the purchase or before any notice of some other person's claim on or interest in it.14 We emphasize that
one cannot close one's eyes to facts that should put a reasonable person on guard and still claim to have acted in good
faith. Petitioner should have inquired whether Olizon had other unsettled obligations and encumbrances that could
burden the subject property. Any person engaged in business would be wary of buying from a company that is closing
shop, because it may be dissipating its assets to defraud its creditors.

Equally important, factual findings of the CA are given much weight when supported by substantial evidence.15
Petitioner has not given us any sufficient or cogent reason to reverse the appellate court.

Second Issue:
Necessity of Judicial Rescission

The NLRC ruled that the subject tanker could not be levied upon and sold on execution for two reasons: (1) the sheriff
was acting outside his authority when he levied on properties that were not unquestionably owned by the judgment
debtor; and (2) the sale of the tanker appeared to have been made to defraud creditors and, therefore, judicial
rescission was required.

The CA held, in overruling the NLRC, that the Commission possessed, under Article 224 (a and b),16 powers necessary to
implement and enforce the latter's final judgments, decisions, orders and awards. The appellate court ruled further that
the disputed contract was not merely rescissible; it was simulated or fictitious and, thus, void ab initio.

We agree with the Court of Appeals. A third-party claim on a levied property does not automatically prevent execution.
Under Rule 39 of the Revised Rules of Court, execution is a remedy afforded by law for the enforcement of a judgment,
its object being to obtain satisfaction of the decision on which the writ is issued.17 In executing a money judgment
against the property of the obligor, the sheriff shall levy on all properties belonging to the judgment debtor as is amply
sufficient to satisfy the decision and the costs; and shall sell the same, paying to the judgment creditor as much of the
proceeds as will satisfy the amount of the debt and costs.18 Sheriffs who levy upon properties other than those of the
judgment debtors are acting beyond the limits of their authority.19

When a third-party claim is filed, the sheriff is not bound to proceed with the levy of the property unless the judgment
creditor or the latter's agent posts an indemnity bond against the claim.20 Where the bond is filed, the remedy of the
third-party claimant is to file an independent reivindicatory action against the judgment creditor or the purchaser of the
property at public auction.21 The NLRC should not have automatically lifted the levy and restrained execution, just
because a third-party claim had been filed.

Further, judicial rescission is not necessary in the case at bar. The NLRC lifted the levy on the subject property, ruling
that its sheriff could execute its judgments only on properties "unquestionably belonging to the judgment debtor." It
observed that the Certificate of Ownership over the disputed vessel was in the name of the third-party claimant, herein
petitioner.

Petitioner's claim of ownership over the disputed tanker is not supported by the evidence on record. The Maritime
Industry Authority (Marina) administrator wrote the parties in two separate letters, which said that the registration of
the disputed vessel under petitioner's name had not been effected, and that the Certificates of Ownership and Vessel
Registry covering the motor tanker M/T Petron 7-C had not been released. The reasons were Marina's receipt of the
Entry of Judgment issued by the Supreme Court on April 29, 1997, and the Notice of Levy/Sale on Execution of Personal
Property covering the subject vessel.22 Under Article 573 of the Code of Commerce, the acquisition of a vessel must
appear on a written instrument, which shall not produce any effect with respect to third persons if not inscribed in the
Registry of Vessels. Insofar as third persons like herein respondents were concerned, the ownership of the disputed
vessel remained with Olizon and CAYCO; thus, the CA correctly held that the NLRC could proceed with the levy and the
sale on execution.

Third Issue:
Equal Protection of the Law

Petitioner protests that the CA gave undue importance to respondent laborers by invoking the protection of labor
mandated by Article II, Section 18 of the 1987 Constitution, and Articles 4 and 221 of the Labor Code. Claiming violation
of her right to equal protection of the law, she argues that she deserves social justice, as held by this Court in Guido v.
Rural Progress Administration23 and Cabatan v. Court of Appeals24 which ruled that capital, too, was entitled to
protection.

The contention of petitioner is untenable. She cannot be given the mantle granted to capital or management, because
she does not appear to be connected in any way to the ownership or the management of CAYCO or Olizon. She is
impleaded here merely as the alleged buyer of the M/T Petron 7-C. If this contention is an admission that she is a
dummy for CAYCO or Olizon, then the charge of a fictitious sale to defraud judgment creditors becomes even more
evident and credible.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

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.

TINGA, J.:

Petitioner Consolidated Rural Bank, Inc. of Cagayan Valley filed the instant Petition for Certiorari1 under Rule 45 of the
Revised Rules of Court, seeking the review of the Decision2 of the Court of Appeals Twelfth Division in CA-G.R. CV No.
33662, promulgated on 27 May 1997, which reversed the judgment3 of the lower court in favor of petitioner; and the
Resolution4 of the Court of Appeals, promulgated on 5 January 1998, which reiterated its Decision insofar as
respondents Heirs of Teodoro dela Cruz (the Heirs) are concerned.

From the record, the following are the established facts:

Rizal, Anselmo, Gregorio, Filomeno and Domingo, all surnamed Madrid (hereafter the Madrid brothers), were the
registered owners of Lot No. 7036-A of plan Psd-10188, Cadastral Survey 211, situated in San Mateo, Isabela per
Transfer Certificate of Title (TCT) No. T-8121 issued by the Register of Deeds of Isabela in September 1956.5

On 23 and 24 October 1956, Lot No. 7036-A was subdivided into several lots under subdivision plan Psd- 50390. One of
the resulting subdivision lots was Lot No. 7036-A-7 with an area of Five Thousand Nine Hundred Fifty-Eight (5,958)
square meters.6

On 15 August 1957, Rizal Madrid sold part of his share identified as Lot No. 7036-A-7, to Aleja Gamiao (hereafter
Gamiao) and Felisa Dayag (hereafter, Dayag) by virtue of a Deed of Sale,7 to which his brothers Anselmo, Gregorio,
Filomeno and Domingo offered no objection as evidenced by their Joint Affidavit dated 14 August 1957.8 The deed of
sale was not registered with the Office of the Register of Deeds of Isabela. However, Gamiao and Dayag declared the
property for taxation purposes in their names on March 1964 under Tax Declaration No. 7981.9

On 28 May 1964, Gamiao and Dayag sold the southern half of Lot No. 7036-A-7, denominated as Lot No. 7036-A-7-B, to
Teodoro dela Cruz,10 and the northern half, identified as Lot No. 7036-A-7-A,11 to Restituto Hernandez.12 Thereupon,
Teodoro dela Cruz and Restituto Hernandez took possession of and cultivated the portions of the property respectively
sold to them.13

Later, on 28 December 1986, Restituto Hernandez donated the northern half to his daughter, Evangeline Hernandez-del
Rosario.14 The children of Teodoro dela Cruz continued possession of the southern half after their fathers death on 7
June 1970.

In a Deed of Sale15 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 confirmed16 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 case24 for reconveyance and damages the southern portion of Lot No. 7036-A (hereafter, the subject
property) against Marquez, Calixto, RBC and CRB in December 1986.

Evangeline del Rosario, the successor-in-interest of Restituto Hernandez, filed with leave of court a Complaint in
Intervention25 wherein she claimed the northern portion of Lot No. 7036-A-7.

In the Answer to the Amended Complaint,26 Marquez, as defendant, alleged that apart from being the first registrant,
he was a buyer in good faith and for value. He also argued that the sale executed by Rizal Madrid to Gamiao and Dayag
was not binding upon him, it being unregistered. For his part, Calixto manifested that he had no interest in the subject
property as he ceased to be the owner thereof, the same having been reacquired by defendant Marquez.27

CRB, as defendant, and co-defendant RBC insisted that they were mortgagees in good faith and that they had the right
to rely on the titles of Marquez which were free from any lien or encumbrance.28

After trial, the Regional Trial Court, Branch 19 of Cauayan, Isabela (hereafter, RTC) handed down a decision in favor of
the defendants, disposing as follows:

WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered:

1. Dismissing the amended complaint and the complaint in intervention;

2. Declaring Pacifico V. Marquez the lawful owner of Lots 7036-A-7 now Lots 7036-A-7-A to 7036-A-7-H, inclusive,
covered by TCT Nos. T-149375 to T-149382, inclusive;

3. Declaring the mortgage of Lots 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-D in favor of the defendant
Consolidated Rural Bank (Cagayan Valley) and of Lot 7036-A-7-E in favor of defendant Rural Bank of Cauayan by Pacifico
V. Marquez valid;

4. Dismissing the counterclaim of Pacifico V. Marquez; and

5. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the lots covered by TCT Nos. T-33119, T-33220 and T-
7583.

No pronouncement as to costs.

SO ORDERED.29

In support of its decision, the RTC made the following findings:

With respect to issues numbers 1-3, the Court therefore holds that the sale of Lot 7036-A-7 made by Rizal Madrid to
Aleja Gamiao and Felisa Dayag and the subsequent conveyances to the plaintiffs and intervenors are all valid and the
Madrid brothers are bound by said contracts by virtue of the confirmation made by them on August 14, 1957 (Exh. B).

Are the defendants Pacifico V. Marquez and Romeo B. Calixto buyers in good faith and for value of Lot 7036-A-7?

It must be borne in mind that good faith is always presumed and he who imputes bad faith has the burden of proving
the same (Art. 527, Civil Code). The Court has carefully scrutinized the evidence presented but finds nothing to show
that Marquez was aware of the plaintiffs and intervenors claim of ownership over this lot. TCT No. T-8121 covering said
property, before the issuance of Marquez title, reveals nothing about the plaintiffs and intervenors right thereto for it
is an admitted fact that the conveyances in their favor are not registered.

The Court is therefore confronted with two sales over the same property. Article 1544 of the Civil Code provides:

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

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded
it in the Registry of Property. x x x " (Underscoring supplied).

From the foregoing provisions and in the absence of proof that Marquez has actual or constructive knowledge of
plaintiffs and intervenors claim, the Court has to rule that as the vendee who first registered his sale, Marquez
ownership over Lot 7036-A-7 must be upheld.30

The Heirs interposed an appeal with the Court of Appeals. In their Appellants Brief,31 they ascribed the following errors
to the RTC: (1) it erred in finding that Marquez was a buyer in good faith; (2) it erred in validating the mortgage of the
properties to RBC and CRB; and (3) it erred in not reconveying Lot No. 7036-A-7-B to them.32

Intervenor Evangeline del Rosario filed a separate appeal with the Court of Appeals. It was, however, dismissed in a
Resolution dated 20 September 1993 for her failure to pay docket fees. Thus, she lost her standing as an appellant.33

On 27 May 1997, the Court of Appeals rendered its assailed Decision34 reversing the RTCs judgment. The dispositive
portion reads:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE. Accordingly, judgment is hereby rendered
as follows:

1. Declaring the heirs of Teodoro dela Cruz the lawful owners of the southern half portion and Evangeline Hernandez-del
Rosario the northern half portion of Lot No. 7036-A-7, now covered by TCT Nos. T-149375 to T-149382, inclusive;

2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V. Marquez and the Madrid brothers
covering said Lot 7036-A-7;

3. Declaring null and void the mortgage made by defendant Pacifico V. Marquez of Lot Nos. 7036-A-7-A, 7036-A-7-B,
7036-A-7-C and 7036-A-7-D in favor of the defendant Consolidated Rural Bank and of Lot 7036-A-7-E in favor of
defendant Rural Bank of Cauayan; and

4. Ordering Pacifico V. Marquez to reconvey Lot 7036-A-7 to the heirs of Teodoro dela Cruz and Evangeline Hernandez-
del Rosario.

No pronouncement as to costs.

SO ORDERED.35

In upholding the claim of the Heirs, the Court of Appeals held that Marquez failed to prove that he was a purchaser in
good faith and for value. It noted that while Marquez was the first registrant, there was no showing that the registration
of the deed of sale in his favor was coupled with good faith. Marquez admitted having knowledge that the subject
property was "being taken" by the Heirs at the time of the sale.36 The Heirs were also in possession of the land at the
time. According to the Decision, these circumstances along with the subject propertys attractive locationit was
situated along the National Highway and was across a gasoline stationshould have put Marquez on inquiry as to its
status. Instead, Marquez closed his eyes to these matters and failed to exercise the ordinary care expected of a buyer of
real estate.37

Anent the mortgagees RBC and CRB, the Court of Appeals found that they merely relied on the certificates of title of the
mortgaged properties. They did not ascertain the status and condition thereof according to standard banking practice.
For failure to observe the ordinary banking procedure, the Court of Appeals considered them to have acted in bad faith
and on that basis declared null and void the mortgages made by Marquez in their favor.38

Dissatisfied, CRB filed a Motion for Reconsideration39 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 Resolution40 dated 5 January 1998, the Court of Appeals stressed its disbelief in CRBs allegation that it did not
merely rely on the certificates of title of the properties and that it conducted credit investigation and standard ocular
inspection. But recalling that intervenor Evangeline del Rosario had lost her standing as an appellant, the Court of
Appeals accordingly modified its previous Decision, as follows:

WHEREFORE, the decision dated May 27, 1997, is hereby MODIFIED to read as follows:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE insofar as plaintiffs-appellants are
concerned. Accordingly, judgment is hereby rendered as follows:

1. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the southern half portion of Lot No. 7036-A-7;

2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V. Marquez and the Madrid brothers
insofar as the southern half portion of Lot NO. (sic) 7036-A-7 is concerned;

3. Declaring the mortgage made by defendant Pacifico V. Marquez in favor of defendant Consolidated Rural Bank
(Cagayan Valley) and defendant Rural Bank of Cauayan as null and void insofar as the southern half portion of Lot No.
7036-A-7 is concerned;

4. Ordering defendant Pacifico V. Marquez to reconvey the southern portion of Lot No. 7036-A-7 to the Heirs of Teodoro
dela Cruz.

No pronouncement as to costs.

SO ORDERED.41

Hence, the instant CRB petition. However, both Marquez and RBC elected not to challenge the Decision of the appellate
court.

Petitioner CRB, in essence, alleges that the Court of Appeals committed serious error of law in upholding the Heirs
ownership claim over the subject property considering that there was no finding that they acted in good faith in taking
possession thereof nor was there proof that the first buyers, Gamiao and Dayag, ever took possession of the subject
property. CRB also makes issue of the fact that the sale to Gamiao and Dayag was confirmed a day ahead of the actual
sale, clearly evincing bad faith, it adds. Further, CRB asserts Marquezs right over the property being its registered
owner.

The petition is devoid of merit. However, the dismissal of the petition is justified by reasons different from those
employed by the Court of Appeals.

Like the lower court, the appellate court resolved the present controversy by applying the rule on double sale provided
in Article 1544 of the Civil Code. They, however, arrived at different conclusions. The RTC made CRB and the other
defendants win, while the Court of Appeals decided the case in favor of the Heirs.

Article 1544 of the Civil Code reads, thus:

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

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

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

The provision is not applicable in the present case. It contemplates a case of double or multiple sales by a single vendor.
More specifically, it covers a situation where a single vendor sold one and the same immovable property to two or more
buyers.42 According to a noted civil law author, it is necessary that the conveyance must have been made by a party
who has an existing right in the thing and the power to dispose of it.43 It cannot be invoked where the two different
contracts of sale are made by two different persons, one of them not being the owner of the property sold.44 And even
if the sale was made by the same person, if the second sale was made when such person was no longer the owner of the
property, because it had been acquired by the first purchaser in full dominion, the second purchaser cannot acquire any
right.45

In the case at bar, the subject property was not transferred to several purchasers by a single vendor. In the first deed of
sale, the vendors were Gamiao and Dayag whose right to the subject property originated from their acquisition thereof

from Rizal Madrid with the conformity of all the other Madrid brothers in 1957, followed by their declaration of the
property in its entirety for taxation purposes in their names. On the other hand, the vendors in the other or later deed
were the Madrid brothers but at that time they were no longer the owners since they had long before disposed of the
property in favor of Gamiao and Dayag.

Citing Manresa, the Court of Appeals in 1936 had occasion to explain the proper application of Article 1473 of the Old
Civil Code (now Article 1544 of the New Civil Code) in the case of Carpio v. Exevea,46 thus:

In order that tradition may be considered performed, it is necessary that the requisites which it implies must have been
fulfilled, and one of the indispensable requisites, according to the most exact Roman concept, is that the conveyor had
the right and the will to convey the thing. The intention to transfer is not sufficient; it only constitutes the will. It is,
furthermore, necessary that the conveyor could juridically perform that act; that he had the right to do so, since a right
which he did not possess could not be vested by him in the transferee.

This is what Article 1473 has failed to express: the necessity for the preexistence of the right on the part of the conveyor.
But even if the article does not express it, it would be understood, in our opinion, that that circumstance constitutes one
of the assumptions upon which the article is based.

This construction is not repugnant to the text of Article 1473, and not only is it not contrary to it, but it explains and
justifies the same. (Vol. 10, 4th ed., p. 159)47

In that case, the property was transferred to the first purchaser in 1908 by its original owner, Juan Millante. Thereafter,
it was sold to plaintiff Carpio in June 1929. Both conveyances were unregistered. On the same date that the property
was sold to the plaintiff, Juan Millante sold the same to defendant Exevea. This time, the sale was registered in the
Registry of Deeds. But despite the fact of registration in defendants favor, the Court of Appeals found for the plaintiff
and refused to apply the provisions of Art. 1473 of the Old Civil Code, reasoning that "on the date of the execution of the
document, Exhibit 1, Juan Millante did not and could not have any right whatsoever to the parcel of land in question."48

Citing a portion of a judgment dated 24 November 1894 of the Supreme Court of Spain, the Court of Appeals elucidated
further:

Article 1473 of the Civil Code presupposes the right of the vendor to dispose of the thing sold, and does not limit or alter
in this respect the provisions of the Mortgage Law in force, which upholds the principle that registration does not
validate acts or contracts which are void, and that although acts and contracts executed by persons who, in the Registry,
appear to be entitled to do so are not invalidated once recorded, even if afterwards the right of such vendor is annulled
or resolved by virtue of a previous unrecorded title, nevertheless this refers only to third parties.49

In a situation where not all the requisites are present which would warrant the application of Art. 1544, the principle of
prior tempore, potior jure or simply "he who is first in time is preferred in right,"50 should apply.51 The only essential
requisite of this rule is priority in time; in other words, the only one who can invoke this is the first vendee.
Undisputedly, he is a purchaser in good faith because at the time he bought the real property, there was still no sale to a
second vendee.52 In the instant case, the sale to the Heirs by Gamiao and Dayag, who first bought it from Rizal Madrid,
was anterior to the sale by the Madrid brothers to Marquez. The Heirs also had possessed the subject property first in
time. Thus, applying the principle, the Heirs, without a scintilla of doubt, have a superior right to the subject property.

Moreover, it is an established principle that no one can give what one does not havenemo dat quod non habet.
Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than what the
seller can transfer legally.53 In this case, since the Madrid brothers were no longer the owners of the subject property at
the time of the sale to Marquez, the latter did not acquire any right to it.

In any event, assuming arguendo that Article 1544 applies to the present case, the claim of Marquez still cannot prevail
over the right of the Heirs since according to the evidence he was not a purchaser and registrant in good faith.

Following Article 1544, in the double sale of an immovable, the rules of preference are:

(a) the first registrant in good faith;

(b) should there be no entry, the first in possession in good faith; and

(c) in the absence thereof, the buyer who presents the oldest title in good faith. 54

Prior registration of the subject property does not by itself confer ownership or a better right over the property. Article
1544 requires that before the second buyer can obtain priority over the first, he must show that he acted in good faith
throughout (i.e., in ignorance of the first sale and of the first buyers rights)from the time of acquisition until the title is
transferred to him by registration or failing registration, by delivery of possession.55

In the instant case, the actions of Marquez have not satisfied the requirement of good faith from the time of the
purchase of the subject property to the time of registration. Found by the Court of Appeals, Marquez knew at the time
of the sale that the subject property was being claimed or "taken" by the Heirs. This was a detail which could indicate a

defect in the vendors title which he failed to inquire into. Marquez also admitted that he did not take possession of the
property and at the time he testified he did not even know who was in possession. Thus, he testified on direct
examination in the RTC as follows:

ATTY. CALIXTO

Q Can you tell us the circumstances to your buying the land in question?

A In 1976 the Madrid brothers confessed to me their problems about their lots in San Mateo that they were being taken
by Teodoro dela Cruz and Atty. Teofilo A. Leonin; that they have to pay the lawyers fee of P10,000.00 otherwise Atty.
Leonin will confiscate the land. So they begged me to buy their properties, some of it. So that on June 3, 1976, they
came to Cabagan where I was and gave them P14,000.00, I think. We have talked that they will execute the deed of sale.

Q Why is it, doctor, that you have already this deed of sale, Exh. 14, why did you find it necessary to have this Deed of
Confirmation of a Prior Sale, Exh. 15?

A Because as I said a while ago that the first deed of sale was submitted to the Register of Deeds by Romeo Badua so
that I said that because when I became a Municipal Health Officer in San Mateo, Isabela, I heard so many rumors, so
many things about the land and so I requested them to execute a deed of confirmation.56

. . .

ATTY. CALIXTO-

Q At present, who is in possession on the Riceland portion of the lot in question?

A I can not say because the people working on that are changing from time to time.

Q Why, have you not taken over the cultivation of the land in question?

A Well, the Dela Cruzes are prohibiting that we will occupy the place.

Q So, you do not have any possession?

A None, sir.57

One who purchases real property which is in actual possession of others should, at least, make some inquiry concerning
the rights of those in possession. The actual possession by people other than the vendor should, at least, put the
purchaser upon inquiry. He can scarcely, in the absence of such inquiry, be regarded as a bona fide purchaser as against
such possessions.58 The rule of caveat emptor requires the purchaser to be aware of the supposed title of the vendor
and one who buys without checking the vendors title takes all the risks and losses consequent to such failure.59

It is further perplexing that Marquez did not fight for the possession of the property if it were true that he had a better
right to it. In our opinion, there were circumstances at the time of the sale, and even at the time of registration, which
would reasonably require a purchaser of real property to investigate to determine whether defects existed in his
vendors title. Instead, Marquez willfully closed his eyes to the possibility of the existence of these flaws. For failure to
exercise the measure of precaution which may be required of a prudent man in a like situation, he cannot be called a
purchaser in good faith.60

As this Court explained in the case of Spouses Mathay v. Court of Appeals:61

Although it is a recognized principle that a person dealing on a registered land need not go beyond its certificate of title,
it is also a firmly settled rule that where there are circumstances which would put a party on guard and prompt him to
investigate or inspect the property being sold to him, such as the presence of occupants/tenants thereon, it is, of course,
expected from the purchaser of a valued piece of land to inquire first into the status or nature of possession of the
occupants, i.e., whether or not the occupants possess the land en concepto de dueo, in concept of owner. As is the
common practice in the real estate industry, an ocular inspection of the premises involved is a safeguard a cautious and
prudent purchaser usually takes. Should he find out that the land he intends to buy is occupied by anybody else other
than the seller who, as in this case, is not in actual possession, it would then be incumbent upon the purchaser to verify
the extent of the occupants possessory rights. The failure of a prospective buyer to take such precautionary steps would
mean negligence on his part and would thereby preclude him from claiming or invoking the rights of a "purchaser in
good faith."62

This rule equally applies to mortgagees of real property. In the case of Crisostomo v. Court of Appeals,63 the Court held:

It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a reasonable man
upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the
vendor or mortgagor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility
of the existence of a defect in the vendors or mortgagors title, will not make him an innocent purchaser or mortgagee

for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the
defects as would have led to its discovery had he acted with the measure of a prudent man in a like situation.64

Banks, their business being impressed with public interest, are expected to exercise more care and prudence than
private individuals in their dealings, even those involving registered lands. Hence, for merely relying on the certificates of
title and for its failure to ascertain the status of the mortgaged properties as is the standard procedure in its operations,
we agree with the Court of Appeals that CRB is a mortgagee in bad faith.

In this connection, Marquezs obstention of title to the property and the subsequent transfer thereof to CRB cannot help
the latters cause. In a situation where a party has actual knowledge of the claimants actual, open and notorious
possession of the disputed property at the time of registration, as in this case, the actual notice and knowledge are
equivalent to registration, because to hold otherwise would be to tolerate fraud and the Torrens system cannot be used
to shield fraud. 65

While certificates of title are indefeasible, unassailable and binding against the whole world, they merely confirm or
record title already existing and vested. They cannot be used to protect a usurper from the true owner, nor can they be
used for the perpetration of fraud; neither do they permit one to enrich himself at the expense of others.66

We also find that the Court of Appeals did not err in awarding the subject property to the Heirs absent proof of good
faith in their possession of the subject property and without any showing of possession thereof by Gamiao and Dayag.

As correctly argued by the Heirs in their Comment,67 the requirement of good faith in the possession of the property
finds no application in cases where there is no second sale.68 In the case at bar, Teodoro dela Cruz took possession of
the property in 1964 long before the sale to Marquez transpired in 1976 and a considerable length of timeeighteen
(18) years in factbefore the Heirs had knowledge of the registration of said sale in 1982. As Article 526 of the Civil Code
aptly provides, "(H)e is deemed a possessor in good faith who is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it." Thus, there was no need for the appellate court to consider the issue of good
faith or bad faith with regard to Teodoro dela Cruzs possession of the subject property.

Likewise, we are of the opinion that it is not necessary that there should be any finding of possession by Gamiao and
Dayag of the subject property. It should be recalled that the regularity of the sale to Gamiao and Dayag was never
contested by Marquez.69 In fact the RTC upheld the validity of this sale, holding that the Madrid brothers are bound by
the sale by virtue of their confirmation thereof in the Joint Affidavit dated 14 August 1957. That this was executed a day
ahead of the actual sale on 15 August 1957 does not diminish its integrity as it was made before there was even any
shadow of controversy regarding the ownership of the subject property.

Moreover, as this Court declared in the case of Heirs of Simplicio Santiago v. Heirs of Mariano E. Santiago ,70 tax
declarations "are good indicia of possession in the concept of an owner, for no one in his right mind would be paying
taxes for a property that is not in his actual or constructive possession."71

WHEREFORE, the Petition is DENIED. The dispositive portion of the Court of Appeals Decision, as modified by its
Resolution dated 5 January 1998, is AFFIRMED. Costs against petitioner.

COL. FRANCISCO DELA MERCED, substituted by his heirs, namely, BLANQUITA E. DELA MERCED, LUIS CESAR DELA
MERCED, BLANQUITA E. DELA MERCED (nee MACATANGAY) and MARIA OLIVIA M. PAREDES, petitioners, vs.
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS) and SPOUSES VICTOR and MILAGROS MANLONGAT, respondents.

YNARES-SANTIAGO, J.:

This is a petition for review under Rule 45 of the Rules of Court, seeking to set aside the decision of the Court of Appeals
dated May 21, 1999 in CA-G.R. CV No. 55034,[1] which reversed the decision of the Regional Trial Court of Pasig, Metro
Manila, Branch 160, in Civil Cases Nos. 51410 and 51470.[2]

The antecedent facts, as culled from the records, are as follows:

Governor Jose C. Zulueta and his wife Soledad Ramos were the owners of parcels of land consisting of 100,986 square
meters, known as the Antonio Village Subdivision, Orambo, Pasig City. The parcels of land were registered in their names
under Transfer Certificates of Title Nos. 26105,[3] 37177[4] and 50256[5] of the Registry of Deeds of the Province of
Rizal.

On September 25, 1956, the Zuluetas obtained a loan of P520,000.00 from the Government Service Insurance System, as
security for which they mortgaged the lands covered by TCT No. 26105. It was expressly stipulated in the mortgage deed
that certain lots within TCT No. 26105 shall be excluded from the mortgage because they have been either previously
sold to third parties or donated to the government.

The Zulueta spouses obtained an additional loan from the GSIS on March 6, 1957 in the amount of P190,000.00, as
security for which they mortgaged the land covered by TCT No. 50256. On April 4, 1957, the Zuluetas obtained another
loan from GSIS this time in the amount of P1,000,000.00, which they secured by mortgaging parcels of land included in
TCT Nos. 26105 and 37177.


On September 3, 1957, the Zulueta spouses executed a contract to sell whereby they undertook to sell to Francisco dela
Merced and Evarista Mendoza lots identified as Lots 6, 7, 8 and 10, Block 2 (formerly Block 4), Antonio Subdivision
covered by TCT No. 26105.[6] On October 26, 1972, after full payment by Col. dela Merced of the purchase price, a Deed
of Absolute Sale was executed by the Zuluetas in his favor.

On October 15, 1957, another loan was extended by GSIS to the Zulueta spouses in the amount of P1,398,000.00,
secured by a mortgage on the properties included in TCT Nos. 26105 and 50256.

The Zuluetas defaulted in the payment of their loans. Thus, GSIS extrajudicially foreclosed the mortgages and, at the
foreclosure sale held on August 16, 1974, GSIS was awarded the mortgaged properties as the highest bidder. Since the
Zuluetas did not redeem the properties within the reglementary period, title to the properties was consolidated to GSIS.

Later, on March 25, 1982, GSIS held a sale at public auction of its acquired assets. Elizabeth D. Manlongat and Ma.
Therese D. Manlongat, the children of Victor and Milagros Manlongat, purchased Lot 6, Block 2 of Antonio Village.[7]

On August 22, 1984, a complaint for declaratory relief, injunction and damages, docketed as Civil Case No. 51410, was
filed with the Regional Trial Court of Pasig, Branch 160, by Victor Lemonsito and several others,[8] against Benjamin
Cabusao, in his capacity as In-Charge of the Municipal Task Force on Squatters of the Municipal Engineers Office of Pasig,
spouses Domini and Olivia Suarez and spouses Victor and Milagros Manlongat.[9] Plaintiffs therein averred that they
were owners of houses in various lots in Antonio Village, having constructed the same with the permission of the late
Jose C. Zulueta before the same was foreclosed by GSIS; that defendants Suarez and Manlongat claimed to be vendees
of lots in Antonio Village; and that defendant Cabusao was threatening to demolish plaintiffs houses on the alleged
ground that they were squatters on the lots.

On September 7, 1984, Col. dela Merced also instituted Civil Case No. 51470 with the Regional Trial Court of Pasig,
Branch 154, against GSIS and the spouses Zulueta, praying, among others, that the foreclosure sale, insofar as his lots
were concerned, be declared null and void.[10]

Meanwhile, Col. dela Merced filed a complaint-in-intervention in Civil Case No. 51410,[11] wherein he prayed that
plaintiffs complaint be dismissed and defendants titles to lots 6, 7 and 8, Block 2 be declared null and void.

The complaint in Civil Case No. 51410 was dismissed for failure of plaintiffs to prosecute, but the complaint-in-
intervention of Col. dela Merced was allowed to proceed against defendants Suarez and Manlongat.[12]

On September 5, 1986, upon motion of plaintiff Col. dela Merced, the trial court ordered the consolidation of Civil Case
No. 51470 with Civil Case No. 51410.[13]

On October 23, 1987, the Regional Trial Court of Pasig, Branch 160, rendered its decision, the dispositive portion of
which reads:

WHEREFORE, judgment is hereby rendered in Civil Case No. 51410:

1. Declaring Lots 6, 7, 8 and 10 of Block 2, and Lot 8 of Block 8 which are the subject of the action, as the exclusive
property of the intervenor. Consequently, the certificates of Title of the defendants covering said property lots are
declared null and void;

and in Civil Case No. 51470:

1. Declaring the foreclosure proceedings conducted by defendant GSIS, insofar as they affected the lots in question, as
null and void, including the consolidation of ownership thereof by the GSIS, and the sale of the lots to defendant
Manlongat spouses;

2. Declaring the certificates of title issued to GSIS covering the aforesaid lots, as well as those issued to defendant
Manlongat spouses by virtue of the sale executed by the former in favor of the latter, as null and void; and directing the
Office of the Register of Deeds of Pasig, Metro Manila, to issue a new one in the name of the plaintiff Francisco Mendoza
dela Merced;

3. Ordering the defendants, jointly and severally, to pay the plaintiff the sums of P100,000.00 as moral damages;
P50,000.00 as exemplary damages; and P50,000.00 by way of attorneys fees; plus costs.

SO ORDERED.[14]

The GSIS and Manlongat spouses filed separate appeals. The Court of Appeals held that the trial court erred in declaring
defendants as having waived their right to present evidence. Thus, on April 19, 1994, the Court of Appeals set aside the
decision of the trial court and remanded the case to the lower court for the reception of evidence of defendants
Manlongat and GSIS.[15]

In the meantime, on March 19, 1988, Col. dela Merced passed away and was substituted by his heirs.


On December 27, 1996, the Regional Trial Court of Pasig, Branch 160, rendered a decision, the dispositive portion of
which reads:

WHEREFORE, judgment is hereby rendered:

1. Declaring the foreclosure sale of Lot Nos. 6, 7, 8 and 10 of Block 2, and Lot 8 of Block 8 and certificate of Titles issued
to GSIS covering the aforesaid lots as well as those issued to defendant Manlongat spouses as null and void;

2. Declaring plaintiff-intervenor as the true and lawful owner of the aforesaid lots;

3. Ordering the Register of Deeds of Pasig, Metro Manila to issue new titles in the name of plaintiff-intervenor or his
substituted heirs namely Blanquita dela Merced-Macatangay, Blanquita Errea dela Merced, Luis dela Merced and Maria
Olivia dela Merced Paredes;

4. Ordering defendants GSIS and spouses Manlongat jointly and severally to pay attorneys fees of P20,000.00 and to pay
the costs.

SO ORDERED.[16]

The trial court made the following findings:

The mortgage contract signed by the Zulueta spouses of the property covered by TCT No. 26105 in favor of GSIS (Exh. C-
C-1 Merced) contained the following provisions:

Note:

The following lots which form part of TCT No. 26105 are not covered by this mortgage contract due to sale to third
parties and donation to government.

1. Lots No. 1 to 13, Block No. 1 - 6,138 sq.m.

2. Lots Nos. 1 to 11, Block No. 2 - 4,660 sq.m.

3. Lot No. 15, Block No. 3 ------ 487 sq.m.

4. Lot No. 17, Block No. 4 ------ 263 sq.m.

5. Lot No. 1, Block No. 7 -------- 402 sq.m.

6. Road Lots Nos. 1, 2, 3 & 4 -- 22,747 sq.m.

Evidently, lot numbers 1 to 11, Block 2 to include plaintiff-intervenors lots were excluded from the mortgage. In fact, in a
letter dated October 1, 1956, defendant GSIS confirmed that portions of the subdivision such as lots Nos. 1 to 11, Block 2
x x x have already been sold x x x. (Exh. B-1 Merced) The intent of the parties was clear to exclude from the mortgage
the properties claimed by plaintiff-intervenor, among others, where he introduced improvements since 1955. On
October 26, 1972, the spouses Zulueta executed the corresponding deed of sale in favor of plaintiff-intervenor (Exh. C).

The contention of defendant GSIS and defendants Victor and Milagros Manlongat that Lot Nos. 6, 7, 8 & 10 are not the
lots excluded from the mortgage by the spouses Zulueta to the GSIS cannot be given credence. Evidence reveal that lots
6, 7, 8 and 10, Block 2, with a total area of 1,405 square meters of the Antonio Village Subdivision were excluded from
the September 25, 1956 mortgage contract executed by defendants in favor of GSIS. (Exh. C, C-1 Merced, 9-1-95)
Defendant GSIS in fact had admitted in its answer, the letter to plaintiff acknowledging that there has been no problem
with respect to Lot 8, Block 8 of the said property. Obviously, defendant recognized the ownership of intervenor of the
mentioned lots. It is further to be noted that plan Pcs-5889 was not yet in existence when the mortgage was executed in
1956. Besides defendant GSIS had knowledge of the possession of intervenor. While the deed of sale between the
Zuluetas and plaintiff-intervenor was never registered nor annotated in the title and executed only after one (1) year,
defendant GSIS had knowledge of the possession of intervenor of the lots; that defendant GSIS was not acting in good
faith when it accepted the mortgage of the questioned lots. Plaintiff-intervenor in 1957 built a house and introduced
improvement and built a house of strong structure on lots 6 & 7 and with the other lots serving as backyard and for 28
years had paid dues on the lots.[17]

Respondents appealed the decision to the Court of Appeals, where the same was docketed as CA-G.R. CV No. 55034. On
May 21, 1999, the Court of Appeals reversed the decision of the trial court. Petitioners filed a Motion for
Reconsideration which was denied on October 4, 1999.

Hence, the instant petition for review, raising the following assignments of error:

FIRST ASSIGNMENT OF ERROR


THE COURT A QUO ACTED CONTRARY TO LAW AND JURISPRUDENCE IN TOTALLY DISREGARDING THE ADMISSION OF
DEFENDANT GSIS THAT THE LOTS IN QUESTION WERE EXCLUDED FROM THE MORTGAGE

SECOND ASSIGNMENT OF ERROR

THE COURT A QUO ACTED CONTRARY TO LAW AND JURISPRUDENCE IN NOT RULING THAT (A) PLAINTIFF HAS BEEN IN
POSSESSION OF THE SUBJECT LOTS SINCE 1955 CONTINUOUSLY UNTIL THE PRESENT AND (B) GSIS HAD KNOWLEDGE OF
PLAINTIFFS POSSESSION

THIRD ASSIGNMENT OF ERROR

THE COURT A QUO ACTED CONTRARY TO LAW AND JURISPRUDENCE IN ITS FAILURE TO APPRECIATE THE SIGNIFICANCE
OF PLAINTIFFS CONTINUOUS OPEN AND ADVERSE POSSESSION IN THE CONCEPT OF OWNER FOR 28 YEARS AND THE
ACTUAL KNOWLEDGE OF GSIS OF SUCH POSSESSION

FOURTH ASSIGNMENT OF ERROR

THE COURT A QUO ACTED CONTRARY TO LAW AND JURISPRUDENCE IN RULING THAT NO JUDGMENT CAN BE RENDERED
AGAINST THE SPOUSES MANLONGAT WITHOUT VIOLATING THEIR RIGHT TO DUE PROCESS OF LAW[18]

In essence, petitioners allege that the foreclosure sale was null and void because the mortgage executed by the parties,
insofar as the properties previously sold to petitioners were concerned, was also void from the beginning. Petitioners
had been in continuous and open possession thereof before and during the time of the mortgage, more specifically,
since 1955 continuously up to the present, and GSIS had knowledge thereof. Furthermore, respondent GSIS admitted
that the lots in questions were excluded from the mortgage. Finally, under Presidential Decree No. 957, also known as
The Subdivision and Condominium Buyers Protective Decree, petitioners are entitled to the issuance of their
corresponding title over the lots after having completed their payments to the subdivision owner.[19]

Petitioners aver that when the Zuluetas mortgaged their properties to GSIS on October 15, 1957, they were no longer
the owners of the lots subject of this litigation, the same having been sold to Francisco dela Merced by virtue of the
contract to sell executed on September 3, 1957. Hence, the mortgage was void from its inception and GSIS, as
mortgagee, acquired no better right notwithstanding the registration of the mortgage. Petitioners also argued that GSIS
was a mortgagee in bad faith as it had been negligent in ascertaining and investigating the condition of the subject lots
mortgaged to it as well as the rights of petitioners who were already in possession thereof at the time of mortgage.
Furthermore, petitioners cite the judicial admission of respondent GSIS in its answer before the trial court, wherein it
recognized the rights of ownership of Francisco dela Merced over Lot 8, Block 8 and of Eva Mendoza dela Merced over
Lot 10, Block 2 of TCT 26105.

Respondent GSIS countered that it cannot be legally presumed to have acknowledged petitioners rights over Lot 8, Block
8 of TCT 26105. With regard to the possession of petitioners, respondent GSIS invoked the ruling of the Court of Appeals
that the mere possession of petitioner cannot stand against the registered titles of GSIS and its buyers, Elizabeth and
Ma. Therese Manlongat. Moreover, Lot 6, Block 2 (formerly Block 4) of the Antonio Village Subdivision was acquired by
Elizabeth Manlongat in a public bidding, as a consequence of which TCT No. PT-94007 was issued to her. Respondent
GSIS also maintained that the lots being claimed by petitioners were included in the real estate mortgage executed by
the Zuluetas in favor of GSIS; and that the inclusion of the subject lots in the mortgage was confirmed by Manuel Ibabao,
an employee of the Acquired Assets Department of GSIS.

For their part, respondent spouses Manlongat alleged that since Francisco dela Merced never registered the contract to
sell and deed of absolute sale with the Register of Deeds, the same cannot affect the rights of third persons such as their
daughter, Elizabeth Manlongat, who dealt in good faith with GSIS as the prior registered owner.

The petition is impressed with merit.

Petitioners rights of ownership over the properties in dispute, albeit unregistered, are superior to the registered
mortgage rights of GSIS over the same. The execution and validity of the contract to sell dated September 3, 1957
executed by the Zulueta spouses, as the former subdivision owner, in favor of Francisco dela Merced, are beyond cavil.
There is also no dispute that the contract to sell was entered into by the parties before the third mortgage was
constituted on October 15, 1957 by the Zuluetas in favor of GSIS on the property covered by TCT No. 26105, which
included the subject lots. Francisco dela Merced was able to fully pay the purchase price to the vendor, who later
executed a deed of absolute sale in his favor. However, the Zuluetas defaulted on their loans; hence, the mortgage was
foreclosed and the properties were sold at public auction to GSIS as the highest bidder.

In the case of State Investment House, Inc. v. Court of Appeals,[20] it was held that:

STATEs registered mortgage right over the property is inferior to that of respondents-spouses unregistered right. The
unrecorded sale between respondents-spouses and SOLID is preferred for the reason that if the original owner (SOLID,
in this case) had parted with his ownership of the thing sold then he no longer had ownership and free disposal of that

thing so as to be able to mortgage it again. Registration of the mortgage is of no moment since it is understood to be
without prejudice to the better right of third parties.

In the same vein, therefore, the registered right of GSIS as mortgagee of the property is inferior to the unregistered right
of Francisco dela Merced. The unrecorded sale between Francisco dela Merced as the vendee of the property and the
Zuluetas, the original owners, is preferred for the same reason stated above.

Respondents cannot even assert that as mortgagee of land registered under the Torrens system, GSIS was not required
to do more than rely upon the certificate of title. As a general rule, where there is nothing on 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 defect or inchoate right
that may subsequently defeat his right thereto. This rule, however, admits of an exception as where the purchaser or
mortgagee has knowledge of a defect or lack of title in the vendor, or that he was aware of sufficient facts to induce a
reasonably prudent man to inquire into the status of the property in litigation.[21]

In the case at bar, GSIS is admittedly a financing institution. In its answer to the complaint filed with the trial court, GSIS
admitted knowledge that the spouses Jose C. Zulueta and Soledad B. Ramos owned the Antonio Subdivision when they
mortgaged the same with GSIS. In Sunshine Finance and Investment Corp. v. Intermediate Appellate Court,[22] we held
that when the purchaser or mortgagee is a financing institution, the general rule that a purchaser or mortgagee of land
is not required to look further than what appears on the face of the title does not apply. Further:

Nevertheless, we have to deviate from the general rule because of the failure of petitioner in this case to take the
necessary precautions to ascertain if there was any flaw in the title of the Nolascos and to examine the condition of the
property they sought to mortgage. The petitioner is an investment and financing corporation. We presume it is
experienced in its business. Ascertainment of the status and condition of properties offered to it as security for the loans
it extends must be a standard and indispensable part of its operations. Surely it cannot simply rely on an examination of
a Torrens certificate to determine what the subject property looks like as its condition is not apparent in the document.
The land might be in a depressed area. There might be squatters on it. It might be easily inundated. It might be an
interior lot without convenient access. These and other similar factors determine the value of the property and so
should be of practical concern to the petitioner.[23]

There is nothing in the records of this case to indicate that an ocular inspection report was conducted by GSIS, or
whether it investigated, examined and assessed the subdivision lots when they were offered as security for the loans by
the original owners. The only inventory made by GSIS based on its documentary evidence was prepared by its officers
employed with the Acquired Assets Department, but that was after the foreclosure sale was already conducted and not
before the mortgage was constituted over the property. The constructive knowledge of GSIS of the defect in the title of
the subject property, or lack of such knowledge due to its negligence, takes the place of registration of the rights of
petitioners.

Likewise, in Philippine National Bank v. Office of the President,[24]24 we held that ---

As between these small lot buyers and the gigantic financial institutions which the developers deal with, it is obvious
that the law --- as an instrument of social justice --- must favor the weak. Indeed, the petitioner Bank had at its disposal
vast resources with which it could adequately protect its loan activities, and therefore is presumed to have conducted
the usual due diligence checking and ascertained (whether thru ocular inspection or other modes of investigation) the
actual status, condition, utilization and occupancy of the property offered as collateral. It could not have been unaware
that the property had been built on by small lot buyers. On the other hand, private respondents obviously were
powerless to discover the attempt of the land developer to hypothecate the property being sold to them. It was
precisely in order to deal with this kind of situation that P.D. 957 was enacted, its very essence and intendment being to
provide a protective mantle over helpless citizens who may fall prey to the razzmatazz of what P.D. 957 termed
unscrupulous subdivision and condominium sellers.[25]

In the case at bar, GSIS admitted in its answer that it received a letter from Francisco dela Merced on August 27, 1981,
stating that he had acquired the subject lots by virtue of a deed of absolute sale executed in his favor by the Zulueta
spouses.[26] GSIS also admitted the fact that on October 17, 1980, its Deputy General Counsel wrote Francisco dela
Merced stating that his claim of ownership over Block 8, Lot 8, of TCT No. 26105 had no problem; but his claim to Lots 6,
7, 10 and 11 of Block 2, of the same title, was not very clear.[27] Clearly, therefore, GSIS had full knowledge of the claim
of ownership of dela Merced over the aforementioned lots even before their sale at public auction to Elizabeth
Manlongat.

Coming now to the last issue --- whether Elizabeth Manlongat, as purchaser of Lot 6, Block 2 at an auction sale
conducted by GSIS, had a better right than petitioners --- we must rule in the negative. It should be borne in mind that
the title of Manlongat was derived through sale or transfer from GSIS, whose acquisition over the property proceeded
from a foreclosure sale that was null and void. Nemo potest plus juris ad alium transferre quam ipse habet. No one can
transfer a greater right to another than he himself has.[28] In other words, the subsequent certificates of title of GSIS
and of Manlongat over the property are both void, because of the legal truism that the spring cannot rise higher than
the source.

Further, Manlongat cannot claim that she was a purchaser in good faith. The records categorically reflect that neither
Manlongat nor her predecessor-in-interest, GSIS, possessed the property prior to or after the former bought the same at
an auction sale. In fact, at the time the lots were sold to Manlongat, petitioners were not only in actual possession
thereof, but their father, Francisco dela Merced, had already built a house thereon. Again, a cautious and prudent
purchaser would usually make an ocular inspection of the premises, this being standard practice in the real estate
industry. Should such prospective buyer find out that the land she intends to buy is being occupied by anybody other
than the seller, who, in this case, was not in actual possession, it would then be incumbent upon her to verify the extent
of the occupants possessory rights. The failure of a prospective buyer to take such precautionary steps would mean
negligence on her part and would thereby preclude her from claiming or invoking the rights of a purchaser in good faith.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The decision of the Court of Appeals is REVERSED AND
SET ASIDE. The decision of the Regional Trial Court of Pasig City, Branch 160, in Civil Cases Nos. 51410 and 51470, is
REINSTATED. The foreclosure sale of Lot Nos. 6, 7, 8 and 10 of Block 2 and Lot 8 of Block 8 of the property originally
covered by TCT 26105, and the subsequent certificates of titles issued to GSIS as well as TCT No. PT-94007 in the name
of Elizabeth Manlongat, are declared NULL AND VOID. The Register of Deeds of Pasig City is ordered to CANCEL all
present certificates of title in the name of GSIS and Elizabeth Manlongat covering the above-mentioned properties, and
to ISSUE new certificates of title over the same in the name of petitioners as co-owners thereof. Respondents GSIS and
spouses Victor and Milagros Manlongat are ORDERED to pay, jointly and severally, attorneys fees in the increased
amount of P50,000.00, and to pay the costs.

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.

TINGA, J.:

From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita Zavalla, (hereinafter, the
Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-
39023 both measuring 15,808 square meters or a total of 3.1616 hectares.

On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta,
(hereinafter, Babasanta) for the price of fifteen pesos (P15.00) per square meter. Babasanta made a downpayment of
fifty thousand pesos (P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several
other payments totaling two hundred thousand pesos (P200,000.00) were made by Babasanta.

Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final deed of sale in his favor
so that he could effect full payment of the purchase price. In the same letter, Babasanta notified the spouses about
having received information that the spouses sold the same property to another without his knowledge and consent. He
demanded that the second sale be cancelled and that a final deed of sale be issued in his favor.

In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to sell the property to him
at fifteen pesos (P15.00) per square meter. She, however, reminded Babasanta that when the balance of the purchase
price became due, he requested for a reduction of the price and when she refused, Babasanta backed out of the sale.
Pacita added that she returned the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio Oya.

On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court (RTC), Branch 31, of San Pedro,
Laguna, a Complaint for Specific Performance and Damages1 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 Babasantas request, the latter rescinded the contract to sell and declared that
the original loan transaction just be carried out in that the spouses would be indebted to him in the amount of two
hundred thousand pesos (P200,000.00). Accordingly, on 6 July 1989, they purchased Interbank Managers Check No.
05020269 in the amount of two hundred thousand pesos (P200,000.00) in the name of Babasanta to show that she was
able and willing to pay the balance of her loan obligation.

Babasanta later filed an Amended Complaint dated 17 January 19903 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 Opposition4 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 19905
admitted the amended complaint.

On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a Motion for Intervention6
before the trial court. SLDC alleged that it had legal interest in the subject matter under litigation because on 3 May
1989, the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale
with Mortgage.7 It alleged that it was a buyer in good faith and for value and therefore it had a better right over the
property in litigation.

In his Opposition to SLDCs motion for intervention,8 respondent Babasanta demurred and argued that the latter had no
legal interest in the case because the two parcels of land involved herein had already been conveyed to him by the
Spouses Lu and hence, the vendors were without legal capacity to transfer or dispose of the two parcels of land to the
intervenor.

Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene. SLDC filed its Complaint-in-
Intervention on 19 April 1990.9 Respondent Babasantas motion for the issuance of a preliminary injunction was likewise
granted by the trial court in its Order dated 11 January 199110 conditioned upon his filing of a bond in the amount of
fifty thousand pesos (P50,000.00).

SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu executed in its favor an Option to
Buy the lots subject of the complaint. Accordingly, it paid an option money in the amount of three hundred sixteen
thousand one hundred sixty pesos (P316,160.00) out of the total consideration for the purchase of the two lots of one
million two hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After the Spouses Lu received a total
amount of six hundred thirty-two thousand three hundred twenty pesos (P632,320.00) they executed on 3 May 1989 a
Deed of Absolute Sale with Mortgage in its favor. SLDC added that the certificates of title over the property were
delivered to it by the spouses clean and free from any adverse claims and/or notice of lis pendens. SLDC further alleged
that it only learned of the filing of the complaint sometime in the early part of January 1990 which prompted it to file
the motion to intervene without delay. Claiming that it was a buyer in good faith, SLDC argued that it had no obligation
to look beyond the titles submitted to it by the Spouses Lu particularly because Babasantas claims were not annotated
on the certificates of title at the time the lands were sold to it.

After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the property to SLDC. It
ordered the Spouses Lu to pay Babasanta the sum of two hundred thousand pesos (P200,000.00) with legal interest plus
the further sum of fifty thousand pesos (P50,000.00) as and for attorneys fees. On the complaint-in-intervention, the
trial court ordered the Register of Deeds of Laguna, Calamba Branch to cancel the notice of lis pendens annotated on
the original of the TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).

Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and SLDC did not register the
respective sales in their favor, ownership of the property should pertain to the buyer who first acquired possession of
the property. The trial court equated the execution of a public instrument in favor of SLDC as sufficient delivery of the
property to the latter. It concluded that symbolic possession could be considered to have been first transferred to SLDC
and consequently ownership of the property pertained to SLDC who purchased the property in good faith.

Respondent Babasanta appealed the trial courts decision to the Court of Appeals alleging in the main that the trial court
erred in concluding that SLDC is a purchaser in good faith and in upholding the validity of the sale made by the Spouses
Lu in favor of SLDC.

Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the trial court erred in failing
to consider that the contract to sell between them and Babasanta had been novated when the latter abandoned the
verbal contract of sale and declared that the original loan transaction just be carried out. The Spouses Lu argued that
since the properties involved were conjugal, the trial court should have declared the verbal contract to sell between
Pacita Lu and Pablo Babasanta null and void ab initio for lack of knowledge and consent of Miguel Lu. They further
averred that the trial court erred in not dismissing the complaint filed by Babasanta; in awarding damages in his favor
and in refusing to grant the reliefs prayed for in their answer.

On 4 October 1995, the Court of Appeals rendered its Decision11 which set aside the judgment of the trial court. It
declared that the sale between Babasanta and the Spouses Lu was valid and subsisting and ordered the spouses to
execute the necessary deed of conveyance in favor of Babasanta, and the latter to pay the balance of the purchase price
in the amount of two hundred sixty thousand pesos (P260,000.00). The appellate court ruled that the Absolute Deed of
Sale with Mortgage in favor of SLDC was null and void on the ground that SLDC was a purchaser in bad faith. The
Spouses Lu were further ordered to return all payments made by SLDC with legal interest and to pay attorneys fees to
Babasanta.

SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate court.12 However, in a
Manifestation dated 20 December 1995,13 the Spouses Lu informed the appellate court that they are no longer
contesting the decision dated 4 October 1995.

In its Resolution dated 11 March 1996,14 the appellate court considered as withdrawn the motion for reconsideration
filed by the Spouses Lu in view of their manifestation of 20 December 1995. The appellate court denied SLDCs motion
for reconsideration on the ground that no new or substantial arguments were raised therein which would warrant
modification or reversal of the courts decision dated 4 October 1995.

Hence, this petition.

SLDC assigns the following errors allegedly committed by the appellate court:

THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A BUYER IN GOOD FAITH BECAUSE WHEN
THE SELLER PACITA ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE OF P200,000.00, SAN LORENZO WAS PUT ON
INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.

THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED FACT THAT THE ALLEGED FIRST BUYER,
RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND
TOOK POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN, ENCUMBRANCE OR LIS PENDENS WAS
ANNOTATED ON THE TITLES.

THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT RESPONDENT BABASANTA HAS SUBMITTED
NO EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.

THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL CONCURRENCE ON THE FINDINGS OF
FACT OF THE TRIAL COURT, IT REVERSED AND SET ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF
SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH. 15

SLDC contended that the appellate court erred in concluding that it had prior notice of Babasantas claim over the
property merely on the basis of its having advanced the amount of two hundred thousand pesos (P200,000.00) to Pacita
Lu upon the latters representation that she needed the money to pay her obligation to Babasanta. It argued that it had
no reason to suspect 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
1989.1awphi1.nt

Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu informed the Court that due to
financial constraints they have no more interest to pursue their rights in the instant case and submit themselves to the
decision of the Court of Appeals.16

On the other hand, respondent Babasanta argued that SLDC could not have acquired ownership of the property because
it failed to comply with the requirement of registration of the sale in good faith. He emphasized that at the time SLDC
registered the sale in its favor on 30 June 1990, there was already a notice of lis pendens annotated on the titles of the
property made as early as 2 June 1989. Hence, petitioners registration of the sale did not confer upon it any right.
Babasanta further asserted that petitioners bad faith in the acquisition of the property is evident from the fact that it
failed to make necessary inquiry regarding the purpose of the issuance of the two hundred thousand pesos
(P200,000.00) managers check in his favor.

The core issue presented for resolution in the instant petition is who between SLDC and Babasanta has a better right
over the two parcels of land subject of the instant case in view of the successive transactions executed by the Spouses
Lu.

To prove the perfection of the contract of sale in his favor, Babasanta presented a document signed by Pacita Lu
acknowledging receipt of the sum of fifty thousand pesos (P50,000.00) as partial payment for 3.6 hectares of farm lot
situated at Barangay Pulong, Sta. Cruz, Sta. Rosa, Laguna.17 While the receipt signed by Pacita did not mention the price
for which the property was being sold, this deficiency was supplied by Pacita Lus letter dated 29 May 198918 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.

Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for the
execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly
refused to do so. In effect, Babasanta himself recognized that ownership of the property would not be transferred to
him until such time as he shall have effected full payment of the price. Moreover, had the sellers intended to transfer
title, they could have easily executed the document of sale in its required form simultaneously with their acceptance of
the partial payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a
perfected contract to sell.

The distinction between a contract to sell and a contract of sale is quite germane. In a contract of sale, title passes to the
vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the
vendor and is not to pass until the full payment of the price.22 In a contract of sale, the vendor has lost and cannot
recover ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by
the vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is
not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.23

The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase price. There
being an obligation to pay the price, Babasanta should have made the proper tender of payment and consignation of the
price in court as required by law. Mere sending of a letter by the vendee expressing the intention to pay without the
accompanying payment is not considered a valid tender of payment.24 Consignation of the amounts due in court is
essential in order to extinguish Babasantas obligation to pay the balance of the purchase price. Glaringly absent from
the records is any indication that Babasanta even attempted to make the proper consignation of the amounts due, thus,
the obligation on the part of the sellers to convey title never acquired obligatory force.

On the assumption that the transaction between the parties is a contract of sale and not a contract to sell, Babasantas
claim of ownership should nevertheless fail.

Sale, being a consensual contract, is perfected by mere consent25 and from that moment, the parties may reciprocally
demand performance.26 The essential elements of a contract of sale, to wit: (1) consent or meeting of the minds, that
is, to transfer ownership in exchange for the price; (2) object certain which is the subject matter of the contract; (3)
cause of the obligation which is established.27

The perfection of a contract of sale should not, however, be confused with its consummation. In relation to the
acquisition and transfer of ownership, it should be noted that sale is not a mode, but merely a title. A mode is the legal
means by which dominion or ownership is created, transferred or destroyed, but title is only the legal basis by which to
affect dominion or ownership.28 Under Article 712 of the Civil Code, "ownership and other real rights over property are
acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain
contracts, by tradition." Contracts only constitute titles or rights to the transfer or acquisition of ownership, while
delivery or tradition is the mode of accomplishing the same.29 Therefore, sale by itself does not transfer or affect
ownership; the most that sale does is to create the obligation to transfer ownership. It is tradition or delivery, as a
consequence of sale, that actually transfers ownership.

Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from the moment it is
delivered to him in any of the ways specified in Article 1497 to 1501.30 The word "delivered" should not be taken
restrictively to mean transfer of actual physical possession of the property. The law recognizes two principal modes of
delivery, to wit: (1) actual delivery; and (2) legal or constructive delivery.

Actual delivery consists in placing the thing sold in the control and possession of the vendee.31 Legal or constructive
delivery, on the other hand, may be had through any of the following ways: the execution of a public instrument
evidencing the sale;32 symbolical tradition such as the delivery of the keys of the place where the movable sold is being
kept;33 traditio longa manu or by mere consent or agreement if the movable sold cannot yet be transferred to the
possession of the buyer at the time of the sale;34 traditio brevi manu if the buyer already had possession of the object
even before the sale;35 and traditio constitutum possessorium, where the seller remains in possession of the property
in a different capacity.36

Following the above disquisition, respondent Babasanta did not acquire ownership by the mere execution of the receipt
by Pacita Lu acknowledging receipt of partial payment for the property. For one, the agreement between Babasanta and
the Spouses Lu, though valid, was not embodied in a public instrument. Hence, no constructive delivery of the lands
could have been effected. For another, Babasanta had not taken possession of the property at any time after the
perfection of the sale in his favor or exercised acts of dominion over it despite his assertions that he was the rightful
owner of the lands. Simply stated, there was no delivery to Babasanta, whether actual or constructive, which is essential
to transfer ownership of the property. Thus, even on the assumption that the perfected contract between the parties
was a sale, ownership could not have passed to Babasanta in the absence of delivery, since in a contract of sale
ownership is transferred to the vendee only upon the delivery of the thing sold.37

However, it must be stressed that the juridical relationship between the parties in a double sale is primarily governed by
Article 1544 which lays down the rules of preference between the two purchasers of the same property. It provides:

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

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

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

The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of double
sale of immovable property. When the thing sold twice is an immovable, the one who acquires it and first records it in
the Registry of Property, both made in good faith, shall be deemed the owner.38 Verily, the act of registration must be
coupled with good faith that is, the registrant must have no knowledge of the defect or lack of title of his vendor or
must not have been aware of facts which should have put him upon such inquiry and investigation as might be
necessary to acquaint him with the defects in the title of his vendor.39

Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge of Babasantas claim.
Babasanta, however, strongly argues that the registration of the sale by SLDC was not sufficient to confer upon the latter
any title to the property since the registration was attended by bad faith. Specifically, he points out that at the time
SLDC registered the sale on 30 June 1990, there was already a notice of lis pendens on the file with the Register of
Deeds, the same having been filed one year before on 2 June 1989.

Did the registration of the sale after the annotation of the notice of lis pendens obliterate the effects of delivery and
possession in good faith which admittedly had occurred prior to SLDCs knowledge of the transaction in favor of
Babasanta?

We do not hold so.

It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to Buy in favor of SLDC upon
receiving P316,160.00 as option money from SLDC. After SLDC had paid more than one half of the agreed purchase price
of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC. At the
time both deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses Lu with Babasanta.
Simply stated, from the time of execution of the first deed up to the moment of transfer and delivery of possession of
the lands to SLDC, it had acted in good faith and the 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.l^vvphi1.net Time and again, this Court has ruled that
a person dealing with the owner of registered land is not bound to go beyond the certificate of title as he is charged with
notice of burdens on the property which are noted on the face of the register or on the certificate of title.41 In assailing
knowledge of the transaction between him and the Spouses Lu, Babasanta apparently relies on the principle of
constructive notice incorporated in Section 52 of the Property Registration Decree (P.D. No. 1529) which reads, thus:

Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment, order, judgment,
instrument or entry affecting registered land shall, if registered, filed, or entered in the office of the Register of Deeds
for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such
registering, filing, or entering.

However, the constructive notice operates as suchby the express wording of Section 52from the time of the
registration of the notice of lis pendens which in this case was effected only on 2 June 1989, at which time the sale in
favor of SLDC had long been consummated insofar as the obligation of the Spouses Lu to transfer ownership over the
property to SLDC is concerned.


More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the annotation of the notice of
lis pendens cannot help Babasantas position a bit and it is irrelevant to the good or bad faith characterization of SLDC as
a purchaser. A notice of lis pendens, as the Court held in Natao v. Esteban,42 serves as a warning to a prospective
purchaser or incumbrancer that the particular property is in litigation; and that he should keep his hands off the same,
unless he intends to gamble on the results of the litigation." Precisely, in this case SLDC has intervened in the pending
litigation to protect its rights. Obviously, SLDCs faith in the merit of its cause has been vindicated with the Courts
present decision which is the ultimate denouement on the controversy.

The Court of Appeals has made capital43 of SLDCs averment in its Complaint-in-Intervention44 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.

Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted by the prior notice of lis pendens and
assuming further for the same nonce that this is a case of double sale, still Babasantas claim could not prevail over that
of SLDCs. In Abarquez v. Court of Appeals,46 this Court had the occasion to rule that if a vendee in a double sale
registers the sale after he has acquired knowledge of a previous sale, the registration constitutes a registration in bad
faith and does not confer upon him any right. If the registration is done in bad faith, it is as if there is no registration at
all, and the buyer who has taken possession first of the property in good faith shall be preferred.

In Abarquez, the first sale to the spouses Israel was notarized and registered only after the second vendee, Abarquez,
registered their deed of sale with the Registry of Deeds, but the Israels were first in possession. This Court awarded the
property to the Israels because registration of the property by Abarquez lacked the element of good faith. While the
facts in the instant case substantially differ from that in Abarquez, we would not hesitate to rule in favor of SLDC on the
basis of its prior possession of the property in good faith. Be it noted that delivery of the property to SLDC was
immediately effected after the execution of the deed in its favor, at which time SLDC had no knowledge at all of the
prior transaction by the Spouses Lu in favor of Babasanta.1a\^/phi1.net

The law speaks not only of one criterion. The first criterion is priority of entry in the registry of property; there being no
priority of such entry, the second is priority of possession; and, in the absence of the two priorities, the third priority is
of the date of title, with good faith as the common critical element. Since SLDC acquired possession of the property in
good faith in contrast to Babasanta, who neither registered nor possessed the property at any time, SLDCs right is
definitely superior to that of Babasantas.

At any rate, the above discussion on the rules on double sale would be purely academic for as earlier stated in this
decision, the contract between Babasanta and the Spouses Lu is not a contract of sale but merely a contract to sell. In
Dichoso v. Roxas,47 we had the occasion to rule that Article 1544 does not apply to a case where there was a sale to one
party of the land itself while the other contract was a mere promise to sell the land or at most an actual assignment of
the right to repurchase the same land. Accordingly, there was no double sale of the same land in that case.

WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals appealed from is REVERSED
and SET ASIDE and the decision of the Regional Trial Court, Branch 31, of San Pedro, Laguna is REINSTATED. No costs.

G.R. No. L-27587
February 18, 1970

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

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

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

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

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

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

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

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

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

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

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

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