A. A. ADDISON v. MARCIANA FELIX, GR No.
12342, even able to show them to the purchaser; and as regards the
1918-08-03
Facts:
By a public instrument the plaintiff sold to the defendant
with the consent of her husband, four parcels of land
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, the second of P5,000 thirty days after the
issuance to her of a certificate of title and further, within ten
years from the date of such title, P10 for each cocoanut 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 also agreed that "within one year from the date of the
certificate of title in favor of Marciana Felix, the 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 be 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."
the vendor, A. A. Addison, filed suit in the Court of First
Instance of Manila to compel Marciana Felix to make
payment of the first installment of P2,000
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
The evidence adduced shows that plaintiff 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 defendant filed an application with the Land Court for
the registration in her name of the 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
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holding the contract of sale to be rescinded and ordering the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 of the P3,000 paid on account of the
price, plaintiff appealed.
Issues:
Whether the subject lands were delivered to the defendant
Ruling:
NO
The record shows that the plaintiff did not deliver the thing
sold. With respect to two of the parcels of land, he was not
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
The execution of a public instrument 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.
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 therefore held that the contract of purchase and sale
entered into by and between the plaintiff and the defendant
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
SOSTENES CAMPILLO v. CA, GR No. L-56483, 1984-05-
29
Facts:
On February 27, 1961, Tomas de Vera and his wife Felisa
Serafico sold two (2) parcels of land located in Tondo,
Manila to Simplicio Santos, now deceased and is represented
by his administratrix, Zenaida Diaz Vda. de Santos, the
herein private respondent.
Said sale was however never presented for registration in the
office of the Registry of Deeds of Manila nor noted in the
title covering the property.
On January 27, 1962, petitioner Sostenes Campillo obtained
a judgment for a sum of money against Tomas de Vera in
Civil Case
That judgment became final and executory, and petitioner
obtained an order for the issuance of a writ of
execution.pursuant thereto, the City Sheriff levied on three
(3) parcels of land in the name of Tomas de Vera, including
the two (2) parcels of land which the latter previously sold
to Simplicio Santos.
A notice of the sale of said lots was issued by the Sheriff and
published in the "Daily Record" and "La Nueva Era."
On July 25, 1962, the three parcels of land were sold at
public auction in favor of petitioner who was issued the
corresponding certificate of sale. After the lapse of one year,
the City Sheriff executed the final deed of sale in favor of
petitioner over the three (3) parcels of land levied and sold
on execution.
Claiming to be the owner of the two parcels of land by reason
of the previous sale to him by Tomas de Vera, Simplicio
Santos filed an action to annul the levy, notice of sale, sale
at public auction and final deed of sale of Lots 1 and 2 in
favor of petitioner Campillo, with damages.
petitioner alleged that he is an innocent purchaser for value
and that the supposed previous sale could not be preferred
over the levy and sale at public auction because it was not
registered.
After due trial, the lower court rendered judgment sustaining
the validity of the levy and sale at public auction because at
the time of the levy and sale, the disputed properties were
still registered in the name of the judgment debtor, Tomas de
Vera.
Issues:
who has a better right or title to the herein disputed two (2)
parcels of land ---
Ruling:
rule in favor of the herein petitioner (Campillo)
It is settled in this jurisdiction that a sale of real estate,
whether made as a result of a private transaction or of a
foreclosure or execution sale, becomes legally effective
against third persons only from the date of its
registration.
considering that the properties subject matter hereof were
actually attached and levied upon at a time when said
properties stood in the official records of the Registry of
Deeds as still owned by and registered in the name of the
judgment debtor, Tomas de Vera, the attachment, levy and
subsequent sale of said properties are proper and legal.
The net result is that the execution sale made in favor of the
herein petitioner transferred to him all the rights, interest and
participation of the judgment debtor in the afore-stated
properties as actually appearing in the certificate of title
As succinctly stated in the case of Philippine National Bank
vs. Court of Appeals:
“A bona fide purchaser for value of such property
at an auction sale acquires good title as against a
prior transferee of same property if such transfer
was unrecorded at the time of the auction sale."
the rule applies that a person dealing with registered land is
not required to go behind the register to determine the
condition of the property and he is merely charged with
notice of the burdens on the property which are noted on the
face of the register or the certificate of title.
Hence, the petitioner herein, as the purchaser in the
execution sale of the registered land in suit, acquires such
right and interest as appears in the certificate of title
unaffected by prior lien or encumbrances not noted therein.
This must be so in order to preserve the efficacy and
conclusiveness of the certificate of title which is sanctified
under our Torrens system of land registration.
LEOPOLDO C. LEONARDO v. VIRGINIA TORRES
MARAVILLA, GR No. 143369, 2002-11-27
Facts:
Petitioner claims that he is the lawful owner of the disputed
lot, having purchased it on September 29, 1972 from a
certain Eusebio Leonardo Roxas, who in turn acquired the
same lot by purchase on August 28, 1972 from Mariano
Torres y Chavarria.
On September 14, 1972, Eusebio Leonardo Roxas sent a
letter-request to the Register of Deed of Pasay City asking
for the registration of the deed of sale allegedly executed in
his favor by Mariano Torres y Chavarria.
Office of the Register of Deeds, however, did not register the
deed as it was awaiting the final disposition of a pending
case between Mariano Torres y Chavarria and a certain
Francisco E. Fernandez involving title of the lot.
Incidentally, the said case was decided in favor of Mariano
Torres y Chavarria
On October 6, 1972, petitioner likewise asked the Register
of Deeds to register the deeds of sale and to issue the
corresponding transfer certificate of title in his name.
The Register of Deeds, however, original copy of TCT the
requested registration could not be effected.
On May 18, 1993, the Register of Deeds of Pasay City was
able to retrieve the original copy of TCT
On May 20, 1993, petitioner caused the annotation of his
affidavit of adverse claim on TCT and asked the respondents
to deliver possession of the owner's duplicate copy of TCT
When the latter ignored his demand, petitioner filed a
complaint for "Delivery of Possession of Property, Owner's
Duplicate Certificate of Title, Rentals and Damages."
Petitioner alleged that he filed the case against respondents
only in 1993 because he was living abroad.
respondents countered that since 1938 up to the present, the
lot in question has been registered in the name of the late
Mariano Torres y Chavarria, their predecessor-in-interest,
and that they have been in material possession thereof in the
concept of owners.
On motion of respondents, the trial court dismissing
petitioner's complaint
Dissatisfied, petitioner appealed to the Court of Appeals
Issues:
whether or not petitioner's action is barred by prescription
and laches.
Ruling:
YES
Maravilla has the better right to the property
Being an action based on written contracts, petitioner's
complaint falls under Article 1144 of the Civil Code, which
provides that an action upon a written contract shall
prescribe in ten years from the time the right of action
accrued.
Since petitioner brought the instant case only 21 years
from the time his supposed right of action accrued i.e.,
the date of execution of the contract conveying to him the
questioned lot, his action was clearly barred by the
statute of limitations.
Petitioner's action is actually an action for specific
performance, i.e., to enforce the deed of absolute sale
allegedly executed in his favor. It is a fundamental
principle that ownership does not pass by mere
stipulation but by delivery. The delivery of a thing
constitutes a necessary and indispensable requisite for
the purpose of acquiring the ownership of the same by
virtue of a contract.
In the case at bar, it is not disputed that the lot in question
was never delivered to petitioner notwithstanding the alleged
execution of a deed of absolute sale. From 1972 to 1993,
petitioner neither had, nor demanded, material possession of
the disputed lot. It was the respondents who have been in
control and possession thereof in the concept of owners since
1938 up to the present. It follows that ownership of the lot
was never transferred to petitioner.
Hence, he can not claim that the instant case is an accion
reivindicatoria or an action to recover ownership and full
possession of the property which, in the first place, never
came into his possession for lack of the requisite delivery.
ROMEO PAYLAGO v. INES PASTRANA JARABE, GR
No. L-20046, 1968-03-27
Facts:
The entire lot involved in this suit was originally covered
by Homestead Patent issued on
1920 and later under OCT of the Registry of Deeds of
Mindoro, in the name of Anselmo Lacatan.
On
1948, after the death of Anselmo Lacatan, TCT was issued
in the name of his two sons and heirs, Vidal and Florentino
Lacatan. Vidal Lacatan died on
1950.
1953, Vidal Lacatan's heirs in favor of the spouses Romeo
Paylago and Rosario Dimaandal, plaintiffs over a portion of
the entire lot
1953, Florentino Lacatan also died, leaving as his heirs, his
widow and three children, the said children of Florentino
Lacatan likewise executed a deed of sale in favor of the
same vendees over another portion of the same lot
1954, by virtue of the registration of the two deeds of sale a
new TCT covering the total area hectares was issued in
favor of the Paylago spouses.
A subsequent subdivision survey disclosed that one half
hectare of the total area purchased by plaintiffs was being
occupied by defendant-respondent.
Hence, the action to recover possession and ownership of
the said portion.
said portion of land was purchased by Hilario Jarabe, late
husband of defendant from one Apolonio Lacatan, which
sale is evidenced by an unregistered deed of sale that
Apolonio Lacatan, in turn, bought the same in 1936 from
Anselmo Lacatan, the original registered owner
After trial, the lower court held that plaintiffs were not
purchasers in good faith and rendered judgment in favor of
defendant
Issues:
Who has a better right in case of double sale of real
property, the registered buyer or the prior but unregistered
purchaser?
Ruling:
Defendant, petitioners were in bad faith
Both Courts below found that petitioners knew beforehand
that the parcel of land in question was owned by defendant-
respondent.
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.
"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 had acquired a valid title thereto." (Sampilo
v. Court of Appeals)
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
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.
The registration of the later instrument creates no right as
against the first purchaser.
DEVELOPMENT BANK OF PHILIPPINES v. LAZARO
MANGAWANG, GR No. L-18861, 1964-06-30
Facts:
Gavino Amposta applied with the Director of Lands for the
issuance of a homestead patent over a parcel of land
Pending action on his application, cadastral proceedings
were instituted by the government in said municipality
On March 8, 1920, the cadastral court rendered decision
awarding the land to Amposta.
The Governor General on November 2, 1920 subsequently
issued in favor of Amposta Homestead Patent No. 2388
covering the same land
On 1941, Amposta sold the land to Santos Camacho
surrending to him Original Certificate of Title and Transfer
Certificate of Title was issued in the name of Camacho.
On 1946, Santos Camacho sold the land to Bonifacio
Camacho
Bonifacio Camacho mortgaged the land to the
Rehabilitation Finance Corporation (now Development
Bank of the Philippines), and having failed to pay the loan
as agreed upon the land was sold at public auction to said
bank as the highest bidder. a final deed of sale was
executed in favor of the bank, and Transfer Certificate of
Title was issued in its name on 1957
Meanwhile, on 1947, Gavino Amposta again sold the same
property to Lazaro and Arsenio Mangawang for the sum of
P2,500.00 and an absolute deed of sale was executed in
their favor.
As a consequence of their purchase of the land, the
Mangawang brothers took possession thereof, and upon
learning of this transfer, the Development Bank of the
Philippines, which as already stated became the owner of
the property, commenced the present action against them in
the Court of First Instance of Bataan to recover its
possession and damages.
Here two certificates of title were issued to Gavino
Amposta over the same parcel of land, one under the
Homestead Law and another under the Cadastral Act. Said
titles were regularly issued and on their face both appear to
be valid, and under such predicament it behooves Amposta
to choose which of them hu would prefer, as he could not
validly make use of both of them. But this Amposta did not
do. On the contrary, he took advantage of the situation by
selling the land to two different persons surrendering to
each purchaser the pertinent certificate of title.
Issues:
Who of the two buyers should be considered as the rightful
owner of the land?
Ruling:
Amposta first sold the land to Santos Camacho on the same
date. And seven years thereafter, or on March 17, 1018,
Amposta again sold the land to the
Mangawang brothers, who also registered it in their name
on the same date. Since both purchasers apparently have
acted in good faith, as there is nothing in the evidence to
show that they did otherwise, We cannot hut conclude that
the sale made by Amposta to Santos Camacho is the valid
one considering that when Amposta sold the same land to
the Mangawang brothers he had nothing more to sell even
if the title he surrendered to them is one issued covering the
same property.
In legal contemplation, therefore, Amposta sold a property
he no longer owned, and hence the transaction is legally
ineffective.
the case under consideration is treated as one of double
sale. And applying this principle, we cannot but conclude
that the title should likewise be adjudicated to appellant
whose predecessor-in-interest acquired and registered the
property much ahead in point of time than the appellees.
Verily, the title acquired by the latter is invalid and
ineffective, contrary to the finding of the court a quo.
PURA CARREON v. RUFO AGCAOILI, GR No. L-
11156, 1961-02-23
Facts:
During the marriage of Bonifacio Carreon and Celerina
Dauag the registered land subject of this case was acquired.
After, the death of Carreon, his widow Celerina executed
on 1946. an affidavit adjudicating to herself alone the said
land. a transfer certificate was issued in her name.
she borrowed P1,200.00 from the Philippine National Bank
guaranted by a mortgage on one-half of the land. After the
maturity of the loan, she requested a certain Mr. Pintang to
look for a buyer of the land
One by the name of Rufo Agcaoili was found. The latter
made payment in full on 1947 the deed of absolute sale
executed in his favor was registered.
On 1955, the children of Celerina with the deceased
husband filed a complaint against the spouses Agcaoili
seeking to have the deed of sale executed by their mother
declared as one of mortgage and to recover one-half pro-
indiviso of the land described in the complaint.
the present appeal is predicated on the arguments that
appellees were buyers in bad faith
Issues:
Whether there was bad faith on the part of Agcaoili
Ruling:
NO
There is no clear proof that when Rufo Agcaoili bought the
land he knew of any flaw in the title of Celerina Dauag
Fraud cannot be presumed. It must be established by clear
and sufficient evidence. Here every indication is that
Agcaoili bought the land in all good faith oblivious of the
source of its acquisition.
If fraud had been committed such was perpetrated by
Celerina, appellants' mother. By her action she induced
Agcaoili to believe that she was the absolute owner of the
land which bore a torrens title. In dealing with it he merely
relied on such title. He was not required to do more. He is
only charged with notice of the burdens which are noted on
the face of said title. So after he bought the land and a new
title was issued in his name, he became a purchaser thereof
for value and a holder of a good and valid title.
there being no fraud in the transaction on the part of
appellee, nor, proof that be knew of any legal infirmity in
the title of his vendor, we find no reason to apply the
proposition that he is deemed to be holding the land in trust
for the children of Celerina Dauag.
AMADO CARUMBA v. CA, GR No. L-27587, 1970-02-
18
Facts:
On April 12, 1955 he Spouses Amado Canuto and Nemesia
Ibasco, by virtue of a 'Deed of Sale of Unregistered Land
with Covenants of "Warranty' sold a parcel of land, to the
spouses
Amado Carumba and Benita Canuto
The referred deed of sale was never registered in the Office
of the Register of Deeds and the Notary, Mr. Vicente
Malaya, was not then an authorized notary public in the
place
Amado Canuto is the older brother of the wife of the herein
appellee, Amado Carumba.
On
1957, a complaint for a sum of money was filed by
Santiago Balbuena against Amado Canuto and Nemesia
Ibasco a decision was rendered in favor of the plaintiff the
ex-officio Sheriff issued a "Definite Deed of Sale 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
The Court of First Instance finding that after execution of
the document Carumba had taken possession of the land
declared him to be the owner of the property under a
consummated sale; held void the execution levy made by
the sheriff and nullified the sale in favor of the judgment
creditor, Santiago Balbuena.
The Court of Appeals, 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
Issues:
Who has the better right in the land
Ruling:
Carumba, we disagree with the court of appeals
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.
the deed of sale in favor of
Canuto had been executed two years before 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.
Hence, the latter must yield the land to petitioner Carumba.
SPOUSES SANTIAGO VS. COURT OF APPEALS
G.R. No. 117014, 14 August 1995
Purchasers in good faith; prius tempore, potior jure
Facts:
Spouses Santiago bought 2 parcels of land from Evelyn
Mercado, who was acting as agent of her siblings.
The disputed lot is the second parcel of land, which is a
100-square meter lot offered to Spouses Santiago for
P100,000 shortly after the sale of the first lot. On 31
January 1978, P2,700 was paid as earnest money to be paid
in installments.
On 30 July 1979, Spouses Santiago, who had already made
several payments, met with Mercado at the
office of the Register of Deeds in Makati where an
Absolute Deed of Sale was executed. Mercado asked for
several more payments, after which she turned over the
owner’s copy of the OCT to Spouses Santiago.
A new title could not be issued at that time as Mercado had
the power of attorney only from one sister
Melita. She assured Spouses Santiago she had full authority
from all her siblings. Due to this, it was only
on 16 April 1982 that the deed of sale was finally registered
while Spouses Santiago possessed and held
the owner’s copy of the OCT. A new TCT was issued in
their name.
On 11 February 1982, however, Mercado sold the same
parcel of land for P100,000 to Aquiliono Arevalo, who
made no attempt to register the deed of sale. Five months
later or on 27 July 1983, the Register of Deeds of Makati
advised Spouses Santiago that Arevalo had filed an
affidavit of adverse claim.
On 28 December 1983, Arevalo filed an action for specific
performance, cancellation of title, and damages against
Spouses Santiago. The trial court ruled in favor of Arevalo
and ordered the Mercado siblings to surrender the disputed
lot to Arevalo and ordered Spouses Santiago to surrender
their TCT for cancellation. The Court of Appeals affirmed
the lower court.
On appeal to the Supreme Court, Spouses Santiago argued
they were the first to buy and the first and
only party to register the sale.
Issue(s):
1. Whether or not Spouses Santiago are purchasers in good
faith at the time of the sale and
registration, thus have a better right to the property than
Arevalo.
Held:
1. Yes, Spouses Santiago are purchasers in good faith
and there’s nothing to suggest
otherwise. Arevalo was out of the picture when Spouses
Santiagos’ sale was perfected
and they were the first to register their purchase while
Arevalo did not.
Good faith is always presumed. here being absent any
direct evidence of bad faith, there is need to
examine what respondent Court of Appeals said are indices
of bad faith on the part of Spouses Santiago.
Although Spouses Santiagos’s deed of sale was dated 30
July 1979, Arevalo was a complete stranger to
the transaction for he only bought said property on 13
September 1982. The Court of Appeals expressed
misgivings on
(1) the deed of sale’s lack of a copy at the
Records Management and Archives Division; and
(2) the commission of the notary extending to
more than the usual 2 years. However, Spouses
Santiago
could not be in bad faith because they were the
only buyers.
Moreover, the failure of the notary to furnish a copy of the
deed of sale to the proper office is a ground for disciplining
him, not for invalidating the document or setting aside the
sale of Spouses Santiago. A
typographical error concerning the expiry year of the
notary’s commission likewise cannot be made a
basis to destroy the presumption of good faith of Spouses
Santiago.
The CA likewise took against Spouses Santiago the fact
that the deed of sale of 30 July 1979 was executed before
the special powers of attorney of the Mercado siblings were
executed. The sale cannot be said to have been in bad faith
because of such fact. None of the co-owners repudiated the
sale or revoked their respective powers of attorney. Any
defect in the deed of sale is improper basis for the CA to
conclude the Spouses Santiago were in bad faith.
Another point is that the CA found Spouses Santiago’s
payments did not tally with the purchase price.
The variance in recorded payments in the course of more
than 3 years was improperly taken against
Spouses Santiago. What is important is that the Mercado
siblings acknowledged having received full
payment. All acts of the parties indicate full consideration
for the land was received.
The Mercado siblings also did not disturb the peaceful
possession and ownership of Spouses Santiago,
who not only bought the property ahead of Arevalo, but
have taken and remained in possession up to the present
time. They registered their of sale, albeit three years
delayed, but validly and not with “feverish haste” as
characterized by the CA. The three years was due to the
time it took for Evelyn Mercado to obtain the special
powers of attorney.

Given that the disputed lot was adjacent to another lot
which Spouses Santiago previously bought, it is
inconceivable how Arevalo never asked to look or take
possession of the title against the Mercado siblings.
Arevalo was not shown to have conducted ocular
inspections of the lot, but if he limited himself to relying on
the face of the Torrens title, he is guilty of negligence for
not asking for the owner’s duplicate copy. Even so, this
could not be given to him for it had been turned over to
Spouses Santiago way before Arevalo purchased the lot and
Evelyn Mercado had not owner’s copy to give.
The governing principle is prius tempore, potior jure (first
in time, stronger in right). Knowledge by the
first buyer of the second sale cannot defeat the first buyer’s
rights except when the second buyer first
registers in good faith the second sale (Olivares v.
Gonzales, 159 SCRA 33). Conversely, knowledge gained
by the second buyer of the first sale defeats his rights even
if he is first to register, since such knowledge taints his
registration with bad faith (see also Astorga v. Court of
Appeals, G.R. No 58530, 26 December 1984) In Cruz v.
Cabana (G.R. No. 56232, 22 June 1984; 129 SCRA 656), it
was held that it is essential, to merit the protection of Art
1544, second paragraph, that the second realty buyer must
act in good faith in registering his deed of sale (citing
Carbonell v. Court of Appeals, 69 SCRA 99, Crisostomo v.
CA, G.R. 95843, 02 September 1992).
The records show that petitioners are the first buyers of the
disputed land. They are the only party to
obtain and take hold of the owner’s copy of the Torrens
title. They are the only party to thereupon take
possession of the property. They are the only registrants of
the sale for which they have been issued a
certificate of title in their names. All these circumstances
and acts can only be indicative of good faith. It
follows that their title to the land should be upheld and
remain undisturbed.
TAN VS. COURT OF APPEALS
G.R. No. 125861, 9 September 1998
In double sale of property, the buyer in possession of a
torrens title and had registered the deed of sale must
prevail
Facts:
Alejandro Tan Keh previously owned two parcels of land
situated at 970 M.H. del Pilar Street, Malate,
Manila titled under his name.
Fernando Tan Kiat filed a complaint for recovery of
property against Tan Keh’s brother, Remigio Tan and
his children. Fernando claimed he bought both parcels of
land from Tan Keh in 1954 for P98,065.35 and
built his house thereon, but was unable to transfer the titles
to his name due to his foreign nationality at
the time of the sale. Fernando alleged that as an assurance
in good faith of the sale, Tan Keh turned over
to him the owner’s duplicate copy of the TCT and executed
a lease contract in his favor for a period of 40 years.
However, Fernando alleged that Tan Keh sold the same
properties to Remigio Tan, who is
(1) allegedly understood to be holding said
properties in trust for Fernando’s benefit; and
(2) obliged to execute the transfer in Fernando’s
favor should he at anytime demand recovery of
said lands. Remigio thus transferred title to the
properties into his name.
Meanwhile, Tan Keh and Remigio allegedly executed
another lease contract in favor of Fernando to
further safeguard his interest on the subject properties, but
the latter never paid any rental and no
demand for payment was made on him.
Remigio died in 1968 and his children were reminded of
Fernando’s ownership of said properties. The
children promised to transfer subject properties to Fernando
who by then was a naturalized Filipino
citizen. The children, however, never conveyed said
properties to Fernando despite repeated demands.
Instead, they fraudulently transferred the titles to their
names.
The children motioned to dismiss Fernando’s complaint
invoking, among others, prescription, laches and
estoppel. The trial court dismissed Fernando’s complaint.
Fernando’s appeal was granted by the Court of
Appeals who reversed the lower court.
Remigio’s children appealed to the Supreme Court, arguing
the CA erred in not ruling that Fernando’s
complaint fails to state a cause of action; his cause of action
has prescribed; he is barred by prior
judgment; and he has waived, abandoned or extinguished
his claim.
Issue(s):
1. Whether or not a trust was established in favor of
Fernando, thus obliging Remigio’s children to
deliver title to the two parcels of land to him.
Held:
1. No, there was no trust, express or implied, in favor of
Fernando. The only transaction
that can be gleaned from the complaint is a double sale.
However, the late Remigio Tan
had the better right since he had the title registered in
his name.
Fernando’s trust theory fails because (1) the execution of a
lease contract between Remigio Tan as lessor and Fernando
as lessee belies any claim of ownership by the latter.
Article 1436 of the Civil Code, Section 2, Rule 131 of the
Rules of Court, and jurisprudence providethat a lessee is
estopped or prevented from disputing the title of his
landlord; and (2) Remigio had to have absolute ownership
of said properties because the Memorandum of
Encumberances found at the back of the title in Remigio’s
name shows he mortgaged said properties to guarantee a
loan from a Philippine Commercial and Industrial Bank.

There being no trust, the Supreme Court held the only
transaction gleaned from the complaint is a double sale
under Article 1544 of the Civil Code, which provides, to
wit:
“Article 1544. If the same thing should have been
sold to different vendees, the ownership shall be
transferred to the person who may have first
taken possession thereof in good faith, if it should
be movable property. Should it be immovable
property, the ownership shall belong to the
person acquiring it who in good faith first
recorded it in the Registry of Property. Should
there be no inscription, the ownership shall
pertain to the person who in good faith was first
in the possession; and, in the absence thereof, to
the person who presents the oldest title, provided
there is good faith.”
Fernando alleged he bought said properties from Tan Keh
in 1954, but failed to present any document to prove such
sale. Remigio Tan, on the other hand, had in his name the
title registered in the Registry of
Deeds of Manila on 13 October 1958. Remigio Tan,
beyond doubt, was the buyer entitled to the subject
properties since the prevailing rule is that in the double sale
of real property, the buyer who is in
possession of a Torrens title and had the deed of sale
registered must prevail.
Now, Remigio’s children are in possession of the title to
the lands, which evidences their ownership of said lands.
On the other hand, Fernando relies on the allegation that he
is entitled to said properties by virtue of a sale between him
and Alejandro Tan Keh, who is now dead. These findings
show Fernando’s
complaint clearly did not have a cause of action.
Additionally, Remigio’s children correctly argued that
Fernando’s cause of action had prescribed. Remigio had his
title registered in 1958, and later his children in 1975.
Fernando filed his complaint 35 years after Remigio Tan
registered his title and 18 years after his children registered
theirs. This is beyond the 10- year limit within which
reconveyance of property based on an implied trust should
be instituted. His cause of action has prescribed.
CARBONELL VS. COURT OF APPEALS
G.R. No. L-29972, 26 January 1976
Double Sale; ownership of immovable property should be
recognized in favor of one who in good faith first recorded"
his right.
Facts:
Jose Poncio owned a parcel of land with improvements at
179 V. Agan St., San Juan, Rizal, having an
area of some 195 square meters covered by a title under his
name and subject to a mortgage in favor of
Republic Savings Bank for P1,500. Rosario Carbonell, a
cousin and neighbor of Poncio, lived in the
adjoining lot at 177 V. Agan Street. Carbonell and another
person, Emma Infante, offered to buy said lot
from Poncio.
Poncio, unable to keep up with the installments due on the
mortgage, approached Carbonell and offered to sell the lot
to her, excluding the house where he lived. Carbonell
accepted the offer and proposed P9.50 per square meter.
Poncio, after securing consent of his wife and parents,
accepted Carbonelle’s price, on the condition that the
purchase price would be used to pay the bank. Carbonell
then paid for the arrears of the mortgage amounting
P247.26.
On 27 January 1955, Carbonell and Poncio, in the presence
of a witness, made and executed a document
in Batanes dialect, which, translated in to English, reads:
CONTRACT FOR ONE HALF LOT WHICH I BOUGHT
FROM JOSE PONCIO
Beginning today January 27, 1955, Jose Poncio can start
living on the lot sold by him to me, Rosario Carbonell, until
after one year during which time he will not pay anything.
Then if after said one can he could not find an place where
to move his house, he could still continue occupying the
site but he should pay a rent that man, be agreed.
After, Carbonell asked an attorney to prepare the formal
deed of sale, which she brought to Poncio
together with the amount of P400, the balance she had yet
to pay, in addition to her assuming the
mortgage obligation to the bank. However, Poncio told
Carbonell he could not proceed with the sale
because he had already given the lot to Infante. Carbonell
sought to contact Infante, who refused to see
the former. Apparently, on 30 January 1955, Poncio agreed
Infante’s improved offer and agreed to sell the land and its
improvements for P3,535. In a private memorandum dated
31 January 1955, Poncio bound himelf to sell the property
for P2,357.52 to Infante, who would assume the existing
mortgage in favor of the bank.
On 2 February 1955, Poncio executed a deed of sale in
favor of Infante.On 5 February 1955, Carbonell
saw Infante erecting a wall around the lot with a gate.
Carbonell’s lawyer advised her to present an
adverse claim over the land with the Register of Deeds,
which she signed, swore to, and registered on 8
February 1955. Infante’s deed was registered only on 12
February 1955, thus her title had an annotation
of adverse claim by Carbonell. Infante took possession of
the lot and built improvements and a house.
On 1 June 1955, Carbonell filed a complaint praying she be
declared the lawful owner of the parcel of
land; that the sale to Infante be declared void; and Poncio
be ordered to execute the deed of conveyance in her favor.
The RTC ruled in favor of Carbonell, but reversed itself
after Infante’s motion for re-trial adding evidence
consisting of the cost of improvements by the latter on the
land in question. The Court of Appeals
reversed the lower court and recognized Carbonell’s
superior right to the land. Infante’s motion for
reconsideration, however, was granted by the CA, thus
reversing their previous ruling. On appeal by
certiorari to the Supreme Court, Carbonell claimed a better
right than Infante.
Issue(s):
1. Whether or not Carbonell has a superior right
over Infante
Held:
1. Yes, Carbonell has a superior right. Article
1544 provides that in a double sale of an
immovable property, ownership shall belong
to the person who first acquired it in good
faith and recorded it in the registry of
property.
It is essential that the buyer of realty must act in good faith
in registering his deed of sale to merit the
protection of the second paragraph of said Article 1544.
same. This means Infante did not bother to make
any inquiry, giving semblance of truth to
Carbonell’s claim that Infante refused to see her
as this is not attitude of a good neighbor imbued
with Christian charity and good will as well as a
clear conscience
(4) Carbonell’s adverse claim was registered
prior to Infante’s registration of her deed of sale,
putting her on notice.
(5) Poncio initially rejected Infante and
Carbonell’s previous offers. Logical to assume
that Infante was told by Poncio of Carbonell’s
offer.
Lastly, the SC also held that the prior sale to
Carbonell was duly established: terms of the
memorandum, there was adequate price, and the
property was identified and described.

Unlike the first and third paragraphs of said Article 1544,

RADIOWEALTH FINANCE COMPANY VS.
which accord preference to the one who first
PALILEO
takes possession in good faith of personal or real property,
G.R. No. 83432, 20 May 1991
the second paragraph directs that ownership of immovable
Double Sale of unregistered land at an execution sale; Act.
property should be recognized in favor of one "who in good
3344 provides registration of instruments
faith first recorded" his right.
affecting registered lands is without prejudice to a third
Under the first and third paragraph, good faith must
party with a better right
characterize the act of anterior registration If there
is no inscription, what is decisive is prior possession in
Facts:
good faith. If there is inscription, as in the case at
On 13 April 1970, Spouses Castro sold to Manuelito Palileo
bar, prior registration in good faith is a pre-condition to
a parcel of unregistered coconut land in
superior title.
Candiis, Mansayaw, Mainit, Surigao del Norte, evidenced
by a notarized Deed of Absolute Sale, but was
When Carbonell bought the lot from Poncio she was the
not registered in the Registry of Property for unregistered
only buyer thereof and the title of Poncio was still in his
lands in Surigao del Norte.
name solely encumbered by the bank mortgage duly
annotated thereon. She was not aware of any sale of Infante
Palileo, who was then employed at Lianga Surigao del Sur,
as there was no such sale then. Carbonell’s purchase,
exercised acts of ownership over the land
therefore, was in good faith. Her good faith subsisted and
through his mother Rafaela, as overseer. Palileo
continued to exist when she recorded her adverse claim 4
continuously paid real estate taxes on said land from
days before Infante registered her deed of sale. Carbonell’s
1971 until present.
good faith did not cease after Poncio informed her of his
second sale to Infante. Carbonell’s good faith was
On 29 November 1976, judgment was rendered against
underscored when she wanted an audience with Infante,
Enrique Castro by then CFI of Manila, ordering
who snubbed her. So Carbonell did the next best thing to
the former to pay Radiowealth Finance Corporation the sum
protect her right: register her adverse claim. Her adverse
of P22,350.35 with interest. A writ of
claim is deemed done in good faith and emphasizes
execution was issued upon finality of judgment and the
Infante’s bad faith when she registered her sale 4 days later
Sheriff levied upon and sold the subject land that Castro had
on 12 February 1955. Infante’s bad faith is indicated by the
sold to Manuelito. A certificate of sale was executed by the
following facts, which the CA failed to appreciate:
Provincial Sheriff in favor of
(1) She refused to see Carbonell, who wanted to
Radiowealth Finance Company, being the only bidder. After
see her after learning from Poncio of the sale to
the period of redemption expired, a deed of
Infante. This means Infante knew from Pancio
final sale was executed by the Provincial Sheriff. The deed
and the bank of the prior sale to Carbonell.
of sale and certificate of sale were registered
(2) Carbonell already possessed the mortgage
with the Registry of Deeds.
passbook and Poncio’s copy of the mortgage
contract. Said passbook proves Carbonell paid for
Palileo filed an action for quieting of title over the property.
the mortgage arrears.
The CFI ruled in his favor. Radiowealth
(3) The fact that Poncio no longer possessed the
appealed to the Court of Appeals, which affirmed the trial
mortgage passbook should have compelled
court.
Infante to inquire why Carbonell possessed the
Issue(s): with a double sale of the same unregistered land. The first
1. Whether or not Radiowealth Finance Company has a sale was made by the original owners and was unrecorded
superior right over Palileo as the lawful while the second sale was an execution sale that resulted fro
owner of the disputed property by reason of the certificate of ma complaint for a sum of money filed against said original
sale and the deed of final sale, which owners. Applying Section 35, Rule 39 of the Rules of Court,
were all registered. it was held that Article 1544 cannot be invoked to benefit the
purchaser at the execution sale though the latter was a buyer
Held: in good faith and even if said second sale was registered.
1. No, Palileo has a better right. Act No. 3344, This is due to the purchaser of unregistered land at a sheriff’s
registration of instruments affecting unregistered lands execution sale only steps into the shoes of the judgment
is "without prejudice to a third party with a better debtor, and
right". The execution sale of unregistered land in favor acquires the latter’s interest in the property sold as of the
of Radiowealth is of no effect because the land no longer time the property was levied upon.
belonged to Castro at the time of said execution sale.
The CA ruled in favor of Palileo due to the fact that the
Sheriff levied upon and sold to Radiowealth a
VILLA REY TRANSIT, INC. VS. FERRER
parcel of land that does not belong to Castro. The
G.R. No. L-23893, 29 October 1968
execution, therefore, is contrary to the directive of the writ
Double Sale; Caveat Emptor; Notice of Levy; Vendee at
of execution which commanded the lands and buildings
auction steps into shoes of judgment debtor
belonging to Enrique Castro be sold to satisfy execution.
Facts:
Undoubtedly, had the property in question been registered
Jose Villarama was the operator of Villa Rey Transit, a bus
land, this case would have been ruled in favor of
transportation business granted with
Radiowealth since it was first have its claim recorded in the
certificates of public convenience by the Public Service
Registry of Deeds. As mentioned earlier, the act of
Commission (PSC). Villa Rey Transit was
registration operates to convey and affect registered land.
authorized to operate 32 buses on various lines from
Therefore, a bona fide purchaser of a registered land at an
Pangasinan to Manila and Vice Versa.
execution sale acquires good title as against a prior
On 8 January 1959, he sold the two certificates of public
transferee, if such transfer was unrecorded.
convenience to Pangasinan Transportation
Company, Inc (Pantranco) for P350,000 with the condition,
There is no ambiguity regarding the application of the law
among others, that Villarama shall not apply
with respect to lands registered under the Torrens System.
for any TPU service identical or competing with Pantranco
Section 51 of Presidential Decree No. 1529 (amending
for 10 years from the date of sale.
Section 50 of Act No. 496 clearly
provides that the act of registration is the operative act to
Barely three months after, 10 March 1959, a corporation
convey or affect registered lands insofar as
called Villa Rey Transit, Inc. (the Corporation)
third persons are concerned. Thus, a person dealing with
was incorporated. It was organized with Villarama’s wife,
registered land is not required to go behind the register to
Natividad R. Villarama, as the treasurer of the
determine the condition of the property. He is only charged
corporation and one of the incorporators. Villarama’s
with notice of the burdens on the property which are noted
brother-in-law- and sister-in-law subscribed as well.
on the face of the register or certificate of title. Following
this principle, this Court has time and again held that a
On 7 April 1959, the Corporation bought five certificates of
purchaser in good faith of registered land (covered by a
public convenience, 49 buses, tools, and
Torrens Title) acquires a good title as against all the
equipment from Valentin Fernando for P249,000. The
transferees thereof whose right is not recorded in the registry
Corporation paid P100,000 upon signing the
of deeds at the time of the sale.
contract, P50,000 payable upon approval of the sale by the
PSC; P49,500 payable one year after the final
However, the case it bar deals with a parcel of unregistered
approval of the sale; and the remaining P50,000 shall be
land and a different sent of rules. Under Act No. 3344,
paid to Fernando’s different suppliers. The
registration of instruments affecting unregistered lands is
parties thereafter applied wit hthe PSC for approval and
"without prejudice to a third party with a better right". The
provisional authority to allow the Corporation to operate
aforequoted phrase has been held by this Court to mean that
the service. The PSC granted the provisional permit.
the mere registration of a sale in one's favor does not give
him any right over the land if the vendor was not anymore
However, on 7 July 1959, the Sheriff of Manila levied on 2
the owner of the land having previously sold the same to
of the 5 certificates of public convenience
somebody else even if the earlier sale was unrecorded.
bought by the Corporation. The levy was pursuant to a writ
of execution issued in favor of Eusebio Ferrer, who is a
The case of Carumba vs. CA is applicable in this instant case.
judgment creditor of Fernando. On 16 July 1959, the
It was held that Article 1544 of the Civil
Sheriff conducted a public sale of the 2 certificates of
Code does not apply to land not registered under Act No.496.
public convenience. Ferrer was the highest bidder and a
Similar to the case at bar, Carumba dealt
certificate of sale was issued in his name. Ferrer then sold
the 2 certificates of public convenience to Pantranco, who
submitted approval of said sale to the PSC.
On 4 November 1959, the Corporation filed a complaint to
annul the sheriff’s sale of the 2 certificates of
public convenience and the subsequent sale of said
certificates by Ferrer to Pantranco. The CFI granted
the Corporation’s complaint.
On appeal to the Supreme Court, Pantranco argued that (1)
the Corporation is not a distinct and separate entity from
Villarama; (2) the restriction clause in the contract between
Pantranco and Villarama is valid; and that the Sheriff’s sale
is valid, thus Pantranco has a better right than Villarama to
said certificates of public convenience.
Issue(s):
1. Whether or not Pantranco has a better right than
Villarama to the certificates of public
convenience purchased from Ferrer who was the highest
bidder in a public sale.
Held:
1. No, the Corporation has a better right than
Pantranco. The notice of levy by the Sheriff on
the two certificates of public convenience only
shows that Ferrer merely stepped into
Fernando’s shoes. Article 1544 provides that
“if the same thing should have been sold to
different vendees, the ownership shall be
transferred to the person who has taken first
possession in good faith, if it should be
movable property.”
Although the stipulation restricting Villarama from
engaging the operation of TPU along the lines
covered by the certificates purchased by Pantranco is a
valid stipulation, said stipulation does not restrict Villarama
from applying for or purchasing certificates of public
convenience.
The sale between Fernando and the Corporation is valid,
such that the rightful ownership of the disputed certificates
still belongs to the plaintiff being the prior purchaser in
good faith and for value thereof. In view of the ancient rule
of caveat emptor (buyer beware; purchase at own risk)1
prevailing in this jurisdiction, what was acquired by Ferrer
in the sheriff's sale was only the right which Fernando,
judgment debtor, had in the certificates of public
convenience on the day of the sale.
Such notice of levy only shows that Ferrer, the vendee at
auction of said certificates, merely stepped into the shoes of
the judgment debtor. Of the same principle is the provision
of Article 1544 of the Civil Code, that "If the same thing
should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable
property."
Moreover, Pantranco and Ferrer incorrectly argue that the
sale of the certificates of public convenience in question,
between the Corporation and Fernando, was not
consummated, because it was a sale subject to a suspensive
condition: the approval of the PSC of said sale.
While section 20(g) of the Public Service Act provides that
"subject to established limitation and
exceptions and saving provisions to the contrary, it shall be
unlawful for any public service or for the
owner, lessee or operator thereof, without the approval and
authorization of the Commission previously
had ... to sell, alienate, mortgage, encumber or lease its
property, franchise, certificates, privileges, or
rights or any part thereof, ...," the same section also provides:
.. Provided, however, That nothing herein
contained shall be construed to prevent
the transaction from being negotiated or
completed before its approval or to prevent
the sale, alienation, or lease by any public service
of any of its property in the
ordinary course of its business.
It is clear, therefore, that the requisite approval of the PSC
is not a condition precedent for the validity
and consummation of the sale.
Filinvest Credit Corporation vs. Philippine Acetylene
Co., Inc.
G.R. No. L-50449, 30 January 1982
Article 1484; Sale of Personal Property; Alternative
Remedies
Facts:
On 30 October 1971, the Philippine Acetylene Co., Inc
(PACI) purchased from Alexander Lim, evidenced
by a Deed of Sale, a 1969 Chevrolet motor vehicle for
P55,247.80 with a downpayment of P20,000 and a
balance of P35.237.80 payable, as per the terms and
conditions of a promissory note, at a monthly
installment of P1036.70 for 34 months, on the first day of
each month starting December 1971 through 1
September 1974 with 12% interest per annum on each
unpaid installment.
As security, PACI executed a chattel mortgage over said
car in favor of said Alexander Lim. On 2
November 1971, Lim assigned to Filinvest Finance
Corporation all his rights, title, and interests in the
promissory note and chattel mortgage by virtue of a Dead
of Assignment.
Later, Filinvest Finance Corporation (FFC) merged with
the Credit and Development Corporation to form
Filinvest Credit Corporation (FCC). FFC then assigned all
its rights to said promissory note and chattel
mortgage to FCC. Payment of PACI’s unpaid balance owed
to Alexander Lim was in effect financed by
FCC.
PACI failed to pay nine successive installments, prompting
FCC to send a demand letter to pay the
aforesaid amount in full including interest and charges or
return the vehicle within 5 days from date of
the letter of demand. PACI’s general manager advised FCC
of its decision to return the vehicle to satisfy
the obligation as per Article 1484 of the Civil Code. The
vehicle was then returned to FCC with a
document “Voluntary Surrender with Special Power of
Attorney to Sell.”
Howoever, on 4 April 1973, FCC informed PACI it was
unable to sell the vehicle due to unpaid taxes
worth P70,122. FCC also requested PACI to update its
account by paying all installments in arrears and
accruing interests totaling P4,232. FCC offered to return
the vehicle to PACI, who refused to accept it.
On 14 September 1973, FCC filed for collection of a sum
of money with damages before the CFI, which
ordered PACI to accept the vehicle and pay its outstanding
obligation to FCC with interest. PACI filed a
direct appeal to the Supreme Court on a pure question of
law.
PACI argued that FCC had already elected the alternative
remedy of exacting fulfillment of the obligation
as per Article 1484 of the Civil Code, thus is precluded
from exercising any other remedy provided by
Article 1484.
Issue(s):
1. Whether or not FCC is precluded from exercising any
other remedy under Article 1484 of the Civil Code.
2.Whether or not unpaid taxes should be borne by PACI.
Held:
1. No, it is foreclosure and actual sale of the property
that bars recovery by the vendor of
any balance of the vendee’s outstanding obligation. In
this case, the return of the car to
FCC with a special power of attorney to sell did not
constitute dation in payment in the
absence of express or implied intent of the parties.
Article 1484 of the Civil Code provides, to wit:
“Article 1484. In a contract of sale of personal property the
price of which is payable
in installments, the vendor may exercise any of the
following remedies:
1) Exact fulfillment of the obligation, should the
vendee fail to pay;
2) Cancel the sale, should the vendee's failure to
pay cover two or more
installments;
3) Foreclose the chattel mortgage on the thing
sold, if one has been constituted,
should the vendee's failure to pay cover two or
more installments. In this case, he
shall have no further action against the purchaser
to recover any unpaid balance of
the price. Any agreement to the contrary shall be
void.”
Dacion en pago, according to Manresa, is the transmission
of the ownership of a thing by the debtor to the creditor as
an accepted equivalent of the performance of obligation. In
dacion en pago, as a special mode of payment, the debtor
offers another thing to the creditor who accepts it as
equivalent of payment of an outstanding debt. The
undertaking really partakes in one sense of the nature of
sale, that is, the creditor is really buying the thing or
property of the debtor, payment for which is to be charged
against the debtor's debt.
Evidence on record fails to show that FCC consented or
intended for mere return or delivery of the car to be
construed as actual payment or dacion en pago. Fact of
delivery to FCC does not mean that ownership as
juridically contemplated by dacion en page was transferred
from PACI to FCC. It is quite possible that FCC, as
mortgagee, merely wanted to secure possession to forestall
the loss, destruction, fraudulent transfer of the vehicle to
third persons, or its being rendered valueless if left in the
hands of the PACI.Under the law, the delivery of
possession of the mortgaged property to the mortgagee,
FCC, can only operate to extinguish PACI’s liability if
FCC had actually caused the foreclosure sale of the
mortgaged property when it recovered possession thereof.
(See Arts 1232, 1245 and 1497 of Civil Code)
2. Yes, since ownership of the mortgaged car never left
PACI (the mortgagor), it has the
burden of paying the unpaid taxes.
There is no dispute that there is an unpaid taxes of
P70,122.00 due on the mortgaged motor vehicle
which, according to appellant, liability for the breach of
warranty under the Deed of Sale is shifted to the
appellee who merely stepped into the shoes of the assignor
Alexander Lim by virtue of the Deed of
Assignment in favor of appellee. The Deed of Sale between
Alexander Lim and appellant and the Deed of
Assignment between Alexander Lim and FCC are very
clear on this point. There is a specific provision in
the Deed of Sale that the seller Alexander Lim warrants the
sale of the motor vehicle to the buyer, the
herein appellant, to be free from and harmless from liens
and encumbrances and counterclaims, defenses or offsets
that should prejudice FCC
KATIGBAK VS. COURT OF APPEALS
G.R. No. L-16480, 31 January 1962
Failure to take delivery & pay price entitles seller to sell to
3rd person & hold buyer liable for difference in
Price
Facts:
Artemio Katigbak went to see V.K. Lundberg, owner and
operator of International Tractor and
Equipment Co., Ltd., about an advertisement for the sale of
a Double Drum Carco Tractor Winch. After
being quoted the price of P12,000, Katigbak was referred to
owner Daniel Evangelista.
Katigbak agreed to purchase the winch for P12,000 payable
at P5,000 upon delivery and the balance of
P7,000 within 60 days, on the condition that the winch
would be delivered in good condition. Katigbak
was informed that the winch needed some repears that
would be done in Lundberg’s shop, the amount of which
was to be advanced by Katigbak but deductible from the
P5,000 payment. Repairs totaled
P2,029.85, but for some reason the sale was not
consummated.

Katigbak sued Evangelista, Lundberg, and International

Tractor and Equipment Co., Ltd. for a refund.
Lundberg alleged the transaction was between Evangelista
and Katigbak. Evangelista claimed there was
an agreement, but that Katigbak refused to comply with his
contract to purchase the winch, forcing
Evanglista to sell the winch to a third person for P10,000,
thus claiming a loss of P2,000.

The lower court ordered Evangelista and Lundberg to pay

P2,029.85 Katigbak. The Court of Appeals
reversed the decision and ordered Katigbak to pay P700 to
Evangelista as attorneys fees, and Evangelista to pay only
P29.85 to Katigbak given he sold the winch at a loss. The
CA applied the ruling in Hanlon vs Hausserman where it
was held that failure of a purchaser to accept delivery and
pay the price entitles theseller to (1) resell the same to
another; and (2) hold the purchaser liable for a difference if
the subject matter was sold at a loss. Katigbak appealed to
the Supreme Court, claiming the CA erred in applying the
Hanlon case and failng to apply the law on rescission of
contracts

Issue(s):
1. Whether or not the CA correctly held that Katigbak’s
failure to accept delivery and pay the price
rendered him liable to Evangelista for the difference in price
for the sale at a loss of the winch.

Held:
1. Yes, the instant case is identical to the Hanlon case.
Katigbak failed to take the delivery
of the winch, and such failure or breach was
attributable to him. Evangelista’s right to
resell to a cannot be disputed. Katigbak must bear the
difference in price because of his
breach.

To quote the Hanlon case, “the contract between Hanlon

and the mining company was executory as to
both parties, and the obligation of the company to deliver
the shares could not arise until Hanlon should
pay or tender payment of the money. The situation is
similar to that which arises every day in business
transactions in which the purchaser of goods upon an
executory contract fails to take delivery and pay the
purchase price. The vendor in such case is entitled to resell
the goods. If he is obliged to sell for less than the contract
price, he holds the buyer for the difference; if he sells for as
much as or more than the
contract price, the breach of contract by the original buyer
is damnum absque injuria. But it has never
been held that there is any need of an action of rescission to
authorize the vendor, who is still in
possession, to dispose of the property where the buyer fails
to pay the price and take delivery”