G.R. No.

L-12342 August 3, 1918

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

Thos. D. Aitken for appellant.

Modesto Reyes and Eliseo Ymzon for 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.

Torres, Johnson, Street, Malcolm and Avanceña, JJ., concur.

G.R. No. L-69970 November 28, 1988

FELIX DANGUILAN, petitioner,

vs.
INTERMEDIATE APPELLATE COURT, APOLONIA MELAD, assisted by her husband, JOSE
TAGACAY, respondents.

Pedro R. Perez, Jr. for petitioner.

Teodoro B. Mallonga for private respondent.

CRUZ, J.:

The subject of this dispute is the two lots owned by Domingo Melad which is claimed by both the petitioner and the respondent. The trial court believed the
petitioner but the respondent court, on appeal, upheld the respondent. The case is now before us for a resolution of the issues once and for all.

On January 29, 1962, the respondent filed a complaint against the petitioner in the then Court of First Instance of
Cagayan for recovery of a farm lot and a residential lot which she claimed she had purchased from Domingo Melad
in 1943 and were now being unlawfully withheld by the defendant. 1 In his answer, the petitioner denied the
allegation and averred that he was the owner of the said lots of which he had been in open, continuous and adverse
possession, having acquired them from Domingo Melad in 1941 and 1943. 2 The case was dismissed for failure to
prosecute but was refiled in 1967. 3

At the trial, the plaintiff presented a deed of sale dated December 4, 1943, purportedly signed by Domingo Melad
and duly notarized, which conveyed the said properties to her for the sum of P80.00. 4 She said the amount was
earned by her mother as a worker at the Tabacalera factory. She claimed to be the illegitimate daughter of Domingo
Melad, with whom she and her mother were living when he died in 1945. She moved out of the farm only when in
1946 Felix Danguilan approached her and asked permission to cultivate the land and to stay therein. She had
agreed on condition that he would deliver part of the harvest from the farm to her, which he did from that year to
1958. The deliveries having stopped, she then consulted the municipal judge who advised her to file the complaint
against Danguilan. The plaintiff 's mother, her only other witness, corroborated this testimony. 5
For his part, the defendant testified that he was the husband of Isidra Melad, Domingo's niece, whom he and his
wife Juana Malupang had taken into their home as their ward as they had no children of their own. He and his wife
lived with the couple in their house on the residential lot and helped Domingo with the cultivation of the farm.
Domingo Melad signed in 1941 a private instrument in which he gave the defendant the farm and in 1943 another
private instrument in which he also gave him the residential lot, on the understanding that the latter would take care
of the grantor and would bury him upon his death. 6 Danguilan presented three other witnesses 7 to corroborate his
statements and to prove that he had been living in the land since his marriage to Isidra and had remained in
possession thereof after Domingo Melad's death in 1945. Two of said witnesses declared that neither the plaintiff
nor her mother lived in the land with Domingo Melad. 8

The decision of the trial court was based mainly on the issue of possession. Weighing the evidence presented by
the parties, the judge 9 held that the defendant was more believable and that the plaintiff's evidence was
"unpersuasive and unconvincing." It was held that the plaintiff's own declaration that she moved out of the property
in 1946 and left it in the possession of the defendant was contradictory to her claim of ownership. She was also
inconsistent when she testified first that the defendant was her tenant and later in rebuttal that he was her
administrator. The decision concluded that where there was doubt as to the ownership of the property, the
presumption was in favor of the one actually occupying the same, which in this case was the defendant. 10

The review by the respondent court 11 of this decision was manifestly less than thorough. For the most part it merely
affirmed the factual findings of the trial court except for an irrelevant modification, and it was only toward the end
that it went to and resolved what it considered the lone decisive issue.

The respondent court held that Exhibits 2-b and 3-a, by virtue of which Domingo Melad had conveyed the two
parcels of land to the petitioner, were null and void. The reason was that they were donations of real property and as
such should have been effected through a public instrument. It then set aside the appealed decision and declared
the respondents the true and lawful owners of the disputed property.

The said exhibits read as follows:

EXHIBIT 2-b is quoted as follows: 12

I, DOMINGO MELAD, of legal age, married, do hereby declare in this receipt the truth of my giving to
Felix Danguilan, my agricultural land located at Barrio Fugu-Macusi, Penablanca, Province of
Cagayan, Philippine Islands; that this land is registered under my name; that I hereby declare and
bind myself that there is no one to whom I will deliver this land except to him as he will be the one
responsible for me in the event that I will die and also for all other things needed and necessary for
me, he will be responsible because of this land I am giving to him; that it is true that I have nieces
and nephews but they are not living with us and there is no one to whom I will give my land except to
Felix Danguilan for he lives with me and this is the length—175 m. and the width is 150 m.

IN WITNESS WHEREOF, I hereby sign my name below and also those present in the execution of
this receipt this 14th day of September 1941.

Penablanca Cagayan, September 14, 1941.

(SGD.) DOMINGO MELAD

WITNESSES:
1. (T.M.) ISIDRO MELAD
2. (SGD.) FELIX DANGUILAN
3. (T.M.) ILLEGIBLE

EXHIBIT 3-a is quoted as follows: 13

I, DOMINGO MELAD, a resident of Centro, Penablanca, Province of Cagayan, do hereby swear and
declare the truth that I have delivered my residential lot at Centro, Penablanca, Cagayan, to Felix
Danguilan, my son-in-law because I have no child; that I have thought of giving him my land
 because he will be the one to take care of SHELTERING me or bury me when I die and this is why I
have thought of executing this document; that the boundaries of this lot is—on the east, Cresencio
Danguilan; on the north, Arellano Street; on the south by Pastor Lagundi and on the west, Pablo
Pelagio and the area of this lot is 35 meters going south; width and length beginning west to east is
40 meters.

IN WITNESS HEREOF, I hereby sign this receipt this 18th day of December 1943.

(SGD.) DOMINGO MELAD

WITNESSES:

(SGD.) ILLEGIBLE
(SGD.) DANIEL ARAO

It is our view, considering the language of the two instruments, that Domingo Melad did intend to donate the
properties to the petitioner, as the private respondent contends. We do not think, however, that the donee was
moved by pure liberality. While truly donations, the conveyances were onerous donations as the properties were
given to the petitioner in exchange for his obligation to take care of the donee for the rest of his life and provide for
his burial. Hence, it was not covered by the rule in Article 749 of the Civil Code requiring donations of real properties
to be effected through a public instrument. The case at bar comes squarely under the doctrine laid down in Manalo
v. De Mesa, 14 where the Court held:

There can be no doubt that the donation in question was made for a valuable consideration, since
the donors made it conditional upon the donees' bearing the expenses that might be occasioned by
the death and burial of the donor Placida Manalo, a condition and obligation which the donee
Gregorio de Mesa carried out in his own behalf and for his wife Leoncia Manalo; therefore, in order
to determine whether or not said donation is valid and effective it should be sufficient to demonstrate
that, as a contract, it embraces the conditions the law requires and is valid and effective, although
not recorded in a public instrument.

The private respondent argues that as there was no equivalence between the value of the lands donated and the
services for which they were being exchanged, the two transactions should be considered pure or gratuitous
donations of real rights, hence, they should have been effected through a public instrument and not mere private
writings. However, no evidence has been adduced to support her contention that the values exchanged were
disproportionate or unequal.

On the other hand, both the trial court and the respondent court have affirmed the factual allegation that the
petitioner did take care of Domingo Melad and later arranged for his burial in accordance with the condition imposed
by the donor. It is alleged and not denied that he died when he was almost one hundred years old, 15 which would
mean that the petitioner farmed the land practically by himself and so provided for the donee (and his wife) during
the latter part of Domingo Melad's life. We may assume that there was a fair exchange between the donor and the
donee that made the transaction an onerous donation.

Regarding the private respondent's claim that she had purchased the properties by virtue of a deed of sale, the
respondent court had only the following to say: "Exhibit 'E' taken together with the documentary and oral evidence
shows that the preponderance of evidence is in favor of the appellants." This was, we think, a rather superficial way
of resolving such a basic and important issue.

The deed of sale was allegedly executed when the respondent was only three years old and the consideration was
supposedly paid by her mother, Maria Yedan from her earnings as a wage worker in a factory. 16 This was itself a
suspicious circumstance, one may well wonder why the transfer was not made to the mother herself, who was after
all the one paying for the lands. The sale was made out in favor of Apolonia Melad although she had been using the
surname Yedan her mother's surname, before that instrument was signed and in fact even after she got
married. 17The averment was also made that the contract was simulated and prepared after Domingo Melad's death
in 1945. 18It was also alleged that even after the supposed execution of the said contract, the respondent considered
Domingo Melad the owner of the properties and that she had never occupied the same. 19
Considering these serious challenges, the appellate court could have devoted a little more time to examining Exhibit
"E" and the circumstances surrounding its execution before pronouncing its validity in the manner described above.
While it is true that the due execution of a public instrument is presumed, the presumption is disputable and will yield
to contradictory evidence, which in this case was not refuted.

At any rate, even assuming the validity of the deed of sale, the record shows that the private respondent did not take
possession of the disputed properties and indeed waited until 1962 to file this action for recovery of the lands from
the petitioner. If she did have possession, she transferred the same to the petitioner in 1946, by her own sworn
admission, and moved out to another lot belonging to her step-brother. 20 Her claim that the petitioner was her tenant
(later changed to administrator) was disbelieved by the trial court, and properly so, for its inconsistency. In short, she
failed to show that she consummated the contract of sale by actual delivery of the properties to her and her actual
possession thereof in concept of purchaser-owner.

As was held in Garchitorena v. Almeda: 21

Since in this jurisdiction it is a fundamental and elementary principle that ownership does not pass
by mere stipulation but only by delivery (Civil Code, Art. 1095; Fidelity and Surety Co. v. Wilson, 8
Phil. 51), and the execution of a public document does not constitute sufficient delivery where the
property involved is in the actual and adverse possession of third persons (Addison vs. Felix, 38
Phil. 404; Masallo vs. Cesar, 39 Phil. 134), it becomes incontestable that even if included in the
contract, the ownership of the property in dispute did not pass thereby to Mariano Garchitorena. Not
having become the owner for lack of delivery, Mariano Garchitorena cannot presume to recover the
property from its present possessors. His action, therefore, is not one of revindicacion, but one
against his vendor for specific performance of the sale to him.

In the aforecited case of Fidelity and Deposit Co. v. Wilson, 22 Justice Mapa declared for the Court:

Therefore, in our Civil Code it is a fundamental principle in all matters of contracts and a well- known
doctrine of law that "non mudis pactis sed traditione dominia rerum transferuntur". In conformity with
said doctrine as established in paragraph 2 of article 609 of said code, that "the ownership and other
property rights are acquired and transmitted by law, by gift, by testate or intestate succession, and,
in consequence of certain contracts, by tradition". And as the logical application of this disposition
article 1095 prescribes the following: "A creditor has the rights to the fruits of a thing from the time
the obligation to deliver it arises. However, he shall not acquire a real right" (and the ownership is
surely such) "until the property has been delivered to him."

In accordance with such disposition and provisions 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. As Manresa states in his Commentaries on the Civil Code, volume 10, pages 339 and 340:
"Our law does not admit the doctrine of the transfer of property by mere consent but limits the effect
of the agreement to the due execution of the contract. ... The ownership, the property right, is only
derived from the delivery of a thing ... "

As for the argument that symbolic delivery was effected through the deed of sale, which was a public instrument, the
Court has held:

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." (Civil Code, art.
1462). It is true that the same article declares that 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. 23

There is no dispute that it is the petitioner and not the private respondent who is in actual possession of the litigated
properties. Even if the respective claims of the parties were both to be discarded as being inherently weak, the
decision should still incline in favor of the petitioner pursuant to the doctrine announced in Santos & Espinosa v.
Estejada 24 where the Court announced:

If the claim of both the plaintiff and the defendant are weak, judgment must be for the defendant, for
the latter being in possession is presumed to be the owner, and cannot be obliged to show or prove
a better right.

WHEREFORE, the decision of the respondent court is SET ASIDE and that of the trial court REINSTATED, with
costs against the private respondent. It is so ordered.

Narvasa (Chairman), Gancayco, Griño-Aquino and Medialdea, JJ., concur.

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.

Julio Siayngco for plaintiffs-appellants.

Filomeno Arteche, Jr. for 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. .

Barredo, Actg. (Chairman), Aquino, Concepcion, Jr. and Martin. JJ., concur. .

Fernando (Chairman), J, is on leave. .

G.R. No. 92989 July 8, 1991

PERFECTO DY, JR. petitioner,

vs.
COURT OF APPEALS, GELAC TRADING INC., and ANTONIO V. GONZALES, respondents.

Zosa & Quijano Law Offices for petitioner.

Expedito P. Bugarin for respondent GELAC Trading, Inc.
GUTIERREZ, JR., J.:

This is a petition for review on certiorari seeking the reversal of the March 23, 1990 decision of the Court of Appeals
which ruled that the petitioner's purchase of a farm tractor was not validly consummated and ordered a complaint for
its recovery dismissed.

The facts as established by the records are as follows:

The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979, Wilfredo Dy purchased a truck and a
farm tractor through financing extended by Libra Finance and Investment Corporation (Libra). Both truck and tractor
were mortgaged to Libra as security for the loan.

The petitioner wanted to buy the tractor from his brother so on August 20, 1979, he wrote a letter to Libra requesting
that he be allowed to purchase from Wilfredo Dy the said tractor and assume the mortgage debt of the latter.

In a letter dated August 27, 1979, Libra thru its manager, Cipriano Ares approved the petitioner's request.

Thus, on September 4, 1979, Wilfredo Dy executed a deed of absolute sale in favor of the petitioner over the tractor
in question.

At this time, the subject tractor was in the possession of Libra Finance due to Wilfredo Dy's failure to pay the
amortizations.

Despite the offer of full payment by the petitioner to Libra for the tractor, the immediate release could not be effected
because Wilfredo Dy had obtained financing not only for said tractor but also for a truck and Libra insisted on full
payment for both.

The petitioner was able to convince his sister, Carol Dy-Seno, to purchase the truck so that full payment could be
made for both. On November 22, 1979, a PNB check was issued in the amount of P22,000.00 in favor of Libra, thus
settling in full the indebtedness of Wilfredo Dy with the financing firm. Payment having been effected through an out-
of-town check, Libra insisted that it be cleared first before Libra could release the chattels in question.

Meanwhile, Civil Case No. R-16646 entitled "Gelac Trading, Inc. v. Wilfredo Dy", a collection case to recover the
sum of P12,269.80 was pending in another court in Cebu.

On the strength of an alias writ of execution issued on December 27, 1979, the provincial sheriff was able to seize
and levy on the tractor which was in the premises of Libra in Carmen, Cebu. The tractor was subsequently sold at
public auction where Gelac Trading was the lone bidder. Later, Gelac sold the tractor to one of its stockholders,
Antonio Gonzales.

It was only when the check was cleared on January 17, 1980 that the petitioner learned about GELAC having
already taken custody of the subject tractor. Consequently, the petitioner filed an action to recover the subject
tractor against GELAC Trading with the Regional Trial Court of Cebu City.

On April 8, 1988, the RTC rendered judgment in favor of the petitioner. The dispositive portion of the decision reads
as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, pronouncing
that the plaintiff is the owner of the tractor, subject matter of this case, and directing the defendants Gelac
Trading Corporation and Antonio Gonzales to return the same to the plaintiff herein; directing the defendants
jointly and severally to pay to the plaintiff the amount of P1,541.00 as expenses for hiring a tractor; P50,000
for moral damages; P50,000 for exemplary damages; and to pay the cost. (Rollo, pp. 35-36)
On appeal, the Court of Appeals reversed the decision of the RTC and dismissed the complaint with costs against
the petitioner. The Court of Appeals held that the tractor in question still belonged to Wilfredo Dy when it was seized
and levied by the sheriff by virtue of the alias writ of execution issued in Civil Case No. R-16646.

The petitioner now comes to the Court raising the following questions:

A.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS MISAPPREHENDED THE FACTS AND
ERRED IN NOT AFFIRMING THE TRIAL COURT'S FINDING THAT OWNERSHIP OF THE FARM
TRACTOR HAD ALREADY PASSED TO HEREIN PETITIONER WHEN SAID TRACTOR WAS LEVIED ON
BY THE SHERIFF PURSUANT TO AN ALIAS WRIT OF EXECUTION ISSUED IN ANOTHER CASE IN
FAVOR OF RESPONDENT GELAC TRADING INC.

B.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS EMBARKED ON MERE CONJECTURE

AND SURMISE IN HOLDING THAT THE SALE OF THE AFORESAID TRACTOR TO PETITIONER WAS
DONE IN FRAUD OF WILFREDO DY'S CREDITORS, THERE BEING NO EVIDENCE OF SUCH FRAUD
AS FOUND BY THE TRIAL COURT.

C.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS MISAPPREHENDED THE FACTS AND
ERRED IN NOT SUSTAINING THE FINDING OF THE TRIAL COURT THAT THE SALE OF THE
TRACTOR BY RESPONDENT GELAC TRADING TO ITS CO-RESPONDENT ANTONIO V. GONZALES
ON AUGUST 2, 1980 AT WHICH TIME BOTH RESPONDENTS ALREADY KNEW OF THE FILING OF
THE INSTANT CASE WAS VIOLATIVE OF THE HUMAN RELATIONS PROVISIONS OF THE CIVIL CODE
AND RENDERED THEM LIABLE FOR THE MORAL AND EXEMPLARY DAMAGES SLAPPED AGAINST
THEM BY THE TRIAL COURT. (Rollo, p. 13)

The respondents claim that at the time of the execution of the deed of sale, no constructive delivery was effected
since the consummation of the sale depended upon the clearance and encashment of the check which was issued
in payment of the subject tractor.

In the case of Servicewide Specialists Inc. v. Intermediate Appellate Court. (174 SCRA 80 [1989]), we stated that:

xxx xxx xxx

The rule is settled that the chattel mortgagor continues to be the owner of the property, and therefore, has
the power to alienate the same; however, he is obliged under pain of penal liability, to secure the written
consent of the mortgagee. (Francisco, Vicente, Jr., Revised Rules of Court in the Philippines, (1972),
Volume IV-B Part 1, p. 525). Thus, the instruments of mortgage are binding, while they subsist, not only
upon the parties executing them but also upon those who later, by purchase or otherwise, acquire the
properties referred to therein.

The absence of the written consent of the mortgagee to the sale of the mortgaged property in favor of a third
person, therefore, affects not the validity of the sale but only the penal liability of the mortgagor under the
Revised Penal Code and the binding effect of such sale on the mortgagee under the Deed of Chattel
Mortgage.

xxx xxx xxx

The mortgagor who gave the property as security under a chattel mortgage did not part with the ownership over the
same. He had the right to sell it although he was under the obligation to secure the written consent of the mortgagee
or he lays himself open to criminal prosecution under the provision of Article 319 par. 2 of the Revised Penal Code.
And even if no consent was obtained from the mortgagee, the validity of the sale would still not be affected.
Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor can not sell the subject tractor. There is no
dispute that the consent of Libra Finance was obtained in the instant case. In a letter dated August 27, 1979, Libra
allowed the petitioner to purchase the tractor and assume the mortgage debt of his brother. The sale between the
brothers was therefore valid and binding as between them and to the mortgagee, as well.

Article 1496 of the Civil Code 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 signing an
agreement that the possession is transferred from the vendor to the vendee. We agree with the petitioner that
Articles 1498 and 1499 are applicable in the case at bar.

Article 1498 states:

Art. 1498. 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.

xxx xxx xxx

Article 1499 provides:

Article 1499. The delivery of movable property may likewise be made by the mere consent or agreement of
the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of
the sale, or if the latter already had it in his possession for any other reason. (1463a)

In the instant case, actual delivery of the subject tractor could not be made. However, there was constructive
delivery already upon the execution of the public instrument pursuant to Article 1498 and upon the consent or
agreement of the parties when the thing sold cannot be immediately transferred to the possession of the vendee.
(Art. 1499)

The respondent court avers that the vendor must first have control and possession of the thing before he could
transfer ownership by constructive delivery. Here, it was Libra Finance which was in possession of the subject
tractor due to Wilfredo's failure to pay the amortization as a preliminary step to foreclosure. As mortgagee, he has
the right of foreclosure upon default by the mortgagor in the performance of the conditions mentioned in the contract
of mortgage. The law implies that the mortgagee is entitled to possess the mortgaged property because possession
is necessary in order to enable him to have the property sold.

While it is true that Wilfredo Dy was not in actual possession and control of the subject tractor, his right of ownership
was not divested from him upon his default. Neither could it be said that Libra was the owner of the subject tractor
because the mortgagee can not become the owner of or convert and appropriate to himself the property mortgaged.
(Article 2088, Civil Code) Said property continues to belong to the mortgagor. The only remedy given to the
mortgagee is to have said property sold at public auction and the proceeds of the sale applied to the payment of the
obligation secured by the mortgagee. (See Martinez v. PNB, 93 Phil. 765, 767 [1953]) There is no showing that
Libra Finance has already foreclosed the mortgage and that it was the new owner of the subject tractor. Undeniably,
Libra gave its consent to the sale of the subject tractor to the petitioner. It was aware of the transfer of rights to the
petitioner.

Where a third person purchases the mortgaged property, he automatically steps into the shoes of the original
mortgagor. (See Industrial Finance Corp. v. Apostol, 177 SCRA 521 [1989]). His right of ownership shall be subject
to the mortgage of the thing sold to him. In the case at bar, the petitioner was fully aware of the existing mortgage of
the subject tractor to Libra. In fact, when he was obtaining Libra's consent to the sale, he volunteered to assume the
remaining balance of the mortgage debt of Wilfredo Dy which Libra undeniably agreed to.

The payment of the check was actually intended to extinguish the mortgage obligation so that the tractor could be
released to the petitioner. It was never intended nor could it be considered as payment of the purchase price
because the relationship between Libra and the petitioner is not one of sale but still a mortgage. The clearing or
encashment of the check which produced the effect of payment determined the full payment of the money obligation
and the release of the chattel mortgage. It was not determinative of the consummation of the sale. The transaction
between the brothers is distinct and apart from the transaction between Libra and the petitioner. The contention,
therefore, that the consummation of the sale depended upon the encashment of the check is untenable.

The sale of the subject tractor was consummated upon the execution of the public instrument on September 4,
1979. At this time constructive delivery was already effected. Hence, the subject tractor was no longer owned by
Wilfredo Dy when it was levied upon by the sheriff in December, 1979. Well settled is the rule that only properties
unquestionably owned by the judgment debtor and which are not exempt by law from execution should be levied
upon or sought to be levied upon. For the power of the court in the execution of its judgment extends only over
properties belonging to the judgment debtor. (Consolidated Bank and Trust Corp. v. Court of Appeals, G.R. No.
78771, January 23, 1991).

The respondents further claim that at that time the sheriff levied on the tractor and took legal custody thereof no one
ever protested or filed a third party claim.

It is inconsequential whether a third party claim has been filed or not by the petitioner during the time the sheriff
levied on the subject tractor. A person other than the judgment debtor who claims ownership or right over levied
properties is not precluded, however, from taking other legal remedies to prosecute his claim. (Consolidated Bank
and Trust Corp. v. Court of Appeals, supra) This is precisely what the petitioner did when he filed the action for
replevin with the RTC.

Anent the second and third issues raised, the Court accords great respect and weight to the findings of fact of the
trial court. There is no sufficient evidence to show that the sale of the tractor was in fraud of Wilfredo and creditors.
1âw phi1

While it is true that Wilfredo and Perfecto are brothers, this fact alone does not give rise to the presumption that the
sale was fraudulent. Relationship is not a badge of fraud (Goquiolay v. Sycip, 9 SCRA 663 [1963]). Moreover, fraud
can not be presumed; it must be established by clear convincing evidence.

We agree with the trial court's findings that the actuations of GELAC Trading were indeed violative of the provisions
on human relations. As found by the trial court, GELAC knew very well of the transfer of the property to the
petitioners on July 14, 1980 when it received summons based on the complaint for replevin filed with the RTC by the
petitioner. Notwithstanding said summons, it continued to sell the subject tractor to one of its stockholders on August
2, 1980.

WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals promulgated on March 23,
1990 is SET ASIDE and the decision of the Regional Trial Court dated April 8, 1988 is REINSTATED.

SO ORDERED.

Fernan, C.J., Feliciano and Bidin, JJ., concur.

Davide, Jr., J., took no part.

G.R. No. 119745 June 20, 1997

POWER COMMERCIAL AND INDUSTRIAL CORPORATION, petitioner,

vs.
COURT OF APPEALS, SPOUSES REYNALDO and ANGELITA R. QUIAMBAO and PHILIPPINE NATIONAL
BANK, respondents.

PANGANIBAN, J.:

Is the seller's failure to eject the lessees from a lot that is the subject of a contract of sale with assumption of
mortgage a ground (1) for rescission of such contract and (2) for a return by the mortgagee of the amortization
payments made by the buyer who assumed such mortgage?
Petitioner posits an affirmative answer to such question in this petition for review on certiorari of the March 27, 1995
Decision1 of the Court of Appeals, Eighth Division, in CA-G.R. CV Case No. 32298 upholding the validity of the
contract of sale with assumption of mortgage and absolving the mortgagee from the liability of returning the
mortgage payments already made.2

The Facts

Petitioner Power Commercial & Industrial Development Corporation, an industrial asbestos manufacturer, needed a
bigger office space and warehouse for its products. For this purpose, on January 31, 1979, it entered into a contract
of sale with the spouses Reynaldo and Angelita R. Quiambao, herein private respondents. The contract involved a
612-sq. m. parcel of land covered by Transfer Certificate of Title No. S-6686 located at the corner of Bagtican and
St. Paul Streets, San Antonio Village, Makati City. The parties agreed that petitioner would pay private respondents
P108,000.00 as down payment, and the balance of P295,000.00 upon the execution of the deed of transfer of the
title over the property. Further, petitioner assumed, as part of the purchase price, the existing mortgage on the land.
In full satisfaction thereof, he paid P79,145.77 to Respondent Philippine National Bank ("PNB" for brevity).

On June 1, 1979, respondent spouses mortgaged again said land to PNB to guarantee a loan of P145,000.00,
P80,000.00 of which was paid to respondent spouses. Petitioner agreed to assume payment of the loan.

On June 26, 1979, the parties executed a Deed of Absolute Sale With Assumption of Mortgage which contained the
following terms and conditions:3

That for and in consideration of the sum of Two Hundred Ninety-Five Thousand Pesos
(P295,000.00) Philippine Currency, to us in hand paid in cash, and which we hereby acknowledge to
be payment in full and received to our entire satisfaction, by POWER COMMERCIAL AND
INDUSTRIAL DEVELOPMENT CORPORATION, a 100% Filipino Corporation, organized and
existing under and by virtue of Philippine Laws with offices located at 252-C Vito Cruz Extension, we
hereby by these presents SELL, TRANSFER and CONVEY by way of absolute sale the above
described property with all the improvements existing thereon unto the said Power Commercial and
Industrial Development Corporation, its successors and assigns, free from all liens and
encumbrances.

We hereby certify that the aforesaid property is not subject to nor covered by the provisions of the
Land Reform Code — the same having no agricultural lessee and/or tenant.

We hereby also warrant that we are the lawful and absolute owners of the above described property,
free from any lien and/or encumbrance, and we hereby agree and warrant to defend its title and
peaceful possession thereof in favor of the said Power Commercial and Industrial Development
Corporation, its successors and assigns, against any claims whatsoever of any and all third persons;
subject, however, to the provisions hereunder provided to wit:

That the above described property is mortgaged to the Philippine National Bank, Cubao, Branch,
Quezon City for the amount of one hundred forty-five thousand pesos, Philippine, evidenced by
document No. 163, found on page No. 34 of Book No. XV, Series of 1979 of Notary Public Herita
L. Altamirano registered with the Register of Deeds of Pasig (Makati), Rizal . . . ;

That the said Power Commercial and Industrial Development Corporation assumes to pay in full the
entire amount of the said mortgage above described plus interest and bank charges, to the said
mortgagee bank, thus holding the herein vendor free from all claims by the said bank;

That both parties herein agree to seek and secure the agreement and approval of the said Philippine
National Bank to the herein sale of this property, hereby agreeing to abide by any and all
requirements of the said bank, agreeing that failure to do so shall give to the bank first lieu (sic) over
the herein described property.

On the same date, Mrs. C.D. Constantino, then General Manager of petitioner-corporation, submitted to PNB said
deed with a formal application for assumption of mortgage.4
On February 15, 1980, PNB informed respondent spouses that, for petitioner's failure to submit the papers
necessary for approval pursuant to the former's letter dated January 15, 1980, the application for assumption of
mortgage was considered withdrawn; that the outstanding balance of P145,000.00 was deemed fully due and
demandable; and that said loan was to be paid in full within fifteen (15) days from notice.5

Petitioner paid PNB P41,880.45 on June 24, 1980 and P20,283.14 on December 23, 1980, payments which were to
be applied to the outstanding loan. On December 23, 1980, PNB received a letter from petitioner which reads:6

With regard to the presence of the people who are currently in physical occupancy of the (l)ot . . . it
is our desire as buyers and new owners of this lot to make use of this lot for our own purpose, which
is why it is our desire and intention that all the people who are currently physically present and in
occupation of said lot should be removed immediately.

For this purpose we respectfully request that . . . our assumption of mortgage be given favorable
consideration, and that the mortgage and title be transferred to our name so that we may undertake
the necessary procedures to make use of this lot ourselves.

It was our understanding that this lot was free and clear of problems of this nature, and that the
previous owner would be responsible for the removal of the people who were there. Inasmuch as the
previous owner has not been able to keep his commitment, it will be necessary for us to take legal
possession of this lot inorder (sic) to take physical possession.

On February 19, 1982, PNB sent petitioner a letter as follows:7

(T)his refers to the loan granted to Mr. Reynaldo Quiambao which was assumed by you on June 4,
1979 for P101,500.00. It was last renewed on December 24, 1980 to mature on June 4, 1981.

A review of our records show that it has been past due from last maturity with interest arrearages
amounting to P25,826.08 as of February 19, 1982. The last payment received by us was on
December 24, 1980 for P20,283. 14. In order to place your account in current form, we request you
to remit payments to cover interest, charges, and at least part of the principal.

On March 17, 1982, petitioner filed Civil Case No. 45217 against respondent spouses for rescission and damages
before the Regional Trial Court of Pasig, Branch 159. Then, in its reply to PNB's letter of February 19, 1982,
petitioner demanded the return of the payments it made on the ground that its assumption of mortgage was never
approved. On May 31, 1983,8 while this case was pending, the mortgage was foreclosed. The property was
subsequently bought by PNB during the public auction. Thus, an amended complaint was filed impleading PNB as
party defendant.

On July 12, 1990, the trial court9 ruled that the failure of respondent spouses to deliver actual possession to
petitioner entitled the latter to rescind the sale, and in view of such failure and of the denial of the latter's assumption
of mortgage, PNB was obliged to return the payments made by the latter. The dispositive portion of said decision
states: 10

IN VIEW OF ALL THE FOREGOING, the Court hereby renders judgment in favor of plaintiff and
against defendants:

(1) Declaring the rescission of the Deed of Sale with Assumption of Mortgage executed between
plaintiff and defendants Spouses Quiambao, dated June 26, 1979;

(2) Ordering defendants Spouses Quiambao to return to plaintiff the amount of P187,144.77
(P108,000.00 plus P79,145.77) with legal interest of 12% per annum from date of filing of herein
complaint, that is, March 17, 1982 until the same is fully paid;

(3) Ordering defendant PNB to return to plaintiff the amount of P62,163.59 (P41,880.45 and
P20,283.14) with 12% interest thereon from date of herein judgment until the same is fully paid.
 No award of other damages and attorney's fees, the same not being warranted under the facts and
circumstances of the case.

The counterclaim of both defendants spouses Quiambao and PNB are dismissed for lack of merit.

No pronouncement as to costs.

SO ORDERED.

On appeal by respondent-spouses and PNB, Respondent Court of Appeals reversed the trial court. In the assailed
Decision, it held that the deed of sale between respondent spouses and petitioner did not obligate the former to
eject the lessees from the land in question as a condition of the sale, nor was the occupation thereof by said lessees
a violation of the warranty against eviction. Hence, there was no substantial breach to justify the rescission of said
contract or the return of the payments made. The dispositive portion of said Decision reads: 11

WHEREFORE, the Decision appealed from is hereby REVERSED and the complaint filed by Power
Commercial and Industrial Development Corporation against the spouses Reynaldo and Angelita
Quiambao and the Philippine National Bank is DISMISSED. No costs.

Hence, the recourse to this Court.

Issues

Petitioner contends that: (1) there was a substantial breach of the contract between the parties warranting
rescission; and (2) there was a "mistake in payment" made by petitioner, obligating PNB to return such payments. In
its Memorandum, it specifically assigns the following errors of law on the part of Respondent Court: 12

A. Respondent Court of Appeals gravely erred in failing to consider in its decision that a breach of
implied warranty under Article 1547 in relation to Article 1545 of the Civil Code applies in the case-
at-bar.

B. Respondent Court of Appeals gravely erred in failing to consider in its decision that a mistake in
payment giving rise to a situation where the principle of solutio indebiti applies is obtaining in the
case-at-bar.

The Court's Ruling

The petition is devoid of merit. It fails to appreciate the difference between a condition and a warranty and the
consequences of such distinction.

Conspicuous Absence of an Imposed Condition

The alleged "failure" of respondent spouses to eject the lessees from the lot in question and to deliver actual and
physical possession thereof cannot be considered a substantial breach of a condition for two reasons: first, such
"failure" was not stipulated as a condition — whether resolutory or suspensive — in the contract; and second, its
effects and consequences were not specified either. 13

The provision adverted to by petitioner does not impose a condition or an obligation to eject the lessees from the lot.
The deed of sale provides in part: 14

We hereby also warrant that we are the lawful and absolute owners of the above described property,
free from any lien and/or encumbrance, and we hereby agree and warrant to defend its title and
peaceful possession thereof in favor of the said Power Commercial and Industrial Development
Corporation, its successors and assigns, against any claims whatsoever of any and all third persons;
subject, however, to the provisions hereunder provided to wit:
By his own admission, Anthony Powers, General Manager of petitioner-corporation, did not ask the corporation's
lawyers to stipulate in the contract that Respondent Reynaldo was guaranteeing the ejectment of the occupants,
because there was already a proviso in said deed of sale that the sellers were guaranteeing the peaceful
possession by the buyer of the land in question. 15 Any obscurity in a contract, if the above-quoted provision can be
so described, must be construed against the party who caused it. 16 Petitioner itself caused the obscurity because it
omitted this alleged condition when its lawyer drafted said contract.

If the parties intended to impose on respondent spouses the obligation to eject the tenants from the lot sold, it
should have included in the contract a provision similar to that referred to in Romero vs. Court of Appeals, 17 where
the ejectment of the occupants of the lot sold by private respondent was the operative act which set into motion the
period of petitioner's compliance with his own obligation, i.e., to pay the balance of the purchase price. Failure to
remove the squatters within the stipulated period gave the other party the right to either refuse to proceed with the
agreement or to waive that condition of ejectment in consonance with Article 1545 of the Civil Code. In the case
cited, the contract specifically stipulated that the ejectment was a condition to be fulfilled; otherwise, the obligation to
pay the balance would not arise. This is not so in the case at bar.

Absent a stipulation therefor, we cannot say that the parties intended to make its nonfulfillment a ground for
rescission. If they did intend this, their contract should have expressly stipulated so. In Ang vs. C.A.,18 rescission was
sought on the ground that the petitioners had failed to fulfill their obligation "to remove and clear" the lot sold, the
performance of which would have given rise to the payment of the consideration by private respondent. Rescission
was not allowed, however, because the breach was not substantial and fundamental to the fulfillment by the
petitioners of the obligation to sell.

As stated, the provision adverted to in the contract pertains to the usual warranty against eviction, and not to a
condition that was not met.

The terms of the contract are so clear as to leave no room for any other interpretation. 19

Furthermore, petitioner was well aware of the presence of the tenants at the time it entered into the sales
transaction. As testified to by Reynaldo, 20 petitioner's counsel during the sales negotiation even undertook the job of
ejecting the squatters. In fact, petitioner actually filed suit to eject the occupants. Finally, petitioner in its letter to
PNB of December 23, 1980 admitted that it was the "buyer(s) and new owner(s) of this lot."

Effective Symbolic Delivery

The Court disagrees with petitioner's allegation that the respondent spouses failed to deliver the lot sold. Petitioner
asserts that the legal fiction of symbolic delivery yielded to the truth that, at the execution of the deed of sale,
transfer of possession of said lot was impossible due to the presence of occupants on the lot sold. We find this
misleading.

Although most authorities consider transfer of ownership as the primary purpose of sale, delivery remains an
indispensable requisite as our law does not admit the doctrine of transfer of property by mere consent. 21 The Civil
Code provides that delivery can either be (1) actual (Article 1497) or (2) constructive (Articles 1498-1501). Symbolic
delivery (Article 1498), as a species of constructive delivery, effects the transfer of ownership through the execution
of a public document. Its efficacy can, however, be prevented if the vendor does not possess control over the thing
sold, 22 in which case this legal fiction must yield to reality.

The key word is control, not possession, of the land as petitioner would like us to believe. The Court has consistently
held that: 23

. . . (I)n 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 . . . 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.

Considering that the deed of sale between the parties did not stipulate or infer otherwise, delivery was effected
through the execution of said deed. The lot sold had been placed under the control of petitioner; thus, the filing of
the ejectment suit was subsequently done. It signified that its new owner intended to obtain for itself and to
terminate said occupants' actual possession thereof. Prior physical delivery or possession is not legally required and
the execution of the deed of sale is deemed equivalent to delivery. 24 This deed operates as a formal or symbolic
delivery of the property sold and authorizes the buyer to use the document as proof of ownership. Nothing more is
required.

Requisites of Breach of Warranty Against Eviction

Obvious to us in the ambivalent stance of petitioner is its failure to establish any breach of the warranty against
eviction. Despite its protestation that its acquisition of the lot was to enable it to set up a warehouse for its asbestos
products and that failure to deliver actual possession thereof defeated this purpose, still no breach of warranty
against eviction can be appreciated because the facts of the case do not show that the requisites for such breach
have been satisfied. A breach of this warranty requires the concurrence of the following circumstances:

(1) The purchaser has been deprived of the whole or part of the thing sold;

(2) This eviction is by a final judgment;

(3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and

(4) The vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee. 25

In the absence of these requisites, a breach of the warranty against eviction under Article 1547 cannot be
declared.

Petitioner argues in its memorandum that it has not yet ejected the occupants of said lot, and not that it has been
evicted therefrom. As correctly pointed out by Respondent Court, the presence of lessees does not constitute an
encumbrance of the land, 26 nor does it deprive petitioner of its control thereof.

We note, however, that petitioner's deprivation of ownership and control finally occurred when it failed and/or
discontinued paying the amortizations on the mortgage, causing the lot to be foreclosed and sold at public auction.
But this deprivation is due to petitioner's fault, and not to any act attributable to the vendor-spouses.

Because petitioner failed to impugn its integrity, the contract is presumed, under the law, to be valid and subsisting.

Absence of Mistake In Payment

Contrary to the contention of petitioner that a return of the payments it made to PNB is warranted under Article 2154
of the Code, solutio indebiti does not apply in this case. This doctrine applies where: (1) a payment is made when
there exists no binding relation between the payor, who has no duty to pay, and the person who received the
payment, and (2) the payment is made through mistake, and not through liberality or some other cause. 27

In this case, petitioner was under obligation to pay the amortizations on the mortgage under the contract of sale and
the deed of real estate mortgage. Under the deed of sale (Exh. "2"), 28 both parties agreed to abide by any and all
the requirements of PNB in connection with the real estate mortgage. Petitioner was aware that the deed of
mortgage (Exh. "C") made it solidarily and, therefore, primarily 29 liable for the mortgage obligation: 30

(e) The Mortgagor shall neither lease the mortgaged property. . . nor sell or dispose of the same in
any manner, without the written consent of the Mortgagee. However, if not withstanding this
stipulation and during the existence of this mortgage, the property herein mortgaged, or any portion
thereof, is . . . sold, it shall be the obligation of the Mortgagor to impose as a condition of the sale,
alienation or encumbrance that the vendee, or the party in whose favor the alienation or
 encumbrance is to be made, should take the property subject to the obligation of this mortgage in
the same terms and condition under which it is constituted, it being understood that the Mortgagor is
not in any manner relieved of his obligation to the Mortgagee under this mortgage by such sale,
alienation or encumbrance; on the contrary both the vendor and the vendee, or the party in whose
favor the alienation or encumbrance is made shall be jointly and severally liable for said mortgage
obligations. . . .

Therefore, it cannot be said that it did not have a duty to pay to PNB the amortization on the mortgage.

Also, petitioner insists that its payment of the amortization was a mistake because PNB disapproved its assumption
of mortgage after it failed to submit the necessary papers for the approval of such assumption.

But even if petitioner was a third party in regard to the mortgage of the land purchased, the payment of the loan by
petitioner was a condition clearly imposed by the contract of sale. This fact alone disproves petitioner's insistence
that there was a "mistake" in payment. On the contrary, such payments were necessary to protect its interest as a
"the buyer(s) and new owner(s) of the lot."

The quasi-contract of solutio indebiti is one of the concrete manifestations of the ancient principle that no one shall
enrich himself unjustly at the expense of another. 31 But as shown earlier, the payment of the mortgage was an
obligation petitioner assumed under the contract of sale. There is no unjust enrichment where the transaction, as in
this case, is quid pro quo, value for value.

All told, respondent Court did not commit any reversible error which would warrant the reversal of the assailed
Decision.

WHEREFORE, the petition is hereby DENIED, and the assailed Decision is AFFIRMED.

SO ORDERED.

Narvasa, C.J., Davide, Jr. and Melo, JJ., concur.

Francisco, J., is on leave.

G.R. No. L-40195 May 29, 1987

VICTORIA R. VALLARTA, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and THE HONORABLE JUDGE FRANCISCO LLAMAS, Pasay City
Court, respondents.

Francisco G.H. Salva for petitioner.

CORTES, J.:

The petitioner seeks a reversal of the Court of Appeals decision dated December 13, 1974 affirming the Trial Court's
judgment convicting her of estafa. We denied the petition initially but granted a motion for reconsideration and gave
the petition due course.

As found by the trial court and the Court of Appeals, Rosalinda Cruz, the private offended party, and accused
Victoria Vallarta are long time friends and business acquaintances. On November 20, 1968, Cruz entrusted to
Victoria Vallarta seven pieces of jewelry. In December of the same year, Vallarta decided to buy some items,
exchanged one item with another, and issued a post-dated check in the amount of P5,000 dated January 30, 1969.
Rosalinda Cruz deposited said check with the bank. However, upon presentment, the check was dishonored and
Cruz was informed that Vallarta's account had been closed. Cruz apprised Vallarta of the dishonor and the latter
promised to give another check. Later, Vallarta pleaded for more time. Still later, she started avoiding Cruz. Hence,
this criminal action was instituted.

Based on the foregoing facts, both the trial court and the Court of Appeals found Vallarta guilty beyond reasonable
doubt of the crime of estafa.

WE affirm.

Petitioner is charged under Art. 315 (2) (d) as amended by Rep. Act No. 4885, of the Revised Penal Code, which
penalizes any person who shall defraud another "(b)y postdating a check, or issuing a check in payment of an
obligation when the offender had no funds in the bank, or his funds deposited therein were not sufficient to cover the
amount of the check."

By virtue of Rep. Act No. 4885, "(t)he failure of the drawer of the check to deposit the amount necessary to cover his
check within three (3) days from receipt of notice from the bank and/or the payee or holder that said check has been
dishonored for lack or insufficiency of funds" is deemed prima facie evidence of deceit constituting false pretense or
fraudulent act.

To constitute estafa under this provision the act of post-dating or issuing a check in payment of an obligation must
be the efficient cause of defraudation, and as such it should be either prior to, or simultaneous with the act of fraud.
The offender must be able to obtain money or property from the offended party because of the issuance of a check
whether post-dated or not. That is, the latter would not have parted with his money or other property were it not for
the issuance of the check. likewise, the check should not be, issued in payment of a pre-existing obligation (People
v. Lilius, 59 Phil. 339 [1933]).

In seeking acquittal, petitioner stresses that the transaction between her and Cruz was a "sale or return," perfected
and consummated on November 20, 1968 when the seven pieces of jewelry were delivered. The check issued in
December 1968 was therefore in payment of a pre-existing obligation. Thus, even if it was dishonored, petitioner
claims that she can only be held civilly liable, but not criminally liable under Art. 315 (2) (d), Revised Penal Code.
She also argues that at any rate, what prompted Cruz to deliver the jewelry was the social standing of petitioner
Vallarta and not the postdated check.

She thus assigns as errors the finding of that Court a quo that the jewelries were entrusted on November 20, 1968,
but the sale was perfected in December 1968, and the finding that there was deceit in the issuance of the postdated
check.

In order to arrive at the proper characterization of the transaction between Vallarta and Cruz, that is, whether it was
a "sale or return" or some other transaction, it is necessary to determine the intention of the parties.

The following excerpts from the transcript of stenographic notes are significant:

I. Direct Examination of Rosalinda Cruz

Q: Now, what happened with that business transaction of yours with Mrs. Vallarta?

A: After that and after she finally agreed to buy two sets and changed the ruby ring
with another ring, she gave me postdated check; I waited for January 30, 1969. 1
deposited the check in the Security Bank. And after that I knew (learned) that it was
closed account (TSN, June 29, 1972, p. 9) (Emphasis supplied).

II. Cross-Examination of Rosalinda Cruz

Q: Now, you mentioned about certain jewelries in Exh. "A. Could you tell under your
oath whether all the jewelries listed here (Exh. "A") were taken by Mrs. Vallarta at
one single instance?
 A: Yes, Sir. It was on one (1) day when I entrusted them to her so she can select
what she wants (Id at p. 22) (Emphasis supplied).

III. Cross-Examination of Rosalinda Cruz

COURT: But could you still recall or you cannot recall whether you agreed to reduce
the cost to Five Thousand Eight Hundred ( P5,800.00) Pesos?

A Yes, Sir. I agreed to reduce it to Five Thousand Eight Hundred (P5,800.00) Pesos,
Sir, when I went to see her in her house to finalize what jewelries she wanted (Id. at
p. 26).

Note that Vallarta changed the ruby ring because it was not acceptable to her, and chose another ring. Likewise, the
price to be paid for the jewelry was finally agreed upon only in December 1968. Thus, there was a meeting of the
minds between the parties as to the object of the contract and the consideration therefore only in December 1968,
the same time that the check was issued. The delivery made on November 20, 1968 was only for the purpose of
enabling Vallarta to select what jewelry she wanted.

Properly, then, the transaction entered into by Cruz and Vallarta was not a "sale or return." Rather, it was a "sale on
approval " (also called " sale on acceptance, " "sale on trial." or "sale on satisfaction" [CIVIL CODE, art. 1502]). In a
"sale or return," the ownership passes to the buyer on delivery (CIVIL CODE, art. 1502). (The subsequent return of
the goods reverts ownership in the seller [CIVIL CODE, art. 1502]). Delivery, or tradition. as a mode of acquiring
ownership must be in consequence of a contract (CIVIL CODE, art. 712), e.g. sale.

If there was no meeting of the minds on November 20, 1968, then, as of that date, there was yet no contract of sale
which could be the basis of delivery or tradition. Thus, the delivery made on November 20, 1968 was not a delivery
for purposes of transferring ownership — the prestation incumbent on the vendor. If ownership over the jewelry was
not transmitted on that date, then it could have been transmitted only in December 1968, the date when the check
was issued. In which case, it was a "sale on approval" since ownership passed to the buyer. Vallarta, only when she
signified her approval or acceptance to the seller, Cruz, and the price was agreed upon.

Thus, when the check which later bounced was issued, it was not in payment of a pre-existing obligation. Instead
the issuance of the check was simultaneous with the transfer of ownership over the jewelry. But was the check
issued simultaneously with the fraud?

Republic Act No. 4885, amending Art. 315 (2) (d), Revised Penal Code, establishes a prima facie evidence of deceit
upon proof that the drawer of the check failed to deposit the amount necessary to cover his check within three (3)
days from receipt of notice of dishonor for lack or insufficiency of funds.

Admittedly, (1) the check was dishonored as Vallarta's account had been earlier closed; (2) she was notified by Cruz
of the dishonor: and, (3) Vallarta failed to make it good within three days. Deceit is therefore presumed.

Petitioner lays stress on her being an alumna of a reputable school, on her having a husband who is a bank
manager, and on the big land-holdings of her father, and argues that it was these qualifications and not the post-
dated check which prompted Cruz to deliver the jewelry (Rollo, pp. 78-79: Motion for Reconsideration, pp. 10-11).
Hence, there was no deceit. It is thus suggested that a person of petitioner's social standing cannot be guilty of
deceit, at least in so far as issuing bouncing checks is concerned. This reasoning does not merit serious
consideration. If accepted, it could result in a law that falls unequally on persons depending on their social position.

Did Cruz part with the jewelry solely because she knew Vallarta to be rich, or did she do so because of the check
issued to her? As the trial court and the Court of Appeals found, petitioner was able to obtain the jewelry because
she issued the check. Her failure to deposit the necessary amount to cover it within three days from notice of
dishonor created the prima facie presumption established by the amendatory law, Rep. Act No. 4885, which she
failed to rebut.

Petitioner, however, contends that Rep. Act No. 4885 is unconstitutional. She claims that even as the presumption
of deceit established by Rep. Act No. 4885 is stated under the guise of being prima facie. It is in effect a conclusive
presumption, because after the prosecution has proved that: (1) the check has been dishonored; (2) notice has
been given to the drawer; and, (3) three days from notice, the check is not funded or the obligation is not paid, the
accused is held guilty. Thus, it is alleged, the constitutional presumption of innocence is violated.

Contrary to petitioner's assertion, the presumption of deceit under Rep. Act No. 4885 is not conclusive. It is
rebuttable. For instance, We ruled in the case of People v. Villapando (56 Phil. 31 [1931]) that good faith is a
defense to a charge of estafa by postdating a check, as when the drawer, foreseeing his inability to pay the check at
maturity, made an arrangement with his creditor as to the manner of payment of the debt.*

Moreover, it is now well settled that "there is no constitutional objection to the passage of a law providing that the
presumption of innocence may be overcome by a contrary presumption founded upon the experience of human
conduct, and enacting what evidence shall be sufficient to overcome such presumption of innocence" (People v.
Mingoa, 92 Phil. 856 [1953] at 858-59, citing I COOLEY, A TREATISE ON THE CONSTITUTIONAL LIMITATIONS,
639-641). And the "legislature may enact that when certain facts have been proved they shall be prima facie
evidence of the existence of the guilt of the accused and shift the burden of proof provided there be a rational
connection between the facts proved and the ultimate fact presumed so that the inference of the one from proof of
the others is not unreasonable and arbitrary because of lack of connection between the two in common experience"
(People v. Mingoa, supra. See also US v. Luling, 34 Phil. 725 [1916]).

There can be no doubt that the "postdating or issuing of a check in payment of an obligation when the offender had
no funds in the bank, or his funds deposited therein were not sufficient to cover the amount of the check," is a false
pretense or a fraudulent act. It is so characterized by Art. 315 (2) (d), Revised Penal Code. Republic Act No. 4885
does nothing more than limit the period within which the drawer/issuer must pay the creditor.

Petitioner also argues that Rep. Act No. 4885 violates the constitutional injunction against imprisonment for non-
payment of debt. Ironically, she does not question the constitutionality of Art. 315 (2) (d), Revised Penal Code,
which defines the crime she is being accused of, and provides for its punishment. In fact, she concedes the
constitutionality of the latter statute. She further concedes that a person may be imprisoned for "criminal fraud"
covered by Art. 315 (2) of the Revised Penal Code.

In People v. Sabio (No. L-45490, November 20, 1978, 86 SCRA 568), this Court ruled that Rep. Act No. 4885 has
not changed the rule established in Art. 315 (2) (d) prior to the amendment; that Republic Act No. 4885 merely
established the prima facie evidence of deceit, and eliminated the requirement that the drawer inform the payee that
he had no funds in the bank or the funds deposited by him were not sufficient to cover the amount of the check.
Thus, even with the amendment introduced by Rep. Act No. 4885 it is still criminal fraud or deceit in the issuance of
a check which is made punishable under the Revised Penal Code, and not the non-payment of the debt.

Petitioner also assigns as error the denial by the trial court of her motion for reconsideration. Her motion was
directed at the finding of the trial court that no payments were made. Alleging that a check drawn by one Sison was
given by petitioner to Cruz in payment of the rubber check, petitioner claims that had her motion for reconsideration
been granted, she would have called to the witness stand the Branch Manager of Security Bank and Trust
Company, Pasay City, where the check was allegedly deposited by Cruz, for said bank manager to Identify the
owner-holder of the savings account to which the amount in Sison's check had been credited (Brief for Petitioner, p.
46).

Granting that the bank manager's testimony would have been as alleged by petitioner, Our decision would remain.
As correctly observed by both the trial court and the Court of Appeals (Court of Appeals Decision, pp. 2-3), the
payments petitioner allegedly made were not shown to have any relevance to the obligation in question.

WHEREFORE, finding no error in the assailed decision of the Court of Appeals, the same is AFFIRMED. Costs
against the petitioner.

SO ORDERED.

Teehankee, C.J., Yap, Fernando, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Gancayco, Padilla, Bidin
and Sarmiento, JJ., concur.
Feliciano, J., is on leave.

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

JOSE SANTA ANA, JR. and LOURDES STO. DOMINGO, petitioners,

vs.
ROSA HERNANDEZ, respondent.

Manuel J. Serapio for petitioners..

J. T. de los Santos for 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
España, 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.

Concepcion, C.J., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ., concur.

Castro, J., took no part.

G.R. No. L-29972 January 26, 1976

ROSARIO CARBONELL, petitioner,

vs.
HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA INFANTE and RAMON INFANTE, respondents.

MAKASIAR, J.

Petitioner seeks a review of the resolution of the Court of Appeals (Special Division of Five) dated October 30, 1968,
reversing its decision of November 2, 1967 (Fifth Division), and its resolution of December 6, 1968 denying
petitioner's motion for reconsideration.

The dispositive part of the challenged resolution reads:

 Wherefore, the motion for reconsideration filed on behalf of appellee Emma Infante, is hereby
granted and the decision of November 2, 1967, is hereby annulled and set aside. Another judgement
shall be entered affirming in toto that of the court a quo, dated January 20, 1965, which dismisses
the plaintiff's complaint and defendant's counterclaim.

Without costs.

The facts of the case as follows:

Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes Islands, was the owner of the parcel of
land herein involve with improvements situated at 179 V. Agan St., San Juan, Rizal, having an area of some one
hundred ninety-five (195) square meters, more or less, covered by TCT No. 5040 and subject to mortgage in favor
of the Republic Savings Bank for the sum of P1,500.00. Petitioner Rosario Carbonell, a cousin and adjacent
neighbor of respondent Poncio, and also from the Batanes Islands, lived in the adjoining lot at 177 V. Agan Street.

Both petitioners Rosario Carbonell and respondent Emma Infante offered to buy the said lot from Poncio (Poncio's
Answer, p. 38, rec. on appeal).

Respondent Poncio, unable to keep up with the installments due on the mortgage, approached petitioner one day
and offered to sell to the latter the said lot, excluding the house wherein respondent lived. Petitioner accepted the
offer and proposed the price of P9.50 per square meter. Respondent Poncio, after having secured the consent of his
wife and parents, accepted the price proposed by petitioner, on the condition that from the purchase price would
come the money to be paid to the bank.

Petitioner and respondent Jose Poncio then went to the Republic Savings Bank and secured the consent of the
President thereof for her to pay the arrears on the mortgage and to continue the payment of the installments as they
fall due. The amount in arrears reached a total sum of P247.26. But because respondent Poncio had previously told
her that the money, needed was only P200.00, only the latter amount was brought by petitioner constraining
respondent Jose Poncio to withdraw the sum of P47.00 from his bank deposit with Republic Savings Bank. But the
next day, petitioner refunded to Poncio the sum of P47.00.

On January 27, 1955, petitioner and respondent Poncio, in the presence of a witness, made and executed a
document in the Batanes dialect, which, translated into 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 pa 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.

(Sgd) JOSE PONCIO

(Sgd.) ROSARIO
CARBONELL
(Sgd) CONSTANCIO
MEONADA
Witness

(Pp. 6-7 rec. on appeal).

Thereafter, petitioner asked Atty. Salvador Reyes, also from the Batanes Islands, to prepare the formal deed of sale,
which she brought to respondent Poncio together with the amount of some P400.00, the balance she still had to pay
in addition to her assuming the mortgaged obligation to Republic Savings Bank.
Upon arriving at respondent Jose Poncio's house, however, the latter told petitioner that he could not proceed any
more with the sale, because he had already given the lot to respondent Emma Infants; and that he could not
withdraw from his deal with respondent Mrs. Infante, even if he were to go to jail. Petitioner then sought to contact
respondent Mrs. Infante but the latter refused to see her.

On February 5, 1955, petitioner saw Emma Infante erecting a all around the lot with a gate.

Petitioner then consulted Atty. Jose Garcia, who advised her to present an adverse claim over the land in question
with the Office of the Register of Deeds of Rizal. Atty. Garcia actually sent a letter of inquiry to the Register of Deeds
and demand letters to private respondents Jose Poncio and Emma Infante.

In his answer to the complaint Poncio admitted "that on January 30, 1955, Mrs. Infante improved her offer and he
agreed to sell the land and its improvements to her for P3,535.00" (pp. 38-40, ROA).

In a private memorandum agreement dated January 31, 1955, respondent Poncio indeed bound himself to sell to
his corespondent Emma Infante, the property for the sum of P2,357.52, with respondent Emma Infante still
assuming the existing mortgage debt in favor of Republic Savings Bank in the amount of P1,177.48. Emma Infante
lives just behind the houses of Poncio and Rosario Carbonell.

On February 2, 1955, respondent Jose Poncio executed the formal deed of sale in favor of respondent Mrs. Infante
in the total sum of P3,554.00 and on the same date, the latter paid Republic Savings Bank the mortgage
indebtedness of P1,500.00. The mortgage on the lot was eventually discharged.

Informed that the sale in favor of respondent Emma Infante had not yet been registered, Atty. Garcia prepared an
adverse claim for petitioner, who signed and swore to an registered the same on February 8, 1955.

The deed of sale in favor of respondent Mrs. Infante was registered only on February 12, 1955. As a consequence
thereof, a Transfer Certificate of Title was issued to her but with the annotation of the adverse claim of petitioner
Rosario Carbonell.

Respondent Emma Infante took immediate possession of the lot involved, covered the same with 500 cubic meters
of garden soil and built therein a wall and gate, spending the sum of P1,500.00. She further contracted the services
of an architect to build a house; but the construction of the same started only in 1959 — years after the litigation
actually began and during its pendency. Respondent Mrs. Infante spent for the house the total amount of
P11,929.00.

On June 1, 1955, petitioner Rosario Carbonell, thru counsel, filed a second amended complaint against private
respondents, praying that she be declared the lawful owner of the questioned parcel of land; that the subsequent
sale to respondents Ramon R. Infante and Emma L. Infante be declared null and void, and that respondent Jose
Poncio be ordered to execute the corresponding deed of conveyance of said land in her favor and for damages and
attorney's fees (pp. 1-7, rec. on appeal in the C.A.).

Respondents first moved to dismiss the complaint on the ground, among others, that petitioner's claim is
unenforceable under the Statute of Frauds, the alleged sale in her favor not being evidenced by a written document
(pp. 7-13, rec. on appeal in the C.A.); and when said motion was denied without prejudice to passing on the
question raised therein when the case would be tried on the merits (p. 17, ROA in the C.A.), respondents filed
separate answers, reiterating the grounds of their motion to dismiss (pp. 18-23, ROA in the C.A.).

During the trial, when petitioner started presenting evidence of the sale of the land in question to her by respondent
Poncio, part of which evidence was the agreement written in the Batanes dialect aforementioned, respondent
Infantes objected to the presentation by petitioner of parole evidence to prove the alleged sale between her and
respondent Poncio. In its order of April 26, 1966, the trial court sustained the objection and dismissed the complaint
on the ground that the memorandum presented by petitioner to prove said sale does not satisfy the requirements of
the law (pp. 31-35, ROA in the C.A.).

From the above order of dismissal, petitioner appealed to the Supreme Court (G.R. No. L-11231) which ruled in a
decision dated May 12, 1958, that the Statute of Frauds, being applicable only to executory contracts, does not
apply to the alleged sale between petitioner and respondent Poncio, which petitioner claimed to have been partially
performed, so that petitioner is entitled to establish by parole evidence "the truth of this allegation, as well as the
contract itself." The order appealed from was thus reversed, and the case remanded to the court a quo for further
proceedings (pp. 26-49, ROA in the C.A.).

After trial in the court a quo; a decision was, rendered on December 5, 1962, declaring the second sale by
respondent Jose Poncio to his co-respondents Ramon Infante and Emma Infante of the land in question null and
void and ordering respondent Poncio to execute the proper deed of conveyance of said land in favor of petitioner
after compliance by the latter of her covenants under her agreement with respondent Poncio (pp. 5056, ROA in the
C.A.).

On January 23, 1963, respondent Infantes, through another counsel, filed a motion for re-trial to adduce evidence
for the proper implementation of the court's decision in case it would be affirmed on appeal (pp. 56-60, ROA in the
C.A.), which motion was opposed by petitioner for being premature (pp. 61-64, ROA in the C.A.). Before their motion
for re-trial could be resolved, respondent Infantes, this time through their former counsel, filed another motion for
new trial, claiming that the decision of the trial court is contrary to the evidence and the law (pp. 64-78, ROA in the
C.A.), which motion was also opposed by petitioner (pp. 78-89, ROA in the C.A.).

The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at which re-hearing only the respondents introduced
additional evidence consisting principally of the cost of improvements they introduced on the land in question (p. 9,
ROA in the C.A.).

After the re-hearing, the trial court rendered a decision, reversing its decision of December 5, 1962 on the ground
that the claim of the respondents was superior to the claim of petitioner, and dismissing the complaint (pp. 91-95,
ROA in the C.A.), From this decision, petitioner Rosario Carbonell appealed to the respondent Court of Appeals (p.
96, ROA in the C.A.).

On November 2, 1967, the Court of Appeals (Fifth Division composed of Justices Magno Gatmaitan, Salvador V.
Esguerra and Angle H. Mojica, speaking through Justice Magno Gatmaitan), rendered judgment reversing the
decision of the trial court, declaring petitioner therein, to have a superior right to the land in question, and
condemning the defendant Infantes to reconvey to petitioner after her reimbursement to them of the sum of
P3,000.00 plus legal interest, the land in question and all its improvements (Appendix "A" of Petition).

Respondent Infantes sought reconsideration of said decision and acting on the motion for reconsideration, the
Appellate Court, three Justices (Villamor, Esguerra and Nolasco) of Special Division of Five, granted said motion,
annulled and set aside its decision of November 2, 1967, and entered another judgment affirming in toto the
decision of the court a quo, with Justices Gatmaitan and Rodriguez dissenting (Appendix "B" of Petition).

Petitioner Rosario Carbonell moved to reconsider the Resolution of the Special Division of Five, which motion was
denied by Minute Resolution of December 6, 1968 (but with Justices Rodriguez and Gatmaitan voting for
reconsideration) [Appendix "C" of Petition].

Hence, this appeal by certiorari.

Article 1544, New Civil Code, which is decisive of this case, recites:

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

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

Should there be no inscription, the ownership shall pertain to the person who in good faith was first
in the possession; and, in the absence thereof, to the person who presents the oldest title, provided
there is good faith (emphasis supplied).
It is essential that the buyer of realty must act in good faith in registering his deed of sale to merit the protection of
the second paragraph of said Article 1544.

Unlike the first and third paragraphs of said Article 1544, which accord preference to the one who first takes
possession in good faith of personal or real property, the second paragraph directs that ownership of immovable
property should be recognized in favor of one "who in good faith first recorded" his right. Under the first and third
paragraph, good faith must characterize the act of anterior registration (DBP vs. Mangawang, et al., 11 SCRA 405;
Soriano, et al. vs. Magale, et al., 8 SCRA 489).

If there is no inscription, what is decisive is prior possession in good faith. If there is inscription, as in the case at bar,
prior registration in good faith is a pre-condition to superior title.

When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer thereof and the title of
Poncio was still in his name solely encumbered by bank mortgage duly annotated thereon. Carbonell was not aware
— and she could not have been aware — of any sale of Infante as there was no such sale to Infante then. Hence,
Carbonell's prior purchase of the land was made in good faith. Her good faith subsisted and continued to exist when
she recorded her adverse claim four (4) days prior to the registration of Infantes's deed of sale. Carbonell's good
faith did not cease after Poncio told her on January 31, 1955 of his second sale of the same lot to Infante. Because
of that information, Carbonell wanted an audience with Infante, which desire underscores Carbonell's good faith.
With an aristocratic disdain unworthy of the good breeding of a good Christian and good neighbor, Infante snubbed
Carbonell like a leper and refused to see her. So Carbonell did the next best thing to protect her right — she
registered her adversed claim on February 8, 1955. Under the circumstances, this recording of her adverse claim
should be deemed to have been done in good faith and should emphasize Infante's bad faith when she registered
her deed of sale four (4) days later on February 12, 1955.

Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is shown by the following facts,
the vital significance and evidenciary effect of which the respondent Court of Appeals either overlooked of failed to
appreciate:

(1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she was informed by Poncio that he sold
the lot to Infante but several days before Infante registered her deed of sale. This indicates that Infante knew —
from Poncio and from the bank — of the prior sale of the lot by Poncio to Carbonell. Ordinarily, one will not refuse to
see a neighbor. Infante lives just behind the house of Carbonell. Her refusal to talk to Carbonell could only mean
that she did not want to listen to Carbonell's story that she (Carbonell) had previously bought the lot from Poncio.

(2) Carbonell was already in possession of the mortgage passbook [not Poncio's saving deposit passbook — Exhibit
"1" — Infantes] and Poncio's copy of the mortgage contract, when Poncio sold the lot Carbonell who, after paying
the arrearages of Poncio, assumed the balance of his mortgaged indebtedness to the bank, which in the normal
course of business must have necessarily informed Infante about the said assumption by Carbonell of the mortgage
indebtedness of Poncio. Before or upon paying in full the mortgage indebtedness of Poncio to the Bank. Infante
naturally must have demanded from Poncio the delivery to her of his mortgage passbook as well as Poncio's
mortgage contract so that the fact of full payment of his bank mortgage will be entered therein; and Poncio, as well
as the bank, must have inevitably informed her that said mortgage passbook could not be given to her because it
was already delivered to Carbonell.

If Poncio was still in possession of the mortgage passbook and his copy of the mortgage contract at the time he
executed a deed of sale in favor of the Infantes and when the Infantes redeemed his mortgage indebtedness from
the bank, Poncio would have surrendered his mortgage passbook and his copy of the mortgage contract to the
Infantes, who could have presented the same as exhibits during the trial, in much the same way that the Infantes
were able to present as evidence Exhibit "1" — Infantes, Poncio's savings deposit passbook, of which Poncio
necessarily remained in possession as the said deposit passbook was never involved in the contract of sale with
assumption of mortgage. Said savings deposit passbook merely proves that Poncio had to withdraw P47.26, which
amount was tided to the sum of P200.00 paid by Carbonell for Poncio's amortization arrearages in favor of the bank
on January 27, 1955; because Carbonell on that day brought with her only P200.00, as Poncio told her that was the
amount of his arrearages to the bank. But the next day Carbonell refunded to Poncio the sum of P47.26.

(3) The fact that Poncio was no longer in possession of his mortgage passbook and that the said mortgage
passbook was already in possession of Carbonell, should have compelled Infante to inquire from Poncio why he
was no longer in possession of the mortgage passbook and from Carbonell why she was in possession of the same
(Paglago, et. al vs. Jara et al 22 SCRA 1247, 1252-1253). The only plausible and logical reason why Infante did not
bother anymore to make such injury , w because in the ordinary course of business the bank must have told her that
Poncio already sold the lot to Carbonell who thereby assumed the mortgage indebtedness of Poncio and to whom
Poncio delivered his mortgage passbook. Hoping to give a semblance of truth to her pretended good faith, Infante
snubbed Carbonell's request to talk to her about the prior sale to her b Poncio of the lot. As aforestated, this is not
the attitude expected of a good neighbor imbued with Christian charity and good will as well as a clear conscience.

(4) Carbonell registered on February 8, 1955 her adverse claim, which was accordingly annotated on Poncio's title,
four [4] days before Infante registered on February 12, 1955 her deed of sale executed on February 2, 1955. Here
she was again on notice of the prior sale to Carbonell. Such registration of adverse claim is valid and effective
(Jovellanos vs. Dimalanta, L-11736-37, Jan. 30, 1959, 105 Phil. 1250-51).

(5) In his answer to the complaint filed by Poncio, as defendant in the Court of First Instance, he alleged that both
Mrs. Infante and Mrs. Carbonell offered to buy the lot at P15.00 per square meter, which offers he rejected as he
believed that his lot is worth at least P20.00 per square meter. It is therefore logical to presume that Infante was told
by Poncio and consequently knew of the offer of Carbonell which fact likewise should have put her on her guard and
should have compelled her to inquire from Poncio whether or not he had already sold the property to Carbonell.

As recounted by Chief Justice Roberto Concepcion, then Associate Justice, in the preceding case of Rosario
Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante (1-11231, May 12, 1958), Poncio alleged in his
answer:

... that he had consistently turned down several offers, made by plaintiff, to buy the land in question,
at P15 a square meter, for he believes that it is worth not less than P20 a square meter; that Mrs.
Infante, likewise, tried to buy the land at P15 a square meter; that, on or about January 27, 1955,
Poncio was advised by plaintiff that should she decide to buy the property at P20 a square meter,
she would allow him to remain in the property for one year; that plaintiff then induced Poncio to sign
a document, copy of which if probably the one appended to the second amended complaint; that
Poncio signed it 'relying upon the statement of the plaintiff that the document was a permit for him to
remain in the premises in the event defendant decided to sell the property to the plaintiff at P20.00 a
square meter'; that on January 30, 1955, Mrs. Infante improved her offer and agreed to sell the land
and its improvement to her for P3,535.00; that Poncio has not lost 'his mind,' to sell his property,
worth at least P4,000, for the paltry sum P1,177.48, the amount of his obligation to the Republic
Saving s Bank; and that plaintiff's action is barred by the Statute of Frauds. ... (pp. 38-40, ROA,
emphasis supplied).

II

EXISTENCE OF THE PRIOR SALE TO CARBONELL

DULY ESTABLISHED

(1) In his order dated April 26, 1956 dismissing the complaint on the ground that the private document Exhibit "A"
executed by Poncio and Carbonell and witnessed by Constancio Meonada captioned "Contract for One-half Lot
which I Bought from Jose Poncio," was not such a memorandum in writing within the purview of the Statute of
Frauds, the trial judge himself recognized the fact of the prior sale to Carbonell when he stated that "the
memorandum in question merely states that Poncio is allowed to stay in the property which he had sold to the
plaintiff. There is no mention of the reconsideration, a description of the property and such other essential elements
of the contract of sale. There is nothing in the memorandum which would tend to show even in the slightest manner
that it was intended to be an evidence of contract sale. On the contrary, from the terms of the memorandum, it tends
to show that the sale of the property in favor of the plaintiff is already an accomplished act. By the very contents of
the memorandum itself, it cannot therefore, be considered to be the memorandum which would show that a sale has
been made by Poncio in favor of the plaintiff" (p. 33, ROA, emphasis supplied). As found by the trial court, to repeat
the said memorandum states "that Poncio is allowed to stay in the property which he had sold to the plaintiff ..., it
tends to show that the sale of the property in favor of the plaintiff is already an accomplished act..."

(2) When the said order was appealed to the Supreme Court by Carbonell in the previous case of Rosario Carbonell
vs. Jose Poncio, Ramon Infante and Emma Infante
(L-11231, supra), Chief Justice Roberto Concepcion, then Associate Justice, speaking for a unanimous Court,
reversed the aforesaid order of the trial court dismissing the complaint, holding that because the complaint alleges
and the plaintiff claims that the contract of sale was partly performed, the same is removed from the application of
the Statute of Frauds and Carbonell should be allowed to establish by parol evidence the truth of her allegation of
partial performance of the contract of sale, and further stated:

Apart from the foregoing, there are in the case at bar several circumstances indicating that plaintiff's
claim might not be entirely devoid of factual basis. Thus, for instance, Poncio admitted in his answer
that plaintiff had offered several times to purchase his land.

Again, there is Exhibit A, a document signed by the defendant. It is in the Batanes dialect, which,
according to plaintiff's uncontradicted evidence, is the one spoken by Poncio, he being a native of
said region. Exhibit A states that Poncio would stay in the land sold by him to plaintiff for one year,
from January 27, 1955, free of charge, and that, if he cannot find a place where to transfer his house
thereon, he may remain upon. Incidentally, the allegation in Poncio's answer to the effect that he
signed Exhibit A under the belief that it "was a permit for him to remain in the premises in the" that
"he decided to sell the property" to the plaintiff at P20 a sq. m." is, on its face, somewhat difficult to
believe. Indeed, if he had not decided as yet to sell the land to plaintiff, who had never increased her
offer of P15 a square meter, there was no reason for Poncio to get said permit from her. Upon the
other hand, if plaintiff intended to mislead Poncio, she would have caused Exhibit A to be drafted,
probably, in English , instead of taking the trouble of seeing to it that it was written precisely in his
native dialect, the Batanes. Moreover, Poncio's signature on Exhibit A suggests that he is neither
illiterate nor so ignorant as to sign document without reading its contents, apart from the fact that
Meonada had read Exhibit A to him and given him a copy thereof, before he signed thereon,
according to Meonada's uncontradicted testimony.

Then, also, defendants say in their brief:

The only allegation in plaintiff's complaint that bears any relation to her claim that
there has been partial performance of the supposed contract of sale, is the notation
of the sum of P247.26 in the bank book of defendant Jose Poncio. The noting or
jotting down of the sum of P247.26 in the bank book of Jose Poncio does not prove
the fact that the said amount was the purchase price of the property in question. For
all we knew, the sum of P247.26 which plaintiff claims to have paid to the Republic
Savings Bank for the account of the defendant, assuming that the money paid to the
Republic Savings Bank came from the plaintiff, was the result of some usurious loan
or accomodation, rather than earnest money or part payment of the land. Neither is it
competent or satisfactory evidence to prove the conveyance of the land in question
the fact that the bank book account of Jose Poncio happens to be in the possession
of the plaintiff. (Defendants-Appellees' brief, pp. 25-26).

How shall We know why Poncio's bank deposit book is in plaintiffs possession, or whether there is
any relation between the P247.26 entry therein and the partial payment of P247.26 allegedly made
by plaintiff to Poncio on account of the price of his land, if we do not allow the plaintiff to explain it on
the witness stand? Without expressing any opinion on the merits of plaintiff's claim, it is clear,
therefore, that she is entitled , legally as well as from the viewpoint of equity, to an opportunity to
introduce parol evidence in support of the allegations of her second amended complaint. (pp. 46-49,
ROA, emphasis supplied).

(3) In his first decision of December 5, 1962 declaring null and void the sale in favor of the Infantes and ordering
Poncio to execute a deed of conveyance in favor of Carbonell, the trial judge found:

... A careful consideration of the contents of Exh. 'A' show to the satisfaction of the court that the sale
of the parcel of land in question by the defendant Poncio in favor of the plaintiff was covered therein
and that the said Exh. "a' was also executed to allow the defendant to continue staying in the
premises for the stated period. It will be noted that Exh. 'A' refers to a lot 'sold by him to me' and
having been written originally in a dialect well understood by the defendant Poncio, he signed the
said Exh. 'A' with a full knowledge and consciousness of the terms and consequences thereof. This
 therefore, corroborates the testimony of the plaintiff Carbonell that the sale of the land was made by
Poncio. It is further pointed out that there was a partial performance of the verbal sale executed by
Poncio in favor of the plaintiff, when the latter paid P247.26 to the Republic Savings Bank on
account of Poncio's mortgage indebtedness. Finally, the possession by the plaintiff of the defendant
Poncio's passbook of the Republic Savings Bank also adds credibility to her testimony. The
defendant contends on the other hand that the testimony of the plaintiff, as well as her witnesses,
regarding the sale of the land made by Poncio in favor of the plaintiff is inadmissible under the
provision of the Statute of Fraud based on the argument that the note Exh. "A" is not the note or
memorandum referred to in the to in the Statute of Fraud. The defendants argue that Exh. "A" fails to
comply with the requirements of the Statute of Fraud to qualify it as the note or memorandum
referred to therein and open the way for the presentation of parole evidence to prove the fact
contained in the note or memorandum. The defendant argues that there is even no description of the
lot referred to in the note, especially when the note refers to only one half lot. With respect to the
latter argument of the Exhibit 'A', the court has arrived at the conclusion that there is a sufficient
description of the lot referred to in Exh. 'A' as none other than the parcel of land occupied by the
defendant Poncio and where he has his improvements erected. The Identity of the parcel of land
involved herein is sufficiently established by the contents of the note Exh. "A". For a while, this court
had that similar impression but after a more and thorough consideration of the context in Exh. 'A' and
for the reasons stated above, the Court has arrived at the conclusion stated earlier (pp. 52-54, ROA,
emphasis supplied).

(4) After re-trial on motion of the Infantes, the trial Judge rendered on January 20, 1965 another decision dismissing
the complaint, although he found

1. That on January 27, 1955, the plaintiff purchased from the defendant Poncio a parcel of land with
an area of 195 square meters, more or less, covered by TCT No. 5040 of the Province of Rizal,
located at San Juan del Monte, Rizal, for the price of P6.50 per square meter;

2. That the purchase made by the plaintiff was not reduced to writing except for a short note or
memorandum Exh. A, which also recited that the defendant Poncio would be allowed to continue his
stay in the premises, among other things, ... (pp. 91-92, ROA, emphasis supplied).

From such factual findings, the trial Judge confirms the due execution of Exhibit "A", only that his legal conclusion is
that it is not sufficient to transfer ownership (pp. 93-94, ROA).

(5) In the first decision of November 2, 1967 of the Fifth Division of the Court of Appeals composed of Justices
Esguerra (now Associate Justice of the Supreme Court), Gatmaitan and Mojica, penned by Justice Gatmaitan, the
Court of Appeals found that:

... the testimony of Rosario Carbonell not having at all been attempted to be disproved by
defendants, particularly Jose Poncio, and corroborated as it is by the private document in Batanes
dialect, Exhibit A, the testimony being to the effect that between herself and Jose there had been
celebrated a sale of the property excluding the house for the price of P9.50 per square meter, so
much so that on faith of that, Rosario had advanced the sum of P247.26 and binding herself to pay
unto Jose the balance of the purchase price after deducting the indebtedness to the Bank and since
the wording of Exhibit A, the private document goes so far as to describe their transaction as one of
sale, already consummated between them, note the part tense used in the phrase, "the lot sold by
him to me" and going so far even as to state that from that day onwards, vendor would continue to
live therein, for one year, 'during which time he will not pay anything' this can only mean that
between Rosario and Jose, there had been a true contract of sale, consummated by delivery
constitutum possession, Art. 1500, New Civil Code;vendor's possession having become converted
from then on, as a mere tenant of vendee, with the special privilege of not paying rental for one year,
— it is true that the sale by Jose Poncio to Rosario Carbonell corroborated documentarily only by
Exhibit A could not have been registered at all, but it was a valid contract nonetheless, since under
our law, a contract sale is consensual, perfected by mere consent, Couto v. Cortes, 8 Phil 459, so
much so that under the New Civil Code, while a sale of an immovable is ordered to be reduced to a
public document, Art. 1358, that mandate does not render an oral sale of realty invalid, but merely
incapable of proof, where still executory and action is brought and resisted for its performance, 1403,
 par. 2, 3; but where already wholly or partly executed or where even if not yet, it is evidenced by a
memorandum, in any case where evidence to further demonstrate is presented and admitted as the
case was here, then the oral sale becomes perfectly good, and becomes a good cause of action not
only to reduce it to the form of a public document, but even to enforce the contract in its entirety, Art.
1357; and thus it is that what we now have is a case wherein on the one hand Rosario Carbonell has
proved that she had an anterior sale, celebrated in her favor on 27 January, 1955, Exhibit
A, annotated as an adverse claim on 8 February, 1955, and on other, a sale is due form in favor of
Emma L. Infante on 2 February, 1955, Exhibit 3-Infante, and registered in due form with title unto her
issued on 12 February, 1955; the vital question must now come on which of these two sales should
prevail; ... (pp. 74-76, rec., emphasis supplied).

(6) In the resolution dated October 30, 1968 penned by then Court of Appeals Justice Esguerra (now a member of
this Court), concurred in by Justices Villamor and Nolasco, constituting the majority of a Special Division of Five, the
Court of Appeals, upon motion of the Infantes, while reversing the decision of November 2, 1967 and affirming the
decision of the trial court of January 20, 1965 dismissing plaintiff's complaint, admitted the existence and
genuineness of Exhibit "A", the private memorandum dated January 27, 1955, although it did not consider the same
as satisfying "the essential elements of a contract of sale," because it "neither specifically describes the property
and its boundaries, nor mention its certificate of title number, nor states the price certain to be paid, or contrary to
the express mandate of Articles 1458 and 1475 of the Civil Code.

(7) In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his decision of November 2, 1967
as well as his findings of facts therein, and reiterated that the private memorandum Exhibit "A", is a perfected sale,
as a sale is consensual and consummated by mere consent, and is binding on and effective between the parties.
This statement of the principle is correct [pp. 89-92, rec.].

III

ADEQUATE CONSIDERATION OR PRICE FOR THE SALE

IN FAVOR OF CARBONELL

It should be emphasized that the mortgage on the lot was about to be foreclosed by the bank for failure on the part
of Poncio to pay the amortizations thereon. To forestall the foreclosure and at the same time to realize some money
from his mortgaged lot, Poncio agreed to sell the same to Carbonell at P9.50 per square meter, on condition that
Carbonell [1] should pay (a) the amount of P400.00 to Poncio and 9b) the arrears in the amount of P247.26 to the
bank; and [2] should assume his mortgage indebtedness. The bank president agreed to the said sale with
assumption of mortgage in favor of Carbonell an Carbonell accordingly paid the arrears of P247.26. On January 27,
1955, she paid the amount of P200.00 to the bank because that was the amount that Poncio told her as his
arrearages and Poncio advanced the sum of P47.26, which amount was refunded to him by Carbonell the following
day. This conveyance was confirmed that same day, January 27, 1955, by the private document, Exhibit "A", which
was prepared in the Batanes dialect by the witness Constancio Meonada, who is also from Batanes like Poncio and
Carbonell.

The sale did not include Poncio's house on the lot. And Poncio was given the right to continue staying on the land
without paying any rental for one year, after which he should pay rent if he could not still find a place to transfer his
house. All these terms are part of the consideration of the sale to Carbonell.

It is evident therefore that there was ample consideration, and not merely the sum of P200.00, for the sale of Poncio
to Carbonell of the lot in question.

But Poncio, induced by the higher price offered to him by Infante, reneged on his commitment to Carbonell and told
Carbonell, who confronted him about it, that he would not withdraw from his deal with Infante even if he is sent to jail
The victim, therefore, "of injustice and outrage is the widow Carbonell and not the Infantes, who without moral
compunction exploited the greed and treacherous nature of Poncio, who, for love of money and without remorse of
conscience, dishonored his own plighted word to Carbonell, his own cousin.

Inevitably evident therefore from the foregoing discussion, is the bad faith of Emma Infante from the time she
enticed Poncio to dishonor his contract with Carbonell, and instead to sell the lot to her (Infante) by offering Poncio a
much higher price than the price for which he sold the same to Carbonell. Being guilty of bad faith, both in taking
physical possession of the lot and in recording their deed of sale, the Infantes cannot recover the value of the
improvements they introduced in the lot. And after the filing by Carbonell of the complaint in June, 1955, the Infantes
had less justification to erect a building thereon since their title to said lot is seriously disputed by Carbonell on the
basis of a prior sale to her.

With respect to the claim of Poncio that he signed the document Exhibit "A" under the belief that it was a permit for
him to remain in the premises in ease he decides to sell the property to Carbonell at P20.00 per square meter, the
observation of the Supreme Court through Mr. Chief Justice Concepcion in G.R. No. L-11231, supra, bears
repeating:

... Incidentally, the allegation in Poncio's answer to the effect that he signed Exhibit A under the
belief that it 'was a permit for him to remain in the premises in the event that 'he decided to sell the
property' to the plaintiff at P20.00 a sq. m is, on its face, somewhat difficult to believe. Indeed, if he
had not decided as yet to sell that land to plaintiff, who had never increased her offer of P15 a
square meter, there as no reason for Poncio to get said permit from her. Upon the they if plaintiff
intended to mislead Poncio, she would have Exhibit A to be drafted, probably, in English, instead of
taking the trouble of seeing to it that it was written precisely in his native dialect, the Batanes.
Moreover, Poncio's signature on Exhibit A suggests that he is neither illiterate nor so ignorant as to
sign a document without reading its contents, apart from the fact that Meonada had read Exhibit A to
him-and given him a copy thereof, before he signed thereon, according to Meonada's uncontradicted
testimony. (pp. 46-47, ROA).

As stressed by Justice Gatmaitan in his first decision of November 2, 1965, which he reiterated in his dissent from
the resolution of the majority of the Special Division. of Five on October 30, 1968, Exhibit A, the private document in
the Batanes dialect, is a valid contract of sale between the parties, since sale is a consensual contract and is
perfected by mere consent (Couto vs. Cortes, 8 Phil. 459). Even an oral contract of realty is all between the parties
and accords to the vendee the right to compel the vendor to execute the proper public document As a matter of fact,
Exhibit A, while merely a private document, can be fully or partially performed, to it from the operation of the statute
of frauds. Being a all consensual contract, Exhibit A effectively transferred the possession of the lot to the vendee
Carbonell by constitutum possessorium (Article 1500, New Civil Code); because thereunder the vendor Poncio
continued to retain physical possession of the lot as tenant of the vendee and no longer as knew thereof. More than
just the signing of Exhibit A by Poncio and Carbonell with Constancio Meonada as witness to fact the contract of
sale, the transition was further confirmed when Poncio agreed to the actual payment by at Carbonell of his mortgage
arrearages to the bank on January 27, 1955 and by his consequent delivery of his own mortgage passbook to
Carbonell. If he remained owner and mortgagor, Poncio would not have surrendered his mortgage passbook to'
Carbonell.

IV

IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN THE MEMORANDUM EXHIBIT "A"

The claim that the memorandum Exhibit "A" does not sufficiently describe the disputed lot as the subject matter of
the sale, was correctly disposed of in the first decision of the trial court of December 5, 1962, thus: "The defendant
argues that there is even no description of the lot referred to in the note (or memorandum), especially when the note
refers to only one-half lot. With respect to the latter argument of the defendant, plaintiff points out that one- half lot
was mentioned in Exhibit 'A' because the original description carried in the title states that it was formerly part of a
bigger lot and only segregated later. The explanation is tenable, in (sic) considering the time value of the contents of
Exh. 'A', the court has arrived at the conclusion that there is sufficient description of the lot referred to in Exh. As
none other than the parcel of lot occupied by the defendant Poncio and where he has his improvements erected.
The Identity of the parcel of land involved herein is sufficiently established by the contents of the note Exh. 'A'. For a
while, this court had that similar impression but after a more and through consideration of the context in Exh. 'A' and
for the reasons stated above, the court has arrived to (sic) the conclusion stated earlier" (pp. 53-54, ROA).

Moreover, it is not shown that Poncio owns another parcel with the same area, adjacent to the lot of his cousin
Carbonell and likewise mortgaged by him to the Republic Savings Bank. The transaction therefore between Poncio
and Carbonell can only refer and does refer to the lot involved herein. If Poncio had another lot to remove his house,
Exhibit A would not have stipulated to allow him to stay in the sold lot without paying any rent for one year and
thereafter to pay rental in case he cannot find another place to transfer his house.
While petitioner Carbonell has the superior title to the lot, she must however refund to respondents Infantes the
amount of P1,500.00, which the Infantes paid to the Republic Savings Bank to redeem the mortgage.

It appearing that the Infantes are possessors in bad faith, their rights to the improvements they introduced op the
disputed lot are governed by Articles 546 and 547 of the New Civil Code. Their expenses consisting of P1,500.00 for
draining the property, filling it with 500 cubic meters of garden soil, building a wall around it and installing a gate and
P11,929.00 for erecting a b ' bungalow thereon, are useful expenditures, for they add to the value of the property
(Aringo vs. Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia vs. Ayala de Roxas, 13 Phil. 45).

Under the second paragraph of Article 546, the possessor in good faith can retain the useful improvements unless
the person who defeated him in his possession refunds him the amount of such useful expenses or pay him the
increased value the land may have acquired by reason thereof. Under Article 547, the possessor in good faith has
also the right to remove the useful improvements if such removal can be done without damage to the land, unless
the person with the superior right elects to pay for the useful improvements or reimburse the expenses therefor
under paragraph 2 of Article 546. These provisions seem to imply that the possessor in bad faith has neither the
right of retention of useful improvements nor the right to a refund for useful expenses.

But, if the lawful possessor can retain the improvements introduced by the possessor in bad faith for pure luxury or
mere pleasure only by paying the value thereof at the time he enters into possession (Article 549 NCC), as a matter
of equity, the Infantes, although possessors in bad faith, should be allowed to remove the aforesaid improvements,
unless petitioner Carbonell chooses to pay for their value at the time the Infantes introduced said useful
improvements in 1955 and 1959. The Infantes cannot claim reimbursement for the current value of the said useful
improvements; because they have been enjoying such improvements for about two decades without paying any rent
on the land and during which period herein petitioner Carbonell was deprived of its possession and use.

WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE OF THE COURT OF APPEALS OF
OCTOBER 30, 1968 IS HEREBY REVERSED; PETITIONER ROSARIO CARBONELL IS HEREBY DECLARED TO
HAVE THE SUPERIOR RIGHT TO THE LAND IN QUESTION AND IS HEREBY DIRECTED TO REIMBURSE TO
PRIVATE RESPONDENTS INFANTES THE SUM OF ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00)
WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION; AND THE REGISTER OF DEEDS OF
RIZAL IS HEREBY DIRECTED TO CANCEL TRANSFER CERTIFICATE OF TITLE NO. 37842 ISSUED IN FAVOR
OF PRIVATE RESPONDENTS INFANTES COVERING THE DISPUTED LOT, WHICH CANCELLED TRANSFER
CERTIFICATE OF TITLE NO. 5040 IN THE NAME OF JOSE PONCIO, AND TO ISSUE A NEW TRANSFER
CERTIFICATE OF TITLE IN FAVOR OF PETITIONER ROSARIO CARBONELL UPON PRESENTATION OF
PROOF OF PAYMENT BY HER TO THE INFANTES OF THE AFORESAID AMOUNT OF ONE THOUSAND FIVE
HUNDRED PESOS (P1,500.00).

PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL IMPROVEMENTS

FROM THE LOT WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION, UNLESS THE
PETITIONER ROSARIO CARBONELL ELECTS TO ACQUIRE THE SAME AND PAYS THE INFANTES THE
AMOUNT OF THIRTEEN THOUSAND FOUR HUNDRED TWENTY-NINE PESOS (P13,429.00) WITHIN THREE
(3) MONTHS FROM THE FINALITY OF THIS DECISION. SHOULD PETITIONER CARBONELL FAIL TO PAY THE
SAID AMOUNT WITHIN THE AFORESTATED PERIOD OF THREE (3) MONTHS FROM THE FINALITY OF THIS
DECISION, THE PERIOD OF THREE (3) MONTHS WITHIN WHICH THE RESPONDENTS INFANTES MAY
REMOVE THEIR AFOREMENTIONED USEFUL IMPROVEMENTS SHALL COMMENCE FROM THE
EXPIRATION OF THE THREE (3) MONTHS GIVEN PETITIONER CARBONELL TO PAY FOR THE SAID USEFUL
IMPROVEMENTS.

WITH COSTS AGAINST PRIVATE RESPONDENTS.

Castro, C.J, Aquino and Martin, JJ., concur.

G.R. No. L-2897 November 23, 1906

PEDRO MAGUYON, plaintiff-appelle,
vs.
MARCELINO AGRA, ET AL., defendants-appellants.

Crispin Oben, for appellants.

Santiago D. Reyes, for appellee.

MAPA, J.:

This is an action for the recovery of a certain tract of land. The court entered judgment in favor of the plaintiff, to
which judgment the defendant, Mariano Aguilan, only, excepted. A motion for a new trial was made on the ground
that the finding of facts contained in the judgment of the court below was plainly and manifestly against the weight of
the evidence. The court below made the following findings:

(1) That some time ago there were mortgaged to Agustin Villanueva a certain tract of land belonging to
Pedro Maguyon (the plaintiff) and another tract belonging to the mother-in-law of Marcelino Agra. Agustin
Villanueva in turn mortgaged the land to one Ocampo. This mortgage was later transferred to one of
Ocampo's heirs, named Alad.

(2) That some time afterwards Marcelino Agra went to Agustin Villanueva and told him that he wished to
redeem his mother-in-law's land. Agustin Villanueva and Marcelino Agra then went to Alad and there
redeemed the mortgage. As the mortgage of the land of Pedro Maguyon and that of mother-in-law of
Marcelino Agra, executed by Agustin Villanueva to Ocampo, was in one single instrument, when the
mortgage in favor of Alad was redeemed, Agustin Villanueva told Marcelino Agra to separate the land of
Pedro Maguyon from that of his mother-in-law.

(3) That Marcelino Agra subsequently sold this land of his mother-in-law's to Mariano Aguilan (the
appellant.) Both went to Agustin Villanueva to get the latter to draw up the document. Agustin Villanueva
drew up the instrument and advised the contracting parties to exclude from the contract the land of Pedro
Maguyon. Aguilan and Marcelino Agra answered that the land was not included.

(4) That when Pedro Maguyon attempted to redeem the mortgaged of Agustin Villanueva it was discovered
that the said land was included in the sale to Mariano Aguilan, whereupon Marcelino Agra and Pedro
Maguyon went to the justice court to settle their differences and then agreed to exclude from the sale made
by Agra to Aguilan the land of Pedro Maguyon, and as a consequence of this agreement Mariano Aguilan,
fenced the land, excluding the portion thereof belonging to Pedro Maguyon.

Upon the foregoing facts the court below held that the land question belonged to the plaintiff, Pedro Maguyon, and
that it was never the intention of Mariano Aguilan and Marcelino Agra to include it in the contract of sale executed by
them.

The foregoing facts were fully established at the trial by the testimony of three witnesses who testified of their own
knowledge that the same were true. It should be noticed that these witnesses had more or less to do with the land in
question. One of them, Agustin Villanueva, is the person to whom the plaintiff had mortgaged the land, the other
witness was the defendant, Marcelino Agra, through whom the appellant claimed, and the third witness was the
justice of the peace before whom the agreement between the plaintiff, the appellant, and Agra was made, excluding
from the land purchased by the appellant from the latter the land involved in this action, doubtless because it was
then admitted to be the property of the plaintiff. To rebut this testimony the appellant presented three witnesses, two
of whom testified as to certain details which, even though they were true, would not necessarily prove that the
defendant was the real owner of the land. For instance, the fact that when the appellant took possession of the land
purchased from Marcelino Agra, the plaintiff was at a short distance from the latter, and this is one of the most
important facts to which those two witnesses testified, proves nothing against plaintiff's contention; first, because the
witness who so testified did not know whether the plaintiff saw that the appellant was doing, and second, because
the plaintiff had not as yet recovered the physical possession of the land which he had turned over to Agustin
Villanueva when he mortgaged the same to the latter and therefore had no right to interfere directly with such
possession. The third witness testified, in short, that the land in question had never belonged to the plaintiff.

The court below in weighing the evidence found that the witnesses of the plaintiff were more credible than those of
the appellant. This finding of the court not only is not erroneous but, on the contrary, is supported by the evidence in
the case. This conclusion of the court below is justified by the preponderance of evidence. lâwphil.net

The appellant further introduced in evidence the judgment rendered in his favor in the action formerly brought by him
against the plaintiff in this case to recover the possession of the land in question. It may be said, however, that a
final judgment rendered in an action to recover possession does not in any way affect the question of title and such
judgment is not and can be admitted as conclusive proof in an action for title such as the present one. Section 87 of
the Code of Civil Procedure contains an express provision to this effect. The facts found by the court below in regard
to the possession of the land only can not be successfully invoked to overcome the evidence introduced in this case
by the plaintiff, not as to the right of possession but as to the ownership of the land. The appellant himself contends
that the conclusion of the court below to the effect that it was never the intention of Mariano Aguilan and Marcelino
Agra to include the said land in the contract of sale made by them, is contrary to the stipulation of facts entered into
by the parties to this action. One of the facts agreed to by the parties is, that the land in question is included in the
contract of sale made between Agra and Aguilan. There seems to be no dispute upon this point. The stipulation
refers to the material fact resulting from the sale, whereas the court below referred to the real intention of the parties
when they made the contract. By reason of some mistake as to the boundaries of the land the property in question
was as a matter of fact included in the land sold by Agra to Aguilan, but it clearly appears from the testimony of Agra
and Agustin Villanueva that it was not the intention of the contracting parties to include the same in the said sale.

We accordingly affirm the judgment appealed from, with the costs of this instance against the appellant. After the
expiration of twenty days let judgment be entered in accordance herewith and let the record be remanded in due
time to the Court of First Instance for execution. So ordered.

Arellano, C.J., Torres, Johnson, Carson, Willard and Tracey, JJ., concur.

G.R. No. 129760 December 29, 1998

RICARDO CHENG, petitioner,

vs.
RAMON B. GENATO and ERNESTO R. DA JOSE & SOCORRO DA JOSE, respondents.

MARTINEZ, J.:

This petition for review on certiorari seeks to annul and set aside the Decision of the Court of Appeals (CA) 1 dated
July 7, 1997 in CA-G.R. No. CV No. 44706 entitled "Ricardo Cheng, plaintiff-appellee vs. Ramon B. Genato,
defendant-appellant, Ernesto R. Da Jose & Socorro B. Da Jose, Intervenors-Appellants" which reversed the
ruling of the Regional Trial Court, Branch 96 of Quezon City dated January 18, 1994. The dispositive portion
of the CA Decision reads:

WHEREFORE, based on the foregoing, appealed decision is hereby REVERSED and SET
ASIDE and judgment is rendered ordering;

1. The dismissal of the complaint;

2. The cancellation of the annotations of the defendant-appellant's Affidavit to Annul Contract

to Sell and plaintiff-appellee's Notice of Adverse Claim in the subject TCT's, namely, TCT No.
T-76.196 (M) and TCT No. T-76.197 (M);
 3. Payment by the intervenors-appellants of the remaining balance of the purchase price
pursuant to their agreement with the defendant-appellant to suspend encashment of the three
post-dated checks issued since 1989.

4. Ordering the execution by the defendant-appellant Genato of the Deed of Absolute Sale
over the subject two lots covered by TCT No. T-76.196 (M) and TCT No. T-76.197 (M) in favor
of intervenors-appellants Spouses Da Jose;

5. The return by defendant-appellant Genato of the P50,000.00 paid to him by the plaintiff-
appellee Cheng, and

6. Payment by plaintiff-appellee Cheng of moral damages to herein intervenors-appellants Da

Jose of P100,000.00, exemplary damages of P50,000.00, attorney's fees of P50,000.00, and
costs of suit; and to defendant-appellant, of P100,000.00 in exemplary damages, P50,000.00 in
attorney's fees. The amounts payable to the defendant-appellant may be compensated by
plaintiff appellee with the amount ordered under the immediately foregoing paragraph which
defendant-appellant has to pay the plaintiff-appellee.

SO ORDERED. 2

The antecedents of the case are as follows:

Respondent Ramon B. Genato (Genato) is the owner of two parcels of land located at Paradise Farms, San
Jose del Monte, Bulacan covered by TCT No. T-76.196 (M) 3 and TCT No. T-76.197 (M) 4 with an aggregate
area of 35,821square meters, more or less.

On September 6, 1989, respondent Genato entered into an agreement with respondent-spouses Ernesto R.
Da Jose and Socorro B. Da Jose (Da Jose spouses) over the above-mentioned two parcels of land. The
agreement culminated in the execution of a contract to sell for which the purchase price was P80.00 per
square meter. The contract was in a public instrument and was duly annotated at the back of the two
certificates of title on the same day. Clauses 1and 3 thereof provide:

1. That the purchase price shall be EIGHTY (P80.00) PESOS, Philippine Currency per square
meter, of which the amount of FIFTY THOUSAND (P50,000.00) PESOS shall be paid by the
VENDEE to the VENDOR as partial down payment at the time of execution of this Contract to
Sell.

xxx xxx xxx

3. That the VENDEE, Thirty (30) DAYS after the execution of this contract, and only after
having satisfactorily verified and confirmed the truth and authenticity of documents, and that
no restrictions, limitations, and developments imposed on and/or affecting the property
subject of this contract shall be detrimental to his interest, the VENDEE shall pay to the
VENDOR, NINE HUNDRED FIFTY THOUSAND (P950,00.00) PESOS. Philippine Currency,
representing the full payment of the agreed Down Payment, after which complete possession
of the property shall be given to the VENDEE to enable him to prepare the premises and any
development therein.

On October 4, 1989, the Da Jose spouses, not having finished verifying the titles mentioned in clause 3 as
aforequoted, asked for and was granted by respondent Genato an extension of another 30 days — or until
November 5, 1989. However, according to Genato, the extension was granted on condition that a new set of
documents is made seven (7) days from October 4, 1989. 6 This was denied by the Da Jose spouses.

Pending the effectivity of the aforesaid extension period, and without due notice to the Da Jose spouses,
Genato executed an Affidavit to Annul the Contract to Sell, 7 on October 13, 1989. Moreover, no annotation
of the said affidavit at the back of his titles was made right away. The affidavit contained, inter alia, the
following paragraphs;
 xxx xxx xxx

That it was agreed between the parties that the agreed downpayment of P950,000.00 shall be
paid thirty (30) days after the execution of the Contract, that is on or before October 6, 1989;

The supposed VENDEES failed to pay the said full downpayment even up to this writing, a
breach of contract;

That this affidavit is being executed to Annul the aforesaid Contract to Sell for the vendee
having committed a breach of contract for not having complied with the obligation as
provided in the Contract to Sell; 8

On October 24, 1989, herein petitioner Ricardo Cheng (Cheng) went to Genato's residence and expressed
interest in buying the subject properties. On that occasion, Genato showed to Ricardo Cheng copies of his
transfer certificates of title and the annotations at the back thereof of his contract to sell with the Da Jose
spouses. Genato also showed him the aforementioned Affidavit to Annul the Contract to Sell which has not
been annotated at the back of the titles.

Despite these, Cheng went ahead and issued a check for P50,000.00 upon the assurance by Genato that the
previous contract with the Da Jose spouses will be annulled for which Genato issued a handwritten receipt
(Exh. "D"), written in this wise:

10/24/89

Received from Ricardo Cheng

the Sum of Fifty Thousand Only (P50.000-)

as partial for T-76196 (M)

T-76197 (M) area 35.821 Sq.m.

Paradise Farm, Gaya-Gaya, San Jose Del Monte

P70/m2 Bulacan

plus C. G. T. etc.

Check # 470393 (SGD.) Ramon B. Genato

10/24/89 9

On October 25, 1989, Genato deposited Cheng's check. On the same day, Cheng called up Genato
reminding him to register the affidavit to annul the contract to sell. 10

The following day, or on October 26, 1989, acting on Cheng's request, Genato caused the registration of the
Affidavit to Annul the Contract to Sell in the Registry of Deeds, Meycauayan, Bulacan as primary entry No.
262702. 11

While the Da Jose spouses were at the Office of the Registry of Deeds of Meycauayan, Bulacan on October
27, 1989, they met Genato by coincidence. It was only then that the Da Jose spouses discovered about the
affidavit to annul their contract. The latter were shocked at the disclosure and protested against the
rescission of their contract. After being reminded that he (Genato) had given them (Da Jose spouses) an
additional 30-day period to finish their verification of his titles, that the period was still in effect, and that
they were willing and able to pay the balance of the agreed down payment, later on in the day, Genato
decided to continue the Contract he had with them. The agreement to continue with their contract was
formalized in a conforme letter dated October 27, 1989.

Thereafter, Ramon Genato advised Ricardo Cheng of his decision to continue his contract with the Da Jose
spouses and the return of Cheng's P50,000.00 check. Consequently, on October 30, 1989, Cheng's lawyer
sent a letter 12 to Genato demanding compliance with their agreement to sell the property to him stating that
the contract to sell between him and Genato was already perfected and threatening legal action.

On November 2, 1989, Genato sent a letter 13 to Cheng (Exh. "6") enclosing a BPI Cashier's Check for
P50,000.00 and expressed regret for his inability to "consummate his transaction" with him. After having
received the letter of Genato on November 4, 1989, Cheng, however, returned the said check to the former
via RCPI telegram 14 dated November 6, 1989, reiterating that "our contract to sell your property had already
been perfected."

Meanwhile, also on November 2, 1989, Cheng executed an affidavit of adverse claim 15 and had it annotated
on the subject TCT's.

On the same day, consistent with the decision of Genato and the Da Jose spouses to continue with their
Contract to Sell of September 6, 1989, the Da Jose spouses paid Genato the complete down payment of
P950,000.00 and delivered to him three (3) postdated checks (all dated May 6, 1990, the stipulated due date)
in the total amount of P1,865,680.00 to cover full payment of the balance of the agreed purchase price.
However, due to the filing of the pendency of this case, the three (3) postdated checks have not been
encashed.

On December 8, 1989, Cheng instituted a complaint 16 for specific performance to compel Genato to execute
a deed of sale to him of the subject properties plus damages and prayer for preliminary attachment. In his
complaint, Cheng averred that the P50,000.00 check he gave was a partial payment to the total agreed
purchase price of the subject properties and considered as an earnest money for which Genato acceded.
Thus, their contract was already perfected.

In Answer 17 thereto, Genato alleged that the agreement was only a simple receipt of an option-bid deposit,
and never stated that it was a partial payment, nor is it an earnest money and that it was subject to
condition that the prior contract with the Da Jose spouses be first cancelled.

The Da Jose spouses, in their Answer in Intervention, 18 asserted that they have a superior right to the
property as first buyers. They alleged that the unilateral cancellation of the Contract to Sell was without
effect and void. They also cited Cheng's bad faith as a buyer being duly informed by Genato of the existing
annotated Contract to Sell on the titles.

After trial on the merits, the lower court ruled that the receipt issued by Genato to Cheng unerringly meant a
sale and not just a priority or an option to buy. It cannot be true that the transaction was subjected to some
condition or reservation, like the priority in favor of the Da Jose spouses as first buyer because, if it were
otherwise, the receipt would have provided such material condition or reservation, especially as it was
Genato himself who had made the receipt in his own hand. It also opined that there was a valid rescission
of the Contract to Sell by virtue of the Affidavit to Annul the Contract to Sell. Time was of the essence in the
execution of the agreement between Genato and Cheng, under this circumstance demand, extrajudicial or
judicial, is not necessary. It falls under the exception to the rule provided in Article 1169 19 of the Civil Code.
The right of Genato to unilaterally rescind the contract is said to be under Article 1191 20 of the Civil Code.
Additionally, after reference was made to the substance of the agreement between Genato and the Da Jose
spouses, the lower court also concluded that Cheng should be preferred over the intervenors-Da Jose
spouses in the purchase of the subject properties. Thus, on January 18, 1994 the trial court rendered its
decision the decretal portion of which reads:

WHEREFORE, judgment is hereby rendered:

1. Declaring the contract to sell dated September 6, 1989 executed between defendant Ramon
Genato, as vendor, and intervenors Spouses Ernesto and Socorro Da Jose, as vendees,
resolved and rescinded in accordance with Art. 1191, Civil Code, by virtue of defendant's
 affidavit to annul contract to sell dated October 13, 1989 and as the consequence of
intervenors' failure to execute within seven (7) days from October 4, 1989 another contract to
sell pursuant to their mutual agreement with defendant;

2. Ordering defendant to return to the intervenors the sum of P1,000,000.00, plus interest at
the legal rate from November 2, 1989 until full payment;

3. Directing defendant to return to the intervenors the three (3) postdated checks immediately
upon finality of this judgment;

4. Commanding defendant to execute with and in favor of the plaintiff Ricardo Cheng, as
vendee, a deed of conveyance and sale of the real properties described and covered in
Transfer Certificates of Title No. T-76-196 (M) and T-76.197 (M) of the Registry of Deeds of
Bulacan, Meycauayan Branch, at the rate of P70.000/square meter, less the amount of
P50,000.00 alreaddy paid to defendant, which is considered as part of the purchase price,
with the plaintiff being liable for payment of the capital gains taxes and other expenses of the
transfer pursuant to the agreement to sell dated October 24, 1989; and

5 Ordering defendant to pay the plaintiff and the intervenors as follows:

a/ P50,000.00, as nominal damages, to plaintiff;

b/ P50,000.00, as nominal damages, to intervenors;

c/ P20,000.00, as and for attorney's fees, to plaintiff;

d/ P20,000.00, as and for attorney's fees, to intervenors; and

e/ Cost of the suit.

xxx xxx xxx

Not satisfied with the aforesaid decision, herein respondents Ramon Genato and Da Jose spouses
appealed to the court a quo which reversed such judgment and ruled that the prior contract to sell in favor
of the Da Jose spouses was not validly rescinded; that the subsequent contract to sell between Genato and
Cheng, embodied in the handwritten receipt, was without force and effect due to the failure to rescind the
prior contract; and that Cheng should pay damages to the respondents herein being found to be in bad
faith.

Hence this petition.21

This petition for review, assails the Court of Appeals' Decision on the following grounds: (1) that the Da
Jose spouses' Contract to Sell has been validly rescinded or resolved; (2) that Ricardo Cheng's own
contract with Genato was not just a contract to sell but one of conditional contract of sale which gave him
better rights, thus precluding the application of the rule on double sales under Article 1544, Civil Code; and
(3) that, in any case, it was error to hold him liable for damages.

The petition must be denied for failure to show that the Court of Appeals committed a reversible error which
would warrant a contrary ruling.

No reversible error can be ascribed to the ruling of the Court of Appeals that there was no valid and
effective rescission or resolution of the Da Jose spouses Contract to Sell, contrary to petitioner's
contentions and the trial court's erroneous ruling.

In a Contract to Sell, the payment of the purchase price is a positive suspensive condition, the failure of
which is not a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey
title from acquiring an obligatory force.22 It is one where the happening of the event gives rise to an
obligation. Thus, for its non-fulfillment there will be no contract to speak of, the obligor having failed to
perform the suspensive condition which enforces a juridical relation. In fact with this circumstance, there
can be no rescission of an obligation that is still non-existent, the suspensive condition not having
occurred as yet.23 Emphasis should be made that the breach contemplated in Article 1191 of the New Civil
Code is the obligor's failure to comply with an obligation already extant, not a failure of a condition to
render binding that obligation.24

Obviously, the foregoing jurisprudence cannot be made to apply to the situation in the instant case because
no default can be ascribed to the Da Jose spouses since the 30-day extension period has not yet expired.
The Da Jose spouses' contention that no further condition was agreed when they were granted the 30-days
extension period from October 7, 1989 in connection with clause 3 of their contract to sell dated September
6, 1989 should be upheld for the following reason, to wit; firstly, If this were not true, Genato could not have
been persuaded to continue his contract with them and later on agree to accept the full settlement of the
purchase price knowing fully well that he himself imposed such sine qua non condition in order for the
extension to be valid; secondly, Genato could have immediately annotated his affidavit to annul the
contract to sell on his title when it was executed on October 13, 1989 and not only on October 26, 1989 after
Cheng reminded him of the annotation; thirdly, Genato could have sent at least a notice of such fact, there
being no stipulation authorizing him for automatic rescission, so as to finally clear the encumbrance on his
titles and make it available to other would be buyers. It likewise settles the holding of the trial court that
Genato "needed money urgently."

Even assuming in gratia argumenti that the Da Jose spouses defaulted, as claimed by Genato, in their
Contract to Sell, the execution by Genato of the affidavit to annul the contract is not even called for. For
with or without the aforesaid affidavit their non-payment to complete the full downpayment of the purchase
price ipso facto avoids their contract to sell, it being subjected to a suspensive condition. When a contract
is subject to a suspensive condition, its birth or effectivity can take place only if and when the event which
constitutes the condition happens or is fulfilled.25 If the suspensive condition does not take place, the
parties would stand as if the conditional obligation had never
existed. 26

Nevertheless, this being so Genato is not relieved from the giving of a notice, verbal or written, to the Da
Jose spouses for his decision to rescind their contract. In many cases,27 even though we upheld the validity
of a stipulation in a contract to sell authorizing automatic rescission for a violation of its terms and
conditions, at least a written notice must be sent to the defaulter informing him of the same. The act of a
party in treating a contract as cancelled should be made known to the other.28 For such act is always
provisional. It is always subject to scrutiny and review by the courts in case the alleged defaulter brings the
matter to the proper courts. In University of the Philippines vs. De Los Angeles,29 this Court stressed and we
quote:

In other words, the party who deems the contract violated may consider it resolved or
rescinded, and act accordingly, without previous court action, but it proceeds at its own risk.
For it is only the final judgment of the corresponding court that will conclusively and finally
settle whether the action taken was or was not correct in law. But the law definitely does not
require that the contracting party who believes itself injured must first file suit and wait for a
judgment before taking extrajudicial steps to protect its interest. Otherwise, the party injured
by the other's breach will have to passively sit and watch its damages accumulate during the
pendency of the suit until the final judgment of rescission is rendered when the law itself
requires that he should exercise due diligence to minimize its own damages (Civil Code,
Article 2203).

This rule validates, both in equity and justice, contracts such as the one at bat, in order to avoid and
prevent the defaulting party from assuming the offer as still in effect due to the obligee's tolerance for such
non-fulfillment. Resultantly, litigations of this sort shall be prevented and the relations among would-be
parties may be preserved. Thus, Ricardo Cheng's contention that the Contract to Sell between Genato and
the Da Jose spouses was rescinded or resolved due to Genato's unilateral rescission finds no support in
this case.
Anent the issue on the nature of the agreement between Cheng and Genato, the records of this case are
replete with admissions30 that Cheng believed it to be one of a Contract to Sell and not one of Conditional
Contract of Sale which he, in a transparent turn-around, now pleads in this Petition. This ambivalent stance
of Cheng is even noted by the appellate court, thus:

At the outset, this Court notes that plaintiff-appellee was inconsistent in characterizing the
contract he allegedly entered into. In his complaint.31 Cheng alleged that the P50,000.00 down
payment was earnest money. And next, his testimony32 was offered to prove that the
transaction between him and Genato on October 24, 1989 was actually a perfected contract to
sell.33

Settled is the rule that an issue which was not raised during the trial in the court below cannot be raised for
the first time on appeal.34 Issues of fact and arguments not adequately brought to the attention of the trial
court need not be and ordinarily will not be considered by a reviewing court as they cannot be raised for the
first time on appeal.35 In fact, both courts below correctly held that the receipt which was the result of their
agreement, is a contract to sell. This was, in fact Cheng's contention in his pleadings before said courts.
This patent twist only operates against Cheng's posture which is indicative of the weakness of his claim.

But even if we are to assume that the receipt, Exh. "D," is to be treated as a conditional contract of sale, it
did not acquire any obligatory force since it was subject to suspensive condition that the earlier contract to
sell between Genato and the Da Jose spouses should first be cancelled or rescinded — a condition never
met, as Genato, to his credit, upon realizing his error, redeemed himself by respecting and maintaining his
earlier contract with the Da Jose spouses. In fact, a careful reading of the receipt, Exh. "D," alone would not
even show that a conditional contract of sale has been entered by Genato and Cheng. When the requisites
of a valid contract of sale are lacking in said receipt, therefore the "sale" is neither valid or enfoceable.36

To support his now new theory that the transaction was a conditional contract of sale, petitioner invokes
the case of Coronel vs. Court of Appeals 37 as the law that should govern their Petition. We do not agree.
Apparently, the factual milieu in Coronel is not on all fours with those in the case at bar.

In Coronel, this Court found that the petitioners therein clearly intended to transfer title to the buyer which
petitioner themselves admitted in their pleading. The agreement of the parties therein was definitively
outlined in the "Receipt of Down Payment" both as to property, the purchase price, the delivery of the seller
of the property and the manner of the transfer of title subject to the specific condition that upon the transfer
in their names of the subject property the Coronels will execute the deed of absolute sale.

Whereas, in the instant case, even by a careful perusal of the receipt, Exh. "D," alone such kind of
circumstances cannot be ascertained without however resorting to the exceptions of the Rule on Parol
Evidence.

To our mind, the trial court and the appellate court correctly held that the agreement between Genato and
Cheng is a contract to sell, which was, in fact, petitioner connection in his pleadings before the said courts.
Consequently, both to mind, which read:

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 he oldest
title, provided there is good faith.

However, a meticulous reading of the aforequoted provision shows that said law is not apropos to the
instant case. This provision connotes that the following circumstances must concur:
 (a) The two (or more) sales transactions in issue must pertain to exactly the same subject
matter, and must be valid sales transactions.

(b) The two (or more) buyers at odds over the rightful ownership of the subject matter must
each represent conflicting interests; and

(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must
each have bought from the very same seller.

These situations obviously are lacking in a contract to sell for neither a transfer of ownership nor a sales
transaction has been consummated. The contract to be binding upon the obligee or the vendor depends
upon the fulfillment or non-fulfillment of an event.

Notwithstanding this contrary finding with the appellate court, we are of the view that the governing
principle of Article 1544, Civil Code, should apply in this situation. Jurisprudence38 teaches us that the
governing principle is PRIMUS TEMPORE, PORTIOR JURE (first in time, stronger in right). For not only was
the contract between herein respondents first in time; it was also registered long before petitioner's
intrusion as a second buyer. This principle only applies when the special rules provided in the aforcited
article of the Civil Code do not apply or fit the specific circumstances mandated under said law or by
jurisprudence interpreting the article.

The rule exacted by Article 1544 of the Civil Code for the second buyer to be able to displace the first buyer
are:

(1) that the second buyer must show that he acted in good faith (i.e. in ignorance of the first sale and of the
first buyer's rights) from the time of acquisition until title is transferred to him by registration or failing
registration, by delivery of possession;39

(2) the second buyer must show continuing good faith and innocence or lack of knowledge of the first sale
until his contract ripens into full ownership through prior registration as provided by law.40

Thus, in the case at bar, the knowledge gained by the Da Jose spouses, as first buyers, of the new
agreement between Cheng and Genato will not defeat their rights as first buyers except where Cheng, as
second buyer, registers or annotates his transaction or agreement on the title of the subject properties in
good faith ahead of the Da Jose spouses. Moreover, although the Da Jose spouses, as first buyers, knew of
the second transaction it will not bar them from availing of their rights granted by law, among them, to
register first their agreement as against the second buyer.

In contrast, knowledge gained by Cheng of the first transaction between the Da Jose spouses and Genato
defeats his rights even if he is first to register the second transaction, since such knowledge taints his prior
registration with bad faith.

"Registration", as defined by Soler and Castillo, means any entry made in the books of the registry,
including both registration in its ordinary and strict sense, and cancellation, annotation, and even marginal
notes.41 In its strict acceptation, it is the entry made in the registry which records solemnly and permanently
the right of ownership and other real rights.42 We have ruled43 before that when a Deed of Sale is inscribed in
the registry of property on the original document itself, what was done with respect to said entries or
annotations and marginal notes amounted to a registration of the sale. In this light, we see no reason why
we should not give priority in right the annotation made by the Da Jose spouses with respect to their
Contract to Sell dated September 6, 1989.

Moreover, registration alone in such cases without good faith is not sufficient. Good faith must concur with
registration for such prior right to be enforceable. In the instant case, the annotation made by the Da Jose
spouses on the titles of Genato of their "Contract To Sell" more than satisfies this requirement. Whereas in
the case of Genato's agreement with Cheng such is unavailing. For even before the receipt, Exh. "D," was
issued to Cheng information of such pre-existing agreement has been brought to his knowledge which did
not deter him from pursuing his agreement with Genato. We give credence to the factual finding of the
appellate court that "Cheng himself admitted that it was he who sought Genato in order to inquire about the
property and offered to buy the same.44 And since Cheng was fully aware, or could have been if he had
chosen to inquire, of the rights of the Da Jose spouses under the Contract to Sell duly annotated on the
transfer certificates of titles of Genato, it now becomes unnecessary to further elaborate in detail the fact
that he is indeed in bad faith in entering into such agreement. As we have held in Leung Yee vs. F.L. Strong
Machinery Co.:45

One who purchases real estate with knowledge of a defect . . . of title in his vendor cannot
claim that he has acquired title thereto in good faith as against . . . . an interest therein; and
the same rule must be applied to one who has knowledge of facts which should have put him
upon such inquiry and investigation as might be necessary to acquaint him with the defects
in the title of his vendor. A purchaser cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he acted in good faith under the belief
that there was no defect in the title of the vendor. His mere refusal to believe that such defect
exists, or his willful closing of his eyes to the possibility of the existence of a defect in his
vendor's title, will not make him an innocent purchaser for value, if it afterwards develops
that the title was in fact defective, and it appears that he had such notice of the defect as
would have led to its discovery had he acted with that measure of precaution which may
reasonably be required of a prudent man in a like situation. Good faith, or lack of it, is in its
last analysis a question of intention; but in ascertaining the intention by which one is
actuated on a given occasion, we are necessarily controlled by the evidence as to the
conduct and outward acts by which alone the inward motive may with safety, be determined.
So it is that "the honesty of intention," "the honest lawful intent," which constitutes good
faith implies a "freedom from knowledge and circumstances which ought to put a person on
inquiry," and so it is that proof of such knowledge overcomes the presumption of good faith
in which the courts always indulge in the absence of the proof to the contrary. "Good faith, or
the want of it, is not a visible, tangible fact that can be seen or touched, but rather a state or
condition of mind which can only be judge of by actual or fancied tokens or signs." (Wilder
vs. Gilman, 55 Vt. 504, 505; Cf. Cardenas vs. Miller, 108 Cal., 250; Breaux-Renoudet, Cypress
Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromely, 119 Mich., 8,
10, 17.) (Emphasis ours)

Damages were awarded by the appellate court on the basis of its finding that petitioner "was in bad faith
when he filed the suit for specific performance knowing fully well that his agreement with Genato did not
push through.46 Such bad faith, coupled with his wrongful interference with the contractual relations
between Genato and the Da Jose spouses, which culminated in his filing of the present suit and thereby
creating what the counsel for the respondents describes as "a prolonged and economically unhealthy
gridlock47 on both the land itself and the respondents' rights provides ample basis for the damages
awarded. Based on these overwhelming evidence of bad faith on the part of herein petitioner Ricardo
Cheng, we find that the award of damages made by the appellate court is in order.

WHEREFORE, premises considered, the instant petition for review is DENIED and the assailed decision is
hereby AFFIRMED EN TOTO.

SO ORDERED.

Belosillo, Puno and Mendoza, JJ., concur.