Sales Part VI Page |1
G.R. No. 133895. October 2, 2001.*
ZENAIDA M. SANTOS, petitioner, vs. CALIXTO SANTOS, ALBERTO SANTOS, ROSA
SANTOS-CARREON and ANTONIO SANTOS, respondents.
Sales; Ownership; Tax Declarations; For tax receipts or declarations of ownership for taxation
purposes to constitute sufficient proof of ownership, they must be supported by other
effective proofs; The circumstances that, despite the alleged sale, the vendors—the parents
of the vendee—still continued to possess and administer the property and enjoy its fruits by
leasing it to third persons, the vendee did not exercise any right of ownership over it, after
the vendee registered the property in his name, he surrendered the title to his mother, are
clear indications that ownership still remained with the original owners.—It is true that
neither tax receipts nor declarations of ownership for taxation purposes constitute sufficient
proof of ownership. They must be supported by other effective proofs. These requisite proofs
we find present in this case. As admitted by petitioner, despite the sale, Jesus and Rosalia
continued to possess and administer the property and enjoy its fruits by leasing it to third
persons. Both Rosa and Salvador did not exercise any right of ownership over it. Before the
second deed of sale to transfer her 1/2 share over the property was executed by Rosa,
Salvador still sought the permission of his mother. Further, after Salvador registered the
property in his name, he surrendered the title to his mother. These are clear indications that
ownership still remained with the original owners. In Serrano vs. CA, 139 SCRA 179, 189
(1985), we held that the continued collection of rentals from the tenants by the seller of
realty after execution of alleged deed of sale is contrary to the notion of ownership.
Same; Same; The vendor’s continued possession of the property makes dubious the contract
of sale between the parties.—Petitioner argues that Salvador, in allowing her mother to use
the property even after the sale, did so out of respect for her and out of generosity, a factual
matter beyond the province of this Court. Significantly, in Alcos vs. IAC, 162 SCRA 823, 837
(1988), we noted that the buyer’s immediate possession and occupation of the property
corroborated the truthfulness and authenticity of the deed of sale. Conversely, the vendor’s
continued possession of the property makes dubious the contract of sale between the
parties.
Same; Nowhere in the Civil Code does it provide that execution of a deed of sale is a
conclusive presumption of delivery of possession.—Nowhere in the Civil Code, however, does
it provide that execution of a deed of sale is a conclusive presumption of delivery of
possession. The Code merely said that the execution shall be equivalent to delivery. The
presumption can be rebutted by clear and convincing evidence. Presumptive delivery can be
negated by the failure of the vendee to take actual possession of the land sold.
Same; If, notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy nor make use of it himself or through another in his name,
then delivery has not been effected.—In Danguilan vs. IAC, 168 SCRA 22, 32 (1988), we held
that for the execution of a public instrument to effect tradition, the purchaser must be placed
in control of the thing sold. When there is no impediment to prevent the thing sold from
converting to 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
nor make use of it himself or through another in his name, then delivery has not been
effected.
Same; The critical factor in the different modes of effecting delivery, which gives legal effect
to the act, is the actual intention of the vendor to deliver, and its acceptance by the vendee—
without the intention, there is no tradition.—Moreover, in Norkis Distributors, Inc. vs. CA, 193
SCRA 694, 698-699 (1991), citing the land case of Abuan vs. Garcia, 14 SCRA 759 (1965),
we held that the critical factor in the different modes of effecting delivery, which gives legal
effect to the act is the actual intention of the vendor to deliver, and its acceptance by the
vendee. Without that intention, there is no tradition. In the instant case, although the
spouses Jesus and Rosalia executed a deed of sale, they did not deliver the possession and
ownership of the property to Salvador and Rosa. They agreed to execute a deed of sale
merely to accommodate Salvador to enable him to generate funds for his business venture.
Actions; Contracts; Simulated Contracts; Prescription; An action for declaration of nullity of a
void contract is imprescriptible.—Has respondents’ cause of action prescribed? In Lacsamana
vs. CA, 288 SCRA 287, 292 (1998), we held that the right to file an action for reconveyance
on the ground that the certificate of title was obtained by means of a fictitious deed of sale is
virtually an action for the declaration of its nullity, which does not prescribe. This applies
squarely to the present case. The complaint filed by respondents in the court a quo was for
the reconveyance of the subject property to the estate of Rosalia since the deeds of sale
were simulated and fictitious. The complaint amounts to a declaration of nullity of a void
contract, which is imprescriptible. Hence, respondents’ cause of action has not prescribed.
Same; Same; Same; Laches; Elements of.—Neither is their action barred by laches. The
elements of laches are: 1) conduct on the part of the defendant, or of one under whom he
claims, giving rise to the situation of which the complaint seeks a remedy; 2) delay in

asserting the complainant’s rights, the complainant having had knowledge or notice of the
defendant’s conduct as having been afforded an opportunity to institute a suit; 3) lack of
knowledge or notice on the part of the defendant that the complainant would assert the right
in which he bases his suit; and 4) injury or prejudice to the defendant in the event relief is
accorded to the complainant, or the suit is not held barred. These elements must all be
proved positively. The conduct which caused the complaint in the court a quo was
petitioner’s assertion of right of ownership as heir of Salvador. This started in December 1985
when petitioner demanded payment of the lease rentals from Antonio Hombrebueno, the
tenant of the apartment units. From December 1985 up to the filing of the complaint for
reconveyance on January 5, 1989, only less than four years had lapsed which we do not
think is unreasonable delay sufficient to bar respondents’ cause of action. We likewise find
the fourth element lacking. Neither petitioner nor her husband made considerable
investments on the property from the time it was allegedly transferred to the latter. They
also did not enter into transactions involving the property since they did not claim ownership
of it until December 1985. Petitioner stood to lose nothing. As we held in the same case of
Lacsamana vs. CA, cited above, the concept of laches is not concerned with the lapse of time
but only with the effect of unreasonable lapse. In this case, the alleged 16 years of
respondents’ inaction has no adverse effect on the petitioner to make respondents guilty of
laches.
Evidence; Witnesses; Dead Man’s Statute; Where a party fails to appeal an order allowing the
other party who is covered by the dead man’s statute to testify, he waives his right to invoke
the said rule; Protection under the dead man’s statute is effectively waived by counsel’s
cross-examination of the other party on matter occurring during the deceased’s lifetime.—
Lastly, petitioner in her memorandum seeks to expunge the testimony of Rosa Santos-
Carreon before the trial court in view of Sec. 23, Rule 130 of the Revised Rules of Court,
otherwise known as the “Dead Man’s Statute.” It is too late for petitioner, however, to invoke
said rule. The trial court in its order dated February 5, 1990, denied petitioner’s motion to
disqualify respondent Rosa as a witness. Petitioner did not appeal therefrom. Trial ensued
and Rosa testified as a witness for respondents and was cross-examined by petitioner’s
counsel. By her failure to appeal from the order allowing Rosa to testify, she waived her right
to invoke the dead man’s statute. Further, her counsel cross-examined Rosa on matters that
occurred during Salvador’s lifetime. In Goñi vs. CA, 144 SCRA 222, 231 (1986), we held that
protection under the dead man’s statute is effectively waived when a counsel for a petitioner
cross-examines a private respondent on matters occurring during the deceased’s lifetime.
The Court of Appeals cannot be faulted in ignoring petitioner on Rosa’s disqualification.
Sales Part VI Page |2
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Delos Reyes, Bonifacio, De los Reyes for petitioner.
     Jose A.L. Obillo for private respondents. Santos vs. Santos, 366 SCRA 395, G.R. No.
133895 October 2, 2001.
QUISUMBING, J.:
This petition for review1 seeks to annul and set aside the decision date March 10, 1998 of the
Court of Appeals that affirmed the decision of the Regional Trial Court of Manila, Branch 48,
dated March 17, 1993. Petitioner also seeks to annul the resolution that denied her motion
for reconsideration.
Petitioner Zenaida M. Santos is the widow of Salvador Santos, a brother of private
respondents Calixto, Alberto, Antonio, all surnamed Santos and Rosa Santos-Carreon.
The spouses Jesus and Rosalia Santos owned a parcel of land registered under TCT No.
27571 with an area of 154 square meters, located at Sta. Cruz Manila. On it was a four-door
apartment administered by Rosalia who rented them out. The spouses had five children,
Salvador, Calixto, Alberto, Antonio and Rosa.
On January 19, 1959, Jesus and Rosalia executed a deed of sale of the properties in favor of
their children Salvador and Rosa. TCT No. 27571 became TCT No. 60819. Rosa in turn sold
her share to Salvador on November 20, 1973 which resulted in the issuance of a new TCT
No. 113221. Despite the transfer of the property to Salvador, Rosalia continued to lease
receive rentals form the apartment units.1âwphi1.nêt
On November 1, 1979, Jesus died. Six years after or on January 9, 1985, Salvador died,
followed by Rosalia who died the following month. Shortly after, petitioner Zenaida, claiming
to be Salvador's heir, demanded the rent from Antonio Hombrebueno, 2 a tenant of Rosalia.
When the latter refused to pay, Zenaida filed and ejectment suit against him with the
Metropolitan Trial Court of Manila, Branch 24, which eventually decided in Zenaida's favor.
On January 5, 1989, private respondents instituted an action for reconveyance of property
with preliminary injunction against petitioner in the Regional Trial Court of Manila, where
they alleged that the two deeds of sale executed on January 19, 1959 and November 20,
1973 were simulated for lack of consideration. They were executed to accommodate

Salvador in generation funds for his business and providing him with greater business
flexibility.
In her Answer, Zenaida denied the material allegations in the complaint as special and
affirmative defenses, argued that Salvador was the registered owner of the property, which
could only be subjected to encumbrances or liens annotated on the title; that the
respondents' right to reconveyance was already barred by prescription and laches; and that
the complaint state no cause of action.
On March 17, 1993, the trial court decided in private respondents' favor, thus:
WHEREFORE, viewed from all the foregoing considerations, judgment is hereby
made in favor of the plaintiffs and against the defendants:
a) Declaring Exh. "B", the deed of sale executed by Rosalia Santos and Jesus Santos
on January 19, 1959, as entirely null and void for being fictitious or stimulated and
inexistent and without any legal force and effect:
b) Declaring Exh. "D", the deed of sale executed by Rosa Santos in favor of Salvador
Santos on November 20, 1973, also as entirely null and void for being likewise
fictitious or stimulated and inexistent and without any legal force and effect;
c) Directing the Register of Deeds of Manila to cancel Transfer Certificate of Title No.
T-113221 registered in the name of Salvador Santos, as well as, Transfer Certificate
of Title No. 60819 in the names of Salvador Santos, Rosa Santos, and consequently
thereafter, reinstating with the same legal force and effect as if the same was not
cancelled, and which shall in all respects be entitled to like faith and credit; Transfer
Certificate of Title No. T-27571 registered in the name of Rosalia A. Santos, married
to Jesus Santos, the same to be partitioned by the heirs of the said registered
owners in accordance with law; and
d) Making the injunction issued in this case permanent.
Without pronouncement as to costs.
SO OREDERED.3
The trial court reasoned that notwithstanding the deeds of sale transferring the property to
Salvador, the spouses Rosalia and Jesus continued to possess the property and to exercise
rights of ownership not only by receiving the monthly rentals, but also by paying the realty
Sales Part VI Page |3
taxes. Also, Rosalia kept the owner's duplicate copy of the title even after it was already in
the name of Salvador. Further, the spouses had no compelling reason in 1959 to sell the
property and Salvador was not financially capable to purchase it. The deeds of sale were
therefore fictitious. Hence, the action to assail the same does not prescribe. 4
Upon appeal, the Court of Appeals affirmed the trial court's decision dated March 10, 1998. It
held that in order for the execution of a public instrument to effect tradition, as provided in
Article 1498 of the Civil Code,5 the vendor shall have had control over the thing sold, at the
moment of sale. It was not enough to confer upon the purchaser the ownership and the right
of possession. The thing sold must be placed in his control. The subject deeds of sale did not
confer upon Salvador the ownership over the subject property, because even after the sale,
the original vendors remained in dominion, control, and possession thereof. The appellate
court further said that if the reason for Salvador's failure to control and possess the property
was due to his acquiescence to his mother, in deference to Filipino custom, petitioner, at
least, should have shown evidence to prove that her husband declared the property for tax
purposes in his name or paid the land taxes, acts which strongly indicate control and
possession. The appellate court disposed:
WHEREFORE, finding no reversible error in the decision appealed from, the same is
hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.6
Hence, this petition where petitioner avers that the Court of Appeals erred in:
I.
… HOLDING THAT THE OWNERSHIP OVER THE LITIGATED PROPERTY BY THE LATE
HUSBAND OF DEFENDANT-APPELLANT WAS AFFECTED BY HIS FAILURE TO
EXERCISE CERTAIN ATTRIBUTES OF OWNERSHIP.
II.
…HOLDING THAT DUE EXECUTION OF A PUBLIC INSTRUMENT IS NOT EQUIVALENT
TO DELIVERY OF THE LAND IN DISPUTE.
III.
…NOT FINDING THAT THE CAUSE OF ACTION OF ROSALIA SANTOS HAD
PRESCRIBED AND/OR BARRED BY LACHES.

IV.
… IGNORING PETITIONER'S ALLEGATION TO THE EFFECT THAT PLAINTIFF DR.
ROSA [S.] CARREON IS NOT DISQUALIFIED TO TESTIFY AS TO THE QUESTIONED
DEEDS OF SALE CONSIDERING THAT SALVADOR SANTOS HAS LONG BEEN DEAD. 7
In this petition, we are asked to resolve the following:
1. Are payments of realty taxes and retention of possession indications of continued
ownership by the original owners?
2. Is a sale through a public instrument tantamount to delivery of the thing sold?
3. Did the cause of action of Rosalia Santos and her heirs prescribe?
4. Can petitioner invoke the "Dead Man's Statute?" 8
On the first issue, petitioner contends that the Court of Appeals erred in holding that despite
the deeds of sale in Salvador's favor, Jesus and Rosalia still owned the property because the
spouses continued to pay the realty taxes and possess the property. She argues that tax
declarations are not conclusive evidence of ownership when not supported by evidence. She
avers that Salvador allowed his mother to possess the property out of respect to her in
accordance with Filipino values.
It is true that neither tax receipts nor declarations of ownership for taxation purposes
constitute sufficient proof of ownership. They must be supported by other effective
proofs.9 These requisite proofs we find present in this case. As admitted by petitioner,
despite the sale, Jesus and Rosalia continued to possess and administer the property and
enjoy its fruits by leasing it to third persons. 10 Both Rosa and Salvador did not exercise any
right of ownership over it.11 Before the second deed of sale to transfer her ½ share over the
property was executed by Rosa, Salvador still sought she permission of his mother. 12 Further,
after Salvador registered the property in his name, he surrendered the title to his
mother.13 These are clear indications that ownership still remained with the original owners.
In Serrano vs. CA, 139 SCRA 179, 189 (1985), we held that the continued collection of
rentals from the tenants by the seller of realty after execution of alleged deed of sale is
contrary to the notion of ownership.
Petitioner argues that Salvador, in allowing her mother to use the property even after the
sale, did so out of respect for her and out of generosity, a factual matter beyond the
province of this Court.14 Significantly, in Alcos vs. IAC 162 SCRA 823, 837 (1988), we noted
Sales Part VI Page |4
that the buyer's immediate possession and occupation of the property corroborated the
truthfulness and authenticity of the deed of sale. Conversely, the vendor's continued
possession of the property makes dubious the contract of sale between the parties.
On the second issue, is a sale through a public instrument tantamount to delivery of the
thing sold? Petitioner in her memorandum invokes Article 1477 15 of the Civil Code which
provides that ownership of the thing sold is transferred to the vendee upon its actual or
constructive delivery. Article 1498, in turn, provides that when the sale is made through a
public instrument, its execution is equivalent to the delivery of the thing subject of the
contract. Petitioner avers that applying said provisions to the case, Salvador became the
owner of the subject property by virtue of the two deeds of sale executed in his favor.
Nowhere in the Civil Code, however, does it provide that execution of a deed of sale is a
conclusive presumption of delivery of possession. The Code merely said that the execution
shall be equivalent to delivery. The presumption can be rebutted by clear and convincing
evidence.16 Presumptive delivery can be negated by the failure of the vendee to take actual
possession of the land sold.17
In Danguilan vs. IAC, 168 SCRA 22, 32 (1988), we held that for the execution of a public
instrument to effect tradition, the purchaser must be placed in control of the thing sold.
When there is no impediment to prevent the thing sold from converting to 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 nor make use of it himself or
through another in his name, then delivery has not been effected.
As found by both the trial and appellate courts and amply supported by the evidence on
record, Salvador was never placed in control of the property. The original sellers retained
their control and possession. Therefore, there was no real transfer of ownership.
Moreover, in Norkis Distributors, Inc. vs. CA,  193 SCRA 694, 698-699 (1991), citing the land
case of Abuan vs. Garcia, 14 SCRA 759 (1965), we held that the critical factor in the different
modes of effecting delivery, which gives legal effect to the act is the actual intention of the
vendor to deliver, and its acceptance by the vendee. Without that intention, there is no
tradition. In the instant case, although the spouses Jesus and Rosalia executed a deed of
sale, they did not deliver the possession and ownership of the property to Salvador and Rosa.
They agreed to execute a deed of sale merely to accommodate Salvador to enable him to
generate funds for his business venture.
On the third issue, petitioner argues that from the date of the sale from Rosa to Salvador on
November 20, 1973, up to his death on January 9, 1985, more or less twelve years had
 Sales Part VI Page |5

lapsed, and from his death up to the filing of the case for reconveyance in the court  a quo on
January 5, 1989, four years had lapsed. In other words, it took respondents about sixteen
years to file the case below. Petitioner argues that an action to annul a contract for lack of
consideration prescribes in ten years and even assuming that the cause of action has not
prescribed, respondents are guilty of laches for their inaction for a long period of time.
Has respondents' cause of action prescribed? In Lacsamana vs. CA, 288 SCRA 287, 292
(1998), we held that the right to file an action for reconveyance on the ground that the
certificate of title was obtained by means of a fictitious deed of sale is virtually an action for
the declaration of its nullity, which does not prescribe. This applies squarely to the present
case. The complaint filed by respondent in the court a quo was for the reconveyance of the
subject property to the estate of Rosalia since the deeds of sale were simulated and fictitious.
The complaint amounts to a declaration of nullity of a void contract, which is imprescriptible.
Hence, respondents' cause of action has not prescribed.
motion to disqualify respondent Rosa as a witness. Petitioner did not appeal therefrom. Trial
ensued and Rosa testified as a witness for respondents and was cross-examined by
petitioner's counsel. By her failure to appeal from the order allowing Rosa to testify, she
waived her right to invoke the dean man's statute. Further, her counsel cross-examined Rosa
on matters that occurred during Salvadors' lifetime. In Goñi vs. CA, 144 SCRA 222, 231
(1986) we held that protection under the dead man's statute is effectively waived when a
counsel for a petitioner cross-examines a private respondent on matters occurring during the
deceased's lifetime. The Court of appeals cannot be faulted in ignoring petitioner on Rosa's
disqualification.1âwphi1.nêt
WHEREFORE, the instant petition is DENIED. The assailed decision dated March 10, 1998
of the Court of Appeals, which sustained the judgment of the Regional Trial Court dated
March 17, 1993, in favor of herein private respondents, is AFFIRMED. Costs against
petitioner.

Neither is their action barred by laches. The elements of laches are: 1) conduct on the part of SO ORDERED.
the defendant, or of one under whom he claims, giving rise to the situation of which the
complaint seeks a remedy; 2) delay in asserting the complainant's rights, the complainant Bellosillo, Mendoza, Buena, De Leon, Jr., JJ., concur.
having had knowledge or notice of the defendant's conduct as having been afforded an
opportunity to institute a suit; 3) lack of knowledge or notice on the part of the defendant
that the complainant would assert the right in which he bases his suit; and 4) injury or
prejudice to the defendant in the event relief is accorded to the complainant, or the suit is
not held barred.18 These elements must all be proved positively. The conduct which caused
the complaint in the court a quo was petitioner's assertion of right of ownership as heir of
Salvador. This started in December 1985 when petitioner demanded payment of the lease
rentals from Antonio Hombrebueno, the tenant of the apartment units. From December 1985
up to the filing of the complaint for reconveyance on January 5, 1989, only less than four
years had lapsed which we do not think is unreasonable delay sufficient to bar respondents'
cause of action. We likewise find the fourth element lacking. Neither petitioner nor her
husband made considerable investments on the property from the time it was allegedly
transferred to the latter. They also did not enter into transactions involving the property since
they did not claim ownership of it until December 1985. Petitioner stood to lose nothing. As
we held in the same case of Lacsamana vs. CA, cited above, the concept of laches is not
concerned with the lapse of time but only with the effect of unreasonble lapse. In this case,
the alleged 16 years of respondents' inaction has no adverse effect on the petitioner to make
respondents guilty of laches.

Lastly, petitioner in her memorandum seeks to expunge the testimony of Rosa Santos-
Carreon before the trial court in view of Sec. 23, Rule 130 of the Revised Rules of Court,
otherwise known as the "Dead Man's Statute." 19 It is too late for petitioner, however, to
invoke said rule. The trial court in its order dated February 5, 1990, denied petitioner's

G.R. No. 92989. July 8, 1991.*
PERFECTO DY, JR. petitioner, vs. COURT OF APPEALS, GELAC TRADING INC., and
ANTONIO V. GONZALES, respondents.
Chattel Mortgage: Mortgagor retains ownership over the property given as security, and has
the right to sell it with the obligation to secure written consent of the mortgagee; Validity of
the sale not affected if no consent was obtained from the mortgagee.—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.
Civil Law; Constructive delivery; There is constructive delivery upon the thing sold; Case at
bar.—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.
PETITION for certiorari to review the decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Zosa & Quijano Law Offices for petitioner.
     Expedito P. Bugarin for respondent GELAC Trading, Inc. Dy, Jr. vs. Court of Appeals, 198
SCRA 826, G.R. No. 92989 July 8, 1991
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
Sales Part VI Page |6
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
Sales Part VI Page |7
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:
x x x           x x x          x x x
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.
x x x           x x x          x x x
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.
x x x           x x x          x x x
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
Sales Part VI Page |8
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
 Sales Part VI Page |9

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.1âwphi1 There is no sufficient evidence to show that the
sale of the tractor was in fraud of Wilfredo and creditors. 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.

[No. 12342. August 3, 1918.]
A. A. ADDISON, plaintiff and appellant, vs. MARCIANA FELIX and BALBINO Tioco,
defendants and appellees.
1.VENDOR AND PURCHASER; DELIVERY; EXECUTION OF PUBLIC INSTRUMENT.—It is the
duty of the vendor to deliver the thing sold. Symbolic delivery by the execution of a public
instrument is equivalent to actual delivery only when the thing sold is subject to the control
of the vendor.
2.ID.; ID.; RESCISSION.—If the vendor fails to deliver the thing sold the vendee may elect to
rescind the contract.
APPEAL from a judgment of the Court of First Instance of Manila. Ostrand, J.
The facts are stated in the opinion of the court.
Thos. D. Aitken for appellant.
Modesto Reyes and Eliseo Ymzon for appellees. Addison vs. Felix and Tioco., 38 Phil. 404,
No. 12342 August 3, 1918
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
S a l e s P a r t V I P a g e | 10
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
S a l e s P a r t V I P a g e | 11
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
 S a l e s P a r t V I P a g e | 12

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.


No. L-69970. November 28, 1988.*
FELIX DANGUILAN, petitioner, vs. INTERMEDIATE APPELLATE COURT, APOLONIA
MELAD, assisted by her husband, JOSE TAGACAY, respondents.
Civil Law; Donations; The conveyances in the case at bar being onerous donations are not
covered by the rule in Article 749 of the Civil Code requiring donations of real properties to
be effected through a public instrument.—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.
Same; Same; Same; Contrary to the arguments of private respondent, there was a fair
exchange between the donor and the donee that made the transaction an onerous donation.
—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, 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.
Same; Sale; Presumption of due execution of a public instrument is disputable and will yield
to contrary evidence.—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. 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
S a l e s P a r t V I P a g e | 13
had been using the surname Yedan, her mother’s surname, before that instrument was
signed and in fact even after she got married. The averment was also made that the contract
was simulated and prepared after Domingo Melad’s death in 1945. It 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. 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.
Same; Same; Delivery; Private respondent failed to show that she consummated the contract
of sale by actual delivery of the properties to her.—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. 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.
Same; Same; Same; Same; It is a fundamental and elementary principle that ownership does
not pass by mere stipulation but only by delivery.—“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.”
Same; Same; Same; Same; Same; In order that symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall have control over the thing sold that, at the

moment of the sale, its material delivery could have been made.—As for the argument that
symbolic delivery was affected 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.”
Same; Possession; Rule where respective claims of the parties were both to be discarded as
being inherently weak.—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, 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.”
PETITION to review the decision of the then Intermediate Appellate Court.
The facts are stated in the opinion of the Court.
     Pedro R. Perez, Jr. for petitioner.
     Teodoro B. Mallonga for private respondent.
Danguilan vs. Intermediate Appellate Court, 168 SCRA 22, No. L-69970 November 28, 1988
CRUZ, J.:
S a l e s P a r t V I P a g e | 14
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
S a l e s P a r t V I P a g e | 15
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
S a l e s P a r t V I P a g e | 16
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
 S a l e s P a r t V I P a g e | 17

acquire a real right" (and the ownership is surely such) "until the property If the claim of both the plaintiff and the defendant are weak, judgment must
has been delivered to him." 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.
In accordance with such disposition and provisions the delivery of a thing
constitutes a necessary and indispensable requisite for the purpose of WHEREFORE, the decision of the respondent court is SET ASIDE and that of the trial court
acquiring the ownership of the same by virtue of a contract. As Manresa REINSTATED, with costs against the private respondent. It is so ordered.
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 Narvasa (Chairman), Gancayco, Griño-Aquino and Medialdea, JJ., concur.
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:

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.
Civil law; Sales; Presumptive delivery by execution of public instrument can be negated by
failure of vendee to take actual possession, of land sold.—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. 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.
Same; Forcible entry and detainer; To constitute an action for forcible entry, complaint must
allege not only plaintiff’s prior physical possession, but also his deprivation thereof by any of
the means provided in Section 1, Rule 70.—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 jurisdiction.
Same: Bare allegation that plaintiff was “deprived” of which he is and has been the legal
owner is insufficient to make the action one for forcible entry.—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. It is true that the mere act of a
trespasser in unlawfully entering the land, x x x 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
property. It is, therefore, not the summary action of forcible entry within the context of the
Rules.
APPEAL from an order of the Court of First Instance of Leyte. Elias B. Asuncion, J.
S a l e s P a r t V I P a g e | 18
The facts are stated in the opinion of the Court.
     Julio Siayngco for plaintiffs-appellants.
     Filomeno Arteche, Jr. for defendants-appellees. Pasagui vs. Villablanca, 68 SCRA 18, No.
L-21998 November 10, 1975
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
 S a l e s P a r t V I P a g e | 19

and the second was likewise denied on July 5, 1963. From the aforementioned orders, appeal Rules of Court, namely: force, intimidation, threats, strategy and stealth. For, if the
on a pure question of law was interposed to this Court. . 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
It is well-settled that what determines the jurisdiction of the municipal court in a forcible has been "deprived" of the land of which he is and has been the legal owner for a long
entry case is the nature of the action pleaded as appears from the allegations in the period has been held to be insufficient. 6 It is true that the mere act of a trespasser in
complaint. In ascertaining whether or not the action is one of forcible entry within the unlawfully entering the land, planting himself on the ground and excluding therefrom the
original exclusive jurisdiction of the municipal court, the averments of the complaint and the prior possessor would imply the use of force. In the case at bar, no such inference could be
character of the relief sought are the ones to be consulted.. 1 . 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-
In the case at bar, the complaint does not allege that the plaintiffs were in physical appellants are not only seeking to get the possession of the property, but as an alternative
possession of the land and have been deprived of that possession through force, cause of action, they seek the return of the price and payment of damages by the vendors
intimidation, threat, strategy, or stealth. It simply avers that plaintiffs-appellants bought on "in case of eviction or loss of ownership" of the said property. It is, therefore, not the
November 12, 1962 from defendants-appellees Eustaquia Bocar and Catalina Bocar the summary action of forcible entry within the context of the Rules. .
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. WHEREFORE, the order of dismissal is hereby set aside, and the case remanded to the court
Villablanca and her husband, Zosimo Villablanca, illegally and without any right whatsoever, a quo for further proceedings. Costs against defendants-appellees. .
took possession of the above described property, harvesting coconuts from the coconut
plantation therein, thus depriving of its possession herein plaintiffs, and causing them Barredo, Actg. (Chairman), Aquino, Concepcion, Jr. and Martin. JJ., concur. .
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 Fernando (Chairman), J, is on leave.
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
 S a l e s P a r t V I P a g e | 20

G.R. No. 119745. June 20, 1997.* Same; Same; Same; Symbolic delivery, as a species of constructive delivery, effects the
transfer of ownership through the execution of a public document. Its efficacy can be
POWER COMMERCIAL AND INDUSTRIAL CORPORATION, petitioner, vs. COURT OF prevented if the vendor does not possess control over the thing sold.—Although most
APPEALS, SPOUSES REYNALDO and ANGELITA R. QUIAMBAO and PHILIPPINE authorities consider transfer of ownership as the primary purpose of sale, delivery remains an
NATIONAL BANK, respondents. indispensable requisite as our law does not admit the doctrine of transfer of property by
mere consent. The Civil Code provides that delivery can either be (1) actual (Article 1497) or
Civil Law; Obligations and Contracts; Sales; Any obscurity in a contract must be construed
(2) constructive (Articles 1498-1501). Symbolic delivery (Article 1498), as a species of
against the party who caused it.—By his own admission, Anthony Powers, General Manager
constructive delivery, effects the transfer of ownership through the execution of a public
of petitioner-corporation, did not ask the corporation’s lawyers to stipulate in the contract
document. Its efficacy can, however, be prevented if the vendor does not possess control
that Respondent Reynaldo was guaranteeing the ejectment of the occupants, because there
over the thing sold, in which case this legal fiction must yield to reality.
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. Any obscurity in a contract, if the above- Same; Same; Same; In order that this symbolic delivery may produce the effect of tradition,
quoted provision can be so described, must be construed against the party who caused it. it is necessary that the vendor shall have had such control over the thing sold.—The key
Petitioner itself caused the obscurity because it omitted this alleged condition when its lawyer word is control, not possession, of the land as petitioner would like us to believe. The Court
drafted said contract. has consistently held that: “xxx (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
Same; Same; Same; If the parties intended to impose on respondent spouses the obligation
that xxx its material delivery could have been made. It is not enough to confer upon the
to eject the tenants from the lot sold, it should have included such provision in the contract.
purchaser the ownership and the right of possession. The thing sold must be placed in his
—If the parties intended to impose on respondent spouses the obligation to eject the tenants
control. When there is no impediment whatever to prevent the thing sold passing into the
from the lot sold, it should have included in the contract a provision similar to that referred to
tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the
in Romero vs. Court of Appeals, where the ejectment of the occupants of the lot sold by
execution of a public instrument is sufficient. But if, notwithstanding the execution of the
private respondent was the operative act which set into motion the period of petitioner’s
instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and
compliance with his own obligation, i.e., to pay the balance of the purchase price. Failure to
make use of it himself or through another in his name, because such tenancy and enjoyment
remove the squatters within the stipulated period gave the other party the right to either
are opposed by the interposition of another will, then fiction yields to reality—the delivery has
refuse to proceed with the agreement or to waive that condition of ejectment in consonance
not been effected.”
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 Same; Same; Same; Prior physical delivery or possession is not legally required and the
would not arise. This is not so in the case at bar. execution of the deed of sale is deemed equivalent to delivery. This deed operates as a
formal or symbolic delivery of the property sold and authorizes the buyer to use the
Same; Same; Same; Rescission; Rescission was not allowed as the breach was not
document as proof of ownership.—Considering that the deed of sale between the parties did
substantial and fundamental to the fulfillment by the petitioners of the obligation to sell.—
not stipulate or infer otherwise, delivery was effected through the execution of said deed.
Absent a stipulation therefor, we cannot say that the parties intended to make its
The lot sold had been placed under the control of petitioner; thus, the filing of the ejectment
nonfulfillment a ground for rescission. If they did intend this, their contract should have
suit was subsequently done. It signified that its new owner intended to obtain for itself and
expressly stipulated so. In Ang vs. C.A., rescission was sought on the ground that the
to terminate said occupants’ actual possession thereof. Prior physical delivery or possession is
petitioners had failed to fulfill their obligation “to remove and clear” the lot sold, the
not legally required and the execution of the deed of sale is deemed equivalent to delivery.
performance of which would have given rise to the payment of the consideration by private
This deed operates as a formal or symbolic delivery of the property sold and authorizes the
respondent. Rescission was not allowed, however, because the breach was not substantial
buyer to use the document as proof of ownership. Nothing more is required.
and fundamental to the fulfillment by the petitioners of the obligation to sell.

Same; Same; Same; Breach of Warranty; Requirements.—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. In the absence of these requisites, a breach of the warranty against eviction
under Article 1547 cannot be declared.
Same; Same; Same; Same; As petitioner failed to impugn the integrity of the contract, it is
presumed, under the law to be valid and subsisting.—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.
Same; Same; Solutio Indebiti; Solutio indebiti 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.—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.
Same; Same; Same; 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.—
The quasicontract 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. But as shown
earlier, the payment of the mortgage was an obligation petitioner assumed under the
S a l e s P a r t V I P a g e | 21
contract of sale. There is no unjust enrichment where the transaction, as in this case, is quid
pro quo, value for value.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Solis, Medina & Magno Law Offices for petitioner.
     The Chief Legal Counsel for PNB.
     Clara Dumandan-Singh for private respondents. Power Commercial and Industrial Corp.
vs. Court of Appeals, 274 SCRA 597, G.R. No. 119745 June 20, 1997
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
S a l e s P a r t V I P a g e | 22
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.
S a l e s P a r t V I P a g e | 23
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.
S a l e s P a r t V I P a g e | 24
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.
S a l e s P a r t V I P a g e | 25
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. . . .
 S a l e s P a r t V I P a g e | 26

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.

 S a l e s P a r t V I P a g e | 27

G.R. No. 119255. April 9, 2003.* ownership of the thing sold to the buyer. Article 1458 of the Civil Code defines a contract of
sale as follows: Art. 1458. By the contract of sale one of the contracting parties obligates
TOMAS K. CHUA, petitioner, vs. COURT OF APPEALS and ENCARNACION VALDES- himself to transfer the ownership of and to deliver a determinate thing, and the other to pay
CHOY, respondents. therefor a price certain in money or its equivalent. x x x. (Emphasis supplied) Prior to the
existence of the contract of sale, the seller is not obligated to transfer ownership to the
Civil Procedure; Pleadings and Practice; Appeals; An issue not raised in the court below
buyer, even if there is a contract to sell between them. It is also upon the existence of the
cannot be raised for the first time on appeal.—An issue not raised in the court below cannot
contract of sale that the buyer is obligated to pay the purchase price to the seller. Since the
be raised for the first time on appeal, as this is offensive to the basic rules of fair play, justice
transfer of ownership is in exchange for the purchase price, these obligations must be
and due process. In addition, when a party deliberately adopts a certain theory, and the case
simultaneously fulfilled at the time of the execution of the contract of sale, in the absence of
is tried and decided on that theory in the court below, the party will not be permitted to
a contrary stipulation.
change his theory on appeal. To permit him to change his theory will be unfair to the adverse
party. Same; Same; Same; Delivery; The delivery, therefore, made in any of the forms provided in
articles 1497 to 1505 signifies that the transmission of ownership from vendor to vendee has
Civil Law; Contracts; Sales; Contract of Sale vs. Contract to Sell; The distinction between a
taken place.—Delivery is not only a necessary condition for the enjoyment of the thing, but is
contract of sale and contract to sell is well-settled.—In a contract of sale, the title to the
a mode of acquiring dominion and determines the transmission of ownership, the birth of the
property passes to the vendee upon the delivery of the thing sold; in a contract to sell,
real right. The delivery, therefore, made in any of the forms provided in articles 1497 to 1505
ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full
signifies that the transmission of ownership from vendor to vendee has taken place. The
payment of the purchase price. Otherwise stated, in a contract of sale, the vendor loses
delivery of the thing constitutes an indispensable requisite for the purpose of acquiring
ownership over the property and cannot recover it until and unless the contract is resolved or
ownership. Our law does not admit the doctrine of transfer of property by mere consent; the
rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of
ownership, the property right, is derived only from delivery of the thing. x x x. (Emphasis
the price. In the latter contract, payment of the price is a positive suspensive condition,
supplied)
failure of which is not a breach but an event that prevents the obligation of the vendor to
convey title from becoming effective. Same; Same; Same; Same; Payment of the capital gains tax, however, is not a pre-requisite
to the transfer of ownership to the lawyer.—The buyer has more interest in having the
Same; Same; Same; Earnest Money; The earnest money forms part of the consideration only
capital gains tax paid immediately since this is a pre-requisite to the issuance of a new
if the sale is consummated upon full payment of the purchase price.—It is true that Article
Torrens title in his name. Nevertheless, as far as the government is concerned, the capital
1482 of the Civil Code provides that “[W]henever earnest money is given in a contract of
gains tax remains a liability of the seller since it is a tax on the seller’s gain from the sale of
sale, it shall be considered as part of the price and proof of the perfection of the contract.”
the real estate. Payment of the capital gains tax, however, is not a pre-requisite to the
However, this article speaks of earnest money given in a contract of sale. In this case, the
transfer of ownership to the buyer. The transfer of ownership takes effect upon the signing
earnest money was given in a contract to sell. The Receipt evidencing the contract to sell
and notarization of the deed of absolute sale.
stipulates that the earnest money is a forfeitable deposit, to be forfeited if the sale is not
consummated should Chua fail to pay the balance of the purchase price. The earnest money PETITION for review on certiorari of a decision of the Court of Appeals.
forms part of the consideration only if the sale is consummated upon full payment of the
purchase price. The facts are stated in the opinion of the Court.

Same; Same; Same; It is only upon the existence of the contract of sale that the seller      Benito Fabie for petitioner.
becomes obligated to transfer the ownership of the thing sold to the buyer.—It is only upon
the existence of the contract of sale that the seller becomes obligated to transfer the      Reynaldo A. Ruiz for private respondent.

Chua vs. Court of Appeals, 401 SCRA 54, G.R. No. 119255 April 9, 2003
CARPIO, J.:
The Case
This is a petition for review on certiorari seeking to reverse the decision 1 of the Court of
Appeals in an action for specific performance 2 filed in the Regional Trial Court3 by petitioner
Tomas K. Chua ("Chua") against respondent Encarnacion Valdes-Choy ("Valdes-Choy"). Chua
sought to compel Valdes-Choy to consummate the sale of her paraphernal house and lot in
Makati City. The Court of Appeals reversed the decision 4 rendered by the trial court in favor
of Chua.
The Facts
Valdes-Choy advertised for sale her paraphernal house and lot ("Property") with an area of
718 square meters located at No. 40 Tampingco Street corner Hidalgo Street, San Lorenzo
Village, Makati City. The Property is covered by Transfer Certificate of Title No. 162955
("TCT") issued by the Register of Deeds of Makati City in the name of Valdes-Choy. Chua
responded to the advertisement. After several meetings, Chua and Valdes-Choy agreed on a
purchase price of P10,800,000.00 payable in cash.
On 30 June 1989, Valdes-Choy received from Chua a check for P100,000.00. The receipt
("Receipt") evidencing the transaction, signed by Valdes-Choy as seller, and Chua as buyer,
reads:
30 June 1989
RECEIPT
RECEIVED from MR. TOMAS K. CHUA PBCom Check No. 206011 in the amount of
ONE HUNDRED THOUSAND PESOS ONLY (P100,000.00) as EARNEST MONEY for the
sale of the property located at 40 Tampingco cor. Hidalgo, San Lorenzo Village,
Makati, Metro Manila (Area : 718 sq. meters).
The balance of TEN MILLION SEVEN HUNDRED THOUSAND (P10,700,000.00) is
payable on or before 155July 1989. Capital Gains Tax for the account of the
seller. Failure to pay balance on or before 15 July 1989 forfeits the earnest money.
This provided that all papers are in proper order.6
S a l e s P a r t V I P a g e | 28
CONFORME:
ENCARNACION VALDES
Seller
TOMAS K. CHUA
                      Buyer
x x x.7
In the morning of 13 July 1989, Chua secured from Philippine Bank of Commerce ("PBCom")
a manager's check for P480,000.00. Strangely, after securing the manager's check, Chua
immediately gave PBCom a verbal stop payment order claiming that this manager's check for
P480,000.00 "was lost and/or misplaced."8 On the same day, after receipt of Chua's verbal
order, PBCom Assistant Vice–President Julie C. Pe notified in writing 9 the PBCom Operations
Group of Chua's stop payment order.
In the afternoon of 13 July 1989, Chua and Valdes-Choy met with their respective counsels
to execute the necessary documents and arrange the payments. 10 Valdes-Choy as vendor
and Chua as vendee signed two Deeds of Absolute Sale ("Deeds of Sale"). The first Deed of
Sale covered the house and lot for the purchase price of P8,000,000.00. 11 The second Deed
of Sale covered the furnishings, fixtures and movable properties contained in the house for
the purchase price of P2,800,000.00.12 The parties also computed the capital gains tax to
amount to P485,000.00.
On 14 July 1989, the parties met again at the office of Valdes-Choy's counsel. Chua handed
to Valdes-Choy the PBCom manager's check for P485,000.00 so Valdes-Choy could pay the
capital gains tax as she did not have sufficient funds to pay the tax. Valdes-Choy issued a
receipt showing that Chua had a remaining balance of P10,215,000.00 after deducting the
advances made by Chua. This receipt reads:
July 14, 1989
Received from MR. TOMAS K. CHUA PBCom. Check No. 325851 in the amount of
FOUR HUNDRED EIGHTY FIVE THOUSAND PESOS ONLY (P485,000.00) as Partial
Payment for the sale of the property located at 40 Tampingco Cor. Hidalgo St., San
Lorenzo Village, Makati, Metro Manila (Area 718 sq. meters), covered by TCT No.
162955 of the Registry of Deeds of Makati, Metro Manila.
The total purchase price of the above-mentioned property is TEN MILLION EIGHT
HUNDRED THOUSAND PESOS only, broken down as follows:

SELLING PRICE   P10,800,000.00
EARNEST MONEY P100,000.00  
PARTIAL PAYMENT 485,000.00  
          585,000.00
BALANCE DUE TO
ENCARNACION VALDEZ-CHOY   P10,215,000.00
PLUS P80,000.00 for documentary stamps
paid in advance by seller   80,000.00
    P10,295,000.00
x x x.13
On the same day, 14 July 1989, Valdes-Choy, accompanied by Chua, deposited the
P485,000.00 manager's check to her account with Traders Royal Bank. She then purchased a
Traders Royal Bank manager's check for P480,000.00 payable to the Commissioner of
Internal Revenue for the capital gains tax. Valdes-Choy and Chua returned to the office of
Valdes-Choy's counsel and handed the Traders Royal Bank check to the counsel who
undertook to pay the capital gains tax. It was then also that Chua showed to Valdes-Choy a
PBCom manager's check for P10,215,000.00 representing the balance of the purchase price.
Chua, however, did not give this PBCom manager's check to Valdes-Choy because the TCT
was still registered in the name of Valdes-Choy. Chua required that the Property be
registered first in his name before he would turn over the check to Valdes-Choy. This
angered Valdes-Choy who tore up the Deeds of Sale, claiming that what Chua required was
not part of their agreement.14
On the same day, 14 July 1989, Chua confirmed his stop payment order by submitting to
PBCom an affidavit of loss15 of the PBCom Manager's Check for P480,000.00. PBCom
Assistant Vice-President Pe, however, testified that the manager's check was nevertheless
honored because Chua subsequently verbally advised the bank that he was lifting the stop-
payment order due to his "special arrangement" with the bank.16
On 15 July 1989, the deadline for the payment of the balance of the purchase price, Valdes-
Choy suggested to her counsel that to break the impasse Chua should deposit in escrow the
P10,215,000.00 balance.17 Upon such deposit, Valdes-Choy was willing to cause the issuance
of a new TCT in the name of Chua even without receiving the balance of the purchase price.
Valdes-Choy believed this was the only way she could protect herself if the certificate of title
is transferred in the name of the buyer before she is fully paid. Valdes-Choy's counsel
promised to relay her suggestion to Chua and his counsel, but nothing came out of it.
S a l e s P a r t V I P a g e | 29
On 17 July 1989, Chua filed a complaint for specific performance against Valdes-Choy which
the trial court dismissed on 22 November 1989. On 29 November 1989, Chua re-filed his
complaint for specific performance with damages. After trial in due course, the trial court
rendered judgment in favor of Chua, the dispositive portion of which reads:
Applying the provisions of Article 1191 of the new Civil Code, since this is an action
for specific performance where the plaintiff, as vendee, wants to pursue the sale,
and in order that the fears of the defendant may be allayed and still have the sale
materialize, judgment is hereby rendered:
I. 1. Ordering the defendant to deliver to the Court not later than five (5) days from
finality of this decision:
a. the owner's duplicate copy of TCT No. 162955 registered in her name;
b. the covering tax declaration and the latest tax receipt evidencing payment
of real estate taxes;
c. the two deeds of sale prepared by Atty. Mark Bocobo on July 13, 1989,
duly executed by defendant in favor of the plaintiff, whether notarized or
not; and
2. Within five (5) days from compliance by the defendant of the above, ordering the
plaintiff to deliver to the Branch Clerk of Court of this Court the sum of
P10,295,000.00 representing the balance of the consideration (with the sum of
P80,000.00 for stamps already included);
3. Ordering the Branch Clerk of this Court or her duly authorized representative:
a. to make representations with the BIR for the payment of capital gains tax
for the sale of the house and lot (not to include the fixtures) and to pay the
same from the funds deposited with her;
b. to present the deed of sale executed in favor of the plaintiff, together with
the owner's duplicate copy of TCT No. 162955, real estate tax receipt and
proof of payment of capital gains tax, to the Makati Register of Deeds;
c. to pay the required registration fees and stamps (if not yet advanced by
the defendant) and if needed update the real estate taxes all to be taken
from the funds deposited with her; and

d. surrender to the plaintiff the new Torrens title over the property;
4. Should the defendant fail or refuse to surrender the two deeds of sale over the
property and the fixtures that were prepared by Atty. Mark Bocobo and executed by
the parties, the Branch Clerk of Court of this Court is hereby authorized and
empowered to prepare, sign and execute the said deeds of sale for and in behalf of
the defendant;
5. Ordering the defendant to pay to the plaintiff;
a. the sum of P100,000.00 representing moral and compensatory damages
for the plaintiff; and
b. the sum of P50,000.00 as reimbursement for plaintiff's attorney's fees and
cost of litigation.
6. Authorizing the Branch Clerk of Court of this Court to release to the plaintiff, to be
taken from the funds said plaintiff has deposited with the Court, the amounts
covered at paragraph 5 above;
7. Ordering the release of the P10,295,000.00 to the defendant after deducting
therefrom the following amounts:
a. the capital gains tax paid to the BIR;
b. the expenses incurred in the registration of the sale, updating of real
estate taxes, and transfer of title; and
c. the amounts paid under this judgment to the plaintiff.
8. Ordering the defendant to surrender to the plaintiff or his representatives the
premises with the furnishings intact within seventy-two (72) hours from receipt of
the proceeds of the sale;
9. No interest is imposed on the payment to be made by the plaintiff because he had
always been ready to pay the balance and the premises had been used or occupied
by the defendant for the duration of this case.
II. In the event that specific performance cannot be done for reasons or causes not
attributable to the plaintiff, judgment is hereby rendered ordering the defendant:
S a l e s P a r t V I P a g e | 30
1. To refund to the plaintiff the earnest money in the sum of P100,000.00, with
interest at the legal rate from June 30, 1989 until fully paid;
2. To refund to the plaintiff the sum of P485,000.00 with interest at the legal rate
from July 14, 1989 until fully paid;
3. To pay to the plaintiff the sum of P700,000.00 in the concept of moral damages
and the additional sum of P300,000.00 in the concept of exemplary damages; and
4. To pay to the plaintiff the sum of P100,000.00 as reimbursement of attorney's
fees and cost of litigation.
SO ORDERED.18
Valdes-Choy appealed to the Court of Appeals which reversed the decision of the trial court.
The Court of Appeals handed down a new judgment, disposing as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and
another one is rendered:
(1) Dismissing Civil Case No. 89-5772;
(2) Declaring the amount of P100,000.00, representing earnest money as
forfeited in favor of defendant-appellant;
(3) Ordering defendant-appellant to return/refund the amount of
P485,000.00 to plaintiff-appellee without interest;
(4) Dismissing defendant-appellant's compulsory counter-claim; and
(5) Ordering the plaintiff-appellee to pay the costs.19
Hence, the instant petition.
The Trial Court's Ruling
The trial court found that the transaction reached an impasse when Valdes-Choy wanted to
be first paid the full consideration before a new TCT covering the Property is issued in the
name of Chua. On the other hand, Chua did not want to pay the consideration in full unless a
new TCT is first issued in his name. The trial court faulted Valdes-Choy for this impasse.

The trial court held that the parties entered into a contract to sell on 30 June 1989, as
evidenced by the Receipt for the P100,000.00 earnest money. The trial court pointed out that
the contract to sell was subject to the following conditions: (1) the balance of
P10,700,000.00 was payable not later than 15 July 1989; (2) Valdes-Choy may stay in the
Property until 13 August 1989; and (3) all papers must be "in proper order" before full
payment is made.
The trial court held that Chua complied with the terms of the contract to sell. Chua showed
that he was prepared to pay Valdes-Choy the consideration in full on 13 July 1989, two days
before the deadline of 15 July 1989. Chua even added P80,000.00 for the documentary
stamp tax. He purchased from PBCom two manager's checks both payable to Valdes-Choy.
The first check for P485,000.00 was to pay the capital gains tax. The second check for
P10,215,000.00 was to pay the balance of the purchase price. The trial court was convinced
that Chua demonstrated his capacity and readiness to pay the balance on 13 July 1989 with
the production of the PBCom manager's check for P10,215,000.00.
On the other hand, the trial court found that Valdes-Choy did not perform her correlative
obligation under the contract to sell to put all the papers in order. The trial court noted that
as of 14 July 1989, the capital gains tax had not been paid because Valdes-Choy's counsel
who was suppose to pay the tax did not do so. The trial court declared that Valdes-Choy was
in a position to deliver only the owner's duplicate copy of the TCT, the signed Deeds of Sale,
the tax declarations, and the latest realty tax receipt. The trial court concluded that these
documents were all useless without the Bureau of Internal Revenue receipt evidencing full
payment of the capital gains tax which is a pre-requisite to the issuance of a new certificate
of title in Chua's name.
The trial court held that Chua's non-payment of the balance of P10,215,000.00 on the agreed
date was due to Valdes-Choy's fault.
The Court of Appeals' Ruling
In reversing the trial court, the Court of Appeals ruled that Chua's stance to pay the full
consideration only after the Property is registered in his name was not the agreement of the
parties. The Court of Appeals noted that there is a whale of difference between the phrases
"all papers are in proper order" as written on the Receipt, and "transfer of title" as demanded
by Chua.
Contrary to the findings of the trial court, the Court of Appeals found that all the papers were
in order and that Chua had no valid reason not to pay on the agreed date. Valdes-Choy was
in a position to deliver the owner's duplicate copy of the TCT, the signed Deeds of Sale, the
S a l e s P a r t V I P a g e | 31
tax declarations, and the latest realty tax receipt. The Property was also free from all liens
and encumbrances.
The Court of Appeals declared that the trial court erred in considering Chua's showing to
Valdes-Choy of the PBCom manager's check for P10,215,000.00 as compliance with Chua's
obligation to pay on or before 15 July 1989. The Court of Appeals pointed out that Chua did
not want to give up the check unless "the property was already in his name." 20 Although
Chua demonstrated his capacity to pay, this could not be equated with actual payment which
he refused to do.
The Court of Appeals did not consider the non-payment of the capital gains tax as failure by
Valdes-Choy to put the papers "in proper order." The Court of Appeals explained that the
payment of the capital gains tax has no bearing on the validity of the Deeds of Sale. It is only
after the deeds are signed and notarized can the final computation and payment of the
capital gains tax be made.
The Issues
In his Memorandum, Chua raises the following issues:
1. WHETHER THERE IS A PERFECTED CONTRACT OF SALE OF IMMOVABLE
PROPERTY;
2. WHETHER VALDES-CHOY MAY RESCIND THE CONTRACT IN CONTROVERSY
WITHOUT OBSERVING THE PROVISIONS OF ARTICLE 1592 OF THE NEW CIVIL
CODE;
3. WHETHER THE WITHHOLDING OF PAYMENT OF THE BALANCE OF THE
PURCHASE PRICE ON THE PART OF CHUA (AS VENDEE) WAS JUSTIFIED BY THE
CIRCUMSTANCES OBTAINING AND MAY NOT BE RAISED AS GROUND FOR THE
AUTOMATIC RESCISSION OF THE CONTRACT OF SALE;
4. WHETHER THERE IS LEGAL AND FACTUAL BASIS FOR THE COURT OF APPEALS
TO DECLARE THE "EARNEST MONEY" IN THE AMOUNT OF P100,000.00 AS
FORFEITED IN FAVOR OF VALDES-CHOY;
5. WHETHER THE TRIAL COURT'S JUDGMENT IS IN ACCORD WITH LAW, REASON
AND EQUITY DESERVING OF BEING REINSTATED AND AFFIRMED. 21

The issues for our resolution are: (a) whether the transaction between Chua and Valdes-
Choy is a perfected contract of sale or a mere contract to sell, and (b) whether Chua can
compel Valdes-Choy to cause the issuance of a new TCT in Chua's name even before
payment of the full purchase price.
The Court's Ruling
The petition is bereft of merit.
There is no dispute that Valdes-Choy is the absolute owner of the Property which is
registered in her name under TCT No.162955, free from all liens and encumbrances. She was
ready, able and willing to deliver to Chua the owner's duplicate copy of the TCT, the signed
Deeds of Sale, the tax declarations, and the latest realty tax receipt. There is also no dispute
that on 13 July 1989, Valdes-Choy received PBCom Check No. 206011 for P100,000.00 as
earnest money from Chua. Likewise, there is no controversy that the Receipt for the
P100,000.00 earnest money embodied the terms of the binding contract between Valdes-
Choy and Chua.
Further, there is no controversy that as embodied in the Receipt, Valdes-Choy and Chua
agreed on the following terms: (1) the balance of P10,215,000.00 is payable on or before 15
July 1989; (2) the capital gains tax is for the account of Valdes-Choy; and (3) if Chua fails to
pay the balance of P10,215,000.00 on or before 15 July 1989, Valdes-Choy has the right to
forfeit the earnest money, provided that "all papers are in proper order." On 13 July 1989,
Chua gave Valdes-Choy the PBCom manager's check for P485,000.00 to pay the capital gains
tax.
Both the trial and appellate courts found that the balance of P10,215,000.00 was not actually
paid to Valdes-Choy on the agreed date. On 13 July 1989, Chua did show to Valdes-Choy the
PBCom manager's check for P10,215,000.00, with Valdes-Choy as payee. However,
Chua refused to give this check to Valdes-Choy until a new TCT covering the Property is
registered in Chua's name. Or, as the trial court put it, until there is proof of payment of the
capital gains tax which is a pre-requisite to the issuance of a new certificate of title.
First and Second Issues: Contract of Sale or Contract to Sell?
Chua has consistently characterized his agreement with Valdez-Choy, as evidenced by the
Receipt, as a contract to sell and not a contract of sale. This has been Chua's persistent
contention in his pleadings before the trial and appellate courts.
Chua now pleads for the first time that there is a perfected contract of sale rather than a
contract to sell. He contends that there was no reservation in the contract of sale that
S a l e s P a r t V I P a g e | 32
Valdes-Choy shall retain title to the Property until after the sale. There was no agreement for
an automatic rescission of the contract in case of Chua's default. He argues for the first time
that his payment of earnest money and its acceptance by Valdes-Choy precludes the latter
from rejecting the binding effect of the contract of sale. Thus, Chua claims that Valdes-Choy
may not validly rescind the contract of sale without following Article 1592 22 of the Civil Code
which requires demand, either judicially or by notarial act, before rescission may take place.
Chua's new theory is not well taken in light of well-settled jurisprudence. An issue not raised
in the court below cannot be raised for the first time on appeal, as this is offensive to the
basic rules of fair play, justice and due process. 23 In addition, when a party deliberately
adopts a certain theory, and the case is tried and decided on that theory in the court below,
the party will not be permitted to change his theory on appeal. To permit him to change his
theory will be unfair to the adverse party.24
Nevertheless, in order to put to rest all doubts on the matter, we hold that the agreement
between Chua and Valdes-Choy, as evidenced by the Receipt, is a contract to sell and not a
contract of sale. The distinction between a contract of sale and contract to sell is well-settled:
In a contract of sale, the title to the property passes to the vendee upon the delivery
of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the
vendor and is not to pass to the vendee until full payment of the purchase price.
Otherwise stated, in a contract of sale, the vendor loses ownership over the property
and cannot recover it until and unless the contract is resolved or rescinded; whereas,
in a contract to sell, title is retained by the vendor until full payment of the price. In
the latter contract, payment of the price is a positive suspensive condition, failure of
which is not a breach but an event that prevents the obligation of the vendor to
convey title from becoming effective.25
A perusal of the Receipt shows that the true agreement between the parties was a contract
to sell. Ownership over the Property was retained by Valdes-Choy and was not to pass to
Chua until full payment of the purchase price.
First, the Receipt provides that the earnest money shall be forfeited in case the buyer fails to
pay the balance of the purchase price on or before 15 July 1989. In such event, Valdes-Choy
can sell the Property to other interested parties. There is in effect a right reserved in favor of
Valdes-Choy not to push through with the sale upon Chua's failure to remit the balance of
the purchase price before the deadline. This is in the nature of a stipulation reserving
ownership in the seller until full payment of the purchase price. This is also similar to giving
the seller the right to rescind unilaterally the contract the moment the buyer fails to pay
within a fixed period.26

Second, the agreement between Chua and Valdes-Choy was embodied in a receipt rather
than in a deed of sale, ownership not having passed between them. The signing of the Deeds
of Sale came later when Valdes-Choy was under the impression that Chua was about to pay
the balance of the purchase price. The absence of a formal deed of conveyance is a strong
indication that the parties did not intend immediate transfer of ownership, but only a transfer
after full payment of the purchase price.27
Third, Valdes-Choy retained possession of the certificate of title and all other documents
relative to the sale. When Chua refused to pay Valdes-Choy the balance of the purchase
price, Valdes-Choy also refused to turn-over to Chua these documents. 28 These are additional
proof that the agreement did not transfer to Chua, either by actual or constructive delivery,
ownership of the Property.29
It is true that Article 1482 of the Civil Code provides that "[W]henever earnest money is
given in a contract of sale, it shall be considered as part of the price and proof of the
perfection of the contract." However, this article speaks of earnest money given in a contract
of sale. In this case, the earnest money was given in a contract to sell. The Receipt
evidencing the contract to sell stipulates that the earnest money is a forfeitable deposit, to be
forfeited if the sale is not consummated should Chua fail to pay the balance of the purchase
price. The earnest money forms part of the consideration only if the sale is consummated
upon full payment of the purchase price. If there is a contract of sale, Valdes-Choy should
have the right to compel Chua to pay the balance of the purchase price. Chua, however, has
the right to walk away from the transaction, with no obligation to pay the balance, although
he will forfeit the earnest money. Clearly, there is no contract of sale. The earnest money
was given in a contract to sell, and thus Article 1482, which speaks of a contract of sale, is
not applicable.
Since the agreement between Valdes-Choy and Chua is a mere contract to sell, the full
payment of the purchase price partakes of a suspensive condition. The non-fulfillment of the
condition prevents the obligation to sell from arising and ownership is retained by the seller
without further remedies by the buyer. 30 Article 1592 of the Civil Code permits the buyer to
pay, even after the expiration of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by notarial act. However, Article 1592
does not apply to a contract to sell where the seller reserves the ownership until full payment
of the price.31
Third and Fourth Issues: Withholding of Payment of the 
Balance of the Purchase Price and Forfeiture of the Earnest Money
Chua insists that he was ready to pay the balance of the purchase price but withheld
payment because Valdes-Choy did not fulfill her contractual obligation to put all the papers in
S a l e s P a r t V I P a g e | 33
"proper order." Specifically, Chua claims that Valdes-Choy failed to show that the capital
gains tax had been paid after he had advanced the money for its payment. For the same
reason, he contends that Valdes-Choy may not forfeit the earnest money even if he did not
pay on time.
There is a variance of interpretation on the phrase "all papers are in proper order" as written
in the Receipt. There is no dispute though, that as long as the papers are "in proper order,"
Valdes-Choy has the right to forfeit the earnest money if Chua fails to pay the balance before
the deadline.
The trial court interpreted the phrase to include payment of the capital gains tax, with the
Bureau of Internal Revenue receipt as proof of payment. The Court of Appeals held
otherwise. We quote verbatim the ruling of the Court of Appeals on this matter:
The trial court made much fuss in connection with the payment of the capital gains
tax, of which Section 33 of the National Internal Revenue Code of 1977, is the
governing provision insofar as its computation is concerned. The trial court failed to
consider Section 34-(a) of the said Code, the last sentence of which provides, that
"[t]he amount realized from the sale or other disposition of property shall be the
sum of money received plus the fair market value of the property (other than
money) received;" and that the computation of the capital gains tax can only be
finally assessed by the Commission on Internal Revenue upon the presentation of the
Deeds of Absolute Sale themselves, without which any premature computation of the
capital gains tax becomes of no moment. At any rate, the computation and payment
of the capital gains tax has no bearing insofar as the validity and effectiveness of the
deeds of sale in question are concerned, because it is only after the contracts of sale
are finally executed in due form and have been duly notarized that the final
computation of the capital gains tax can follow as a matter of course. Indeed, exhibit
D, the PBC Check No. 325851, dated July 13, 1989, in the amount of P485,000.00,
which is considered as part of the consideration of the sale, was deposited in the
name of appellant, from which she in turn, purchased the corresponding check in the
amount representing the sum to be paid for capital gains tax and drawn in the name
of the Commissioner of Internal Revenue, which then allayed any fear or doubt that
that amount would not be paid to the Government after all. 32
We see no reason to disturb the ruling of the Court of Appeals.
In a contract to sell, the obligation of the seller to sell becomes demandable only upon the
happening of the suspensive condition. In this case, the suspensive condition is the full
payment of the purchase price by Chua. Such full payment gives rise to Chua's right to
demand the execution of the contract of sale.

It is only upon the existence of the contract of sale that the seller becomes obligated to
transfer the ownership of the thing sold to the buyer. Article 1458 of the Civil Code defines a
contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
x x x. (Emphasis supplied)
Prior to the existence of the contract of sale, the seller is not obligated to transfer ownership
to the buyer, even if there is a contract to sell between them. It is also upon the existence of
the contract of sale that the buyer is obligated to pay the purchase price to the seller. Since
the transfer of ownership is in exchange for the purchase price, these obligations must be
simultaneously fulfilled at the time of the execution of the contract of sale, in the absence of
a contrary stipulation.
In a contract of sale, the obligations of the seller are specified in Article 1495 of the Civil
Code, as follows:
Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as
warrant the thing which is the object of the sale. (Emphasis supplied)
The obligation of the seller is to transfer to the buyer ownership of the thing sold. In the sale
of real property, the seller is not obligated to transfer in the name of the buyer a new
certificate of title, but rather to transfer ownership of the real property. There is a difference
between transfer of the certificate of title in the name of the buyer, and transfer of
ownership to the buyer. The buyer may become the owner of the real property even if the
certificate of title is still registered in the name of the seller. As between the seller and buyer,
ownership is transferred not by the issuance of a new certificate of title in the name of the
buyer but by the execution of the instrument of sale in a public document.
In a contract of sale, ownership is transferred upon delivery of the thing sold. As the noted
civil law commentator Arturo M. Tolentino explains it, -
Delivery is not only a necessary condition for the enjoyment of the thing, but is a
mode of acquiring dominion and determines the transmission of ownership, the birth
of the real right. The delivery, therefore, made in any of the forms provided in
articles 1497 to 1505 signifies that the transmission of ownership from vendor to
vendee has taken place. The delivery of the thing constitutes an indispensable
requisite for the purpose of acquiring ownership. Our law does not admit the doctrine
S a l e s P a r t V I P a g e | 34
of transfer of property by mere consent; the ownership, the property right, is derived
only from delivery of the thing. x x x.33 (Emphasis supplied)
In a contract of sale of real property, delivery is effected when the instrument of sale is
executed in a public document. When the deed of absolute sale is signed by the parties and
notarized, then delivery of the real property is deemed made by the seller to the buyer.
Article 1498 of the Civil Code provides that –
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.
x x x.
Similarly, in a contract to sell real property, once the seller is ready, able and willing to sign
the deed of absolute sale before a notary public, the seller is in a position to transfer
ownership of the real property to the buyer. At this point, the seller complies with his
undertaking to sell the real property in accordance with the contract to sell, and to assume
all the obligations of a vendor under a contract of sale pursuant to the relevant articles of the
Civil Code. In a contract to sell, the seller is not obligated to transfer ownership to the buyer.
Neither is the seller obligated to cause the issuance of a new certificate of title in the name of
the buyer. However, the seller must put all his papers in proper order to the point that he is
in a position to transfer ownership of the real property to the buyer upon the signing of the
contract of sale.
In the instant case, Valdes-Choy was in a position to comply with all her obligations as a
seller under the contract to sell. First, she already signed the Deeds of Sale in the office of
her counsel in the presence of the buyer. Second, she was prepared to turn-over the owner's
duplicate of the TCT to the buyer, along with the tax declarations and latest realty tax
receipt. Clearly, at this point Valdes-Choy was ready, able and willing to transfer ownership
of the Property to the buyer as required by the contract to sell, and by Articles 1458 and
1495 of the Civil Code to consummate the contract of sale.
Chua, however, refused to give to Valdes-Choy the PBCom manager's check for the balance
of the purchase price. Chua imposed the condition that a new TCT should first be issued in
his name, a condition that is found neither in the law nor in the contract to sell as evidenced
by the Receipt. Thus, at this point Chua was not ready, able and willing to pay the full
purchase price which is his obligation under the contract to sell. Chua was also not in a
position to assume the principal obligation of a vendee in a contract of sale, which is also to
pay the full purchase price at the agreed time. Article 1582 of the Civil Code provides that –

Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing
sold at the time and place stipulated in the contract .
x x x. (Emphasis supplied)
In this case, the contract to sell stipulated that Chua should pay the balance of the purchase
price "on or before 15 July 1989." The signed Deeds of Sale also stipulated that the buyer
shall pay the balance of the purchase price upon signing of the deeds. Thus, the Deeds of
Sale, both signed by Chua, state as follows:
Deed of Absolute Sale covering the lot:
xxx
For and in consideration of the sum of EIGHT MILLION PESOS (P8,000,000.00),
Philippine Currency, receipt of which in full is hereby acknowledged by the VENDOR
from the VENDEE, the VENDOR sells, transfers and conveys unto the VENDEE, his
heirs, successors and assigns, the said parcel of land, together with the
improvements existing thereon, free from all liens and encumbrances. 34 (Emphasis
supplied)
Deed of Absolute Sale covering the furnishings:
xxx
For and in consideration of the sum of TWO MILLION EIGHT HUNDRED THOUSAND
PESOS (P2,800,000.00), Philippine Currency, receipt of which in full is hereby
acknowledged by the VENDOR from the VENDEE , the VENDOR sells, transfers and
conveys unto the VENDEE, his heirs, successors and assigns, the said furnitures,
fixtures and other movable properties thereon, free from all liens and
encumbrances.35 (Emphasis supplied)
However, on the agreed date, Chua refused to pay the balance of the purchase price as
required by the contract to sell, the signed Deeds of Sale, and Article 1582 of the Civil Code.
Chua was therefore in default and has only himself to blame for the rescission by Valdes-
Choy of the contract to sell.
Even if measured under existing usage or custom, Valdes-Choy had all her papers "in proper
order." Article 1376 of the Civil Code provides that:
S a l e s P a r t V I P a g e | 35
Art. 1376. The usage or custom of the place shall be borne in mind in the
interpretation of the ambiguities of a contract, and shall fill the omission of
stipulations which are ordinarily established.
Customarily, in the absence of a contrary agreement, the submission by an individual seller
to the buyer of the following papers would complete a sale of real estate: (1) owner's
duplicate copy of the Torrens title;36 (2) signed deed of absolute sale; (3) tax declaration;
and (3) latest realty tax receipt. The buyer can retain the amount for the capital gains tax
and pay it upon authority of the seller, or the seller can pay the tax, depending on the
agreement of the parties.
The buyer has more interest in having the capital gains tax paid immediately since this is a
pre-requisite to the issuance of a new Torrens title in his name. Nevertheless, as far as the
government is concerned, the capital gains tax remains a liability of the seller since it is a tax
on the seller's gain from the sale of the real estate. Payment of the capital gains tax,
however, is not a pre-requisite to the transfer of ownership to the buyer . The transfer of
ownership takes effect upon the signing and notarization of the deed of absolute sale.
The recording of the sale with the proper Registry of Deeds 37 and the transfer of the
certificate of title in the name of the buyer are necessary only to bind third parties to the
transfer of ownership.38 As between the seller and the buyer, the transfer of ownership takes
effect upon the execution of a public instrument conveying the real estate. 39Registration of
the sale with the Registry of Deeds, or the issuance of a new certificate of title, does not
confer ownership on the buyer. Such registration or issuance of a new certificate of title is
not one of the modes of acquiring ownership.40
In this case, Valdes-Choy was ready, able and willing to submit to Chua all the papers that
customarily would complete the sale, and to pay as well the capital gains tax. On the other
hand, Chua's condition that a new TCT be first issued in his name before he pays the balance
of P10,215,000.00, representing 94.58% of the purchase price, is not customary in a sale of
real estate. Such a condition, not specified in the contract to sell as evidenced by the Receipt,
cannot be considered part of the "omissions of stipulations which are ordinarily established"
by usage or custom.41 What is increasingly becoming customary is to deposit in escrow the
balance of the purchase price pending the issuance of a new certificate of title in the name of
the buyer. Valdes-Choy suggested this solution but unfortunately, it drew no response from
Chua.
Chua had no reason to fear being swindled. Valdes-Choy was prepared to turn-over to him
the owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and
the latest realty tax receipt. There was no hindrance to paying the capital gains tax as Chua
himself had advanced the money to pay the same and Valdes-Choy had procured a
 S a l e s P a r t V I P a g e | 36

manager's check payable to the Bureau of Internal Revenue covering the amount. It was
only a matter of time before the capital gains tax would be paid. Chua acted precipitately in
filing the action for specific performance a mere two days after the deadline of 15 July 1989
when there was an impasse. While this case was dismissed on 22 November 1989, he did not
waste any time in re-filing the same on 29 November 1989.

Accordingly, since Chua refused to pay the consideration in full on the agreed date, which is
a suspensive condition, Chua cannot compel Valdes-Choy to consummate the sale of the
Property. Article 1181 of the Civil Code provides that -

ART. 1181. In conditional obligations, the acquisition of rights, as well as the

extinguishment or loss of those already acquired shall depend upon the happening of
the event which constitutes the condition.

Chua acquired no right to compel Valdes-Choy to transfer ownership of the Property to him
because the suspensive condition - the full payment of the purchase price - did not happen.
There is no correlative obligation on the part of Valdes-Choy to transfer ownership of the
Property to Chua. There is also no obligation on the part of Valdes-Choy to cause the
issuance of a new TCT in the name of Chua since unless expressly stipulated, this is not one
of the obligations of a vendor.

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 37652 dated 23
February 1995 is AFFIRMED in toto.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Vitug, Ynares-Santiago, and Azcuna, JJ.,  concur.

G.R. No. 150308. November 26, 2004.*
VIVE EAGLE LAND, INC. and VIRGILIO O. CERVANTES, petitioners, vs. COURT OF
APPEALS and GENUINO ICE CO., INC., respondents.
Civil Law; Contracts; Sales; Registration; Under Article 1487 of the New Civil Code, the
expenses for the registration of the sale should be shouldered by the vendor unless there is a
stipulation to the contrary.—Under the third deed of absolute sale, petitioner VELI did not
oblige itself to spend for the registration of the said deed; to secure a torrens title over the
property to and under the name of the respondent; or to cause the eviction of the
tenants/occupants on the property. Nevertheless, petitioner VELI is liable for the said
expenses because, under Article 1487 of the New Civil Code, the expenses for the
registration of the sale should be shouldered by the vendor unless there is a stipulation to
the contrary. In the absence of any stipulation of the parties relating to the expenses for the
registration of the sale and the transfer of the title to the vendee, Article 1487 shall be
applied in a supplementary manner.
Same; Same; Same; Under Article 1495 of the New Civil Code, petitioner Vive Eagle Land,
Inc. (VELI), as the vendor, is obliged to transfer title over the property and deliver the same
to the vendee.—Under Article 1495 of the New Civil Code, petitioner VELI, as the vendor, is
obliged to transfer title over the property and deliver the same to the vendee. While Article
1498 of the New Civil Code provides that the execution of a notarized deed of absolute sale
shall be equivalent to the delivery of the property subject of the contract, the same shall not
apply if, from the deed, the contrary does not appear or cannot clearly be inferred. In the
present case, the respondent and petitioner VELI agreed that the latter would cause the
eviction of the tenants/occupants and deliver possession of the property. It is clear that at
the time the petitioner executed the deed of sale in favor of the respondent, there were
tenants/occupants in the property. It cannot, thus, be concluded that, through the execution
of the third deed of sale, the property was thereby delivered to the respondent.
Statutory Construction; Retroactivity; Only laws existing at the time of the execution of a
contract are applicable thereto and not later statutes.—It is settled that only laws existing at
the time of the execution of a contract are applicable thereto and not later statutes, unless
the latter are specifically intended to have retroactive effect.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
The facts are stated in the opinion of the Court
S a l e s P a r t V I P a g e | 37
 Rolando L. Villones for petitioners.
     Reynaldo Z. Calabio for respondent.
DECISION
CALLEJO, SR., J.:
This is a petition filed by Vive Eagle Land, Inc. (VELI) and Virgilio Cervantes for the review of
the July 19, 2001 Decision 1 and October 4, 2001 Resolution of the Court of Appeals (CA) in
CA-G.R. CV No. 51933.
The Antecedents
The Spouses Raul and Rosalie Flores were the owners of two parcels of land situated along
Aurora Boulevard, Cubao, Quezon City, covered by
Transfer Certificates of Title (TCT) Nos. 241845 and 241846, with an area of 1,026 and 2,963
square meters, respectively. On October 10, 1987, the Spouses Flores and Tatic Square
International Corporation (TATIC) executed an Agreement to Sell in which the said spouses
bound and obliged themselves to sell the properties to TATIC. The latter then applied for a
loan with the Capital Rural Bank of Makati, Inc. (Bank) to finance its purchase of the said
lots. The Bank agreed to grant the application of TATIC in the amount of P5,757,827.63
provided that the torrens titles over the subject properties would be registered under the
name of the latter as the subject lots would be used as collateral for the payment of the said
loan.2
On April 13, 1988, the Spouses Flores, TATIC, Isidro S. Tobias (who acted as broker), and
the Bank executed a Memorandum of Agreement (MOA), wherein the Spouses Flores, as
vendees-owners, warranted that "the titles of the two properties were free and clear from
any and all obligations and claims, whether past or present, from any creditors or third
persons." Tobias, as broker, undertook to pay any and all the taxes and assessments
imposed and/or charged over the lots, including the payment of capital gains tax; and to
secure tax clearances from the proper government agencies within thirty days from April 12,
1988. Tobias also undertook to remove any and all tenants/occupants on the lots within sixty
days from April 12, 1988 with the assistance and cooperation of the Spouses Flores. The
parties agreed that the expenses to be incurred by Tobias and TATIC would be deducted
from the purchase price of the property, which was estimated at P790,000.00:

6. The BROKER undertakes to clear the titles covering the two (2) parcels of land
from any and all liens and encumbrances, including future claims and/or liability from
any person or entity within thirty (30) days from April 12, 1988. Towards this end,
the OWNER shall endeavor to provide the BROKER the documents/papers, which are
necessary and proper to carry out this objective;
The OWNERS warrant that the titles of the two properties are free and clear from
any and all obligations and claims, whether past or present, from any bank or
financial institution or any other creditor, or third persons;
7. The BROKER shall undertake to pay any and all taxes and assessments imposed
and/or charged over the two (2) parcels of land including the payment of capital
gains tax and secure tax clearance from the proper government agency/ies within
thirty (30) days from April 12, 1988. Official receipts of payments thereof shall be
presented and delivered to CAPITAL BANK;
The payment of any taxes and assessments on the two parcels of land may be
advanced by CAPITAL BANK provided that TATIC SQUARE will execute a Promissory
Note in favor of CAPITAL BANK in the amount corresponding thereto. The amount
covered by this Promissory Note shall be deducted from the balance of the purchase
price payable by TATIC SQUARE to the OWNERS;
8. The BROKER and TATIC SQUARE shall undertake to remove any and all
occupants/tenants of the two (2) parcels of land whether legally or illegally residing
thereat within sixty (60) days from April 12, 1988 with the assistance and
cooperation of the OWNERS;
9. Any and all expenses to be incurred in complying with the undertakings mentioned
in paragraphs 6, 7 and 8 shall be deducted from the purchase price of the two
parcels of land, the expenses of which is estimated to be SEVEN HUNDRED NINETY
THOUSAND PESOS (P790,000.00). If the said amount of P790,000.00 would not be
sufficient, the other expenses connected therewith shall be taken and/or deducted
from the amount due the BROKER.3
On the same day, the Spouses Flores executed a deed of absolute sale over the two parcels
of land for the price of P5,700,000.00 in favor of TATIC. 4 The Spouses Flores, thereafter,
turned over the custody of the owner's copy of their titles to the Bank. 5
Although the torrens titles over the lots were still in the custody of the Bank, TATIC, as
vendor, and petitioner VELI, as vendee, executed a deed of absolute sale 6 on April 14, 1988,
in which TATIC sold the properties to the petitioner for P6,295,224.88, receipt of which was
S a l e s P a r t V I P a g e | 38
acknowledged in the said deed by TATIC. The latter warranted in the said deed that there
were valid titles to the property and that it would deliver possession thereof to the petitioner.
The parties executed a deed entitled "Addendum" in which they agreed on the following:
1. TATIC SQUARE represents and warrants that the titles covering the two (2)
parcels of land are free from any and all liens and encumbrances except the
mortgage which may be subsisting in favor of CAPITAL BANK. TATIC SQUARE shall
cause the registration and transfer of the titles covering the two (2) parcels of land in
its name;
TATIC SQUARE undertakes to remove all the occupants/tenants whether legally or
illegally residing thereat within sixty (60) days from April 12, 1988. Otherwise, VELI
shall have the right and authority to withhold payment of the remaining balance of
the purchase price of the sale of the entire project;
2. In consideration of the execution of the Deed of Sale over the two (2) parcels of
land (Annex "A" hereof), VELI hereby absorbs and assumes to pay the loan
obligations of TATIC SQUARE with CAPITAL BANK in the principal amount of FIVE
MILLION SEVEN HUNDRED FIFTY-SEVEN THOUSAND EIGHT HUNDRED TWENTY-
SEVEN & 63/100 (P5,757,827.63) plus whatever interests and other charges that
may be imposed thereon by CAPITAL BANK including the release of the mortgage
constituted over the property upon full payment of the loan;
3. TATIC SQUARE, likewise, represents and warrants that it is the absolute owner of
the entire project known as TATIC WALK-UP CONDOMINIUM including its accessories
and appurtenance thereto;
4. In accordance with the Deed of Sale of the entire project (Annex "B" hereof), VELI
shall promptly pay on its due date TATIC SQUARE, the remaining balance of the
purchase price in the amount of P400,000.00 subject to adjustment set forth in the
next preceding paragraph.7
On November 11, 1988, VELI, as vendor, through its president, petitioner Virgilio Cervantes,
and respondent Genuino Ice Co., Inc., as vendee, executed a deed of absolute sale 8 over the
parcel of land covered by TCT No. 241846 for the price of P4,000,000.00, receipt of which
was acknowledged by petitioner VELI. On the same day, the respondent and petitioner VELI
executed a deed of assignment of rights in which the latter assigned in favor of the
respondent, for and in consideration of P4,000,000.00, all its rights and interests under the
Deed of Absolute Sale executed on April 13, 1988 by the Spouses Flores and the deed of
absolute sale executed by TATIC in its favor, insofar as that lot covered by TCT No. 241846
only was concerned.9

In the meantime, the respondent, through counsel, wrote petitioner VELI and made the
following demands:
In view of the foregoing facts, demand is hereby made upon you to pay to the BIR
the capital gains tax amounting to P285,000.00 and deliver to us the receipt and/or
clearance thereof, plus the interests for all registration fees on account of delay in
the payment of the capital gains tax and the 1% documentary stamp tax for the sale
of the property from your company to our client or to give them a BIR clearance
regarding payment of all said taxes within five (5) days from receipt hereof;
otherwise, much to our regret, we will be constrained to file legal action for specific
performance and damages against your company in order to protect the interest of
our client.10
In a letter to the respondent, petitioner VELI, through counsel, rejected the former's
demand.11
On June 24, 1990, the respondent filed a Complaint against petitioner VELI and its president,
Virgilio Cervantes, for specific performance and damages in the Regional Trial Court (RTC) of
Quezon City. The respondent alleged, inter alia, that petitioner VELI failed (a) to transfer title
to and in the name of the respondent over the property covered by TCT No. 241846 despite
the lapse of a reasonable time; (b) to cause the eviction/removal of the squatters/occupants
on the property; and (c) to pay the capital gains tax and other assessments due to effectuate
the transfer of the titles of the property to and in its name. The respondent prayed that, after
due proceedings, judgment be rendered in its favor, thus:
WHEREFORE, premises considered, it is most respectfully prayed that, after trial,
judgment be rendered against defendants to, jointly and severally, indemnify plaintiff
as follows:
I. FIRST CAUSE OF ACTION
a) To effect or cause the transfer of title in favor of the plaintiff;
b) To pay the capital gains tax and other requirements or expenses
necessary to effect said transfer.
II. SECOND CAUSE OF ACTION
a) To direct defendants to cause the removal or eviction of the squatters or
unlawful occupants for (sic) the area;
S a l e s P a r t V I P a g e | 39
b) In the alternative, if eviction is not accomplished to forfeit the amount of
P300,000 in favor of plaintiff.
III. THIRD CAUSE OF ACTION
a) To pay actual damages in the amount of no less than FIVE HUNDRED
THOUSAND PESOS;
b) To pay exemplary damages in the amount of FIVE HUNDRED THOUSAND
PESOS;
c) Attorney's fees in the amount of P250,000;
d) Costs of suits.
Plaintiff further prays for such relief or reliefs as may be just and equitable under the
premises.12
In their answer13 to the complaint, the petitioners alleged that the respondent had no cause
of action against them because (a) petitioner VELI was exempt from the payment of capital
gains tax; (b) the Spouses Flores and Tobias were liable for the payment of capital gains tax;
and (c) the Spouses Flores and Tobias were responsible for the eviction of the
occupants/squatters from the property.
The trial court rendered judgment, amended per its Order dated April 17, 1995, in favor of
the respondent. The fallo of the decision, as amended, reads:
WHEREFORE, foregoing considered, judgment is hereby rendered in favor of plaintiff
ordering defendants to cause the transfer of the title to the plaintiff. The payment of
the capital gains tax shall be paid by the defendants. Further, defendants are hereby
ordered to remove or evict or cause the removal or eviction of the squatters or
unlawful occupants of the area, otherwise, the amount of P300,000.00 shall be
deemed forfeited in favor of plaintiff; to pay attorney's fees of P20,000.00 and to pay
the costs.
SO ORDERED.14
The trial court held that the petitioners were liable for the payment of the capital gains tax,
and that the respondent was not privy to the deeds of absolute sale executed by the Spouses
Flores and TATIC, and TATIC and petitioner VELI, and as such is not bound by the said

deeds; neither could the respondent enforce the same against the Spouses Flores, TATIC
and petitioner VELI.
In due course, the petitioners appealed to the CA which rendered judgment, on July 19,
2001, affirming, with modification, the appealed decision. The CA held that the petitioners
were liable for the expenses for the registration of the sale. It also ruled that the respondent
was not bound by the deed of absolute sale executed by TATIC and the petitioners because
it was not a party thereto, and that the latter were obliged to cause the eviction of the
squatters from the property.15
The petitioners, in the instant petition for review, raise the following issues for resolution: (a)
whether or not petitioner VELI is obliged to pay for the expenses for transfer of the property
and the issuance of the titles to and under the name of the respondent; (b) whether or not
the petitioners are liable for the capital gains tax for the sale between petitioner VELI and the
respondent; and (c) whether or not the petitioners are obliged to evict the remaining
squatters from the land.
Petitioner VELI is Obliged to Cause the Registration of the November 11, 1988
Deed of Absolute Sale in Favor of Respondent, the Issuance of a Torrens Title
in the Name of Respondent and the Eviction of the Tenants/Occupants
from the Property at the Expense of the Petitioner.
The petitioners assail the ruling of the CA that, under Article 1487 of the New Civil Code,
petitioner VELI, as vendor, is liable for the expenses for the registration of the third deed of
sale in favor of the respondent, as vendee, and to secure a torrens title over the property to
and under the name of the latter. The petitioners contend that, under the MOA executed by
the Spouses Flores, Tobias (the broker), the Bank and TATIC, the April 14, 1988 agreement
and the first deed of sale executed by the Spouses Flores and Tobias, the latter obliged
themselves to spend for the registration of the said deed of absolute sale and for the
issuance of torrens titles over the properties in the name of the vendees; and further obliged
themselves to cause the eviction of the tenants/occupants from the property within sixty
days from April 12, 1988. The petitioners, likewise, emphasize that, under the April 14, 1988
agreement of the petitioners and TATIC, the latter obliged itself to cause and spend for the
registration of the second deed of sale between petitioner VELI and TATIC, and the issuance
of the titles over the property in favor of petitioner VELI; and to cause the eviction of the
tenants/occupants from the property within sixty days from April 12, 1988. Also, under the
deed of assignment of rights executed by petitioner VELI and the respondent, the latter
acquired the rights and interests of petitioner VELI under the deeds of sale executed by the
Spouses Flores in favor of TATIC, and by TATIC in favor of petitioner VELI.
S a l e s P a r t V I P a g e | 40
The petitioners aver that, under the deed of sale they executed in favor of the respondent,
as well as the acts of the parties before, contemporaneous with and subsequent to the
execution of the said deed, they cannot be held liable for the expenses for the registration of
the third deed of sale, the transfer of titles to and under the name of the respondent, for
payment of the capital gains tax and the eviction of the tenants/occupants on the property.
Such acts include the execution of the following: the addendum to the said deed of sale; the
deed of assignment of rights executed by petitioner VELI in favor of the respondent; and the
deeds executed by the Spouses Flores, TATIC and Tobias.
The petitioners contend that the CA erred in ruling that the respondent is not bound by the
deeds executed by the Spouses Flores, TATIC and Tobias, and by TATIC and petitioner VELI
simply because the respondent was not a party to the said deeds. The petitioners insist that
the respondent acquired the rights and interests of its predecessors; and, being the
vendee/owner of the property covered by TCT No. 241846, the petitioners had the right to
enforce the said contracts against its predecessors.
We are not in full accord with the petitioners. It bears stressing that there are three separate
deeds of absolute sale on record, to wit: first, the April 13, 1988 deed of absolute sale
executed by the Spouses Flores and TATIC; second, the April 14, 1988 deed of absolute sale
executed by TATIC in favor of petitioner VELI; and third, the November 11, 1988 deed of
absolute sale between petitioner VELI, as vendor, and the respondent, as vendee, over the
property covered by TCT No. 241846. Under the April 13, 1988 MOA executed by the
Spouses Flores, Tobias, TATIC and the Bank, the Spouses Flores and Tobias obliged
themselves to spend for and cause the registration of the first deed of absolute sale, to cause
the issuance of the torrens titles over the property to and under the name of TATIC, as
vendee, and to pay the capital gains tax on the said sales. Tobias and TATIC bound and
obliged themselves to cause the eviction of the tenants/occupants on the property within
sixty days from April 12, 1988, with the assistance of the Spouses Flores. On the other hand,
under the April 14, 1988 agreement of TATIC and petitioner VELI, TATIC obliged itself to
spend for the registration of the second deed of absolute sale and the issuance of the titles
over the property to and under the name of petitioner VELI, and to cause the eviction of the
tenants/occupants from the property within sixty days from April 12, 1988. TATIC did not
bind itself to pay the capital gains tax for the said sale.
Indeed, under the third deed of absolute sale, petitioner VELI did not oblige itself to spend
for the registration of the said deed; to secure a torrens title over the property to and under
the name of the respondent; or to cause the eviction of the tenants/occupants on the
property. Nevertheless, petitioner VELI is liable for the said expenses because, under Article
148716 of the New Civil Code, the expenses for the registration of the sale should be
shouldered by the vendor unless there is a stipulation to the contrary. In the absence of any

stipulation of the parties relating to the expenses for the registration of the sale and the
transfer of the title to the vendee, Article 1487 shall be applied in a supplementary manner. 17
Under Article 149518 of the New Civil Code, petitioner VELI, as the vendor, is obliged to
transfer title over the property and deliver the same to the vendee. While Article 1498 19 of
the New Civil Code provides that the execution of a notarized deed of absolute sale shall be
equivalent to the delivery of the property subject of the contract, the same shall not apply if,
from the deed, the contrary does not appear or cannot clearly be inferred. In the present
case, the respondent and petitioner VELI agreed that the latter would cause the eviction of
the tenants/occupants and deliver possession of the property. It is clear that at the time the
petitioner executed the deed of sale in favor of the respondent, there were
tenants/occupants in the property. It cannot, thus, be concluded that, through the execution
of the third deed of sale, the property was thereby delivered to the respondent.
Petitioner VELI is obliged to cause the eviction of the tenants/occupants unless there is a
contrary agreement of the parties. Indeed, under the addendum executed by petitioner VELI
and the respondent, the latter was given the right to withhold P300,000.00 of the purchase
price until after petitioner VELI cleared the property of squatters.
While it is true that the respondent acquired the rights and interests of TATIC under the first
deed of sale and that of petitioner VELI under the second deed of sale by virtue of the deed
of assignment of rights executed by the petitioners and the respondent, the latter cannot
enforce the terms and conditions of the said deeds. It must be stressed that there is no
showing in the records that the Spouses Flores, Tobias and TATIC conformed to the said
deed of assignment of rights or that the same was registered in the office of the Register of
Deeds in accordance with Article 162520 of the New Civil Code.
Moreover, the execution, by petitioner VELI and the respondent, of such deed of assignment
of rights did not relieve the said petitioner of its obligation to clear the property of
tenants/occupants. This is because the following agreement was embodied in their
addendum:
NOW THEREFORE, for and in consideration of the foregoing premises, the Transferee
hereby retains and holds from the Transferor the amount of Three Hundred
Thousand & 00/100 Pesos (P300,000.00), from the purchase price due the
Transferor until after the premises have been rid of and cleared from squatters
occupying therein.
That after the said parcel of land has been cleared of squatters, the Transferee shall
immediately remit to the Transferor the aforesaid sum of Three Hundred Thousand &
00/100 Pesos (P300,000.00) without need of further act or deed.21
S a l e s P a r t V I P a g e | 41
Petitioner VELI is Not Liable for 
Payment of the Capital Gains Tax for the Third Sale
We agree with the petitioners' contention that petitioner VELI is not liable for the payment of
capital gains tax for the third deed of sale. A capital gains tax is a final tax assessed on the
presumed gain derived by citizens and resident aliens, as well as estates and trusts, from the
sale or exchange of real property.22 Under the first sale, per the agreement of the Spouses
Flores, TATIC, and Tobias, the said spouses were obliged to pay the capital gains tax.
However, under the deed of absolute sale for the second sale, TATIC was not obliged to pay
the said tax. The Court notes that in answer to the respondent's demand letter, petitioner
VELI claimed that such tax could not be assessed against it or against TATIC for the reason
that they are corporations and, therefore, exempt from the payment of capital gains tax for
any sale or exchange or disposition of property.
It is settled that only laws existing at the time of the execution of a contract are applicable
thereto and not later statutes, unless the latter are specifically intended to have retroactive
effect.23 When the first and second deeds of absolute sale took place in 1988, the 1977
National Internal Revenue Code (NIRC), as amended by Batas Pambansa Blg. 37 and
Executive Order No. 237 was still in effect. Under Sections 21(e) 24 and 34(h)25 of the 1977
NIRC, as amended, the Spouses Flores, as vendors, were liable for the payment of capital
gains tax. In the second sale, however, TATIC was not similarly liable because while Article
1487 of the Civil Code provides that the seller is obliged to pay the capital gains tax based on
its obligation to transfer title over the property to the vendee under Sections 21(e) and 34(h)
of the 1977 NIRC, the payment of capital gains tax from the sale, exchange of disposition of
real property devolved only upon individual taxpayers. In fact, the Bureau of Internal
Revenue (BIR), in response to the queries of several corporations which had sold, exchanged
or disposed of their real properties, more particularly in BIR Ruling Nos. 159 (September
13, 1985), 127 (July 12, 1983), 191 (November 15, 1983), 195 (November 15, 1983), 60
(May 12, 1986), 177 (September 17, 1986), and 415-87 (December 23, 1987), definitely
ruled that the corporations were exempt from the payment of capital gains tax. Their income
from the sale or exchange or disposition of real property was treated as ordinary income, and
was taxed as such. One of the opinions of the BIR Commissioner reads:
Ruling No. 159
September 13, 1985
Gentlemen:

In reply to your letter dated September 11, 1985, I have the honor to inform you
that Revenue Regulations No. 8-79 implementing Section 34(h) of the Tax Code, as
amended by Batas Pambansa Blg. 37 is explicit that only natural persons or
individuals are liable to the final capital gains tax prescribed therein. Such being the
case, the gains derived by your client, the Religious of the Virgin Mary from the sale
of its real property in Balanga, Bataan, is not subject to the final capital gains tax
prescribed by Section 34(h) of the Tax Code, as amended by Batas Pambansa Blg.
37 but to the ordinary corporate income tax prescribed under Section 24(a) of the
same Code, as amended.
Very truly yours,
(Sgd.)
RUBEN B. ANCHETA
Acting Commissioner
This is the reason why, in the second sale, neither TATIC nor petitioner VELI paid any capital
gains tax. Similarly, in the third sale, i.e., between petitioner VELI and the respondent,
petitioner VELI, being a corporation, was not obliged to pay the capital gains tax. However,
petitioner VELI, as seller, should have included in its ordinary income tax return, whatever
gain or loss it incurred with respect to the sale of the property in dispute, pursuant to Section
24(a)26 of the 1977 NIRC, as amended.
We do not agree with the ruling of the CA that, under Section 24(d) of the 1997 NIRC,
previously Section 34(h) of the 1977 NIRC, petitioner VELI is obliged to pay capital gains tax
for its sale of the property to the respondent. Section 34(h) of the 1977 NIRC, as amended
by B.P. Blg. 37 reads as follows:
(h) The provision of paragraph (b) of this Section to the contrary notwithstanding,
net capital gains from the sale or other disposition of real property by citizens of the
Philippines or resident alien individuals shall be subject to the final income tax rates
prescribed as follows:
NET CAPITAL GAINS RATES
On the first P100,000 or less 10%
On any amount over P100,000 20%
S a l e s P a r t V I P a g e | 42
Such tax shall be in lieu of the tax imposed under Section 21 of this Code; Provided,
however, That the tax liability, if any, on gains from sales or other dispositions of real
property to the government or any of its political subdivisions or agencies or to
government-owned and controlled corporations shall be determined either under
Section 21 hereof or under this Section, at the option of the taxpayer; Provided,
further, That if the taxpayer elects to report such gains in accordance with the
provisions of Section 43(b), the amount of the tax which shall be paid on each
installment shall be the proportion of the tax herein imposed, which the installment
payment received bears to the total selling price; Provided, finally, That failure on the
part of the seller to pay tax imposed herein on any gains returnable under the
installment method will automatically disqualify the seller-taxpayer from paying the
tax in installments and the unpaid portion of the tax shall immediately be due and
demandable. The tax herein imposed shall be returned and paid in accordance with
Sections 45(c)27 and 51(a)(4) of this Code.
No registration of any document transferring real property shall be effected by
Register of Deeds unless the Commissioner or his duly authorized representative has
certified that such transfer has been reported and the tax herein imposed, if any, has
been paid; in case of deferred-payment sales of real property where the vendor
retains title to the property, the vendee shall furnish the Commissioner with a copy
of the instrument of sale within the same period prescribed for payment of the tax
herein imposed.
Section 24(D) of the 1997 NIRC, which refers to the capital gains from sale of real property,
is found in the Title "Chapter III Tax on Individuals," and is herein quoted:
(D) Capital Gains from Sale of Real Property. –
(1) In General. – The provisions of Section 39(B) notwithstanding, a final tax of six
percent (6%) based on the gross selling price or current fair market value as
determined in accordance with Section 6(E) of this Code, whichever is higher, is
hereby imposed upon capital gains presumed to have been realized from the sale,
exchange, or other disposition of real property located in the Philippines, classified as
capital assets, including pacto de retro sales and other forms of conditional sales, by
individuals, including estates and trusts: Provided, That the tax liability, if any, on
gains from sales or other disposition of real property to the government or any of its
political subdivisions or agencies or to government-owned or controlled corporations
shall be determined either under Section 24(A)or under this Subsection, at the option
of the taxpayer.
 S a l e s P a r t V I P a g e | 43

As pointed out earlier, the sale between petitioner VELI and the respondent occurred in
November 11, 1988. At that point in time, it was the 1977 NIRC as amended, which was in
effect. Hence, the applicable law is Section 34(h). Section 24(d) of the 1997 NIRC, which
requires corporations to pay capital gains tax at rates provided for in Chapter IV, Section 27
thereof, cannot be applied retroactively.28 The latter provision reads:

CHAPTER IV – TAX ON CORPORATIONS

Section 27. Rates of Income Tax on Domestic Corporations. –

(D) Rates of Tax on Certain Passive Incomes. –

(5) Capital Gains Realized from the Sale, Exchange or Disposition of Lands and/or
Buildings. A final tax of six percent (6%) is hereby imposed on the gain presumed to
have been realized on the sale, exchange or disposition of lands and/or buildings
which are not actually used in the business of a corporation and are treated as
capital assets, based on the gross selling price or fair market value as determined in
accordance with Section 6(E) of this Code, whichever is higher, of such lands and/or
buildings.

The gains that a corporation earned in the sale, exchange or disposition of the real properties
it made should be included in the Corporation's return, pursuant to Sections 24(a) and 45 of
the 1977 NIRC, as amended.29

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The decision of the
Court of Appeals in CA-G.R. CV No. 51933 is hereby AFFIRMED WITH MODIFICATION. That
portion of the Decision of the Court of Appeals mandating petitioner Vive Eagle Land, Inc. to
pay capital gains tax for the November 11, 1988 sale of the property covered by TCT No.
241846 to respondent Genuino Ice Co., Inc. is DELETED. No costs.

SO ORDERED.

Puno, J., Austria-Martinez, Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.

 S a l e s P a r t V I P a g e | 44

[No. 13203. September 18, 1918.] 8.ID.; PERFORMANCE.—The contract between the parties was for 80 drums of caustic soda,
76 per cent "Carabao" brand, at the price of $9.75 per one hundred pounds, cost, insurance,
BEHN, MEYER & Co. (I/ro.), plaintiff and appellant, vs. TEODORO R. YANGCO, and freight included, to be shipped during March, 1916, to be delivered at Manila and paid
defendant and appellee. for on delivery of the documents. The soda which the plaintiff offered to defendant was not
of the "Carabao" brand. The merchandise was not shipped in March, 1916, but in April, 1916.
1.CONTRACTS OF SALE; PLACE OF DELIVERY.—Determination of the place of delivery always
The plaintiff failed to deliver at Manila the goods contracted for. Held: That the buyer may
resolves itself into a question of fact.
rescind the contract of sale because of a breach in substantial particulars going to the
2.ID.; ID.—If the contract be silent as to the person or mode by which the goods are to be essence of the contract.
sent, delivery by the vendor to a common carrier in the usual and ordinary course of
APPEAL from a judgment of the Court of First Instance of Manila. Ostrand, J.
business, tranfers the property to the vendee.
The facts are stated in the opinion of the court.
3.ID.; ID.; PAYMENT OF FREIGHT—A specification in a contract relative to the payment of
freight can be taken to indicate the intention of the parties in regard to the place of delivery. Crossfield & O'Brien for appellant.
If the buyer is to pay the freight, it is reasonable to suppose that he does so because the
goods become his at the point of shipment. On the other hand, if the seller is to pay the Charles C. Cohn for appellee.
freight, the inference is equally strong that the duty of the seller is to have the goods
transported to their ultimate destination and that title to property does not pass until the MALCOLM, J.:
goods have reached their destination.
The first inquiry to be determined is what was the contract between the parties.
4.ID.; ID.; "C. I. F." CoNSTRUED.—The letters "c. i. f." found in British contracts stand for
costs, insurance, and freight. They signify that the price fixed covers not only the cost of the The memorandum agreement executed by the duly authorized representatives of the parties
goods, but the expense of freight and insurance to be paid by the seller. (Ireland vs. to this action reads:
Livingston, L. R., 5 EL L., 395.)
Contract No. 37.
5ID.; ID.; "F. O. B." CONSTRUED.—In mercantile contracts of American origin, the letters "F,
O. B.," standing for the words "Free on Board," are frequently used. The meaning is that the MANILA,     7 de marzo, de 1916.
seller shall bear all expenses until the goods are delivered where they are to be "F. O. B."
According as to whether the goods are to be delivered "F. O. B." at the point of shipment or
Confirmanos haber vendido a Bazar Siglo XX, 80 drums Caustic Soda 76 per cent
at the point of destination determines the time when property passes.
"Carabao" brand al precio de Dollar Gold Nine and 75/100 per 100-lbs., c.i.f. Manila,
pagadero against delivery of documents. Embarque March, 1916.
6.ID.; ID.—Both of the terms "C. I. F." and "F. 0. B." merely make rules of presumption
which yield to proof of contrary intention. "The question, at last, is one of intent, to be
ascertained by a consideration of all the circumstances." ("Benjamin on Sales," par. 329.) Comprador Bazar Siglo XX
de Teodoro R. Yangco
7.ID.; TIME OF DELIVERY.—The decision of the United States Supreme Court in Norrington J. Siquia
vs. Wright ([1885], 115 U. S. 188) can be noted.
                Vendores
BEHN, MEYER & CO. (Ltd.)

            O. LOMBECK.
This contract of sale can be analyzed into three component parts.
1. SUBJECT MATTER AND CONSIDERATION.
Facts. — The contract provided for "80 drums Caustic Soda 76 per cent "Carabao" brand al
precio de Dollar Gold Nine and 75/100 1-lbs."
Resorting to the circumstances surrounding the agreement are we are permitted to do, in
pursuance of this provision, the merchandise was shipped from New York on the
steamship Chinese Prince. The steamship was detained by the British authorities at Penang,
and part of the cargo, including seventy-one drums of caustic soda, was removed. Defendant
refused to accept delivery of the remaining nine drums of soda on the ground that the goods
were in bad order. Defendant also refused the optional offer of the plaintiff, of waiting for the
remainder of the shipment until its arrival, or of accepting the substitution of seventy-one
drums of caustic soda of similar grade from plaintiff's stock. The plaintiff thereupon sold, for
the account of the defendant, eighty drums of caustic soda from which there was realized
the sum of P6,352.89. Deducting this sum from the selling price of P10,063.86, we have the
amount claimed as damages for alleged breach of the contract.
Law. — It is sufficient to note that the specific merchandise was never tendered. The soda
which the plaintiff offered to defendant was not of the "Carabao" brand, and the offer of
drums of soda of another kind was not made within the time that a March shipment,
according to another provision the contract, would normally have been available.
2. PLACE OF DELIVERY.
Facts. — The contract provided for "c.i.f. Manila, pagadero against delivery of documents."
Law. — Determination of the place of delivery always resolves itself into a question of act. If
the contract be silent as to the person or mode by which the goods are to be sent, delivery
by the vendor to a common carrier, in the usual and ordinary course of business, transfers
the property to the vendee. A specification in a contact relative to the payment of freight can
be taken to indicate the intention of the parties in regard to the place of delivery. If the
buyer is to pay the freight, it is reasonable to suppose that he does so because the goods
become his at the point of shipment. On the other hand, if the seller is to pay the freight, the
inference is equally so strong that the duty of the seller is to have the goods transported to
their ultimate destination and that title to property does not pass until the goods have
reached their destination. (See Williston on Sales, PP. 406-408.)
S a l e s P a r t V I P a g e | 45
The letters "c.i.f." found in British contracts stand for cost, insurance, and freight. They
signify that the price fixed covers not only the cost of the goods, but the expense of freight
and insurance to be paid by the seller. (Ireland vs.Livingston, L. R., 5 H. L., 395.) Our instant
contract, in addition to the letters "c.i.f.," has the word following, "Manila." Under such a
contract, an Australian case is authority for the proposition that no inference is permissible
that a seller was bound to deliver at the point of destination. (Bowden vs. Little, 4 Comm.
[Australia], 1364.)
In mercantile contracts of American origin the letters "F.O.B." standing for the words "Free
on Board," are frequently used. The meaning is that the seller shall bear all expenses until
the goods are delivered where they are to be "F.O.B." According as to whether the goods are
to be delivered "F.O.B." at the point of shipment or at the point of destination determines the
time when property passes.
Both the terms "c.i.f." and "F.O.B." merely make rules of presumption which yield to proof of
contrary intention. As Benjamin, in his work on Sales, well says: "The question, at last, is one
of intent, to be ascertained by a consideration of all the circumstances." For instance, in a
case of Philippine origin, appealed to the United States Supreme Court, it was held that the
sale was complete on shipment, though the contract was for goods, "F.O.B. Manila," the
place of destination the other terms of the contract showing the intention to transfer the
property. (United States vs. R. P. Andrews & Co. [1907], 207 U.S., 229.)
With all due deference to the decision of the High Court of Australia, we believe that the
word Manila in conjunction with the letters "c.i.f." must mean that the contract price,
covering costs, insurance, and freight, signifies that delivery was to made at Manila. If the
plaintiff company has seriously thought that the place of delivery was New York and Not
Manila, it would not have gone to the trouble of making fruitless attempts to substitute goods
for the merchandise named in the contract, but would have permitted the entire loss of the
shipment to fall upon the defendant. Under plaintiffs hypothesis, the defendant would have
been the absolute owner of the specific soda confiscated at Penang and would have been
indebted for the contract price of the same.
This view is corroborated by the facts. The goods were not shipped nor consigned from New
York to plaintiff. The bill of lading was for goods received from Neuss Hesslein & Co. the
documents evidencing said shipment and symbolizing the property were sent by Neuss
Hesslein & Co. to the Bank of the Philippine Islands with a draft upon Behn, Meyer & Co. and
with instructions to deliver the same, and thus transfer the property to Behn, Meyer & Co.
when and if Behn, Meyer & Co. should pay the draft.
The place of delivery was Manila and plaintiff has not legally excused default in delivery of
the specified merchandise at that place.
 S a l e s P a r t V I P a g e | 46

3. TIME OF DELIVERY.

Facts. — The contract provided for: " Embarque: March 1916," the merchandise was in fact
shipped from New York on the Steamship Chinese Prince on April 12, 1916.

Law. — The previous discussion makes a resolution of this point unprofitable, although the
decision of the United States Supreme Court in Norrington vs. Wright (([1885], 115 U.S.,
188) can be read with profit. Appellant's second and third assignments of error could, if
necessary, be admitted, and still could not recover.

THE CONTRACT.

To answer the inquiry with which we begun this decision, the contract between the parties
was for 80 drums of caustic soda, 76 per cent "Carabao" brand, at the price of $9.75 per one
hundred pounds, cost, insurance, and freight included, to be shipped during March, 1916, to
be delivered to Manila and paid for on delivery of the documents.

PERFORMANCE.

In resume, we find that the plaintiff has not proved the performance on its part of the
conditions precedent in the contract. The warranty — the material promise — of the seller to
the buyer has not been complied with. The buyer may therefore rescind the contract of sale
because of a breach in substantial particulars going to the essence of the contract. As
contemplated by article 1451 of the Civil Code, the vendee can demand fulfillment of the
contract, and this being shown to be impossible, is relieved of his obligation. There thus
being sufficient ground for rescission, the defendant is not liable.

The judgment of the trial court ordering that the plaintiff take nothing by its action, without
special finding as to costs, is affirmed, with the costs of this instance. Against the appellant.
So ordered.

Arellano, C.J., Torres, Johnson, Street and Avanceña, JJ., concur.


[No. L-8717. November 20, 1956]
GENERAL FOODS CORPORATION, plaintiff and appellant, vs. NATIONAL COCONUT
CORPORATION, defendant and appellee.
SALE; PAYMENT OF PRICE ACCORDING TO “NET LANDED WEIGHT;" ABSENCE OF PROOF
THAT SHORTAGE IN WEIGHT WAS DUE TO RISKS OF VOYAGE; VENDORS BEARS RISK OF
Loss.—Where the parties agreed that the payment of the price of the copra sold was to be
according to the “net landed weight” upon arrival in New York, the vendor has the burden of
proof to show that the shortage in weight upon arrival was due to risks of the voyage and
not to the natural drying up of the copra while in transit, or to reasonable allowances for
errors in the weighing of the gross cargo and empty bags in Manila. In the absence of such
proof the net landed weight of the shipment in New York should control, as stipulated in the
agreement, and that therefore, the vendor should be held liable for the amount which it had
overdrawn from the vendee’s letter of credit covering the price.
APPEAL from a judgment of the Court of First Instance Of Manila. Narvasa, J.
The facts are stated in the opinion of the Court.
Ross, Selph, Carrascoso & Janda for appellant.
Government Corporate Counsel Ambrosio Padilla and First Assistant Corporate Counsel
Simeon M. Gopengco for appellee. Gen. Foods Corp. vs. Nat’l. Coconut Corp., 100 Phil. 337,
No. L-8717 November 20, 1956
DECISION
REYES, J. B. L., J.:
Appellant General Foods Corporation is a foreign corporation organized under the laws of the
State of Delaware, U. S. A., and licensed to do business in the Philippines;  chan
roblesvirtualawlibrarywhile Appellee National Coconut Corporation (otherwise called
NACOCO), was, on the date of the transaction in question, a corporation created by
Commonwealth Act No. 518, but later abolished and place in liquidation by Executive Order
No. 3727 dated November 24, 1950.
On September 23, 1947, Appellee sold to Appellant 1,500 (later reduced to 1,000) long tons
of copra, at $164 (later reduced to $163) per ton of 2,000 pounds, under the following terms
and conditions:
“CONTRACT NO. RH-3551
S a l e s P a r t V I P a g e | 47
FRANKLIN BAKER DIVISION OF GENERAL FOODS CORPORATION
15th & Bloomfield Streets
Hoboken, New Jersey
WE CONFIRM HAVING PURCHASED FOR YOU TODAY from Messrs. National Coconut
Corporation, Manila, Philippine Islands, through Mercantile, Inc., Manila, P. I.
COMMODITY:  COPRA — Fair Merchantable Quality, Basis
  6% F. F. A.
QUALITY:  As per rule 100 of National Institute of
  Oilseeds Products.
QUANTITY: Fifteen Hundred (1500) tons of 2,240 pounds   each. Seller has the option of
delivering 5 per   cent more or less of the contracted quantity,   such surplus or deficiency to
be settled as   follows:chanroblesvirtuallawlibrary On the basis of the delivered weight   up to
3 per cent at the contract price and any   excess or deficiency beyond this 3 per cent at   the
market price of the day of arrival at port of   discharge, this market price to be fixed by
the   Executive Committee of the National Institute   of Oilseeds Products. Each shipment to
be   treated as a separate contract.
PACKING:  In bulk. SHIPMENT: November, 1947, earlier   if possible, from Philippine Islands.
PRICE: One hundred and sixty-four dollars ($164) per   ton of 2,000 pounds, CIF New York.
PAYMENT:chanroblesvirtuallawlibrary  Buyers to open immediately by cable in favor   of
Sellers Irrevocable Letter of Credit through   the Philippine National Bank for 95 per cent
of   invoice value based on shipping weight in   exchange for the following
documents:chanroblesvirtuallawlibrary
1.  Provisional Invoice.
2.  Full set of negotiable ocean bills of lading, freight charges fully prepaid and showing the
material on board.
3.  Weight Certificate confirming quantity shown on invoice and bill of lading.
4.  Consular invoice or certificate of origin in duplicate.
5.  Loading survey report and weight certificate of Superintendence Corporation.
6.  Consular form No. 197 (Pure Food & Drug Certificate).
Balance due to be paid promptly upon ascertainment and based upon outturn weights and
quality at port of discharge.
WEIGHTS: Net landed weights.

SAMPLING: As per Rule 101 of National Institute   of Oilseeds Products.
INSURANCE:  Buyer to provide valid insurance for   Marine and War risks for 110 per   cent
of CIF contract value. Seller to   allow buyer from the CIF price an   amount equivalent to the
current rate   of insurance prevailing on the date of   shipment, in lieu of sellers
covering   usual marine insurance themselves.
CLAUSE PARAMOUNT:chanroblesvirtuallawlibrary  This contract is subject to published   rules
of the National Institute of   Oilseeds Products adopted and now   in force, which are hereby
made a   part hereof. Any dispute arising under   this contract shall be settled by a   Board of
Arbitrators selected by the   Chairman of the Foreign Commerce   Association of the San
Francisco   Chamber of Commerce and to be   judged according to the rules of the   National
Institute of Oilseeds   Products and the findings of said   Board will be final and binding
upon   all the signatories hereto, providing   such rules are not in conflict with   existing
Government regulations.
The above shipment to be made under Franklin Baker’s license No. 26429. This contract
covers the sale made by the Nacoco thru the Mercantile, Inc. dated September 9, 1947 in the
Philippines.” (Exhibit “A”).
From November 14 to December 3, 1947, Appellee shipped 1054.6278 short tons of copra
to Appellant on board the S. S. “Mindoro”. The weighing of the cargo was done by the Luzon
Brokerage Co., in its capacity as agent of the General Superintendence Co., Ltd., of Geneva,
Switzerland, by taking the individual weight of each bag of copra and summing up the total
gross weight of the shipment, then weighing a certain number of empty bags to determine
the average tare of the empty bags, which was subtracted from the gross weight of the
shipment to determine the net weight of the cargo. On the strength of the net weigh thus
found, Appellee prepared and remitted to Appellant the corresponding bills of lading and
other documents, and withdrew from the latter’s letter of credit 95 per cent of the invoice
value of the shipment, or a total of $136,686.95.
Upon arrival in New York, the net cargo was reweighed by Appellant and was found to weigh
only 898.792 short tons. Deducting from the value of the shortage the sum of $8,092.02
received by Appellant from the insurer for 58.25 long tons lost or destroyed even before the
copra was loaded on board the vessel, Appellant demanded from Appellee the refund of the
amount of $24,154.59. Sometime after the receipt of Appellant’s demand, the Appellee,
through its officers-in-charge Jose Nieva, Sr., acknowledged in a letter liability for the
deficiency in the outturn weights of the copra and promised payment thereof as soon as
funds were available (Exhibit “B”). Then Appellee was, as already stated, abolished and went
into liquidation. Appellant submitted its claim to the Board of Liquidators, which refused to
pay the same; chan roblesvirtualawlibrarywherefore, it filed the present action in the Court of
First Instance of Manila to recover from Defendant-Appellee the amount of $24,154.49 and
the 17 per cent exchange tax thereon which, under the provisions of Republic Act 529, had
to be paid in order to remit said amount to the United States, plus attorney’s fees and costs.
S a l e s P a r t V I P a g e | 48
The Court a quo found for the Defendant and dismissed the complaint; chan
roblesvirtualawlibraryhence, this appeal by Plaintiff.
Plaintiff-Appellant’s theory is that although the sale between the parties quoted a CIF New
York price, the agreement contemplated the payment of the price according to the weight
and quality of the cargo upon arrival in New York, the port of destination, and that therefore,
the risk of the shipment was upon the seller. Defendant-Appellee, on the other hand, insists
that the contract in question was an ordinary C. I. F. agreement wherein delivery to the
carrier is delivery to the buyer, and that the shipment having been delivered to the buyer and
the latter having paid its price, the sale was consummated.
There is no question that under an ordinary C.I.F. agreement, delivery to the buyer is
complete upon delivery of the goods to the carrier and tender of the shipping and other
documents required by the contract and the insurance policy taken in the buyer’s behalf
(77 C.J. S. 983; chan roblesvirtualawlibrary46 Am. Jur. 313; chan roblesvirtualawlibraryII
Williston on Sales, 103 — 107). There is equally no question that the parties may, by express
stipulation or impliedly (by making the buyer’s obligation depend on arrival and inspection of
the goods), modify a CIF contract and throw the risk upon the seller until arrival in the port
of destination (77 CJS 983- 984; chan roblesvirtualawlibraryWilliston, supra, 116; chan
roblesvirtualawlibraryalso Willits vs. Abekobei, 189 NYS 525; chan
roblesvirtualawlibraryNational Wholesale Grocery Co. vs. Mann. 146 NE 791, Klipstein vs.
Dilsizian, 273 F 473).
In the transaction now in question, despite the quoted price of CIF New York, and the right
of the seller to withdraw 95 per cent of the invoice price from the buyer’s letter of credit
upon tender of the shipping and other documents required by the contract, the express
agreement that the “Net Landed Weights” were to govern, and the provision that the balance
of the price was to be ascertained on the basis of outturn weights and quality of the cargo at
the port of discharge, indicate an intention that the precise amount to be paid by the buyer
depended upon the ascertainment of the exact net weight of the cargo at the port of
destination. That is furthermore shown by the provision that the seller could deliver 5 per
cent more or less than the contracted quantity, such surplus or deficiency to be paid “on the
basis of the delivered weight”.
In our opinion, the governing rule may be found in the decision of the Supreme Court of New
York in the case of Warner, Barnes & Co. vs. Warner Sugar R. Co., 192 NYS 151, cited
in Appellee’s brief (pp. 16-19.) In said case, the parties had expressly agreed that the
payment of the price was to be according to “landed weights”, and that delivery of the goods
shipped from the Philippine Islands to New York was to be in New York ex vessel at
wharf; chan roblesvirtualawlibrarybut it was also agreed that the seller had the right, upon
presentation of full shipping documents, including full insurance, to draw upon
the Defendants for 90 per cent of the invoice price, evidencing an intent to give the buyers
dominion over the goods and to place the risk of loss upon them. The reasonable
construction given by the Court to this contract was that:
 S a l e s P a r t V I P a g e | 49

“though the seller was required to deliver the goods at a customary wharf in New York, and an admission of liability on the part of Appellee in the absence of a showing that Nieva was
the price could not be finally determined until the goods were landed, yet the property in the authorized to admit liability for the corporation, it is nevertheless competent evidence of the
goods and the risk of loss was intended to pass when the full shipping documents were intention of the parties, particularly the NACOCO, to be bound by the net landed weight or
presented, including an insurance policy. If the goods were totally lost, then by the express outturn weight of the copra at the port of discharge.
terms of the contract the buyers were to pay the full amount of invoice and if the goods were
With respect to Appellant’s claim for damages equivalent to the 17 per cent excise tax which
partially lost, then it is fairly inferable that, while payment was to be made according to
it has to pay in order to remit the sum of $24,154.59 to the United States, such excise tax is
landed weights, the seller should not be deprived of the right to show that these landed
no longer imposed in view of the trade (Laurel-Langley) agreement, so that it need not be
weights were diminished by loss or damage due to the risk of the voyage. Any other
taken into account.
construction of the contract would require the seller to provide insurance for the buyer for a
loss which falls not on the buyer, but on the seller.” (Emphasis supplied.) Wherefore, the judgment appealed from is reversed and the Appellee National Coconut
Corporation is ordered to pay the Appellant General Foods Corporation the equivalent in
The same could be said in the instant case. While the risk of loss was apparently placed on
Philippine currency of the amount of $24,154.59, with legal interest from the time of the
the Appellant after delivery of the cargo to the carrier, it was nevertheless agreed that the
filing of the complaint. No pronouncement as to costs. SO ORDERED.
payment of the price was to be according to the “net landed weight”. The net landed or
outturn weight of the cargo, upon arrival in New York, was 898.692 short tons. Although the
evidence shows that the estimated weight of the shipment when it left Manila was Parás, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador,
1,054.6278 tons, the Appellee had the burden of proof to show that the shortage in weight Concepcion, Endencia and Felix, JJ., concur.
upon arrival in New York was due to risks of the voyage and not the natural drying up of the
copra while in transit, or to reasonable allowances for errors in the weighing of the gross
cargo and the empty bags in Manila. In the absence of such proof on the part of the shipper-
Appellee, we are constrained to hold that the net landed weight of the shipment in New York
should control, as stipulated in the agreement, and that therefore, the Appellee should be
held liable for the amount of $24,154.59 which it had overdrawn from Appellant’s letter of
credit.
Appellee contends that as it was only the “balance due to be paid” that was to be ascertained
and based “upon outturn weights and quality at port of discharge”, as provided in the
contract, there was no more balance due to be ascertained at the port of discharge because
it had already received full payment of the copra it sent to the Appellant when it withdrew
$136,686.95 from the latter’s letter of credit. The argument is untenable. The provision
regarding the ascertainment of the balance due based upon outturn weight and quality of the
shipment at the port of discharge, should not be construed separately from the stipulation
that the “net landed weight” was to control. The manifest intention of the parties was for the
total price to be finally ascertained only upon determining the net weight and quality of the
goods upon arrival in New York, most likely because the cargo in question, being copra, by
nature dries up and diminishes in weight during the voyage; chan roblesvirtualawlibrarythat
no bulk weigher was available in Manila so that the best that could be done was to get the
gross weight of the shipment and deduct the average tare of the empty bags; chan
roblesvirtualawlibraryand that the buyer in New York had no agent in Manila to represent it
and protect its interest during the weighing of the cargo. The intention of the parties to be
bound by the outturn or net landed weight in New York is clearly shown in the letter
of Appellee’s then officer-in-charge Jose Nieva, Sr., acknowledging liability for the deficiency
in the outturn weight of the copra (Exhibit “B”). Although this letter may not be considered
 S a l e s P a r t V I P a g e | 50

Pacific Vegetable Oil Corporation v. Angel Singzon
GR. No. L-7917 (Unreported Case)
Facts:
This is an action instituted by the plaintiff, a foreign corporation, against the defendant to
recover the sum of P157,760 as damages suffered by plaintiff as a consequence of the failure
of the defendant to deliver 300 tons of copra which he sold and bound himself to deliver to
the plaintiff.
Singzon in August 1947, acting through a broker in San Francisco, sold to Pacific 500 tons of
copra for shipment in September and October 1947. The agreed price to be covered by an
irrevocable letter of credit for the contract price. Thus, pursuant to this, the Bank of
California, on behalf of Pacific, opened an irrevocable letter of credit with China Bank in the
Philippines. Singzon failed to ship the 500 tons of copra, but upon negotiation through the
broker, a conditional amicable settlement was arrived at under which Singzon promised to
ship on February 1948, the amount of 300 tons of copra with the understanding that if he
effectually ship said 300 tons of copra not later than February, the original contract would be
considered cancelled. But that should he fail to ship said 300 tons, Singzon shall pay Pacific
$10,000 as damages and shall furthermore be obliged to fulfill all his obligations under
original contract.
Singzon failed to ship and deliver the 300 tons of copra to Pacific according to their
agreement. Thereafter, Pacific demanded from Singzon the payment of $10,000 but he failed
and refused to ship the 500 tons of copra. As a result of the default, Pacific was forced to
purchase copra from the world marker and thus incurred additional expenses.
It appears from the facts that the copra in question was actually sold by the defendant to the
plaintiff in the US. It also appears that the contract was entered into in the US by appellee’s
broker and appellant’s representatives. It further appears that the payment of the price was
to be made at San Francisco, California, through a letter of credit to be opened at the Bank
of California. And with respect to the delivery of copra, it likewise appears that the price
agreed upon was $142 per 2,000 lbs., c.i.f. Pacific Coast. This means that the vendor was to
pay not only the cost of the goods, but also the freight and insurance expenses, and, it was
judicially interpreted, this is taken to indicate that the delivery is to be made at the port of
destination. It is therefore cleat that the contract covering the copra has not only entered
into in the US but it was agreed to be consummated there. It follows that Pacific has not
transacted business in the Philippines in contemplation of Sections 68 and 69 of the
Corporation Law which require any foreign corporation to obtain a license before it could
transact business, or before it could have personality to file suit in the Philippines.
It appearing that Pacific has not transacted business in the Philippines and as such it is not
required to obtain a license before acquiring personality to bring court action, it may be
stated that the appellant, even if a foreign corporation, can maintain the present action
because, as aptly said by this Court, “it was never the purpose of the Legislature to exclude a
foreign corporation which happens to obtain an isolated order for business in the Philippines,
from securing redress in the Philippine courts, and thus, in effect, to permit persons to avoid
their contracts made with such foreign corporation.” Wherefore, the decision appealed from
is reversed. Pacific is entitled to prosecute its claim in the Philippine courts against Singzon.

Hence, this action is filed by Pacific. Singzon, in defense, filed a motion to dismiss on the
ground that Pacific Vegetable Oil Corp. (Pacific) failed to obtain license to transact business in
the Philippines and consequently, it had no personality to file the action. RTC denied the
motion. It also denied MR. However, the Court of Appeals reversed and dismissed the case
holding that Pacific had no personality to institute the present case even if it afterwards
obtained a license to transact business upon the theory that this belated act did not have the
effect of curing the defect.

Issue: W/N appellant transacted business in the Philippines in contemplation of law?

Decision: No, it was transacted in the US.

 S a l e s P a r t V I P a g e | 51

G.R. No. 122463. December 19, 2005.* statement with respect to the area contained within its boundaries.—Where both the area
and the boundaries of the immovable are declared, the area covered within the boundaries of
RUDOLF LIETZ, INC., petitioner, vs. THE COURT OF APPEALS, AGAPITO BURIOL, the immovable prevails over the stated area. In cases of conflict between areas and
TIZIANA TURATELLO & PAOLA SANI, respondents. boundaries, it is the latter which should prevail. What really defines a piece of ground is not
the area, calculated with more or less certainty, mentioned in its description, but the
Contracts; Sales; Unit Price and Lump Sum Contracts; In a unit price contract, the statement
boundaries therein laid down, as enclosing the land and indicating its limits. In a contract of
of area of immovable is not conclusive and the price may be reduced or increased depending
sale of land in a mass, it is well established that the specific boundaries stated in the contract
on the area actually delivered.—Article 1539 governs a sale of immovable by the unit, that is,
must control over any statement with respect to the area contained within its boundaries. It
at a stated rate per unit area. In a unit price contract, the statement of area of immovable is
is not of vital consequence that a deed or contract of sale of land should disclose the area
not conclusive and the price may be reduced or increased depending on the area actually
with mathematical accuracy. It is sufficient if its extent is objectively indicated with sufficient
delivered. If the vendor delivers less than the area agreed upon, the vendee may oblige the
precision to enable one to identify it. An error as to the superficial area is immaterial. Thus,
vendor to deliver all that may be stated in the contract or demand for the proportionate
the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is
reduction of the purchase price if delivery is not possible. If the vendor delivers more than
the entirety thereof that distinguishes the determinate object.
the area stated in the contract, the vendee has the option to accept only the amount agreed
upon or to accept the whole area, provided he pays for the additional area at the contract Damages; The filing alone of a civil action should not be a ground for an award of moral
rate. damages in the same way that a clearly unfounded civil action is not among the grounds for
moral damages.—The Court of Appeals reversed the trial court’s dismissal of respondents
Same; Same; Same; Words and Phrases; While it is the rule that in a sale of real estate
Turatello and Sani’s counterclaim for moral and exemplary damages, attorney’s fees and
made for a lump sum and not a rate of certain sum for a unit of measure or number, there
litigation expenses. In awarding moral damages in the amount of P100,000 in favor of
shall be no increase or decrease in price although there be a greater or lesser area or
Turatello and Sani, the Court of Appeals justified the award to alleviate the suffering caused
number than that stated in the contract, the discrepancy must not be substantial; The use of
by petitioner’s unfounded civil action. The filing alone of a civil action should not be a ground
“more or less” or similar words in designating quantity covers only a reasonable excess or
for an award of moral damages in the same way that a clearly unfounded civil action is not
deficiency.—In some instances, a sale of an immovable may be made for a lump sum and
among the grounds for moral damages.
not at a rate per unit. The parties agree on a stated purchase price for an immovable the
area of which may be declared based on an estimate or where both the area and boundaries PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
are stated. In the case where the area of the immovable is stated in the contract based on
an estimate, the actual area delivered may not measure up exactly with the area stated in The facts are stated in the opinion of the Court.
the contract. According to Article 1542 of the 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  Ricardo J.M. Rivera Law Office for petitioner.
be no increase or decrease of the price although there be a greater or lesser area or number
   Zoilo C. Cruzat for respondents.
than that stated in the contract. However, the discrepancy must not be substantial. A vendee
of land, when sold in gross or with the description “more or less” with reference to its area,      Carpio, Villaraza & Cruz collaborating counsel for respondents. Rudolf Lietz, Inc. vs. Court
does not thereby ipso facto take all risk of quantity in the land. The use of “more or less” or of Appeals, 478 SCRA 451, G.R. No. 122463 December 19, 2005
similar words in designating quantity covers only a reasonable excess or deficiency.
DECISION
Same; Same; Same; Specific Boundaries; Where both the area and the boundaries of the
immovable are declared, the area covered within the boundaries of the immovable prevails Tinga, J.:
over the stated area—the specific boundaries stated in the contract must control over any

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, praying
for the annulment of the Decision1 dated April 17, 1995 and the Resolution2 dated October 25,
1995 of the Court of Appeals in CA-G.R. CV No. 38854. The Court of Appeals affirmed
the Decision3 in Civil Case No. 2164 of the Regional Trial Court (RTC), Branch 48, of Palawan
and Puerto Princesa City with the modification that herein respondents Tiziana Turatello and
Paola Sani are entitled to damages, attorney’s fees, and litigation expenses.
The dispositive portion of the RTC Decision  reads:
WHEREFORE, in view of the foregoing and as prayed for by the defendants, the instant
complaint is hereby DISMISSED. Defendant’s counterclaim is likewise DISMISSED. Plaintiff,
however, is ordered to pay defendant Turatello and Sani’s counsel the sum of ₱3,010.38
from August 9, 1990 until fully paid representing the expenses incurred by said counsel when
the trial was cancelled due to the non-appearance of plaintiff’s witnesses. With costs against
the plaintiff.
SO ORDERED.4
As culled from the records, the following antecedents appear:
Respondent Agapito Buriol previously owned a parcel of unregistered land situated at
Capsalay Island, Port Barton, San Vicente, Palawan. On August 15, 1986, respondent Buriol
entered into a lease agreement with Flavia Turatello and respondents Turatello and Sani, all
Italian citizens, involving one (1) hectare of respondent Buriol’s property. The lease
agreement was for a period of 25 years, renewable for another 25 years. The lessees took
possession of the land after paying respondent Buriol a down payment of ₱10,000.00. 5 The
lease agreement, however, was reduced into writing only in January 1987.
On November 17, 1986, respondent Buriol sold to petitioner Rudolf Lietz, Inc. the same
parcel of land for the amount of ₱30,000.00. The Deed of Absolute Sale  embodying the
agreement described the land as follows:
A parcel of land, consisting of FIVE (5) hectares, more or less, a portion of that parcel of land
declared in the name of Agapito Buriol, under Tax Declaration No. 0021, revised in the year
1985, together with all improvements thereon, situated at the Island of Capsalay, Barangay
Port Barton, municipality of San Vicente, province of Palawan which segregated from the
whole parcel described in said tax declaration, has the following superficial boundaries:
NORTH, Sec. 01-017; and remaining property of the vendor; EAST, by Seashore; SOUTH, 01-
020; and WEST, by 01-018 (now Elizabeth Lietz). 6
S a l e s P a r t V I P a g e | 52
Petitioner later discovered that respondent Buriol owned only four (4) hectares, and with one
more hectare covered by lease, only three (3) hectares were actually delivered to petitioner.
Thus, petitioner instituted on April 3, 1989 a complaint for Annulment of Lease with Recovery
of Possession with Injunction and Damages  against respondents and Flavia Turatello before
the RTC. The complaint alleged that with evident bad faith and malice, respondent Buriol sold
to petitioner five (5) hectares of land when respondent Buriol knew for a fact that he owned
only four (4) hectares and managed to lease one more hectare to Flavia Turatello and
respondents Tiziana Turatello and Paola Sani. The complaint sought the issuance of a
restraining order and a writ of preliminary injunction to prevent Flavia Turatello and
respondents Turatello and Sani from introducing improvements on the property, the
annulment of the lease agreement between respondents, and the restoration of the amount
paid by petitioner in excess of the value of the property sold to him. Except for Flavia
Turatello, respondents filed separate answers raising similar defenses of lack of cause of
action and lack of jurisdiction over the action for recovery of possession. Respondents
Turatello and Sani also prayed for the award of damages and attorney’s fees. 7
After trial on the merits, the trial court rendered judgment on May 27, 1992, dismissing both
petitioner’s complaint and respondents’ counterclaim for damages. Petitioner and
respondents Turatello and Sani separately appealed the RTC Decision to the Court of
Appeals, which affirmed the dismissal of petitioner’s complaint and awarded respondents
Turatello and Sani damages and attorney’s fees. The dispositive portion of the Court of
Appeals Decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED, with the following
modification:
Plaintiff-appellant Rudolf Lietz, Inc. is hereby (1) ordered to pay defendants-appellants
Turatello and Sani, the sum of ₱100,000.00 as moral damages; (2) ₱100,000.00 as
exemplary damages; (3) ₱135,728.73 as attorney’s fees; and (4) ₱10,000.00 as litigation
expenses.
SO ORDERED.8
Petitioner brought to this Court the instant petition after the denial of its motion for
reconsideration of the Court of Appeal Decision. The instant petition imputes the following
errors to the Court of Appeals.
I. IN DEFENDING AGAPITO BURIOL’S GOOD FAITH AND IN STATING THAT ASSUMING
THAT HE (BURIOL) WAS IN BAD FAITH PETITIONER WAS SOLELY RESPONSIBLE FOR ITS
INEXCUSABLE CREDULOUSNESS.

II. IN ASSERTING THAT ARTICLES 1542 AND 1539 OF THE NEW CIVIL CODE ARE,
RESPECTIVELY, APPLICABLE AND INAPPLICABLE IN THE CASE AT BAR.
III. IN NOT GRANTING PETITIONER’S CLAIM FOR ACTUAL AND EXEMPLARY DAMAGES.
IV. IN GRANTING RESPONDENTS TIZIANA TURATELLO AND PAOLA SANI EXHORBITANT
[sic] AMOUNTS AS DAMAGES WHICH ARE EVEN BEREFT OF EVIDENTIARY BASIS. 9
Essentially, only two main issues confront this Court, namely: (i) whether or not petitioner is
entitled to the delivery of the entire five hectares or its equivalent, and (ii) whether or not
damages may be awarded to either party.
Petitioner contends that it is entitled to the corresponding reduction of the purchase price
because the agreement was for the sale of five (5) hectares although respondent Buriol
owned only four (4) hectares. As in its appeal to the Court of Appeals, petitioner anchors its
argument on the second paragraph of Article 1539 of the Civil Code, which provides:
Art. 1539. The obligation to deliver the thing sold includes that of placing in the control of the
vendee all that is mentioned in the contract, in conformity with the following rules:
If the sale of real estate should be made with a statement of its area, at the rate of a certain
price for a unit of measure or number, the vendor shall be obliged to deliver to the vendee, if
the latter should demand it, all that may have been stated in the contract; but, should this be
not possible, the vendee may choose between a proportional reduction of the price and the
rescission of the contract, provided that, in the latter case, the lack in the area be not less
than one-tenth of that stated.
....
The Court of Appeals Decision, however, declared as inapplicable the abovequoted provision
and instead ruled that petitioner is no longer entitled to a reduction in price based on the
provisions of Article 1542 of the Civil Code, which read:
Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain
sum for a unit of measure or number, there shall be no increase or decrease of the price,
although there be a greater or lesser 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
S a l e s P a r t V I P a g e | 53
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.
Article 1539 governs a sale of immovable by the unit, that is, at a stated rate per unit area.
In a unit price contract, the statement of area of immovable is not conclusive and the price
may be reduced or increased depending on the area actually delivered. If the vendor delivers
less than the area agreed upon, the vendee may oblige the vendor to deliver all that may be
stated in the contract or demand for the proportionate reduction of the purchase price if
delivery is not possible. If the vendor delivers more than the area stated in the contract, the
vendee has the option to accept only the amount agreed upon or to accept the whole area,
provided he pays for the additional area at the contract rate.10
In some instances, a sale of an immovable may be made for a lump sum and not at a rate
per unit. The parties agree on a stated purchase price for an immovable the area of which
may be declared based on an estimate or where both the area and boundaries are stated.
In the case where the area of the immovable is stated in the contract based on an estimate,
the actual area delivered may not measure up exactly with the area stated in the contract.
According to Article 154211 of the 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 a greater or lesser area or number than
that stated in the contract. However, the discrepancy must not be substantial. A vendee of
land, when sold in gross or with the description "more or less" with reference to its area,
does not thereby ipso facto  take all risk of quantity in the land. The use of "more or less" or
similar words in designating quantity covers only a reasonable excess or deficiency. 12
Where both the area and the boundaries of the immovable are declared, the area covered
within the boundaries of the immovable prevails over the stated area. In cases of conflict
between areas and boundaries, it is the latter which should prevail. What really defines a
piece of ground is not the area, calculated with more or less certainty, mentioned in its
description, but the boundaries therein laid down, as enclosing the land and indicating its
limits. In a contract of sale of land in a mass, it is well established that the specific
boundaries stated in the contract must control over any statement with respect to the area
contained within its boundaries. It is not of vital consequence that a deed or contract of sale
of land should disclose the area with mathematical accuracy. It is sufficient if its extent is
objectively indicated with sufficient precision to enable one to identify it. An error as to the
superficial area is immaterial. 13 Thus, the obligation of the vendor is to deliver everything
 S a l e s P a r t V I P a g e | 54

within the boundaries, inasmuch as it is the entirety thereof that distinguishes the the deletion of the award for moral damages, there is no basis for the award of exemplary
determinate object.14 damages.

As correctly noted by the trial court and the Court of Appeals, the sale between petitioner WHEREFORE, the instant petition for review on certiorari is GRANTED in PART. The Court of
and respondent Buriol involving the latter’s property is one made for a lump sum. The Deed Appeals Decision in CA-G.R. CV No. 38854 is AFFIRMED with the MODIFICATION that the
of Absolute Sale shows that the parties agreed on the purchase price on a predetermined award of moral and exemplary damages is DELETED.
area of five hectares within the specified boundaries and not based on a particular rate per
area. In accordance with Article 1542, there shall be no reduction in the purchase price even SO ORDERED.
if the area delivered to petitioner is less than that stated in the contract. In the instant case,
the area within the boundaries as stated in the contract shall control over the area agreed
upon in the contract.

The Court rejects petitioner’s contention that the property’s boundaries as stated in the Deed
of Absolute Sale are superficial and unintelligible and, therefore, cannot prevail over the area
stated in the contract. First, as pointed out by the Court of Appeals, at an ocular inspection
prior to the perfection of the contract of sale, respondent Buriol pointed to petitioner the
boundaries of the property. Hence, petitioner gained a fair estimate of the area of the
property sold to him. Second, petitioner cannot now assail the contents of the Deed of
Absolute Sale, particularly the description of the boundaries of the property, because
petitioner’s subscription to the Deed of Absolute Saleindicates his assent to the correct
description of the boundaries of the property.

Petitioner also asserts that respondent Buriol is guilty of misleading petitioner into believing
that the latter was buying five hectares when he knew prior to the sale that he owned only
four hectares. The review of the circumstances of the alleged misrepresentation is factual
and, therefore, beyond the province of the Court. Besides, this issue had already been raised
before and passed upon by the trial court and the Court of Appeals. The factual finding of the
courts below that no sufficient evidence supports petitioner’s allegation of misrepresentation
is binding on the Court.

The Court of Appeals reversed the trial court’s dismissal of respondents Turatello and Sani’s
counterclaim for moral and exemplary damages, attorney’s fees and litigation expenses. In
awarding moral damages in the amount of ₱100,000 in favor of Turatello and Sani, the Court
of Appeals justified the award to alleviate the suffering caused by petitioner’s unfounded civil
action. The filing alone of a civil action should not be a ground for an award of moral
damages in the same way that a clearly unfounded civil action is not among the grounds for
moral damages.15

Exemplary or corrective damages are imposed, by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory damages. 16 With

G.R. No. 128573. January 13, 2003.*
NAAWAN COMMUNITY RURAL BANK, INC., petitioner, vs. THE COURT OF APPEALS
and SPOUSES ALFREDO AND ANNABELLE LUMO, respondents.
Land Registration; Where a person claims to have superior proprietary rights over another on
the ground that he derived his title from a sheriff’s sale registered in the Registry of Property,
Article 1473 of the Civil Code will apply only if said execution sale of real estate is registered
under Act 496.—It has been held that, where a person claims to have superior proprietary
rights over another on the ground that he derived his title from a sheriff’s sale registered in
the Registry of Property, Article 1473 (now Article 1544) of the Civil Code will apply only if
said execution sale of real estate is registered under Act 496.
Same; Torrens Title; Under the Torrens System, registration is the operative act that gives
validity to the transfer or creates a lien upon the land.—A close scrutiny of the records
reveals that, at the time of the execution and delivery of the sheriff’s deed of final
conveyance on September 5, 1986, the disputed property was already covered by the Land
Registration Act and Original Certificate of Title No. 0-820 pursuant to Decree No. N189413
was likewise already entered in the registration book of the Register of Deeds of Cagayan De
Oro City as of April 17, 1984. Thus, from April 17, 1984, the subject property was already
under the operation of the Torrens System. Under the said system, registration is the
operative act that gives validity to the transfer or creates a lien upon the land.
Same; Same; Issuance of a certificate of title had the effect of relieving the land of all claims
except those noted thereon.—The issuance of a certificate of title had the effect of relieving
the land of all claims except those noted thereon. Accordingly, private respondents, in
dealing with the subject registered land, were not required by law to go beyond the register
to determine the legal condition of the property. They were only charged with notice of such
burdens on the property as were noted on the register or the certificate of title. To have
required them to do more would have been to defeat the primary object of the Torrens
System which is to make the Torrens Title indefeasible and valid against the whole world.
Same; Same; Double Sale; Mere registration of title in case of double sale is not enough—
good faith must concur with the registration.—The rights created by the above-stated statute
of course do not and cannot accrue under an inscription in bad faith. Mere registration of title
in case of double sale is not enough; good faith must concur with the registration.
S a l e s P a r t V I P a g e | 55
Same; Same; Same; “Priority in time” principle invoked by petitioner bank is misplaced; A
person dealing with registered land have the legal right to rely on the fact of the Torrens
Certificate of Title and to dispense with the need to inquire further except when the party
concerned has actual knowledge of facts and circumstances that would impel a reasonably
cautious man to make such inquiry.—The “priority in time” principle being invoked by
petitioner bank is misplaced because its registration referred to land not within the Torrens
System but under Act 3344. On the other hand, when private respondents bought the
subject property, the same was already registered under the Torrens System. It is a well-
known rule in this jurisdiction that persons dealing with registered land have the legal right to
rely on the face of the Torrens Certificate of Title and to dispense with the need to inquire
further, except when the party concerned has actual knowledge of facts and circumstances
that would impel a reasonably cautious man to make such inquiry.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Ike L. Roa for petitioner.
     Teogenes X. Velez for private respondents. Naawan Community Rural Bank, Inc. vs. Court
of Appeals, 395 SCRA 43, G.R. No. 128573 January 13, 2003.
CORONA, J.:
Under the established principles of land registration, a person dealing with registered land
may generally rely on the correctness of a certificate of title and the law will in no way oblige
him to go beyond it to determine the legal status of the property.
Before us is a Petition for Review on Certiorari challenging the February 7, 1997 Decision 1 of
the Court of Appeals in CA-G.R. CV No. 55149, which in turn affirmed the decision 2 of the
Regional Trial Court of Misamis Oriental, Branch 18 as follows:
"WHEREFORE, the plaintiffs-spouses are adjudged the absolute owners and
possessors of the properties in question (Lot 18583, under TCT No. T-50134, and all
improvements thereon) and quieting title thereto as against any and all adverse
claims of the defendant. Further, the sheriff's certificate of sale, Exhibit 4; 4-A;
Sheriff's deed of final conveyance, Exhibit 5, 5-A; Tax Declarations No. 71211, Exhibit
7, and any and all instrument, record, claim, encumbrance or proceeding in favor of
the defendant, as against the plaintiffs, and their predecessor-in-interest, which may

be extant in the office of the Register of Deeds of Province of Misamis Oriental, and
of Cagayan de Oro City, and in the City Assessor's Office of Cagayan de Oro City, are
declared as invalid and ineffective as against the plaintiffs' title.
"The counterclaim is dismissed for lack of merit.
"SO ORDERED."3
The facts of the case, as culled from the records, are as follows:
On April 30, 1988, a certain Guillermo Comayas offered to sell to private respondent-spouses
Alfredo and Annabelle Lumo, a house and lot measuring 340 square meters located at
Pinikitan, Camaman-an, Cagayan de Oro City.
Wanting to buy said house and lot, private respondents made inquiries at the Office of the
Register of Deeds of Cagayan de Oro City where the property is located and the Bureau of
Lands on the legal status of the vendor's title. They found out that the property was
mortgaged for P8,000 to a certain Mrs. Galupo and that the owner's copy of the Certificate of
Title to said property was in her possession.
Private respondents directed Guillermo Comayas to redeem the property from Galupo at their
expense, giving the amount of P10,000 to Comayas for that purpose.
On May 30, 1988, a release of the adverse claim of Galupo was annotated on TCT No. T-
41499 which covered the subject property.
In the meantime, on May 17, 1988, even before the release of Galupo's adverse claim,
private respondents and Guillermo Comayas, executed a deed of absolute sale. The subject
property was allegedly sold for P125,000 but the deed of sale reflected the amount of only
P30,000 which was the amount private respondents were ready to pay at the time of the
execution of said deed, the balance payable by installment.
On June 9, 1988, the deed of absolute sale was registered and inscribed on TCT No. T-41499
and, on even date, TCT No. T-50134 was issued in favor of private respondents.
After obtaining their TCT, private respondents requested the issuance of a new tax
declaration certificate in their names. However, they were surprised to learn from the City
Assessor's Office that the property was also declared for tax purposes in the name of
petitioner Naawan Community Rural Bank Inc. Records in the City Assessor's Office revealed
that, for the lot covered by TCT No. T-50134, Alfredo Lumo's T/D # 83324 bore the note:
S a l e s P a r t V I P a g e | 56
"This lot is also declared in the name of Naawan Community Rural Bank Inc. under T/D #
71210".
Apparently, on February 7, 1983, Guillermo Comayas obtained a P15,000 loan from petitioner
Bank using the subject property as security. At the time said contract of mortgage was
entered into, the subject property was then an unregistered parcel of residential land, tax-
declared in the name of a certain Sergio A. Balibay while the residential one-storey house
was tax-declared in the name of Comayas.
Balibay executed a special power of attorney authorizing Comayas to borrow money and use
the subject lot as security. But the Deed of Real Estate Mortgage and the Special Power of
Attorney were recorded in the registration book of the Province of Misamis Oriental, not in
the registration book of Cagayan de Oro City. It appears that, when the registration was
made, there was only one Register of Deeds for the entire province of Misamis Oriental,
including Cagayan de Oro City. It was only in 1985 when the Office of the Register of Deeds
for Cagayan de Oro City was established separately from the Office of the Register of Deeds
for the Province of Misamis Oriental.
For failure of Comayas to pay, the real estate mortgage was foreclosed and the subject
property sold at a public auction to the mortgagee Naawan Community Rural Bank as the
highest bidder in the amount of P16,031.35. Thereafter, the sheriff's certificate of sale was
issued and registered under Act 3344 in the Register of Deeds of the Province of Misamis
Oriental.
On April 17, 1984, the subject property was registered in original proceedings under the
Land Registration Act. Title was entered in the registration book of the Register of Deeds of
Cagayan de Oro City as Original Certificate of Title No. 0-820, pursuant to Decree No. N-
189413.
On July 23, 1984, Transfer Certificate of Title No. T-41499 in the name of Guillermo P.
Comayas was entered in the Register of Deeds of Cagayan de Oro City.
Meanwhile, on September 5, 1986, the period for redemption of the foreclosed subject
property lapsed and the MTCC Deputy Sheriff of Cagayan de Oro City issued and delivered to
petitioner bank the sheriff's deed of final conveyance. This time, the deed was registered
under Act 3344 and recorded in the registration book of the Register of Deeds of Cagayan de
Oro City.
By virtue of said deed, petitioner Bank obtained a tax declaration for the subject house and
lot.

Thereafter, petitioner Bank instituted an action for ejectment against Comayas before the
MTCC which decided in its favor. On appeal, the Regional Trial Court affirmed the decision of
the MTCC in a decision dated April 13, 1988.
On January 27, 1989, the Regional Trial Court issued an order for the issuance of a writ of
execution of its judgment. The MTCC, being the court of origin, promptly issued said writ.
However, when the writ was served, the property was no longer occupied by Comayas but
herein private respondents, the spouses Lumo who had, as earlier mentioned, bought it from
Comayas on May 17, 1988.
Alarmed by the prospect of being ejected from their home, private respondents filed an
action for quieting of title which was docketed as Civil Case No. 89-138. After trial, the
Regional Trial Court rendered a decision declaring private respondents as purchasers for
value and in good faith, and consequently declaring them as the absolute owners and
possessors of the subject house and lot. Petitioner appealed to the Court of Appeals which in
turn affirmed the trial court's decision.
Hence, this petition.
Petitioner raises the following issues:
I. WHETHER OR NOT THE SHERIFF'S DEED OF FINAL CONVEYANCE WAS DULY
EXECUTED AND REGISTERED IN THE REGISTER OF DEEDS OF CAGAYAN DE ORO
CITY ON DECEMBER 2, 1986;
II. WHETHER OR NOT REGISTRATION OF SHERIFF'S DEED OF FINAL CONVEYANCE
IN THE PROPER REGISTRY OF DEEDS COULD BE EFFECTIVE AS AGAINST SPOUSES
LUMO.
Both parties cite Article 1544 of the Civil Code which governs the double sale of immovable
property.
Article 1544 provides:
". . . . 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."
Petitioner bank contends that the earlier registration of the sheriff's deed of final conveyance
in the day book under Act 3344 should prevail over the later registration of private
S a l e s P a r t V I P a g e | 57
respondents' deed of absolute sale under Act 496, 4 as amended by the Property Registration
Decree, PD 1529.
This contention has no leg to stand on. It has been held that, where a person claims to have
superior proprietary rights over another on the ground that he derived his title from a
sheriff's sale registered in the Registry of Property, Article 1473 (now Article 1544) of the
Civil Code will apply only if said execution sale of real estate is registered under Act 496. 5
Unfortunately, the subject property was still untitled when it was already acquired by
petitioner bank by virtue of a final deed of conveyance. On the other hand, when private
respondents purchased the same property, it was covered by the Torrens System.
Petitioner also relies on the case of Bautista vs. Fule6 where the Court ruled that the
registration of an instrument involving unregistered land in the Registry of Deeds creates
constructive notice and binds third person who may subsequently deal with the same
property.
However, a close scrutiny of the records reveals that, at the time of the execution and
delivery of the sheriff's deed of final conveyance on September 5, 1986, the disputed
property was already covered by the Land Registration Act and Original Certificate of Title
No. 0-820 pursuant to Decree No. N189413 was likewise already entered in the registration
book of the Register of Deeds of Cagayan De Oro City as of April 17, 1984.
Thus, from April 17, 1984, the subject property was already under the operation of the
Torrens System. Under the said system, registration is the operative act that gives validity to
the transfer or creates a lien upon the land.
Moreover, the issuance of a certificate of title had the effect of relieving the land of all claims
except those noted thereon. Accordingly, private respondents, in dealing with the subject
registered land, were not required by law to go beyond the register to determine the legal
condition of the property. They were only charged with notice of such burdens on the
property as were noted on the register or the certificate of title. To have required them to do
more would have been to defeat the primary object of the Torrens System which is to make
the Torrens Title indefeasible and valid against the whole world.
Private respondents posit that, even assuming that the sheriff's deed of final conveyance in
favor of petitioner bank was duly recorded in the day book of the Register of Deeds under
Act 3344, ownership of the subject real property would still be theirs as purchasers in good
faith because they registered the sale first under the Property Registration Decree.
 S a l e s P a r t V I P a g e | 58

The rights created by the above-stated statute of course do not and cannot accrue under an
inscription in bad faith. Mere registration of title in case of double sale is not enough; good
faith must concur with the registration. 7
Petitioner contends that the due and proper registration of the sheriff's deed of final
conveyance on December 2, 1986 amounted to constructive notice to private respondents.
Thus, when private respondents bought the subject property on May 17, 1988, they were
deemed to have purchased the said property with the knowledge that it was already
registered in the name of petitioner bank.
Thus, the only issue left to be resolved is whether or not private respondents could be
considered as buyers in good faith.
property and found no flaws therein, they should be considered as innocent purchasers for
value and in good faith.
Accordingly, the appealed judgment of the appellate court upholding private respondents
Alfredo and Annabelle Lumo as the true and rightful owners of the disputed property is
affirmed.
WHEREFORE, petition is hereby DENIED.
SO ORDERED.
Puno, Panganiban, Sandoval-Gutierrez, and Carpio-Morales JJ ., concur.

The "priority in time" principle being invoked by petitioner bank is misplaced because its
registration referred to land not within the Torrens System but under Act 3344. On the other
hand, when private respondents bought the subject property, the same was already
registered under the Torrens System. It is a well-known rule in this jurisdiction that persons
dealing with registered land have the legal right to rely on the face of the Torrens Certificate
of Title and to dispense with the need to inquire further, except when the party concerned
has actual knowledge of facts and circumstances that would impel a reasonably cautious man
to make such inquiry.8

Did private respondents exercise the required diligence in ascertaining the legal condition of
the title to the subject property so as to be considered as innocent purchasers for value and
in good faith?

We answer in the affirmative.

Before private respondents bought the subject property from Guillermo Comayas, inquiries
were made with the Registry of Deeds and the Bureau of Lands regarding the status of the
vendor's title. No liens or encumbrances were found to have been annotated on the
certificate of title. Neither were private respondents aware of any adverse claim or lien on the
property other than the adverse claim of a certain Geneva Galupo to whom Guillermo
Comayas had mortgaged the subject property. But, as already mentioned, the claim of
Galupo was eventually settled and the adverse claim previously annotated on the title
cancelled. Thus, having made the necessary inquiries, private respondents did not have to go
beyond the certificate of title. Otherwise, the efficacy and conclusiveness of the Torrens
Certificate of Title would be rendered futile and nugatory.

Considering therefore that private respondents exercised the diligence required by law in
ascertaining the legal status of the Torrens title of Guillermo Comayas over the subject

G.R. No. 167412. February 22, 2006.*
JUANITA NAVAL, petitioner, vs. COURT OF APPEALS, JUANITO CAMALLA, JAIME
NACION, CONRADO BALILA, ESTER MOYA and PORFIRIA AGUIRRE, respondents.
Remedial Law; Appeals; When a party adopts a certain theory in the court below, he is not
allowed to change his theory on appeal, for to allow him to do so would not only be unfair to
the other party, but it would also be offensive to the basic rules of fair play, justice and due
process.—A perusal of the records reveals that during the trial, petitioner vigorously asserted
that the subject land was the exclusive property of Ildefonso who sold it to her in 1972.
However, in this appeal, petitioner assails the ownership not only of Gregorio but also of
Ildefonso by alleging that at the time the latter sold the land to Gregorio, the same was
declared in the name of Agrifina Avila. When a party adopts a certain theory in the court
below, he is not allowed to change his theory on appeal, for to allow him to do so would not
only be unfair to the other party, but it would also be offensive to the basic rules of fair play,
justice and due process.
Civil Law; Land Registration; Article 1544 of the Civil Code has no application to land not
registered under Torrens System.— While we agree with the appellate court that
respondents have superior right over the petitioner on the subject property, we find Article
1544 inapplicable to the case at bar since the subject land was unregistered at the time of
the first sale. The registration contemplated under this provision has been held to refer to
registration under the Torrens System, which considers the act of registration as the
operative act that binds the land. Thus, in Carumba v. Court of Appeals, we held that Article
1544 of the Civil Code has no application to land not registered under Torrens System.
Same; Same; Double Sales; Act No. 3344; Under this law, registration by the first buyer is
constructive notice to the second buyer that can defeat his right as such buyer in good faith.
—The law applicable therefore is Act No. 3344, which provides for the registration of all
instruments on land neither covered by the Spanish Mortgage Law nor the Torrens System.
Under this law, registration by the first buyer is constructive notice to the second buyer that
can defeat his right as such buyer in good faith. Applying the law, we held in Bautista v. Fule
that the registration of an instrument involving unregistered land in the Registry of Deeds
creates constructive notice and binds third person who may subsequently deal with the same
property.
Same; Same; Same; Same; The issue of good faith or bad faith of the buyer is relevant only
where the subject of the sale is registered land and the purchaser is buying the same from
S a l e s P a r t V I P a g e | 59
the registered owner whose title to the land is clean.—Even if petitioner argues that she
purchased and registered the subject land in good faith and without knowledge of any
adverse claim thereto, respondents still have superior right over the disputed property. We
held in Rayos v. Reyes that: “[T]he issue of good faith or bad faith of the buyer is relevant
only where the subject of the sale is registered land and the purchaser is buying the same
from the registered owner whose title to the land is clean x x x in such case the purchaser
who relies on the clean title of the registered owner is protected if he is a purchaser in good
faith for value.” Since the properties in question are unregistered lands, petitioners as
subsequent buyers thereof did so at their peril. Their claim of having bought the land in good
faith, i.e., without notice that some other person has a right to or interest in the property,
would not protect them if it turns out, as it actually did in this case, that their seller did not
own the property at the time of the sale.
Same; Same; Same; One can sell only what one owns or is authorized to sell, and the buyer
can acquire no more than what the seller can transfer legally.—It is an established principle
that no one can give what one does not have, nemo dat quod non habet. Accordingly, one
can sell only what one owns or is authorized to sell, and the buyer can acquire no more than
what the seller can transfer legally. In the case at bar, since Ildefonso no longer owned the
subject land at the time of the sale to the petitioner, he had nothing to sell and the latter did
not acquire any right to it.
Same; Same; Certificates of Title; What cannot be collaterally attacked is the certificate of
title and the title or ownership which is represented by such certificate; A certificate of title is
merely an evidence of ownership or title over the particular property described therein.—A
certificate of title, once registered, should not thereafter be impugned, altered, changed,
modified, enlarged or diminished except in a direct proceeding permitted by law. Moreover,
Section 32 of Presidential Decree No. 1529 provides that “[u]pon the expiration of said period
of one year, the decree of registration and the certificate of title shall become
incontrovertible.” However, it does not deprive an aggrieved party of a remedy in law. What
cannot be collaterally attacked is the certificate of title and not the title or ownership which is
represented by such certificate. Ownership is different from a certificate of title. The fact that
petitioner was able to secure a title in her name did not operate to vest ownership upon her
of the subject land. Registration of a piece of land under the Torrens System does not create
or vest title, because it is not a mode of acquiring ownership. A certificate of title is merely
an evidence of ownership or title over the particular property described therein. It cannot be
used to protect a usurper from the true owner; nor can it be used as a shield for the
commission of fraud; neither does it permit one to enrich himself at the expense of others.

Its issuance in favor of a particular person does not foreclose the possibility that the real
property may be co-owned with persons not named in the certificate, or that it may be held
in trust for another person by the registered owner.
Same; Same; Same; Reconveyance; In an action for reconveyance, the decree of registration
is respected as incontrovertible; What is sought instead is the transfer of the property or its
title which has been wrongfully or erroneously registered in another person’s name, to its
rightful or legal owner, or to the one with a better right.— As correctly held by the Court of
Appeals, notwithstanding the indefeasibility of the Torrens title, the registered owner may
still be compelled to reconvey the registered property to its true owners. The rationale for the
rule is that reconveyance does not set aside or re-subject to review the findings of fact of the
Bureau of Lands. In an action for reconveyance, the decree of registration is respected as
incontrovertible. What is sought instead is the transfer of the property or its title which has
been wrongfully or erroneously registered in another person’s name, to its rightful or legal
owner, or to the one with a better right.
Same; Same; Same; Same; An action for reconveyance does not prescribe when the plaintiff
is in possession of the land to be reconveyed.—The Court of Appeals correctly held that an
action for reconveyance does not prescribe when the plaintiff is in possession of the land to
be reconveyed, as in this case. Thus, in Leyson v. Bontuyan, 452 SCRA 94 (2005): x x x
[T]his Court declared that an action for reconveyance based on fraud is imprescriptible where
the plaintiff is in possession of the property subject of the acts.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Gloriosa S. Navarro for petitioner.
     Eustaquio Beltran for respondents. Naval vs. Court of Appeals, 483 SCRA 102, G.R. No.
167412 February 22, 2006
YNARES-SANTIAGO, J.:
This petition for review assails the Decision 1 of the Court of Appeals dated December 14,
2004, in CA-G.R. SP No. 86736, which reversed the Decision 2 of the Regional Trial Court
(RTC) of Naga City, Branch 26, in Civil Case No. 2004-0054 affirming the Decision 3 of the
Municipal Circuit Trial Court (MCTC) of Magarao-Canaman, Camarines Sur, as well as the
Resolution4 dated February 17, 2005 denying petitioner’s motion for reconsideration.
S a l e s P a r t V I P a g e | 60
The facts of the case are as follows:
On December 2, 1969, Ildefonso A. Naval sold a parcel of land located in Sto. Tomas,
Magarao, Camarines Sur, consisting of 858 sq. m. to Gregorio B. Galarosa. The sale was
recorded in the Registry of Property of the Registry of Deeds of Camarines Sur on December
3, 1969 pursuant to Act No. 3344, the law governing registrations of all instruments on
unregistered lands.5
Subsequently, Gregorio sold portions of the land to respondents Conrado Rodrigo Balilla 6 on
November 4, 1976, Jaime Nacion 7 on January 10, 1977 and spouses Ireneo and Ester
Moya8 in July 1977, and Juanito Camalla9 on September 4, 1987. All buyers occupied the
portion they bought, built improvements thereon, and paid the taxes due thereto. 10
The controversy arose when petitioner Juanita Naval, the great granddaughter of Ildefonso,
was issued on April 1, 1975 by the Register of Deeds of Camarines Sur an Original Certificate
of Title (OCT) No. RP-5386 (29791), covering 733 sq. m. of the subject land. 11 She claimed
that she bought the subject land from Ildefonso in 1972.12
On November 10, 1977, petitioner filed a complaint for recovery of possession against
Bartolome Aguirre, Conrado Balila, 13 Ireneo Moya, Jaime Nacion and Domingo Nacion, which
was docketed as Civil Case No. 306. 14 However, the case was dismissed15 without
prejudice16 for failure to prosecute the action for an unreasonable length of time.
Almost 20 years later, or on April 21, 1997, petitioner re-filed the complaint for recovery of
possession with damages before the MCTC of Magarao-Canaman, Camarines Sur, against
Juanita17 Camalla, Diosdado Balila, Conrado Balila, Forferia 18 Aguirre, Jaime Nacion and Ester
Moya. The case was docketed as Civil Case No. 994.
After trial, the MCTC rendered its decision, the dispositive portion reads as follows:
WHEREFORE, for all the foregoing consideration, decision is hereby rendered in favor of the
plaintiff and against defendants:
1) Declaring the plaintiff to be the legal owner of the land as described in paragraph
2 of the complaint;
2) Ordering defendants Juanito Camalla, Diosdado Balila, Conrado Balila, Porferia
Aguirre and Jaime Nacion to vacate the property in question and to deliver its
possession to the plaintiff;

3) Ordering Ester Moya to vacate the fifty (50) square meters occupied by her and to
relinquish its possession to the plaintiff;
4) Dismissing the respective claims for damages of the parties.
Pronouncing no costs.
SO ORDERED. 19
Aggrieved, respondents appealed the decision to the RTC of Naga City, which affirmed in
toto the assailed decision.20
Respondents thereafter elevated the case to the Court of Appeals via Rule 42 of the Rules of
Court. Finding the prior registration of the deed of sale between Ildefonso and Gregorio with
the Register of Deeds as a constructive notice to subsequent buyers, the appellate court
reversed the decision of the RTC. Thus,
WHEREFORE, premises considered, the present petition is hereby GRANTED. The appealed
decision of the court a quo is hereby REVERSED and SET ASIDE and a new judgment is
hereby entered dismissing respondent's complaint for recovery of possession with damages.
Petitioners' counterclaim for damages is likewise dismissed for lack of legal and factual bases.
No pronouncement as to costs.
SO ORDERED.21
Hence, this petition assigning the following errors:
I
THE COURT OF APPEALS ERRED IN DECLARING THAT GREGORIO GALAROSA HAS
RIGHTFULLY ACQUIRED OWNERSHIP OVER THE LOT COVERED BY OCT RP #5386
(29791) AND DECLARING HIM TO HAVE POSSESSED THE LOT BEFORE THE
ALLEGED SALES TO RESPONDENTS.
II
THE COURT OF APPEALS ERRED IN HOLDING THAT THE PAYMENT OF TAXES BY
RESPONDENTS WERE (sic) EVIDENCE OF LAWFUL POSSESSION AND OWNERSHIP.
S a l e s P a r t V I P a g e | 61
III
THE COURT OF APPEALS ERRED IN DECLARING THAT THE LOTS CLAIMED BY THE
RESPONDENTS HAVE BEEN POSSESSED BY THEM IN GOOD FAITH DESPITE THEIR
KNOWLEDGE OF THE EXISTENCE OF OCT RP #5386(29791).22
Petitioner claims that she has superior rights over the subject land because the sale between
Ildefonso and Gregorio and the subsequent registration thereof with the Register of Deeds
had no legal effect since the subject land was declared in the name of Agrifina Avila while the
tax declaration cancelled by Gregorio’s was that of Gregorio Boñaga. Petitioner thus assails
the right claimed by Gregorio over the subject land from which the respondents derived their
respective claims.23
On the other hand, respondents contend that the registered sale by Ildefonso to Gregorio in
1969 of the subject land, from whom they derive their claims, vests them with better right
than the petitioner; that registration under Act No. 3344 served as constructive notice to the
whole world, including the petitioner, who claimed to have purchased the subject land from
Ildefonso in 1972, but failed to present evidence to prove such acquisition. 24
We deny the petition.
Prefatorily, a perusal of the records reveals that during the trial, petitioner vigorously
asserted that the subject land was the exclusive property of Ildefonso who sold it to her in
1972.25 However, in this appeal, petitioner assails the ownership not only of Gregorio but also
of Ildefonso by alleging that at the time the latter sold the land to Gregorio, the same was
declared in the name of Agrifina Avila. When a party adopts a certain theory in the court
below, he is not allowed to change his theory on appeal, for to allow him to do so would not
only be unfair to the other party, but it would also be offensive to the basic rules of fair play,
justice and due process.26
In this appeal, the issue for resolution is who has the superior right to a parcel of land sold to
different buyers at different times by its former owner.
It is not disputed that the subject land belonged to Ildefonso and that it was not registered
under the Torrens System27 when it was sold to Gregorio in 1969 and to the petitioner in
1972. Further, the deed of sale between Ildefonso and Gregorio was registered with the
Register of Deeds of Camarines Sur pursuant to Act No. 3344, as shown by Inscription No.
54609 dated December 3, 1969, Page 119, Volume 186, File No. 55409 at the back thereof.
In holding that respondents have a better right to possess the subject land in view of
the bona fide registration of the sale with the Register of Deeds of Camarines Sur by

Ildefonso and Gregorio, the Court of Appeals applied Article 1544 of the Civil Code, which
provides:
ART. 1544. If the same thing should have been sold to different vendees, the ownership shall
be transferred to the person who may have first taken possession thereof in good faith, if it
should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.
While we agree with the appellate court that respondents have superior right over the
petitioner on the subject property, we find Article 1544 inapplicable to the case at bar since
the subject land was unregistered at the time of the first sale. The registration contemplated
under this provision has been held to refer to registration under the Torrens System, which
considers the act of registration as the operative act that binds the land. 28 Thus, in Carumba
v. Court of Appeals,29 we held that Article 1544 of the Civil Code has no application to land
not registered under Torrens System.
The law applicable therefore is Act No. 3344, which provides for the registration of all
instruments on land neither covered by the Spanish Mortgage Law nor the Torrens System.
Under this law, registration by the first buyer is constructive notice to the second buyer that
can defeat his right as such buyer in good faith.
Applying the law, we held in Bautista v. Fule  that the registration of an instrument involving
30
unregistered land in the Registry of Deeds creates constructive notice and binds third person
who may subsequently deal with the same property. We also held in Bayoca v.
Nogales31 that:
Verily, there is absence of prior registration in good faith by petitioners of the second sale in
their favor. As stated in the Santiago case, registration by the first buyer under Act No. 3344
can have the effect of constructive notice to the second buyer that can defeat his right as
such buyer. On account of the undisputed fact of registration under Act No. 3344 by [the first
buyers], necessarily, there is absent good faith in the registration of the sale by the [second
buyers] for which they had been issued certificates of title in their names. It follows that their
title to the land cannot be upheld. x x x.
S a l e s P a r t V I P a g e | 62
Even if petitioner argues that she purchased and registered the subject land in good faith
and without knowledge of any adverse claim thereto, respondents still have superior right
over the disputed property. We held in Rayos v. Reyes32 that:
"[T]he issue of good faith or bad faith of the buyer is relevant only where the subject of the
sale is registered land and the purchaser is buying the same from the registered owner
whose title to the land is clean x x x in such case the purchaser who relies on the clean title
of the registered owner is protected if he is a purchaser in good faith for value ." Since the
properties in question are unregistered lands, petitioners as subsequent buyers thereof did so
at their peril. Their claim of having bought the land in good faith,  i.e., without notice that
some other person has a right to or interest in the property, would not protect them if it
turns out, as it actually did in this case, that their seller did not own the property at the time
of the sale.
It is an established principle that no one can give what one does not have, nemo dat quod
non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the
buyer can acquire no more than what the seller can transfer legally. 33 In the case at bar,
since Ildefonso no longer owned the subject land at the time of the sale to the petitioner, he
had nothing to sell and the latter did not acquire any right to it.
Even if we apply Article 1544, the facts would nonetheless show that respondents and their
predecessors-in-interest registered first the source of their ownership and possession, i.e.,
the 1969 deed of sale, and possessed the subject land at the earliest time. Applying the
doctrine of "priority in time, priority in rights" or " prius tempore, potior jure," respondents are
entitled to the ownership and possession of the subject land.34
True, a certificate of title, once registered, should not thereafter be impugned, altered,
changed, modified, enlarged or diminished except in a direct proceeding permitted by
law.35 Moreover, Section 32 of Presidential Decree No. 1529 provides that "[u]pon the
expiration of said period of one year, the decree of registration and the certificate of title
shall become incontrovertible."
However, it does not deprive an aggrieved party of a remedy in law. What cannot be
collaterally attacked is the certificate of title and not the title or ownership which is
represented by such certificate. Ownership is different from a certificate of title. 36 The fact
that petitioner was able to secure a title in her name did not operate to vest ownership upon
her of the subject land. Registration of a piece of land under the Torrens System does not
create or vest title, because it is not a mode of acquiring ownership. A certificate of title is
merely an evidence of ownership or title over the particular property described therein. 37 It
cannot be used to protect a usurper from the true owner; nor can it be used as a shield for
the commission of fraud; neither does it permit one to enrich himself at the expense of
 S a l e s P a r t V I P a g e | 63

others.38Its issuance in favor of a particular person does not foreclose the possibility that the
real property may be co-owned with persons not named in the certificate, or that it may be
held in trust for another person by the registered owner. 39
As correctly held by the Court of Appeals, notwithstanding the indefeasibility of the Torrens
title, the registered owner may still be compelled to reconvey the registered property to its
true owners. The rationale for the rule is that reconveyance does not set aside or re-subject
to review the findings of fact of the Bureau of Lands. In an action for reconveyance, the
decree of registration is respected as incontrovertible. What is sought instead is the transfer
of the property or its title which has been wrongfully or erroneously registered in another
person’s name, to its rightful or legal owner, or to the one with a better right. 40
Finally, the Court of Appeals correctly held that an action for reconveyance does not
prescribe when the plaintiff is in possession of the land to be reconveyed, as in this case.
Thus, in Leyson v. Bontuyan:41
determine the nature of the adverse claim of a third party and its effect on his own title,
which right can be claimed only by one who is in possession. No better situation can be
conceived at the moment for Us to apply this rule on equity than that of herein petitioners
whose ... possession of the litigated property for no less than 30 years and was suddenly
confronted with a claim that the land she had been occupying and cultivating all these years,
was titled in the name of a third person. We hold that in such a situation the right to quiet
title to the property, to seek its reconveyance and annul any certificate of title covering it,
accrued only from the time the one in possession was made aware of a claim adverse to his
own, and it is only then that the statutory period of prescription commences to run against
such possessor.
The paramount reason for this exception is based on the theory that registration proceedings
could not be used as a shield for fraud. Moreover, to hold otherwise would be to put
premium on land-grabbing and transgressing the broader principle in human relations that no
person shall unjustly enrich himself at the expense of another.

x x x [T]his Court declared that an action for reconveyance based on fraud is imprescriptible WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision of the Court
where the plaintiff is in possession of the property subject of the acts. In Vda. de Cabrera v. of Appeals dated December 14, 2004, in CA-G.R. SP No. 86736, dismissing petitioner’s
Court of Appeals, the Court held: complaint for recovery of possession and respondents’ counterclaim for damages for lack of
legal and factual bases, and the Resolution dated February 17, 2005 denying the motion for
... [A]n action for reconveyance of a parcel of land based on implied or constructive trust reconsideration, are AFFIRMED.
prescribes in ten years, the point of reference being the date of registration of the deed or
the date of the issuance of the certificate of title over the property, but this rule applies SO ORDERED.
only when the plaintiff or the person enforcing the trust is not in possession of the
property, since if a person claiming to be the owner thereof is in actual possession of the
property, as the defendants are in the instant case, the right to seek reconveyance, which in
effect seeks to quiet title to the property, does not prescribe. The reason for this is that one
who is in actual possession of a piece of land claiming to be the owner thereof may wait until
his possession is disturbed or his title is attacked before taking steps to vindicate his right,
the reason for the rule being, that his undisturbed possession gives him a continuing right to
seek the aid of a court of equity to ascertain and determine the nature of the adverse claim
of a third party and its effect on his own title, which right can be claimed only by one who is
in possession.

Similarly, in the case of David v. Malay, the same pronouncement was reiterated by the
Court:

... There is settled jurisprudence that one who is in actual possession of a piece of land
claiming to be owner thereof may wait until his possession is disturbed or his title is attacked
before taking steps to vindicate his right, the reason for the rule being, that his undisturbed
possession gives him a continuing right to seek the aid of the court of equity to ascertain and

G.R. No. 121165. September 26, 2006.*
HON. DOMINADOR F. CARILLO, Presiding Judge, R.T.C. XI-19 Digos, Davao del
Sur, BONIFACIO J. GUYOT, Clerk of Court and Provincial Sheriff of Davao del Sur,
ALFREDO C. SENOY, Deputy Prov. Sheriff assigned to R.T.C. XI-19 Digos, Davao
del Sur, MARCOS D. RISONAR, JR., Registrar of Deeds of Davao del Sur, and
MARIA GONZALES, petitioners, vs. HON. COURT OF APPEALS, MARIA PAZ DABON
and ROSALINA DABON, respondents.
Civil Procedure; Actions; Parties; The real party in interest is the party who would be
benefited or injured by the judgment or is the party entitled to the avails of the suit. We have
held that in such a situation, an attorney-infact is not a real party in interest and that there is
no law permitting an action to be brought by and against an attorney-in-fact.—Petitioner
Gonzales should be reminded of Section 3 of Rule 3 of the Rules on Civil Procedure which
explicitly states that an action should be brought against the real party in interest, and in
case the action is brought against the agent, the action must be brought against an agent
acting in his own name and for the benefit of an undisclosed principal without joining the
principal, except when the contract involves things belonging to the principal. The real party
in interest is the party who would be benefited or injured by the judgment or is the party
entitled to the avails of the suit. We have held that in such a situation, an attorney-in-fact is
not a real party in interest and that there is no law permitting an action to be brought by and
against an attorney-in-fact.
Same, Same; Same; The joinder of all indispensable parties is a condition sine qua non of the
exercise of judicial powers, and the absence of indispensable party renders all subsequent
actions of the court null and void for want of authority to act, not only as to the absent
parties but even as to those present.—The action filed by Gonzales before the RTC is for
specific performance to compel Priscilla to execute a deed of sale, involving real property
which, however, does not belong to Priscilla but to Aristotle Manio, the son of Priscilla. The
complaint only named as defendant Priscilla, joined by her spouse, yet Priscilla had no
interest on the lot and can have no interest whatever in any judgment rendered. She was not
acting in her own name, nor was she acting for the benefit of an undisclosed principal. The
joinder of all indispensable parties is a condition sine qua non of the exercise of judicial
powers, and the absence of indispensable party renders all subsequent actions of the court
null and void for want of authority to act, not only as to the absent parties but even as to
those present. Accordingly, the failure to implead Aristotle Manio as defendant renders all
S a l e s P a r t V I P a g e | 64
proceedings in the Civil Case No. 2647, including the order granting the cancellation of TCT
No. 16658 and issuance of a new title, null and void.
Actions; Parties; Judgments; It is settled that a person need not be a party to the judgment
sought to be annulled.—It is settled that a person need not be a party to the judgment
sought to be annulled. What is essential is that he can prove his allegation that the judgment
was obtained by fraud or collusion and he would be adversely affected thereby, because if
fully substantiated by preponderance of evidence, those allegations could be the basis for
annulment of the assailed judgment. In the present case, even if respondents were not
parties to the specific performance case, any finding that there was extrinsic fraud in the
institution of the complaint, i.e. exclusion of the real party in interest, and collusion between
petitioner and Sheriff Senoy, would adversely affect the respondents’ ownership and thus,
could be their basis for annulment of the judgment.
Fraud; The overriding consideration when extrinsic fraud is alleged is that the fraudulent
scheme of the prevailing litigant prevented a party from having his day in court.—Section 2
of Rule 47 of the Rules on Civil Procedure explicitly provides the two grounds for annulment
of judgment, namely: extrinsic fraud and lack of jurisdiction. There is extrinsic fraud when a
party has been prevented by fraud or deception from presenting his case. Fraud is extrinsic
where it prevents a party from having a trial or from presenting his entire case to the court,
or where it operates upon matters pertaining not to the judgment itself but to the manner in
which it is procured. The overriding consideration when extrinsic fraud is alleged is that the
fraudulent scheme of the prevailing litigant prevented a party from having his day in court. It
must be distinguished from intrinsic fraud which refers to acts of a party at a trial which
prevented a fair and just determination of the case, and which could have been litigated and
determined at the trial or adjudication of the case.
Same; Notices; Deliberately failing to notify a party entitled to notice also constitutes
extrinsic fraud.—Of the indices of fraud cited by the Court of Appeals, the failure to comply
with the notification requirement in the petition for the cancellation of title amounts to
extrinsic fraud. Under the Property Registration Decree, all parties in interest shall be given
notice. There is nothing in the records that show Gonzales notified the actual occupants or
lessees of the property. Further, the records show that Gonzales had known of the sale of
the land by Aristotle to the Dabons and despite her knowledge, the former did not include
the Dabons in her petition for the annulment of title. Deliberately failing to notify a party
entitled to notice also constitutes extrinsic fraud. This fact is sufficient ground to annul the
order allowing the cancellation of title in the name of Gonzales.

Ownership; Sales; Where it is immovable property that is the subject of double sale,
ownership shall be transferred 1) to the person acquiring it who in good faith first recorded it
in the Registry of Property; 2) in default thereof, to the person who in good faith was the
first in possession; and 3) in default thereof, to the person who presents the oldest title,
provided there is good faith.—Where it is immovable property that is the subject of a double
sale, ownership shall be transferred (1) to the person acquiring it who in good faith first
recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith
was first in possession; and (3) in default thereof, to the person who presents the oldest
title, provided there is good faith. The requirement of the law is two-fold: acquisition in good
faith and registration in good faith.
Judgments; An action for annulment of judgment is independent of the case where the
judgment sought to be annulled is rendered and is not an appeal of the judgment therein.—
An action for annulment of judgment is independent of the case where the judgment sought
to be annulled is rendered and is not an appeal of the judgment therein.
Same; Annulment of judgment is not a relief to be granted indiscriminately by the courts. It
is a recourse equitable in character and allowed only in exceptional cases as where there is
no available or other adequate remedy.—Annulment of judgment is not a relief to be granted
indiscriminately by the courts. It is a recourse equitable in character and allowed only in
exceptional cases as where there is no available or other adequate remedy. This case falls
under said exception. In this case, where it was found that the trial court did not have
jurisdiction over the real parties in interest, and that notices were deliberately not given,
amount to extrinsic fraud. The Court of Appeals did not err in granting the annulment of the
judgment in Civil Case No. 2647 and the orders subsequent thereto, for lack of jurisdiction
and extrinsic fraud.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the resolution of the Court.
     Malaya, Sanchez, Francisco, Anover & Anover Law Offices lead counsel for petitioner M.
Gonzales.
     Marcos A. Chua, Jr. for respondents. Carillo vs. Court of Appeals, 503 SCRA 66, G.R. No.
121165 September 26, 2006
RESOLUTION
S a l e s P a r t V I P a g e | 65
QUISUMBING, J.:
For review on certiorari is the Decision 1 dated February 22, 1995 of the Court of Appeals in
CA-G.R. SP No. 23687, which annulled and set aside the judgment and orders of the
Regional Trial Court (RTC) of Digos, Davao del Sur, Branch 19, in Civil Case No. 2647, Maria
Gonzales v. Priscilla Manio and Jose Manio.
The facts as culled from the records are as follows:
On April 2, 1990, petitioner Maria Gonzales filed a complaint against the spouses Priscilla and
Jose Manio with the RTC of Digos, Davao del Sur, Branch 19. Gonzales sought the execution
of the deed of sale in her favor for the property she bought from Priscilla Manio. She also
asked for damages and attorney's fees.
Gonzales alleged that on April 26, 1988, she paid P10,000 to Priscilla as downpayment on
the P400,000 purchase price of the lot with improvements, since Priscilla had a special power
of attorney from her son, Aristotle, the owner of the land. They also agreed that the balance
would be paid within three months after the execution of the deed of sale. Yet, after the
lapse of the period and despite repeated demands, Priscilla did not execute the deed of sale.
Thus, Gonzales filed an action for specific performance against the spouses Priscilla and Jose
Manio.
For failure to file an Answer, the Manios were declared in default and Gonzales was allowed
to present evidence ex parte.
After trial, the court rendered judgment in favor of Gonzales, which we quote verbatim:
WHEREFORE, premises considered, it is hereby ordered that judgment is rendered in
favor of plaintiff and against defendants, ordering defendants:
1) To execute the final deed of sale and transfer of the property mentioned
in paragraph 4 above to plaintiff, or should the defendant refuse to execute
the deed of sale, the Clerk of Court be directed to execute the same upon
plaintiff's depositing of the sum of P390,000.00 with the Clerk of Court as
complete and valid payment thereof to defendant Priscilla Manio;
2) To pay plaintiff the sum of P100,000.00 for moral damages
and P50,000.00 for exemplary damages;

3) To pay plaintiff the sum of P50,000.00 for attorney's fees plus P700.00
per appearances of plaintiff's counsel before this Honorable Court as
appearance fees;
4) To pay plaintiff the sum of P5,000.00 as litigation expenses.
SO ORDERED.2
Gonzales deposited with the Clerk of Court the P390,000 balance of the price and filed a
motion for execution.3 She later withdrew the motion because the trial court's decision was
not properly served on the defendants. After numerous delays, the sheriff finally personally
served a copy of the decision on Priscilla on August 4, 1990, at the ungodly hour of 12:00
midnight at Sitio Wilderness, Barangay Mount Carmel, Bayugan, Agusan del Sur. 4
Since there was no appeal, the trial court's decision became final and executory. But the writ
of execution was not served upon the defendants, since according to the Sheriff's Return, the
defendants could not be located. The sheriff, likewise, informed the trial court that the
money judgment could be readily satisfied by the petitioner's cash deposit should the trial
court grant the motion to release the cash deposit filed by Gonzales. 5
Subsequently, Gonzales filed a motion asking that the Clerk of Court be directed to be the
one to execute a deed of conveyance. Gonzales also filed a motion to withdraw the cash
deposit for the balance of the price to offset the award of damages. The trial court granted
both motions but later modified the amount to P207,800.
On October 29, 1990, Gonzales filed a petition for the nullification of the Owner's Duplicate
Certificate of Title No. 16658 and asked that a new certificate be issued in her name to give
effect to the deed of conveyance since Priscilla refused to relinquish the owner's duplicate
copy.
Consequently, the trial court declared the owner's duplicate copy of TCT No. 16658 void, and
directed the City Civil Registrar to issue a new certificate of title in favor of Gonzales. The
orders were reiterated in subsequent orders and TCT No. T-23690 was issued under the
name of Gonzales.
On December 14, 1990, herein respondents Maria Paz Dabon and Rosalina Dabon, claiming
to have bought the aforementioned lot from Aristotle Manio filed before the Court of Appeals
a petition for annulment of judgment and orders of the RTC in Civil Case No. 2647. The
case was docketed as CA G.R. SP No. 23687, entitled " Maria Paz Dabon and Rosalina Dabon
v. Hon. Dominador F. Carillo, Presiding Judge, RTC Branch 19, Digos, Davao del Sur;
Bonifacio J. Guyot, Clerk of Court and Provincial Sheriff of Davao del Sur; Alfredo C. Senoy,
S a l e s P a r t V I P a g e | 66
Deputy Prov. Sheriff assigned to RTC Br. 19, Digos, Davao del Sur; Marcos D. Risonar, Jr.,
Registrar of Deeds of Davao del Sur; and Maria Gonzales ." The Dabons alleged therein that
the judgment of the trial court was void  ab initio because of lack of jurisdiction over their
persons, as the real parties in interest, and that they were fraudulently deprived of their right
to due process. They also prayed for a Temporary Restraining Order and for Preliminary
Prohibitory Injunction against Gonzales. They gave the trial court a notice of their action for
the annulment of the judgment and subsequent orders in Civil Case No. 2647. 6
Meanwhile, Gonzales filed before the trial court a motion for the issuance of a writ of
possession. The Dabons filed an opposition on the following grounds: (1) The writ of
possession cannot be enforced because the defendants named in the writ, the Manios, were
no longer in possession of the property; (2) They had bought the lot with the improvements
therein and had taken possession, although they had not yet registered their ownership with
the Register of Deeds; and (3) The court did not acquire jurisdiction over them as the real
parties in interest.
On December 17, 1990, the Court of Appeals, without giving due course to the petition,
issued a resolution restraining the trial court from implementing its Decision dated June 19,
19907 and its subsequent orders thereto in Civil Case No. 2647 until further notice from the
Court of Appeals. It also required Gonzales to file her Comment.8
The Court of Appeals in a resolution denied the application for preliminary injunction and
appointed a commissioner to receive evidence of the parties.9
Following the Commissioner's report, the Court of Appeals found that (1) the contract of sale
between Gonzales and Priscilla was unenforceable because the sale was evidenced by a
handwritten note which was vague as to the amount and which was not notarized; (2) the
trial court did not acquire jurisdiction over the indispensable parties; and (3) the proceedings
were attended with fraud. The Court of Appeals nullified the judgment of the RTC in Civil
Case No. 2647 and cancelled TCT No. T-23690. The dispositive portion of said judgment
reads as follows:
WHEREFORE, premises considered, the questioned decision, dated June 19, 1990
(and all orders arising therefrom), of the Regional Trial Court (Branch 19) in Digos,
Davao del Sur is hereby ANNULLED and SET ASIDE—and the Transfer Certificate of
Title No. T-23690 which was issued thereafter declared null and void and ordered
canceled. Costs against the private respondent.
SO ORDERED.10

On July 17, 1995, Gonzales' Motion for Reconsideration was denied. Hence, the instant
petition, assigning the following errors:
I annulment of judgment.
The Honorable Court of Appeals erred in not holding that the purchase of the
disputed property by petitioner Maria Gonzales from Aristotle Manio thru the latter's
mother and attorney-in-fact was a valid contract as between the contracting parties.
II
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONER
MARIA GONZALES WAS IN GOOD FAITH IN BUYING THE DISPUTED PROPERTY
FROM ARISTOTLE MANIO THRU THE LATTER'S MOTHER AND ATTORNEY-IN-FACT.
III
THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING IN THE INSTANT
CASE THE DOCTRINE IN DOUBLE SALE UNDER ARTICLE 1544 OF THE CIVIL CODE
OF THE PHILIPPINES.
IV
THE HONORABLE COURT OF APPEALS GRAVELY FAILED TO APPRECIATE THE FACT
THAT PRIVATE RESPONDENTS' [PETITIONERS BELOW] CLAIM IS HIGHLY
INCREDIBLE, IMPROBABLE, AND FRAUDULENT.
V annulment of the judgment. According to petitioner Gonzales, she did not implead Aristotle
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT PRIVATE
RESPONDENTS MARIA PAZ DABON AND ROSALINA DABON HAVE NO RIGHT TO
BRING THE INSTANT SUIT.
VI
COROLLARILY, THE HONORABLE COURT OF APPEALS ERRED IN NOT SUSTAINING
PETITIONER MARIA GONZALES' [PRIVATE RESPONDENT BELOW] CLAIM FOR
DAMAGES AGAINST THE PRIVATE RESPONDENTS [PETITIONERS BELOW].11
S a l e s P a r t V I P a g e | 67
Simply, the threshold issues in this petition are: (1) whether the Court of Appeals erred in
declaring the sale of the land to Gonzales by Priscilla invalid; (2) whether there was basis to
annul the judgment of the RTC; and (3) whether the Dabons could file the action for
We shall discuss the issues jointly.
Prefatorily, we note that named as petitioners are Presiding Judge Dominador Carillo;
Bonifacio Guyot, Alfredo Senoy, Clerk of Court and Deputy Sheriff of the same court,
respectively; Marcos D. Risonar, Registrar of Deeds of Davao del Sur; and Maria Gonzales. In
our view, petitioner Gonzales apparently had impleaded Judge Carillo, Guyot, Senoy and
Risonar in this petition by merely reversing the designation of said public officers among the
respondents below in the Court of Appeals, as now among the petitioners herein. Since they
are not interested parties and would not benefit from any of the affirmative reliefs sought,
only Maria Gonzales remains as the genuine party-petitioner in the instant case.
We now come to the main issues: (1) Was there sufficient basis to annul the judgment in
Civil Case No. 2647? (2) Are the Dabons proper parties to file the petition for annulment of
judgment?
Petitioner Gonzales contends that the respondents do not have standing before the Court of
Appeals to file a petition for annulment of the judgment in Civil Case No. 2647 because
respondents were not parties therein. Petitioner maintains that respondents have no right
that could be adversely affected by the judgment because they are not the owners of the
property. Petitioner claims that the Court of Appeals should have applied the doctrine of
double sale to settle the issue of ownership and declare her the true owner of the property.
Petitioner concludes that respondents – not being the owners and are not real parties in
interest in the complaint for specific performance – have no right to bring the action for
as defendant in Civil Case No. 2647 since a decision against Priscilla, Aristotle's attorney-in-
fact, would bind Aristotle also.
Respondents (Maria Paz and Rosalina Dabon) now insist that they are parties in interest as
buyers, owners and possessors of the contested land and that they had been fraudulently
deprived of their day in court during the proceedings in the trial court in Civil Case No. 2647.
They have no remedy in law other than to file a case for the annulment of judgment of the
trial court in said case.
Petitioner Gonzales should be reminded of Section 3 of Rule 3 of the Rules on Civil Procedure
which explicitly states that an action should be brought against the real party in
interest,12 and in case the action is brought against the agent, the action must be brought

against an agent acting in his own name and for the benefit of an undisclosed principal
without joining the principal, except when the contract involves things belonging to the
principal.13 The real party in interest is the party who would be benefited or injured by the
judgment or is the party entitled to the avails of the suit. We have held that in such a
situation, an attorney-in-fact is not a real party in interest and that there is no law permitting
an action to be brought by and against an attorney-in-fact. 14
Worth stressing, the action filed by Gonzales before the RTC is for specific performance to
compel Priscilla to execute a deed of sale, involving real property which, however, does not
belong to Priscilla but to Aristotle Manio, the son of Priscilla. The complaint only named as
defendant Priscilla, joined by her spouse, yet Priscilla had no interest on the lot and can have
no interest whatever in any judgment rendered. She was not acting in her own name, nor
was she acting for the benefit of an undisclosed principal. The joinder of all indispensable
parties is a condition sine qua non of the exercise of judicial powers, and the absence of
indispensable party renders all subsequent actions of the court null and void for want of
authority to act, not only as to the absent parties but even as to those present. 15 Accordingly,
the failure to implead Aristotle Manio as defendant renders all proceedings in the Civil Case
No. 2647, including the order granting the cancellation of TCT No. 16658 and issuance of a
new title, null and void.
It is settled that a person need not be a party to the judgment sought to be annulled. 16 What
is essential is that he can prove his allegation that the judgment was obtained by fraud or
collusion and he would be adversely affected thereby, 17 because if fully substantiated by
preponderance of evidence, those allegations could be the basis for annulment of the
assailed judgment.
In the present case, even if respondents were not parties to the specific performance case,
any finding that there was extrinsic fraud in the institution of the complaint, i.e. exclusion of
the real party in interest, and collusion between petitioner and Sheriff Senoy, would
adversely affect the respondents' ownership and thus, could be their basis for annulment of
the judgment.
Pertinently, Section 2 of Rule 47 of the Rules on Civil Procedure explicitly provides the two
grounds for annulment of judgment, namely: extrinsic fraud and lack of jurisdiction. 18
There is extrinsic fraud when a party has been prevented by fraud or deception from
presenting his case. Fraud is extrinsic where it prevents a party from having a trial or from
presenting his entire case to the court, or where it operates upon matters pertaining not to
the judgment itself but to the manner in which it is procured. The overriding consideration
when extrinsic fraud is alleged is that the fraudulent scheme of the prevailing litigant
prevented a party from having his day in court. 19 It must be distinguished from intrinsic fraud
S a l e s P a r t V I P a g e | 68
which refers to acts of a party at a trial which prevented a fair and just determination of the
case, and which could have been litigated and determined at the trial or adjudication of the
case.20
In its Decision dated February 22, 1995, the Court of Appeals found that indices of fraud
attended the case before the trial court: First, the plaintiff deliberately excluded the Dabons
as party to the case despite knowledge that the Dabons had alleged that they had bought
the land from Aristotle. Second, the Sheriff's Return was suspiciously served on a Saturday,
at midnight, on August 4, 1990. Third, the trial court ordered the plaintiff to deposit the full
payment of property, but subsequently ordered its withdrawal. Lastly, there was no notice
given to the person named in the certificate of title which Gonzales wanted to be annulled.
Of the indices of fraud cited by the Court of Appeals, the failure to comply with the
notification requirement in the petition for the cancellation of title amounts to extrinsic fraud.
Under the Property Registration Decree, all parties in interest shall be given notice. 21 There is
nothing in the records that show Gonzales notified the actual occupants or lessees of the
property. Further, the records show that Gonzales had known of the sale of the land by
Aristotle to the Dabons and despite her knowledge, the former did not include the Dabons in
her petition for the annulment of title. Deliberately failing to notify a party entitled to notice
also constitutes extrinsic fraud. 22 This fact is sufficient ground to annul the order allowing the
cancellation of title in the name of Gonzales.
Likewise, under Rule 47, a judgment is void for lack of jurisdiction over the persons of the
real parties in interest, i.e., Aristotle Manio and the Dabons.
Lastly, petitioner insists that the contract of sale between her and Priscilla was valid and
enforceable because under the provision on double sale, 23 she owned the land because she
bought the lot on April 26, 1988, while the same was allegedly sold to the Dabons on
October 19, 1989. In our view, the doctrine on double sale holds no relevance in this case.
The pertinent article of the Civil Code provides:
ART. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first possession thereof
in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring
it who in good faith recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in possession; and in the absence thereof; to the person who presents
the oldest title, provided there is good faith.
 S a l e s P a r t V I P a g e | 69

Otherwise stated, where it is immovable property that is the subject of a double sale,
ownership shall be transferred (1) to the person acquiring it who in good faith first recorded
it in the Registry of Property; (2) in default thereof, to the person who in good faith was first
in possession; and (3) in default thereof, to the person who presents the oldest title,
provided there is good faith. The requirement of the law is two-fold: acquisition in good faith
and registration in good faith.24

At this juncture, we must emphasize that the action for annulment of judgment under Rule
47 of the Rules of Court does not involve the merits of the final order of the trial court. 25 The
issue of whether before us is a case of double sale is outside the scope of the present
petition for review. The appellate court only allowed the reception of extraneous evidence to
determine extrinsic fraud. To determine which sale was valid, review of evidence is
necessary. This we cannot do in this petition. An action for annulment of judgment is
independent of the case where the judgment sought to be annulled is rendered 26 and is not
an appeal of the judgment therein.27

The extraneous evidence presented to the appellate court cannot be used to supplant the
evidence in the records of the specific performance case because the extraneous evidence
was not part of the records on the merits of the case. Again, the extraneous evidence was
only allowed merely to prove the allegations of extrinsic fraud. Accordingly, we hold that the
issue of ownership of the subject real property cannot be addressed in this petition for
review.

Annulment of judgment is not a relief to be granted indiscriminately by the courts. It is a

recourse equitable in character and allowed only in exceptional cases as where there is no
available or other adequate remedy. 28 This case falls under said exception. In this case,
where it was found that the trial court did not have jurisdiction over the real parties in
interest, and that notices were deliberately not given, amount to extrinsic fraud. The Court of
Appeals did not err in granting the annulment of the judgment in Civil Case No. 2647 and the
orders subsequent thereto, for lack of jurisdiction and extrinsic fraud.

WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision dated
February 22, 1995 of the Court of Appeals in CA-G.R. SP No. 23687, is AFFIRMED. Costs
against petitioner Maria Gonzales.

SO ORDERED.

Carpio, Carpio-Morales, Tinga, Velasco, Jr., J.J., concur.


No. L-29972. January 26, 1976.*
ROSARIO CARBONELL, petitioner, vs. HONORABLE COURT OF APPEALS, JOSE
PONCIO, EMMA INFANTE and RAMON INFANTE, respondents.
Civil Code; Property; Possession; Sale; In case of double sale of an immovable property,
second paragraph of Article 1544 directs that ownership should be recognized in favor of one
who in good faith first recorded his right. If there is no inscription, what is decisive is prior
possession in good faith.—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 paragraphs, good faith must characterize the prior possession. Under the second
paragraph, good faith must characterize the act of anterior registration. 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.
Same; Same; Same; Same; Circumstances which indicate prior possession in good faith in
case of double sale of immovable property.—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 to 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 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 adverse 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 days later on February 12, 1955.
Same; Same; Same; Same; Circumstances which show bad faith in case of double sale of
immovable property.—Bad faith arising from previous knowledge by Infante of the prior sale
to Carbonell is shown by the following facts, the vital significance and evidentiary effect of
which the respondent Court of Appeals either overlooked or failed to appreciate: (1) Mrs.
S a l e s P a r t V I P a g e | 70
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. x x x (2) Carbonell was already in possession of the mortgage
passbook and Poncio’s copy of the mortgage contract, when Poncio sold the lot to Infante.
This also shows that the lot was already sold to Carbonell who, after paying the arrearages of
Poncio, assumed the balance of his mortgage 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. x x x (3) The fact that Poncio was no
longer in possession of his mortgage passbook 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, x x x (4) Carbonell registered on February 8, 1955
her adverse claim which was accordingly annotated on Poncio’s title, four days before Infante
registered on February 12, 1955 her deed of sale executed on February 2, 1955. Here she
was again on notice on the prior sale to Carbonell.
Same: Sales: Right given to vendor to continue staying on land sold for one year without
paying and rent is adequate part of consideration of the sale.—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.
Same; Same; A private deed of sale is valid contract between the parties.—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. x x x Being a valid consensual
contract, Exhibit A effectively transferred possession of the lot to the vendee Carbonell by
constitutum possessorium (Art. 1500, NCC); because thereunder the vendor Poncio
continued to retain physical possession of the lot as tenant of the vendee and no longer as
owner thereof.
Same; Same; Contracts; Sufficiency of description of land subject of sale when same is
mentioned only as “one-half lot”.—“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 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. ‘A’ as none other than the
parcel of lot occupied by the defendant Poncio and where he has his improvements erected,
x x x” Moreover, it is not shown that Poncio owns another parcel of land 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.
Same; Property; Sale; Where immovable was sold twice, the one with superior title should
refund the sum paid by other vendee to redeem mortgage on the land.—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.
Same; Same; Same; As a matter of equity, possessor in bad faith is entitled to remove one
useful expenditures made by him, such as drainage construction, walled fence and bungalow,
if lawful possessor fails to refund the same.—It appearing that the Infantes are possessors in
bad faith, their rights to the improvements they introduced on 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 bungalow thereon, are useful
expenditures, for they add to the value of the property. x x x 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 (Art. 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.
PETITION for review of the resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Tolentino, Garcia, Cruz & Reyes for petitioner.
S a l e s P a r t V I P a g e | 71
     Guillermo B. Guevara for private respondents. Carbonell vs. Court of Appeals, 69 SCRA
99, No. L-29972 January 26, 1976
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  Informed that the sale in favor of respondent Emma Infante had not yet been registered,
(Sgd.) ROSARIO CARBONELL  Atty. Garcia prepared an adverse claim for petitioner, who signed and swore to an registered
(Sgd) CONSTANCIO MEONADA  the same on February 8, 1955.
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.
S a l e s P a r t V I P a g e | 72
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.
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.).
S a l e s P a r t V I P a g e | 73
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.
S a l e s P a r t V I P a g e | 74
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
S a l e s P a r t V I P a g e | 75
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
S a l e s P a r t V I P a g e | 76
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
S a l e s P a r t V I P a g e | 77
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  With respect to the claim of Poncio that he signed the document Exhibit "A" under the belief
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.
S a l e s P a r t V I P a g e | 78
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
S a l e s P a r t V I P a g e | 79
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.
 S a l e s P a r t V I P a g e | 80

WITH COSTS AGAINST PRIVATE RESPONDENTS.

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


G.R. No. 124242. January 21, 2005.*
SAN LORENZO DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS,
PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA ZAVALLA LU, respondents.
Civil Law; Contracts; Contracts shall be obligatory in whatever form they may have been
entered into, provided all the essential requisites for their validity are present.—Contracts, in
general, are perfected by mere consent, which is manifested by the meeting of the offer and
the acceptance upon the thing which are to constitute the contract. The offer must be certain
and the acceptance absolute. Moreover, contracts shall be obligatory in whatever form they
may have been entered into, provided all the essential requisites for their validity are
present.
Same; Same; Distinction between a contract to sell and a contract of sale.—The distinction
between a contract to sell and a contract of sale is quite germane. In a contract of sale, title
passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by
agreement the ownership is reserved in the vendor and is not to pass until the full payment
of the price. In a contract of sale, the vendor has lost and cannot recover ownership until
and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained
by the vendor until the full payment of the price, such payment being a positive suspensive
condition and failure of which is not a breach but an event that prevents the obligation of the
vendor to convey title from becoming effective.
Same; Same; Being a consensual contract, a sale is perfected by mere consent and from that
moment, the parties may reciprocally demand performance; Essential elements of a contract
of sale.—Sale, being a consensual contract, is perfected by mere consent and from that
moment, the parties may reciprocally demand performance. The essential elements of a
contract of sale, to wit: (1) consent or meeting of the minds, that is, to transfer ownership in
exchange for the price; (2) object certain which is the subject matter of the contract; (3)
cause of the obligation which is established.
Same; Same; Perfection of a contract of sale should not, however, be confused with its
consummation; Sale by itself does not transfer or affect ownership; the most that sale does
is to create the obligation to transfer ownership.—The perfection of a contract of sale should
not, however, be confused with its consummation. In relation to the acquisition and transfer
of ownership, it should be noted that sale is not a mode, but merely a title. A mode is the
legal means by which dominion or ownership is created, transferred or destroyed, but title is
only the legal basis by which to affect dominion or ownership. Under Article 712 of the Civil
S a l e s P a r t V I P a g e | 81
Code, “ownership and other real rights over property are acquired and transmitted by law, by
donation, by testate and intestate succession, and in consequence of certain contracts, by
tradition.” Contracts only constitute titles or rights to the transfer or acquisition of ownership,
while delivery or tradition is the mode of accomplishing the same. Therefore, sale by itself
does not transfer or affect ownership; the most that sale does is to create the obligation to
transfer ownership. It is tradition or delivery, as a consequence of sale, that actually transfers
ownership.
Same; Same; The word “delivered” should not be taken restrictively to mean transfer of
actual physical possession of the property; The law recognizes two principal modes of
delivery, to wit: (1) actual delivery; and (2) legal or constructive delivery.—Explicitly, the law
provides that the ownership of the thing sold is acquired by the vendee from the moment it
is delivered to him in any of the ways specified in Article 1497 to 1501. The word “delivered”
should not be taken restrictively to mean transfer of actual physical possession of the
property. The law recognizes two principal modes of delivery, to wit: (1) actual delivery; and
(2) legal or constructive delivery.
Same; Same; Double Sales; When the thing sold twice is an immovable, the one who
acquires it and first records it in the Registry of Property, both made in good faith, shall be
deemed the owner.—The principle of primus tempore, potior jure (first in time, stronger in
right) gains greater significance in case of double sale of immovable property. When the
thing sold twice is an immovable, the one who acquires it and first records it in the Registry
of Property, both made in good faith, shall be deemed the owner. Verily, the act of
registration must be coupled with good faith—that is, the registrant must have no knowledge
of the defect or lack of title of his vendor or must not have been aware of facts which should
have put him upon such inquiry and investigation as might be necessary to acquaint him with
the defects in the title of his vendor.
Same; Same; Same; Definition of a purchaser in good faith.—A purchaser in good faith is one
who buys property of another without notice that some other person has a right to, or
interest in, such property and pays a full and fair price for the same at the time of such
purchase, or before he has notice of the claim or interest of some other person in the
property. Following the foregoing definition, we rule that SLDC qualifies as a buyer in good
faith since there is no evidence extant in the records that it had knowledge of the prior
transaction in favor of Babasanta.
Same; Same; Same; If a vendee in a double sale registers the sale after he has acquired
knowledge of a previous sale, the registration constitutes a registration in bad faith and does

not confer upon him any right.—Assuming ex gratia argumenti that SLDC’s registration of the
sale had been tainted by the prior notice of lis pendens and assuming further for the same
nonce that this is a case of double sale, still Babasanta’s claim could not prevail over that of
SLDC’s. In Abarquez v. Court of Appeals, this Court had the occasion to rule that if a vendee
in a double sale registers the sale after he has acquired knowledge of a previous sale, the
registration constitutes a registration in bad faith and does not confer upon him any right. If
the registration is done in bad faith, it is as if there is no registration at all, and the buyer
who has taken possession first of the property in good faith shall be preferred.
Same; Same; Same; Article 1544 does not apply to a case where there was a sale to one
party of the land itself while the other contract was a mere promise to sell the land or at
most an actual assignment of the right to repurchase the same land.—At any rate, the above
discussion on the rules on double sale would be purely academic for as earlier stated in this
decision, the contract between Babasanta and the Spouses Lu is not a contract of sale but
merely a contract to sell. In Dichoso v. Roxas, we had the occasion to rule that Article 1544
does not apply to a case where there was a sale to one party of the land itself while the
other contract was a mere promise to sell the land or at most an actual assignment of the
right to repurchase the same land. Accordingly, there was no double sale of the same land in
that case.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Enrique M. Belo and Gener Asuncion for petitioner.
     Froilan M. Bacungan for respondent P.S. Babasanta.
     Pano, Gonzales, Relova & Associates co-counsel for respondent P. Babasanta. San
Lorenzo Development Corporation vs. Court of Appeals, 449 SCRA 99, G.R. No. 124242
January 21, 2005
DECISION
TINGA, J.:
From a coaptation of the records of this case, it appears that respondents Miguel Lu and
Pacita Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land situated in Sta.
S a l e s P a r t V I P a g e | 82
Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-39023 both measuring 15,808
square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent
Pablo Babasanta, (hereinafter, Babasanta) for the price of fifteen pesos (₱15.00) per square
meter. Babasanta made a downpayment of fifty thousand pesos (₱50,000.00) as evidenced
by a memorandum receipt issued by Pacita Lu of the same date. Several other payments
totaling two hundred thousand pesos (₱200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a
final deed of sale in his favor so that he could effect full payment of the purchase price. In
the same letter, Babasanta notified the spouses about having received information that the
spouses sold the same property to another without his knowledge and consent. He
demanded that the second sale be cancelled and that a final deed of sale be issued in his
favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed
to sell the property to him at fifteen pesos (₱15.00) per square meter. She, however,
reminded Babasanta that when the balance of the purchase price became due, he requested
for a reduction of the price and when she refused, Babasanta backed out of the sale. Pacita
added that she returned the sum of fifty thousand pesos (₱50,000.00) to Babasanta through
Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court
(RTC), Branch 31, of San Pedro, Laguna, a Complaint for Specific Performance and
Damages1 against his co-respondents herein, the Spouses Lu. Babasanta alleged that the
lands covered by TCT No. T- 39022 and T-39023 had been sold to him by the spouses at
fifteen pesos (₱15.00) per square meter. Despite his repeated demands for the execution of
a final deed of sale in his favor, respondents allegedly refused.
In their Answer,2 the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and
when the total advances of Pacita reached fifty thousand pesos (₱50,000.00), the latter and
Babasanta, without the knowledge and consent of Miguel Lu, had verbally agreed to
transform the transaction into a contract to sell the two parcels of land to Babasanta with the
fifty thousand pesos (₱50,000.00) to be considered as the downpayment for the property
and the balance to be paid on or before 31 December 1987. Respondents Lu added that as
of November 1987, total payments made by Babasanta amounted to only two hundred
thousand pesos (₱200,000.00) and the latter allegedly failed to pay the balance of two
hundred sixty thousand pesos (₱260,000.00) despite repeated demands. Babasanta had
purportedly asked Pacita for a reduction of the price from fifteen pesos (₱15.00) to twelve
pesos (₱12.00) per square meter and when the Spouses Lu refused to grant Babasanta’s

request, the latter rescinded the contract to sell and declared that the original loan
transaction just be carried out in that the spouses would be indebted to him in the amount of
two hundred thousand pesos (₱200,000.00). Accordingly, on 6 July 1989, they purchased
Interbank Manager’s Check No. 05020269 in the amount of two hundred thousand pesos
(₱200,000.00) in the name of Babasanta to show that she was able and willing to pay the
balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 19903 wherein he prayed for
the issuance of a writ of preliminary injunction with temporary restraining order and the
inclusion of the Register of Deeds of Calamba, Laguna as party defendant. He contended that
the issuance of a preliminary injunction was necessary to restrain the transfer or conveyance
by the Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition4 to the amended complaint contending that it raised
new matters which seriously affect their substantive rights under the original complaint.
However, the trial court in its Order dated 17 January 1990 5 admitted the amended
complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed
a Motion for Intervention6 before the trial court. SLDC alleged that it had legal interest in the
subject matter under litigation because on 3 May 1989, the two parcels of land involved,
namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale with
Mortgage.7 It alleged that it was a buyer in good faith and for value and therefore it had a
better right over the property in litigation.
In his Opposition to SLDC’s motion for intervention,8 respondent Babasanta demurred and
argued that the latter had no legal interest in the case because the two parcels of land
involved herein had already been conveyed to him by the Spouses Lu and hence, the vendors
were without legal capacity to transfer or dispose of the two parcels of land to the
intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene. SLDC
filed its Complaint-in-Intervention on 19 April 1990.9 Respondent Babasanta’s motion for the
issuance of a preliminary injunction was likewise granted by the trial court in its Order dated
11 January 199110 conditioned upon his filing of a bond in the amount of fifty thousand pesos
(₱50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu
executed in its favor an Option to Buy the lots subject of the complaint. Accordingly, it paid
an option money in the amount of three hundred sixteen thousand one hundred sixty pesos
(₱316,160.00) out of the total consideration for the purchase of the two lots of one million
S a l e s P a r t V I P a g e | 83
two hundred sixty-four thousand six hundred forty pesos (₱1,264,640.00). After the Spouses
Lu received a total amount of six hundred thirty-two thousand three hundred twenty pesos
(₱632,320.00) they executed on 3 May 1989 a Deed of Absolute Sale with Mortgage in its
favor. SLDC added that the certificates of title over the property were delivered to it by the
spouses clean and free from any adverse claims and/or notice of lis pendens. SLDC further
alleged that it only learned of the filing of the complaint sometime in the early part of
January 1990 which prompted it to file the motion to intervene without delay. Claiming that it
was a buyer in good faith, SLDC argued that it had no obligation to look beyond the titles
submitted to it by the Spouses Lu particularly because Babasanta’s claims were not
annotated on the certificates of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of
the property to SLDC. It ordered the Spouses Lu to pay Babasanta the sum of two hundred
thousand pesos (₱200,000.00) with legal interest plus the further sum of fifty thousand pesos
(₱50,000.00) as and for attorney’s fees. On the complaint-in-intervention, the trial court
ordered the Register of Deeds of Laguna, Calamba Branch to cancel the notice of lis
pendens annotated on the original of the TCT No. T-39022 (T-7218) and No. T-39023 (T-
7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and
SLDC did not register the respective sales in their favor, ownership of the property should
pertain to the buyer who first acquired possession of the property. The trial court equated
the execution of a public instrument in favor of SLDC as sufficient delivery of the property to
the latter. It concluded that symbolic possession could be considered to have been first
transferred to SLDC and consequently ownership of the property pertained to SLDC who
purchased the property in good faith.
Respondent Babasanta appealed the trial court’s decision to the Court of Appeals alleging in
the main that the trial court erred in concluding that SLDC is a purchaser in good faith and in
upholding the validity of the sale made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that
the trial court erred in failing to consider that the contract to sell between them and
Babasanta had been novated when the latter abandoned the verbal contract of sale and
declared that the original loan transaction just be carried out. The Spouses Lu argued that
since the properties involved were conjugal, the trial court should have declared the verbal
contract to sell between Pacita Lu and Pablo Babasanta null and void ab initio for lack of
knowledge and consent of Miguel Lu. They further averred that the trial court erred in not
dismissing the complaint filed by Babasanta; in awarding damages in his favor and in
refusing to grant the reliefs prayed for in their answer.

On 4 October 1995, the Court of Appeals rendered its Decision11 which set aside the
judgment of the trial court. It declared that the sale between Babasanta and the Spouses Lu
was valid and subsisting and ordered the spouses to execute the necessary deed of
conveyance in favor of Babasanta, and the latter to pay the balance of the purchase price in
the amount of two hundred sixty thousand pesos (₱260,000.00). The appellate court ruled
that the Absolute Deed of Sale with Mortgage  in favor of SLDC was null and void on the
ground that SLDC was a purchaser in bad faith. The Spouses Lu were further ordered to
return all payments made by SLDC with legal interest and to pay attorney’s fees to
Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate
court.12 However, in a Manifestation dated 20 December 1995,13 the Spouses Lu informed the
appellate court that they are no longer contesting the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,14 the appellate court considered as withdrawn the
motion for reconsideration filed by the Spouses Lu in view of their manifestation of 20
December 1995. The appellate court denied SLDC’s motion for reconsideration on the ground
that no new or substantial arguments were raised therein which would warrant modification
or reversal of the court’s decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A BUYER IN
GOOD FAITH BECAUSE WHEN THE SELLER PACITA ZAVALLA LU OBTAINED FROM IT THE
CASH ADVANCE OF ₱200,000.00, SAN LORENZO WAS PUT ON INQUIRY OF A PRIOR
TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED FACT THAT
THE ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE
DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND TOOK POSSESSION OF THE
PROPERTY AND NO ADVERSE CLAIM, LIEN, ENCUMBRANCE OR LIS PENDENS WAS
ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT RESPONDENT
BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE
OF HIS RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL
CONCURRENCE ON THE FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED AND SET
S a l e s P a r t V I P a g e | 84
ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF SAN LORENZO AS
A BUYER AND FIRST POSSESSOR IN GOOD FAITH. 15
SLDC contended that the appellate court erred in concluding that it had prior notice of
Babasanta’s claim over the property merely on the basis of its having advanced the amount
of two hundred thousand pesos (₱200,000.00) to Pacita Lu upon the latter’s representation
that she needed the money to pay her obligation to Babasanta. It argued that it had no
reason to suspect that Pacita was not telling the truth that the money would be used to pay
her indebtedness to Babasanta. At any rate, SLDC averred that the amount of two hundred
thousand pesos (₱200,000.00) which it advanced to Pacita Lu would be deducted from the
balance of the purchase price still due from it and should not be construed as notice of the
prior sale of the land to Babasanta. It added that at no instance did Pacita Lu inform it that
the lands had been previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took
possession of the property and asserted its rights as new owner as opposed to Babasanta
who has never exercised acts of ownership. Since the titles bore no adverse claim,
encumbrance, or lien at the time it was sold to it, SLDC argued that it had every reason to
rely on the correctness of the certificate of title and it was not obliged to go beyond the
certificate to determine the condition of the property. Invoking the presumption of good
faith, it added that the burden rests on Babasanta to prove that it was aware of the prior sale
to him but the latter failed to do so. SLDC pointed out that the notice of  lis pendens was
annotated only on 2 June 1989 long after the sale of the property to it was consummated on
3 May 1989.1awphi1.nét
Meanwhile, in an Urgent Ex-Parte Manifestation  dated 27 August 1999, the Spouses Lu
informed the Court that due to financial constraints they have no more interest to pursue
their rights in the instant case and submit themselves to the decision of the Court of
Appeals.16
On the other hand, respondent Babasanta argued that SLDC could not have acquired
ownership of the property because it failed to comply with the requirement of registration of
the sale in good faith. He emphasized that at the time SLDC registered the sale in its favor
on 30 June 1990, there was already a notice of lis pendens annotated on the titles of the
property made as early as 2 June 1989. Hence, petitioner’s registration of the sale did not
confer upon it any right. Babasanta further asserted that petitioner’s bad faith in the
acquisition of the property is evident from the fact that it failed to make necessary inquiry
regarding the purpose of the issuance of the two hundred thousand pesos (₱200,000.00)
manager’s check in his favor.

The core issue presented for resolution in the instant petition is who between SLDC and
Babasanta has a better right over the two parcels of land subject of the instant case in view
of the successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a document
signed by Pacita Lu acknowledging receipt of the sum of fifty thousand pesos (₱50,000.00)
as partial payment for 3.6 hectares of farm lot situated at Barangay Pulong, Sta. Cruz, Sta.
Rosa, Laguna.17 While the receipt signed by Pacita did not mention the price for which the
property was being sold, this deficiency was supplied by Pacita Lu’s letter dated 29 May
198918 wherein she admitted that she agreed to sell the 3.6 hectares of land to Babasanta for
fifteen pesos (₱15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by the
parties, irresistibly leads to the conclusion that the agreement between Babasanta and the
Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent, 19 which is manifested by the meeting
of the offer and the acceptance upon the thing which are to constitute the contract. The offer
must be certain and the acceptance absolute. 20 Moreover, contracts shall be obligatory in
whatever form they may have been entered into, provided all the essential requisites for their
validity are present.21
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand
pesos (₱50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot situated in
Sta. Rosa, Laguna. While there is no stipulation that the seller reserves the ownership of the
property until full payment of the price which is a distinguishing feature of a contract to sell,
the subsequent acts of the parties convince us that the Spouses Lu never intended to
transfer ownership to Babasanta except upon full payment of the purchase price.
Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that despite his
repeated requests for the execution of the final deed of sale in his favor so that he could
effect full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta
himself recognized that ownership of the property would not be transferred to him until such
time as he shall have effected full payment of the price. Moreover, had the sellers intended
to transfer title, they could have easily executed the document of sale in its required form
simultaneously with their acceptance of the partial payment, but they did not. Doubtlessly,
the receipt signed by Pacita Lu should legally be considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane. In a
contract of sale, title passes to the vendee upon the delivery of the thing sold; whereas in a
contract to sell, by agreement the ownership is reserved in the vendor and is not to pass
S a l e s P a r t V I P a g e | 85
until the full payment of the price. 22 In a contract of sale, the vendor has lost and cannot
recover ownership until and unless the contract is resolved or rescinded; whereas in a
contract to sell, title is retained by the vendor until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not a breach but an
event that prevents the obligation of the vendor to convey title from becoming effective. 23
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of
the purchase price. There being an obligation to pay the price, Babasanta should have made
the proper tender of payment and consignation of the price in court as required by law. Mere
sending of a letter by the vendee expressing the intention to pay without the accompanying
payment is not considered a valid tender of payment. 24 Consignation of the amounts due in
court is essential in order to extinguish Babasanta’s obligation to pay the balance of the
purchase price. Glaringly absent from the records is any indication that Babasanta even
attempted to make the proper consignation of the amounts due, thus, the obligation on the
part of the sellers to convey title never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not a
contract to sell, Babasanta’s claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent 25 and from that moment, the
parties may reciprocally demand performance.26 The essential elements of a contract of sale,
to wit: (1) consent or meeting of the minds, that is, to transfer ownership in exchange for
the price; (2) object certain which is the subject matter of the contract; (3) cause of the
obligation which is established.27
The perfection of a contract of sale should not, however, be confused with its consummation.
In relation to the acquisition and transfer of ownership, it should be noted that sale is not a
mode, but merely a title. A mode is the legal means by which dominion or ownership is
created, transferred or destroyed, but title is only the legal basis by which to affect dominion
or ownership.28 Under Article 712 of the Civil Code, "ownership and other real rights over
property are acquired and transmitted by law, by donation, by testate and intestate
succession, and in consequence of certain contracts, by tradition." Contracts only constitute
titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the
mode of accomplishing the same.29 Therefore, sale by itself does not transfer or affect
ownership; the most that sale does is to create the obligation to transfer ownership. It is
tradition or delivery, as a consequence of sale, that actually transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee
from the moment it is delivered to him in any of the ways specified in Article 1497 to
1501.30 The word "delivered" should not be taken restrictively to mean transfer of actual

physical possession of the property. The law recognizes two principal modes of delivery, to
wit: (1) actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the
vendee.31 Legal or constructive delivery, on the other hand, may be had through any of the
following ways: the execution of a public instrument evidencing the sale; 32 symbolical
tradition such as the delivery of the keys of the place where the movable sold is being
kept;33 traditio longa manu or by mere consent or agreement if the movable sold cannot yet
be transferred to the possession of the buyer at the time of the sale; 34 traditio brevi manu if
the buyer already had possession of the object even before the sale; 35 and traditio
constitutum possessorium, where the seller remains in possession of the property in a
different capacity.36
Following the above disquisition, respondent Babasanta did not acquire ownership by the
mere execution of the receipt by Pacita Lu acknowledging receipt of partial payment for the
property. For one, the agreement between Babasanta and the Spouses Lu, though valid, was
not embodied in a public instrument. Hence, no constructive delivery of the lands could have
been effected. For another, Babasanta had not taken possession of the property at any time
after the perfection of the sale in his favor or exercised acts of dominion over it despite his
assertions that he was the rightful owner of the lands. Simply stated, there was no delivery
to Babasanta, whether actual or constructive, which is essential to transfer ownership of the
property. Thus, even on the assumption that the perfected contract between the parties was
a sale, ownership could not have passed to Babasanta in the absence of delivery, since in a
contract of sale ownership is transferred to the vendee only upon the delivery of the thing
sold.37
However, it must be stressed that the juridical relationship between the parties in a double
sale is primarily governed by Article 1544 which lays down the rules of preference between
the two purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall
be transferred to the person who may have first taken possession thereof in good faith, if it
should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.
S a l e s P a r t V I P a g e | 86
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of double sale of immovable property. When the thing sold twice is an
immovable, the one who acquires it and first records it in the Registry of Property, both
made in good faith, shall be deemed the owner. 38 Verily, the act of registration must be
coupled with good faith— that is, the registrant must have no knowledge of the defect or
lack of title of his vendor or must not have been aware of facts which should have put him
upon such inquiry and investigation as might be necessary to acquaint him with the defects
in the title of his vendor.39
Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired
knowledge of Babasanta’s claim. Babasanta, however, strongly argues that the registration of
the sale by SLDC was not sufficient to confer upon the latter any title to the property since
the registration was attended by bad faith. Specifically, he points out that at the time SLDC
registered the sale on 30 June 1990, there was already a notice of lis pendens on the file
with the Register of Deeds, the same having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis pendens obliterate the
effects of delivery and possession in good faith which admittedly had occurred prior to
SLDC’s knowledge of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed the  Option
to Buy  in favor of SLDC upon receiving ₱316,160.00 as option money from SLDC. After SLDC
had paid more than one half of the agreed purchase price of ₱1,264,640.00, the Spouses Lu
subsequently executed on 3 May 1989 a Deed of Absolute Salein favor or SLDC. At the time
both deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses
Lu with Babasanta. Simply stated, from the time of execution of the first deed up to the
moment of transfer and delivery of possession of the lands to SLDC, it had acted in good
faith and the subsequent annotation of lis pendens has no effect at all on the consummated
sale between SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of another without  notice that some
other person has a right to, or interest in, such property and pays a full and fair price for the
same at the time of such purchase, or before he has notice  of the claim or interest of some
other person in the property. 40 Following the foregoing definition, we rule that SLDC qualifies
as a buyer in good faith since there is no evidence extant in the records that it had
knowledge of the prior transaction in favor of Babasanta. At the time of the sale of the
property to SLDC, the vendors were still the registered owners of the property and were in
fact in possession of the lands. l^vvphi1.net Time and again, this Court has ruled that a
person dealing with the owner of registered land is not bound to go beyond the certificate of

title as he is charged with notice of burdens on the property which are noted on the face of
the register or on the certificate of title. 41 In assailing knowledge of the transaction between
him and the Spouses Lu, Babasanta apparently relies on the principle of constructive notice
incorporated in Section 52 of the Property Registration Decree (P.D. No. 1529) which reads,
thus:
Sec. 52. Constructive notice upon registration. – Every conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land shall, if
registered, filed, or entered in the office of the Register of Deeds for the province or city
where the land to which it relates lies, be constructive notice to all persons from the time of
such registering, filing, or entering.
However, the constructive notice operates as such¾by the express wording of Section
52¾from the time of the registration of the notice of lis pendens which in this case was
effected only on 2 June 1989, at which time the sale in favor of SLDC had long been
consummated insofar as the obligation of the Spouses Lu to transfer ownership over the
property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the
annotation of the notice of lis pendens cannot help Babasanta’s position a bit and it is
irrelevant to the good or bad faith characterization of SLDC as a purchaser. A notice of lis
pendens, as the Court held in Nataño v. Esteban,42 serves as a warning to a prospective
purchaser or incumbrancer that the particular property is in litigation; and that he should
keep his hands off the same, unless he intends to gamble on the results of the litigation."
Precisely, in this case SLDC has intervened in the pending litigation to protect its rights.
Obviously, SLDC’s faith in the merit of its cause has been vindicated with the Court’s present
decision which is the ultimate denouement on the controversy.
The Court of Appeals has made capital 43 of SLDC’s averment in its Complaint-in-
Intervention44 that at the instance of Pacita Lu it issued a check for ₱200,000.00 payable to
Babasanta and the confirmatory testimony of Pacita Lu herself on cross-
examination.45 However, there is nothing in the said pleading and the testimony which
explicitly relates the amount to the transaction between the Spouses Lu and Babasanta for
what they attest to is that the amount was supposed to pay off the advances made by
Babasanta to Pacita Lu. In any event, the incident took place after the Spouses Lu had
already executed the Deed of Absolute Sale with Mortgage  in favor of SLDC and therefore, as
previously explained, it has no effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDC’s registration of the sale had been tainted by the
prior notice of lis pendensand assuming further for the same nonce that this is a case of
double sale, still Babasanta’s claim could not prevail over that of SLDC’s. In Abarquez v.
S a l e s P a r t V I P a g e | 87
Court of Appeals,46 this Court had the occasion to rule that if a vendee in a double sale
registers the sale after he has acquired knowledge of a previous sale, the registration
constitutes a registration in bad faith and does not confer upon him any right. If the
registration is done in bad faith, it is as if there is no registration at all, and the buyer who
has taken possession first of the property in good faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only after the
second vendee, Abarquez, registered their deed of sale with the Registry of Deeds, but the
Israels were first in possession. This Court awarded the property to the Israels because
registration of the property by Abarquez lacked the element of good faith. While the facts in
the instant case substantially differ from that in Abarquez, we would not hesitate to rule in
favor of SLDC on the basis of its prior possession of the property in good faith. Be it noted
that delivery of the property to SLDC was immediately effected after the execution of the
deed in its favor, at which time SLDC had no knowledge at all of the prior transaction by the
Spouses Lu in favor of Babasanta. 1a\^/phi1.net
The law speaks not only of one criterion. The first criterion is priority of entry in the registry
of property; there being no priority of such entry, the second is priority of possession; and, in
the absence of the two priorities, the third priority is of the date of title, with good faith as
the common critical element. Since SLDC acquired possession of the property in good faith in
contrast to Babasanta, who neither registered nor possessed the property at any time,
SLDC’s right is definitely superior to that of Babasanta’s.
At any rate, the above discussion on the rules on double sale would be purely academic for
as earlier stated in this decision, the contract between Babasanta and the Spouses Lu is not a
contract of sale but merely a contract to sell. In Dichoso v. Roxas,47 we had the occasion to
rule that Article 1544 does not apply to a case where there was a sale to one party of the
land itself while the other contract was a mere promise to sell the land or at most an actual
assignment of the right to repurchase the same land. Accordingly, there was no double sale
of the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals
appealed from is REVERSED and SET ASIDE and the decision of the Regional Trial Court,
Branch 31, of San Pedro, Laguna is REINSTATED. No costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

[No. 16420. October 12, 1921]
Agripino Mendoza, petitioner and appellee, vs. Primitivo Kalaw, objector and
appellant.
1.Land Registration; Facts of this Case.—C sold a parcel of land to K under "pacto de retro."
About two weeks later C sold the same parcel of land, by an absolute deed of sale, to M,
who, four days thereafter, took possession of said land and enclosed it with a fence. A
representative of K then tried to obtain possession of the land from M but the latter refused
to deliver it. Then Z tried to have his "pacto de retro" registered in the registry of deeds; but,
for some valid reasons, the register of deeds declined to register the same and only made a
"preventative precautionary notice" (anotacion preventiva) of K's "pacto de retro." Later, M
applied for the registration of said parcel of land under the Torrens system, and K opposed
the same upon the ground that he was the owner thereof by virtue of his "pacto de retro."
Held: M was entitled to have said land registered in his name. He has a better title to said
land than K because he (M) had acquired it by an absolute deed of sale and had taken
possession thereof prior to K.
2.Id.; Effect of an "Anotacion Preventiva."—The preventative precautionary notice obtained
by K created no advantage in his favor, for the reason that such a notice on the records of
the registry of deeds only protects the rights of the person securing it for a period of thirty
days. (Par. 2, art. 17, Mortgage Law; see also cases cited in the opinion.)
APPEAL from a judgment of the Court of First Instance of Manila. Ostrand, J.
The facts are stated in the opinion of the court.
Guillermo M. Katigbak for appellant.
Felipe A. Jose for appellee. Mendoza vs. Kalaw, 42 Phil., 237, No. 16420 October 12,
JOHNSON, J.:
From the record it appears that on the 26th day of November, 1919, the petitioner presented
a petition in the Court of First instance of the City of Manila for the registration, under the
Torrens system, of a piece or parcel of land, particularly described in paragraph A of the
petition. The said lot is alleged to have an area of 371.6 square meters. The petitioner
alleged that he was the owner in fee simple of said parcel of land for the reason that he had
purchased the same of Federico Cañet on the 8th day of November, 1919. Accompanying the
S a l e s P a r t V I P a g e | 88
petition, there was united a plan (marked Exhibit A) containing a technical description of the
metes and bounds of said parcel of land.
To the registration of said parcel of land the oppositor, Primitivo Kalaw, presented his
opposition, alleging that he was the owner of the same and that he had acquired it from the
said Federico Cañet.
Upon the issue thus presented by the petitioner and opposition, the Honorable James A.
Ostrand, on the 23d day of January, 1920, in a carefully prepared opinion, reached the
conclusion that the petitioner was the owner in fee simple of said parcel of land, and ordered
it registered in his name in accordance with the provisions of the Land registration Act. From
that decree the oppositor appealed to this court.
From an examination of the record the following facts seem to be proved by a large
preponderance of the evidence:
(1) That on the 24th day of September, 1919, the said Federico Cañet sold, under
a conditional sale, the parcel of land in question to the appellant (Exhibit 1);
(2) That on the 8th day of November, 1919, the said Federico Cañet made
an absolute sale of said parcel of land to the petitioner Agripino Mendoza (Exhibit B);
(3) That on the 12th day of November, 1919, Agripino Mendoza entered upon, and
took actual possession of, said parcel of land, enclosed it with a fence, and began to
clean the same;
(4) That after the petitioner had fenced and cleaned said lot, as above indicated, a
representative of the oppositor claimed and attempted to obtain possession of said
lot, but the petitioner, who was then in possession, refused to deliver the possession,
upon the ground that the was the owner;
(5) That on the 17th day of November (18th day of November), 1919, the oppositor
attempted to have his title registered in the registry of deeds of the City of Manila,
but such registration was denied by the register of deeds for the reason that there
existed some defect in the description of the property, and for the reason that the
title of the vendor had not therefore been registered. The register of deeds,
however, did make an "anotacion preventiva."
 S a l e s P a r t V I P a g e | 89

It will be noted from the foregoing that Federico Cañet made two sales of the same property
— one of the oppositor and the other to the petitioner. The first was but a conditional sale
while the latter was an absolute sale. It will also be noted that while the absolute sale to the
petitioner was subsequent to the conditional sale to the oppositor, the former obtained the
actual possession of the property first. It will further be noted from a reading of Exhibits 1
and B that the petitioner actually paid to his vendor the purchase price of the property in
question, while the payment by the oppositor depended upon the performance of certain
conditions mentioned in the contract of sale. 1awph!l.net

While was have stated that there were two sales of the parcel of land in question, that is
hardly the fact, because a conditional sale, before the performance of the condition, can
hardly be said to be a sale of property, especially where the condition has not been
performed or complied with. That being true, article 1473 of the Civil Code can hardly be said
to be applicable.

Neither can the "anotacion preventiva" obtained by the oppositor be said to have created any
advance in his favor, for the reason that a preventative precautionary notice on the records
of the registry of deeds only protects the rights of the person securing it for a period of thirty
days. (Par. 2, art. 17, Mortgage Law.) A preventative precautionary notice only protects the
interests and rights of the person who secures it against those who acquire an interest in the
property subsequent thereto, and then, only for a period of thirty days. It cannot affect the
rights or interests of persons who acquired an interest in the property theretofore.
(Veguillas vs. Jaucian, 25 Phil., 315; Samson vs.Garcia and Ycalina, 34 Phil., 805.) In the
present case the petitioner had acquired an absolute deed to the land in question, and had
actually entered into the possession of the same, before the preventative precautionary
notice was noted in the office of the registry of deeds. Therefore, under the provisions of the
Mortgage Law above cited, it could in no way affect the rights or interests of persons,
acquired theretofore.

For all of the foregoing reasons, we are fully persuaded that the judgment ordering the
registration of the parcel of land in question in the name of the petitioner should be and is
hereby affirmed, with costs. So ordered.

Araullo, Street, Avanceña and Villamor, JJ., concur.


G.R. No. 120191. October 10, 1997.*
LORETO ADALIN, CARLOS CALINGASAN, DEMETRIO ADAYA and MAGNO ADALIN,
petitioners, vs. THE HON. COURT OF APPEALS, FAUSTINO L. YU, ANTONIO T. LIM,
ELENA K. PALANCA, JOSE PALANCA, EDUARDA K. VARGAS, JOSE VARGAS,
MERCEDES K. CABALLERO, EBERHADO CABALLERO, ISABEL K. VILLAMOR,
FEDERICO VILLAMOR, JOSE KADO, URSULA KADO, MARIA K. CALONZO, BAYANI
L. CALONZO, TEOFILA KADO, NESTOR KADO and LILIA KADO, respondents.
Civil Law; Sales; Sale made by Palanca to private respondents was definitive and absolute.—
Undisputedly, Palanca, in behalf of the Kado siblings who had already committed to sell the
property to private respondents Yu and Lim and Loreto Adalin, understood her obligation to
eject the tenants on the subject property. Having gone to the extent of filing an ejectment
case before the Barangay Captain, Palanca clearly showed an intelligent appreciation of the
nature of the transaction that she had entered into: that she, in behalf of the Kado siblings,
had already sold the subject property to private respondents Yu and Lim and Loreto Adalin,
and that only the payment of the balance of the purchase price was subject to the condition
that she would successfully secure the eviction of their tenants. In the sense that the
payment of the balance of the purchase price was subject to a condition, the sale transaction
was not yet completed, and both sellers and buyers have their respective obligations yet to
be fulfilled: the former, the ejectment of their tenants; and the latter, the payment of the
balance of the purchase price. In this sense, the Deed of Conditional Sale may be an
accurate denomination of the transaction. But the sale was conditional only inasmuch as
there remained yet to be fulfilled, the obligation of the sellers to eject their tenants and the
obligation of the buyers to pay the balance of the purchase price. The choice of who to sell
the property to, however, had already been made by the sellers and is thus no longer subject
to any condition nor open to any change. In that sense, therefore, the sale made by Palanca
to private respondents was definitive and absolute.
Same; Same; Court cannot countenance the double dealing perpetrated by Palanca in behalf
of the Kado siblings.—Certainly, we cannot countenance the double dealing perpetrated by
Palanca in behalf of the Kado siblings. No amount of legal rationalizing can sanction the
arbitrary breach of contract that Palanca committed in accepting the offer of Magno Adalin,
Adaya and Calingasan to purchase a property already earlier sold to private respondents Yu
and Lim.
Same; Same; Though the second sale to the tenants was registered, such prior registration
cannot erase the gross bad faith that characterized such second sale, and consequently,
S a l e s P a r t V I P a g e | 90
there is no legal basis to rule that such second sale prevails over the first sale of the said
property to private respondents Yu and Lim.—Petitioners claim that they were given a 30-day
option to purchase the subject property as contained in the September 2, 1987 letter of
Palanca. In the first place, such option is not valid for utter lack of consideration. Secondly,
private respondents twice asked Palanca and the tenants concerned as to whether or not the
latter were interested to buy the subject property, and twice, too, the answer given to
private respondents was that the said tenants were not interested to buy the subject
property because they could not afford it. Clearly, said tenants and Palanca, who represented
the former in the initial negotiations with private respondents, are estopped from denying
their earlier statement to the effect that the said tenants Magno Adalin, Adaya and
Calingasan had no intention of buying the four doors that they were leasing from the Kado
siblings. More significantly, the subsequent sale of the subject property by Palanca to the
said tenants, smacks of gross bad faith, considering that Palanca and the said tenants were
in full awareness of the August and September negotiations between Bautista and Palanca,
on the one hand, and Loreto Adalin, Faustino Yu and Antonio Lim, on the other, for the sale
of the one-storey building. It cannot be denied, thus, that Palanca and the said tenants
entered into the subsequent or second sale notwithstanding their full knowledge of the
subsistence of the earlier sale over the same property to private respondents Yu and Lim. It
goes without saying, thus, that though the second sale to the said tenants was registered,
such prior registration cannot erase the gross bad faith that characterized such second sale,
and consequently, there is no legal basis to rule that such second sale prevails over the first
sale of the said property to private respondents Yu and Lim.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Edgardo A. Camello and Efren A.P. Peralta for petitioners.
Racela, Manguera & Fabie and Bayani Calonzo for private respondents. Adalin vs. Court of
Appeals, 280 SCRA 536, G.R. No. 120191 October 10, 1997
HERMOSISIMA, JR., J.:
Before us is a petition for review seeking the reversal of the Decision 1 of the Court of
Appeals2 and in lieu thereof, the reinstatement of the Decision 3 of the Regional Trial Court4 in
an action for specific performance filed by private respondents Faustino L. Yu and Antonio T.
Lim against the Kado siblings, namely, private respondents Elena K. Palanca, Eduarda K.

Vargas, Mercedes K. Caballero, Isabel K. Villamor, Jose Kado, Maria K. Calonzo, Teofila Kado
and Nestor Kado, and their respective spouses.
In essence, the petition poses a challenge against the respondent appellate court's legal
conclusion that the transaction entered into by private respondents Yu and Lim with private
respondents Kado siblings, is one of an absolute sale and not merely a conditional sale as
denominated in the document signed by said parties. As such, there is no dispute as to the
following facts:
. . . [F]rom the welter of evidence and the record, it has been established that Elena
Kado Palanca, and her brothers and sisters, namely, Eduarda K. Vargas, Mercedes K.
Caballero, Isabel K. Villamor, Jose Kado, Maria K. Calonzo, Teofila Kado and Nestor
Kado, hereinafter referred to, for brevity's sake, as the Appellees-Vendors, were the
owners of a parcel of land, with an area of 1,343 square meters, with a five-door,
one storey commercial building constructed thereon, fronting the Imperial Hotel,
located along Magallanes Street, Cotabato City, described in and covered by Transfer
Certificate of Title No. T-12963 of the Registry of Deeds of Cotabato City . . . . One
of the five (5) doors was leased to Loreto Adalin, hereinafter referred to as the
Appellee Adalin, two (2) doors were leased to Carlos Calingasan and Demetrio Adaya
respectively, and two (2) doors were leased to Magno Adalin, all of whom are
hereinafter referred to, for brevity's sake, as the Appellees-Vendees. The Appellees-
Vendees and Appellee Adalin paid a monthly rental of P1,500.00 for each door. The
Appellees-Vendors commissioned Ester Bautista to look for and negotiate with
prospective buyers for the sale of their property for the price of P3,000,000.00.
Sometime in August, 1987, Ester Bautista offered the property, for sale, to the
Appellants and the latter agreed to buy the property. A conference was held in the
office of the Appellant Faustino Yu, at the Imperial Hotel, where he was the
President-Manager, with both Appellants, the Appellee Adalin, the Appellees-Vendors
Elena Palanca and Teofilo Kado, in their behalf and in behalf of the Appellees-
Vendors, in attendance, to discuss the terms and conditions of the sale. The
Appellants and Appellee Adalin, the Appellees-Vendors agreed that the Appellants will
each buy two (2) doors while Appellee Adalin will buy the fifth door which he was
leasing from the Appellees-Vendors, all for the price of P2,600,000.00. During the
conference, the Appellants inquired from the Appellee-Vendor Elena Palanca whether
the Appellees-Vendees were interested to buy the property but the Appellee-Vendor
Elena Palanca replied that the property had been offered to the Appellees-Vendees
for sale but that the latter were not interested to buy the same. The conferees then
agreed to meet, on September 2, 1987, in the house of the Appellee-Vendor Palanca,
with Atty. Bayani Calonzo, her brother-in-law, in attendance, to finalize the sale.
However, unknown to the Appellants, the Appellee-Vendor Elena Palanca, in her
behalf and in behalf of the other Appelles-Vendors, sent, on September 2, 1987,
S a l e s P a r t V I P a g e | 91
separate letters to each of the Appellees-Vendees informing them that someone was
interested to buy the property and requested them to vacate the property within
thirty (30) days "unless all of you could buy the property at the same price" . . . .
During the conference in the house of the Appellee-Vendor Elena Palanca, on
September 2, 1987, the Appellants, the Appellee Adalin and the Appellees-Vendors
Elena Palanca and Teofilo Kado in their behalf and in behalf of the other Appellees-
Vendors, Atty. Bayani Calonzo, the husband of the Appellee Maria Kado, Atty.
Eugenio Soyao, the counsel of the Appellants and the Appellee-Vendee Magno Adalin
who attended in his behalf and in behalf of the Appellees-Vendees, were present.
When asked by the Appellants if the Appellees-Vendees were interested to buy the
property, the Appellee-Vendee Magno Adalin forthrightly replied that the Appellees-
Vendees were not interested to buy the property because they cannot afford the
purchase price thereof. However, he claimed that the Appellees' Vendees were
entitled to P50,000.00 each as disturbance money, in consideration for their vacating
the property, to be borne by the Appellees-Vendors. The Appellants, the Appellee
Adalin and the Appelles-Vendors forthwith agreed that each Appellant will buy two
(2) doors while the fifth door leased by Appellee Adalin will be purchased by him, all
for the purchase price of P2,600,000.00 and that the Appellants and Appellee Adalin
will pay, P300,000.00 as downpayment for the property, the balance to be payable
upon the eviction of the Appellees-Vendees from the property and the execution of a
"Deed of Absolute Sale". Atty. Bayani Calonzo forthwith assured the Appellants that
he could secure the eviction of the Appellees-Vendees from the property within a
month because the latter were his close friends and compadres. Atty. Bayani Calonzo
then gave Atty. Eugenio Soyao, the counsel of the Appellants, the go-signal to
prepare the deed for the signatures of the parties. On September 8, 1987, the
Appellants and Appellee Adalin, as buyers of the property, and the Appellees-
Vendors, met in the office of the Appellant Faustino Yu at the Imperial Hotel and
executed the "Deed of Conditional Sale" prepared by Atty. Eugenio Soyao
. . . . The Appellants and Appellee Adalin each contributed P100,000.00 and gave the
total amount of P300,000.00 to the Appellee-Vendor Elena Palanca as the
downpayment for the property. The Appellees-Vendors Elena Palanca and Eduarda
Vargas signed an "Acknowledgment Receipt" for the downpayment . . . in their
behalf and in behalf of the other Appellees-Vendors. In the meantime, the Appellants
deferred registration of the deed until after the eviction of the Appellees-Vendees
from the property and the payment of the balance of the purchase price of the
property to the Appellees-Vendors as agreed upon under the "Deed of Conditional
Sale".
In the interim, on October 14, 1987, the Appellees-Vendors, through the Appellee-
Vendor Elena Palanca, wrote, conformably with the terms of the "Deed of Conditional
Sale" . . . a letter complaint against the Appellees-Vendees with the Barangay
Captain for unlawful detainer . . . . The case was docketed as Barangay Case No.

7,052-87 . . . . On October 16, 1987, the Appellee-Vendee Magno Adalin wrote a
letter to the Appellees-Vendors, through the Appellee-Vendor Elena Palanca,
informing them that he had decided to purchase the two doors he was leasing for
the purchase price of P600,000.00 per door and was ready to tender the amount by
the end of the month . . . . The Appellee-Vendee Demetrio Adaya and the Appellee-
Vendee Carlos Calingasan likewise wrote separate letters to the Appellees-Vendors
informing the latter of their decision to purchase the premises occupied by them
respectively for the amount of P600,000.00 each . . . . Inspite of the prior sale of the
property to the Appellants and Appellee Adalin, the Appellees-Vendors decided to
back out from said sale to the Appellants and to sell the property to the Appellees-
Vendees and to return the downpayments of the Appellants for the property in the
total amount of P200,000.00 with interests thereon. The Appellees-Vendees procured
TCBT Check No. 195031 in the amount of P101,416.66 payable to the Appellant
Faustino Yu and TCBT Check No. 195032 in the amount of P101,416.66 payable to
the Appellant Antonio Lim and transmitted the same to the Appellants with a
covering letter . . . . The Appellants were flabbergasted. Both the Appellants refused
to receive the said letter and checks and insisted, instead, that the Appellees-
Vendors comply with the "Deed of Conditional Sale" . . . . On November 16, 1987,
the Appellants, through their counsel, wrote a letter to the Appellees-Vendors, copies
of which were furnished the Appellees-Vendees, inquiring if the appropriate action
has been undertaken towards the eviction of the Appellees-Vendees
. . . . The Appellees-Vendors ignored the said letter. Instead, the Appellees-Vendors
signed, in December, 1987, a "Deed of Sale of Registered Land" under which they
sold the said property to the Appellees-Vendees, including the Appellee Adalin for the
price of only P1,000,000.00 . . . much lower than the price of the Appellant under the
"Deed of Conditional Sale"
. . . . Although it appears that the deed was notarized by Atty. Bayani Calonzo,
however, the deed does not bear any number in the notarial register of the lawyer.
In the same month, the Appellees-Vendors signed another "Deed of Sale of
Registered Land" under which they sold to the Appellees-Vendees including Appellee
Adalin the aforesaid property for the considerably increased price of
P3,000,000.00 . . . . The deed was notarized by Atty. Bayani Calonzo. Interestingly,
both deeds were not filed with the Register of Deeds of Cotabato City. Not content
with the two (2) Deeds of Sale of Registered Land . . . the Appellees-Vendors, signed
a third "Deed of Sale of Registered Land" which appears dated February 5, 1988
under which they purportedly sold to the Appellees-Vendees, including Appellee
Adalin, the aforesaid property for the much reduced price of only P860,000.00 . . . .
However, the aforesaid deed was not immediately filed with the Register of Deeds of
Cotabato City. On February 26, 1988, the Appellees-Vendors, through Atty. Bayani
Calonzo, filed a Petition against the Appellants for the consignation of their
downpayment of P200,000.00, with the Regional Trial Court of General Santos City
entitled "Maria K. Calonzo, et al. versus Faustino Yu, Special Civil Case No. 259". . . .
S a l e s P a r t V I P a g e | 92
Undaunted, the Appellants filed a complaint with the Barangay Captain for Breach of
Contract against the Appellees-Vendors entitled "Faustino Yu, et al. versus Elena K.
Palanca, et al., Barangay Case No. 9,014-88". The Barangay Captain issued, on April
7, 1988, summons to the Appellees-Vendors for them to appear for a conference on
April 22, 1988 at 9:00 o'clock in the morning . . . . Invitations were also sent to the
Appellees-Vendees . . . . During the conference attended by Appellee-Vendees, the
Appellants, if only to accommodate the Appellee-Vendee Magno Adalin and settle the
case amicably, agreed to buy only one door each so that the Appellee-Vendee Magno
Adalin could purchase the two doors he was occupying. However, the Appellee-
Vendee Magno Adalin adamantly refused, claiming that he was already the owner of
the two (2) doors. When the Appellant Antonio Lim asked the Appellee Vendee
Magno Adalin to show the "Deed of Sale" for the two doors, the latter insouciantly
walked out. Atty. Bayani Calonzo likewise stated that there was no need to show the
deed of sale. No settlement was forged and, on May 16, 1988, the Barangay Captain
issued the Certification to File Action . . . .
On May 5, 1988, the Appellants filed their complaint for " Specific Performance"
against the Appellees-Vendors and Appellee Adalin in the Court a quo.
On June 14, 1988, the Appellants caused the annotation of a "Notice of Lis Pendens"
at the dorsal portion of Transfer Certificate of Title No. 12963 under the names of
the Appellees-Vendors . . . . On October 25, 1988, the Appellees-Vendees filed a
"Motion for Intervention as Plaintiffs-Intervenors" appending thereto a copy of the
"Deed of Sale of Registered Land" signed by the Appellees-Vendors . . . . On October
27, 1988, the Appellees-Vendees filed the "Deed of Sale of Registered Land" . . . with
the Register of Deeds on the basis of which Transfer Certificate of Title No. 24791
over the property was issued under their names . . . . On the same day, the
Appellees-Vendees filed in the Court a quo a "Motion To Admit Complaint-In-
Intervention . . . . Attached to the Complaint-In-Intervention was the "Deed of Sale
of Registered Land" signed by the Appellees-Vendees . . . . The Appellants were
shocked to learn that the Appellees-Vendors had signed the said deed. As a counter-
move, the Appellants filed a motion for leave to amend Complaint and, on November
11, 1988, filed their Amended Complaint impleading the Appellees-Vendees as
additional Defendants. . . .
xxx xxx xxx
The Appellees-Vendors suffered a rebuff when, on January 10, 1989, the Regional
Trial Court of General Santos City issued an Order dismissing the Petition of the
Appellees-Vendors for consignation . . . . In the meantime, on November 30, 1989,
Appellee Adalin died and was substituted, per order of the Court a quo, on January

5, 1990, by his heirs, namely, Anita, Anelita, Loreto, Jr., Teresita, Wilfredo, Lilibeth,
Nelson, Helen and Jocel, all surnamed Adalin, as Appellees-Vendees . . . .
After trial, the Court a quo rendered judgment in favor of the Appellees-
Vendees . . . .5
In the opinion of the court a quo, petitioners became the owners of the parcel of land in
question with the five-door, one storey commercial building standing thereon, when they
purchased the same following the offer and the 30-day option extended to them by private
respondent Elena Palanca, in behalf of the other Kado siblings, in her letter to them dated
September 2, 1987. The trial court disregarded the fact that the Kado siblings had already
finished transacting with private respondents Faustino Yu and Antonio Lim and had in fact
entered into a conditional sale with them respecting the same property. The trial court
brushed aside this fact as it reasoned that:
. . . In conditional deed of sale, ownership is only transferred after the purchase
price is fully paid or the fulfillment of the condition and the execution of a definite or
absolute deed of sale are made. . . .
In this case, it is clear from the provision of the Deed of Conditional Sale . . . that the
balance of the price of P2,300,000.00 shall be paid only after all the defendants-
vendees shall have vacated and surrendered the premises to the defendants-
vendors. However, the tenants did not leave the premises. In fact they opted to buy
the property. Moreover, at that time, the property was legally leased to the
defendants-vendees. . . .
xxx xxx xxx
Clearly therefore, the condition set forth in the said Deed of Conditional Sale
between the plaintiffs and the defendants-vendors was not fulfilled. Since the
condition was not fulfilled, there was no transfer of ownership of the property from
the defendants-vendors to the plaintiffs. . . .
. . . [In] the letters of Elena Palanca to the defendants-vendees dated September 2,
1987 . . . [t]hey were given the option or preferential right to purchase the property.
xxx xxx xxx
When the defendants-vendors accepted defendants-vendees' option to buy, the
former returned the initial payment of P200,000.00 to the plaintiffs . . . but they
S a l e s P a r t V I P a g e | 93
refused to accept the same. This refusal however did not diminish the effect of the
acceptance of the option to buy, which in fact led to the execution of the said Deed
of Sale of Registered Land . . . and the subsequent issuance of the Transfer
Certificate of Title No. T-24791 of the Registry of Deeds for the City of Cotabato in
the names of the defendants-vendees . . . . . .
. . . [T]he defendants-vendors acted in bad faith when, while during the effectivity of
the period of the option to buy [that] they gave to the defendants-vendees, they
executed a Deed of Conditional Sale . . . in favor of the plaintiffs. This was only six
(6) days from date of the option. . . .6
The trial court also ruled that the conditional sale of the subject property to private
respondents Faustino Yu and Antonio Lim and the sale of the same property to petitioners,
did not involve a double sale as to warrant the application of Article 1544 of the Civil Code.
The court a quo ratiocinated in this manner:
. . . [T]he plaintiffs assert that this case is one of double sale and should be
governed by Article 1544 of the Civil Code. The first sale, plaintiffs claim, is that
under the Deed of Conditional Sale . . . in their favor and the second sale is that
ultimately covered by the Deed of Sale of Registered Land for P860,000.00 . . . in
favor of the defendants-vendee. As already pointed out by the court, the execution
of the Deed of Conditional Sale did not transfer ownership of the property to the
plaintiff, hence, there can be no double sale. As held in the case of Mendoza
vs. Kalaw, 42 Phil. 236, Article 1544 does not apply to situations where one sale was
subject to a condition which was not complied with. This is because a conditional
sale, before the performance of the condition, can hardly be said to be a sale of
property, specially where the condition has not been performed or complied with. 7
Pursuant to the above ruminations of the court a quo, it ordered the following in the
dispositive portion of its decision:
WHEREFORE, the court hereby orders the dismissal of plaintiffs' complaint against
the defendants-vendees for lack or merit, and hereby further sustains the validity of
Transfer Certificate of Title No. T-24791 issued in their names (defendants-vendees)
by the Registry of Deeds for the City of Cotabato.
The defendants-vendors are hereby jointly and severally ordered to pay moral
damages of P500,000.00 to each of the plaintiffs, P100,000.00 exemplary damages
to each of the plaintiffs and P50,000.00 as and for attorney's fees.

Defendants-vendors are hereby further ordered to return the P200,000.00 initial
payment received by them with legal interest from date of receipt thereof up to
November 3, 1987.
Defendants-vendees' counterclaim is hereby ordered dismissed.
With cost against the defendants-vendors
SO ORDERED.8
Private respondents Faustino Yu and Antonio Lim wasted no time in appealing from the
above decision of the court a quo. They were vindicated when the respondent Court of
Appeals rendered its decision in their favor. The respondent appellate court reversed the trial
court as it ruled, thus:
. . . We find, and so declare. that the "Deed of Conditional Sale" . . . executed by the
Appellees-Vendors in favor of the Appellants was an absolute deed of sale and not a
conditional sale.
xxx xxx xxx
In ascertaining the nature of a contract and the intention of the parties thereto, it
behooves the trier of facts to look into the context of the contract in its entirety and
not merely specific words or phrases therein, standing alone, as well as the
contemporaneous and subsequent acts of the parties. It bears stressing that the title
of the contract is not conclusive of its nature. . . .
Although a contract may be denominated a "Deed of Conditional Sale", or
"Agreement to Sell", the same may be, in reality a deed of absolute sale or a
contract of sale . . . .
Under Article 1458 of the New Civil Code, a sale may be absolute or conditional. A
contract may be conditional when the ownership of the thing sold is retained until
the fulfillment of a positive suspensive condition, generally the payment of the
purchase price, the breach of which condition will prevent the onset of the obligation
to deliver title . . . . A sale of immovables is absolute where the contract does not
contain any provision that title to the property sold is reserved to the Vendors or that
the Vendor is entitled to unilaterally rescind the same.
xxx xxx xxx
S a l e s P a r t V I P a g e | 94
The Court a quo . . . resolutely subscribed to the view that the . . . deed is
conditional, its efficacy dependent upon a suspensive condition — that of the
payment by the Appellants of the balance of the purchase price of the properly, after
the Appellees-Vendees shall have been evicted from the property or shall have
voluntarily vacated the same and the Deed of Absolute Sale shall have been
executed in favor of the Appellants; and, since the condition was not fulfilled, the
sale never became effective . . . . . . . Even a cursory reading of the deed will readily
show absence of any stipulation in said deed that the title to the property was
reserved to the Appellees-Vendors until the balance of the purchase price was paid
nor giving them the right to unilaterally rescind the contract if the Appellants failed to
pay the said amount upon the eviction of the Appellees-Vendees. Inscrutably the, the
deed is a perfected deed of absolute sale, not a conditional one. . . .
xxx xxx xxx
There may not have been delivery of the properly to the Appellants either
symbolically or physically and more, the Appellees-Vendors may have deferred their
obligation of delivering physical possession of the property to the Appellees only after
the Appellees-Vendees shall have vacated the property, however, the right of
retention of the Appellees-Vendors of title to or ownership over the property cannot
thereby be inferred therefrom. . . . .
In fine, the non-payment of the balance of the purchase price of the property and
the consequent eviction of the Appellees-Vendees therefrom were not conditions
which suspended the efficacy of the "Deed of Conditional Sale". Rather, the same, if
due to the fault of the Appellants, merely accorded the Appellees-Vendors the option
to rescind the already existing and effective sale.
The Appellants and the Appellees-Vendors, having entered into, under the "Deed of
Conditional Sale" . . . an absolute sale, the Appellants thus had every right to
demand that the Appellees-Vendors performed their prestation under the deed, to
wit — the eviction of the Appellees-Vendees from the property — so that the
Appellants may then pay the balance of the purchase price of the property.
xxx xxx xxx
The Court a quo and the Appellees, however, posit that the "Deed of Conditional
Sale" . . . had not been consummated and title to and ownership over the property
had not been transferred to the Appellants because there had been neither
constructive nor actual delivery of the property to the Appellants . . . .

We do not agree. The evidence in the record shows that the Appellants and the
Appellees-Vendors met in the house of Appellee Elena Palanca on September 2,
1987. The Appellees-Vendees were represented by the Appellee-Vendee, Retired Col.
Magno Adalin. The latter did not object to the sale of the property to the Appellants
but merely insisted that each of the Appellees-Vendees be give in P50,000.00 as
disturbance fee by the Appellees-Vendors to which the latter acquiesced because
Atty. Bayani Calonzo forthwith gave Atty. Eugenio Soyao, the go-signal to prepare
the "Deed of Conditional Sale" for the signatures thereof by the parties on
September 8, 1987. The Appellees-Vendors, on September 2, 1987, wrote letters to
the Appellees-Vendees giving them the option to match the price offered by the
Appellants. The Appellees-Vendees maintained a resounding silence to the letter-
offer of the Appellees-Vendors. It was only, on October 16, 1987, that the Appellees-
Vendees, after the execution by the Appellants and the Appellees-Vendors of the
"Deed of Conditional Sale", that the Appellees-Vendees finally decided to themselves,
purchase the property. The Appellees are estopped from claiming that the property
had not been delivered to the Appellants. The Appellants cannot use their gross bad
faith as a shield to frustrate the enforcement, by the Appellants, of the "Deed of
Conditional Sale". . . .
xxx xxx xxx
The Appellees-Vendors cannot invoke the refusal of the Appellees-Vendees to vacate
the property and the latter's decision to themselves purchase the property as a valid
justification to renege on and turn their backs against their obligation to deliver or
cause the eviction of the Appellees-Vendees from and deliver physical possession or
the property to the Appellants. For, if We gave our approbation to the stance of the
Appellees, then We would thereby be sanctioning the performance by the Appellees-
Vendors of their obligations under the deed subject to the will and caprices of the
Appellees-Vendees, which we cannot do . . . .
It would be the zenith of inequity for the Appellees-Vendors to invoke the occupation
by the Appellees-Vendees, as of the property, as a justification to ignore their
obligation to have the Appellees-Vendees evicted from the property and for them to
give P50,000.00 disturbance fee for each of the Appellees-Vendees and a justification
for the latter to hold on to the possession of the property.
xxx xxx xxx
Assuming, gratia arguendi, for the nonce, that there had been no consummation of
the "Deed of Conditional Sale" . . . by reason of the non-delivery to the Appellants of
the property, it does not thereby mean that the "Deed of Sale of Registered Land" . .
S a l e s P a r t V I P a g e | 95
. executed by the Appellees should be given preference. Apropos to this, We give our
approbation to the plaint of the Appellants that the Court a quo erred in not applying
the second and third paragraphs of Article 1544 . . . . .
For, the evidence in the record shows that, although the Appellees-Vendees
managed to cause the registration of the Deed of Sale of Registered Land . . . on
October 27, 1988 and procure Transfer Certificate of Title No. 24791 under their
names, on said date, and that they were, as of said date, in physical possession of
the property, however, the evidence in the record shows that the Appellees-Vendees
were in gross evident bad faith. At the time the Appellees executed the "Deed of Sale
of Registered Land" in December 1987 . . . they were aware that the Appellees-
Vendors and the Appellants had executed their "Deed of Conditional Sale" as early as
September 8, 1987. . . . In the light of the foregoing, We arrive at the ineluctable
conclusion that preference must be accorded the "Deed of Conditional Sale"
executed by the Appellants and the Appellees-Vendors.9
Accordingly, the respondent Court of Appeals rendered another judgment in the case and
ordered the following:
1. The "Deed of Conditional Sale", Exhibit "A" is hereby declared valid;
2. The "Deeds of Sale of Registered Land", Exhibits "E", "F" and "G" and Transfer
Certificate of Title No. 24791 are hereby declared null and void;
3. The Appellees-Vendees except the heirs of Loreto Adalin are hereby ordered to
vacate the property within thirty (30) days from the finality of this Decision;
4. The Appellees-Vendors are hereby ordered to execute, in favor of the Appellants,
a "Deed of Absolute Sale" covering four (4) doors of the property (which includes the
area of the property on which said four doors are constructed) except the door
purchased by the Appellee-Vendee Loreto Adalin, free of any liens or encumbrances;
5. The Appellants are hereby ordered to remit to the Appellees-Vendors the balance
of the purchase price of the four (4) doors in the amount of P1,880,000.00;
6. The Appellees-Vendors are hereby ordered to refund to the Appellees-Vendees the
amount of P840,000.00 which they paid for the properly under the "Deed of
Conditional Sale of Registered Land", Exhibit "G", without interest considering that
they also acted in bad faith;

7. The Appellee-Vendee Magno Adalin is hereby ordered to pay the amount of
P3,000.00 a month, and each of the Appellees-Vendees, except the Appellee Adalin,
the amount of P1,500.00 to the Appellants, from November, 1987, up to the time the
property is vacated and delivered to the Appellants, as reasonable compensation for
the occupancy of the property, with interest thereon at the rate of 6%   per annum;
8. The Appellees-Vendors are hereby ordered to pay, jointly and severally, to each of
the Appellants the amount of P100,000.00 by way of moral damages, P20,000.00 by
way of exemplary damages and P20,000.00 by way of attorney's fees;
9. The counterclaims of the Appellees are dismissed.
With costs against the Appellees.
SO ORDERED.10
Unable to agree with the above decision of the respondent appellate court, petitioners seek
reversal thereof on the basis on the following grounds:
1. The Unconsummated Conditional Contract of Sale in favor of the herein
respondent VENDEES is Inferior to and Cannot Prevail Over the Consummated
Absolute Contracts of Sale in favor of the herein petitioners.
2. The Deeds of Sale in favor of the herein Petitioners as well as Transfer Certificate
of Title No. 24791 in their names are Perfectly Valid Documents.
3. The herein Petitioners may not be Legally and Rightfully Ordered to Vacate the
Litigated Property or Pay Reasonable Compensation for the Occupancy Thereof  .
4. The herein Petitioners may not be Held Liable to Pay the Costs.11
5. The Court of Appeals erred in holding that the Deed of Conditional Sale is in reality
an absolute deed of sale.
6. The Court of Appeals erred in relying totally and exclusively on the evidence
presented by respondents and in disregarding the evidence for petitioners.
7. The Court of Appeals erred in holding that herein petitioners are guilty of bad faith
and that Article 1544 of the Civil Code is
applicable.12
S a l e s P a r t V I P a g e | 96
The petition lacks merit.
The grounds relied upon by petitioners are essentially a splitting of the various aspects of the
one pivotal issue that holds the key to the resolution of this controversy: the true nature of
the sale transaction entered into by the Kado siblings with private respondents Faustino Yu
and Antonio Lim. Our task put simply, amounts to a declaration of what kind contract had
been entered into by said parties and of what their respective rights and obligations are
thereunder.
It is not disputed that in August, 1987, Elena K. Palanca, in behalf of the Kado siblings,
commissioned Ester Bautista to look for buyers for their property fronting the Imperial Hotel
in Cotabato City. Bautista logically offered said property to the owners of the Imperial Hotel
which may be expected to grab the offer and take advantage of the proximity of the property
to the hotel site. True enough, private respondent Faustino Yu, the President-General
Manager of Imperial Hotel, agreed to buy said property.
Thus during that same month of August, 1987, a conference was held in the office of private
respondent Yu at the Imperial Hotel. Present there were private respondent Yu, Loreto Adalin
who was one of the tenants of the five-door, one-storey building standing on the subject
property, and Elena Palanca and Teofilo Kado in their own behalf as sellers and in behalf of
the other tenants of said building. During the conference, private respondents Yu and Lim
categorically asked Palanca whether the other tenants were interested to buy the property,
but Palanca also categorically answered that the other tenants were not interested to buy the
same. Consequently, they agreed to meet at the house of Palanca on September 2, 1987 to
finalize the sale.
On September 2, 1987, Loreto Adalin; Yu and Lim and their legal counsel; Palanca and Kado
and their legal counsel; and one other tenant, Magno Adalin, met at Palanca's house. Magno
Adalin was there in his own behalf as tenant of two of the five doors of the one-storey
building standing on the subject property and in behalf of the tenants of the two other doors,
namely. Carlos Calingasan and Demetrio Adaya. Again, private respondents Yu and Lim
asked Palanca and Magno Adalin whether the other tenants were interested to buy the
subject property, and Magno Adalin unequivocally answered that he and the other tenants
were not so interested mainly because they could not afford it. However, Magno Adalin
asserted that he and the other tenants were each entitled to a disturbance fee of P50,000.00
as consideration for their vacating the subject property.
During said meeting, Palanca and Kado, as sellers, and Loreto Adalin and private respondents
Yu and Lim, as buyers, agreed that the latter will pay P300,000.00 as downpayment for the
property and that as soon as the former secures the eviction of the tenants, they will be paid
the balance of P2,300,000.00.

Pursuant to the above terms and conditions, a Deed of Conditional Sale was drafted by the
counsel of private respondents Yu and Lim. On September 8, 1987, at the Imperial Hotel
office of private respondent Yu, Palanca and Eduarda Vargas, representing the sellers, and
Loreto Adalin and private respondents Yu and Lim signed the Deed of Conditional Sale. They
also agreed to defer the registration of the deed until after the sellers have secured the
eviction of the tenants from the subject property.
The tenants, however, refused to vacate the subject property. Being under obligation to
secure the eviction of the tenants, in accordance with the terms and conditions of the Deed
of Conditional Sale, Elena Palanca filed with the Barangay Captain a letter complaint for
unlawful detainer against the said tenants.
Undisputedly, Palanca, in behalf of the Kado siblings who had already committed to sell the
property to private respondents Yu and Lim and Loreto Adalin, understood her obligation to
eject the tenants on the subject property. Having gone to the extent of filing an ejectment
case before the Barangay Captain, Palanca clearly showed an intelligent appreciation of the
nature of the transaction that she had entered into: that she, in behalf of the Kado siblings,
had already sold the subject property to private respondents Yu and Lim and Loreto Adalin,
and that only the payment of the balance of the purchase price was subject to the condition
that she would successfully secure the eviction of their tenants. In the sense that the
payment of the balance of the purchase price was subject to a condition, the sale transaction
was not yet completed, and both sellers and buyers have their respective obligations yet to
be fulfilled: the former, the ejectment of their tenants; and the latter, the payment of the
balance of the purchase price. In this sense, the Deed of Conditional Sale may be an
accurate denomination of the transaction. But the sale was conditional only inasmuch as
there remained yet to be fulfilled, the obligation of the sellers to eject their tenants and the
obligation of the buyers to pay the balance of the purchase price. The choice of who to sell
the property to, however, had already been made by the sellers and is thus no longer subject
to any condition nor open to any change. In that sense, therefore, the sale made by Palanca
to private respondents was definitive and absolute.
Nothing in the acts of the sellers and buyers before, during or after the said transaction
justifies the radical change of posture of Palanca who, in order to provide a legal basis for
her later acceptance of the tenants' offer to buy the same property, in effect claimed that the
sale, being conditional, was dependent on the sellers not changing their minds about selling
the property to private respondents Yu and Lim. The tenants, for their part, defended
Palanca's subsequent dealing with them by asserting their option rights under Palanca's letter
of September 2, 1987 and harking on the non-fulfillment of the condition that their ejectment
be secured first.
S a l e s P a r t V I P a g e | 97
Two days after Palanca filed an ejectment case before the Barangay Captain against the
tenants of the subject property, Magno Adalin, Demetrio Adaya and Carlos Calingasan wrote
letters to Palanca informing the Kado siblings that they have decided to purchase the doors
that they were leasing for the purchase price of P600,000.00 per door. Almost instantly,
Palanca, in behalf of the Kado siblings, accepted the offer of the said tenants and returned
the downpayments of private respondents Yu and Lim. Of course, the latter refused to accept
the reimbursements.
Certainly, we cannot countenance the double dealing perpetrated by Palanca in behalf of the
Kado siblings. No amount of legal rationalizing can sanction the arbitrary breach of contract
that Palanca committed in accepting the offer of Magno Adalin, Adaya and Calingasan to
purchase a property already earlier sold to private respondents Yu and Lim.
Petitioners claim that they were given a 30-day option to purchase the subject property as
contained in the September 2, 1987 letter of Palanca. In the first place, such option is not
valid for utter lack of consideration. 13Secondly, private respondents twice asked Palanca and
the tenants concerned as to whether or not the latter were interested to buy the subject
property, and twice, too, the answer given to private respondents was that the said tenants
were not interested to buy the subject property because they could not afford it. Clearly, said
tenants and Palanca, who represented the former in the initial negotiations with private
respondents, are estopped from denying their earlier statement to the effect that the said
tenants Magno Adalin, Adaya and Calingasan had no intention of buying the four doors that
they were leasing from the Kado siblings. More significantly, the subsequent sale of the
subject property by Palanca to the said tenants, smacks of gross bad faith, considering that
Palanca and the said tenants were in full awareness of the August and September
negotiations between Bautista and Palanca, on the one hand, and Loreto Adalin, Faustino Yu
and Antonio Lim, on the other, for the sale of the one-storey building. It cannot be denied,
thus, that Palanca and the said tenants entered into the subsequent or second sale
notwithstanding their full knowledge of the subsistence of the earlier sale over the same
property to private respondents Yu and Lim. It goes without saying, thus, that though the
second sale to the said tenants was registered, such prior registration cannot erase the gross
bad faith that characterized such second sale, and consequently, there is no legal basis to
rule that such second sale prevails over the first sale of the said property to private
respondents Yu and Lim.
We agree, thus, with the ruminations of the respondent Court of Appeals that:
The Appellees-Vendors cannot invoke the refusal of the Appellees-Vendees to vacate
the property and the latter's decision to themselves purchase the property as a valid
justification to renege on and turn their backs against their obligation to deliver or
cause the eviction of the Appellees-Vendees from the deliver physical possession or
 S a l e s P a r t V I P a g e | 98

the property to the Appellants. For, if We gave our approbation to the stance of the Bellosillo, J., took no part.
Appellees, then We would thereby be sanctioning the performance by the Appellees-
Vendors of their obligations under the deed subject to the will and caprices of the
Appellees-Vendees, which we cannot do . . . .

It would be the zenith of inequity for the Appellees-Vendors to invoke the occupation
by the Appellees-Vendees, as of the property, as a justification to ignore their
obligation to have the Appellees-Vendees evicted from the property and for them to
give P50,000.00 disturbance fee for each of the Appellees-Vendees and a justification
for the latter to hold on to the possession of the property.

xxx xxx xxx

Assuming, gratia arguendi, for the nonce, that there had been no consummation of
the "Deed of Conditional Sale" . . . by reason of the non-delivery to the Appellants of
the property, it does not thereby mean that the "Deed of Sale of Registered Land" . .
. executed by the Appellees should be given preference. Apropos to this, We give our
approbation to the plaint of the Appellants that the Court a quo erred in not applying
the second and third paragraphs of Article 1544 . . . .

For, the evidence in the record shows that, although the Appellees-Vendees
managed to cause the registration of the Deed of Sale of Registered Land . . . on
October 27, 1988 and procure Transfer Certificate of Title No. 24791 under their
names, on said date, and that they were, as of said date, in physical possession of
the property, however, the evidence in the record shows that the Appellees-Vendees
were in gross evident bad faith. At the time the Appellees executed the "Deed of Sale
of Registered Land" in December 1987 . . . they were aware that the Appellees-
Vendors and the Appellants had executed their "Deed of Conditional Sale" as early as
September 8, 1987. . . . In the light of the foregoing, We arrive at the ineluctable
conclusion that preference must be accorded the "Deed
of Conditional Sale" executed by the Appellants and the Appellees-Vendors. 14

WHEREFORE, the instant petition is HEREBY DISMISSED.

Costs against petitioners.

SO ORDERED.

Davide, Jr., Vitug and Kapunan, JJ., concur.


G.R. No. 129760. December 29, 1998.*
RICARDO CHENG, petitioner, vs. RAMON B. GENATO and ERNESTO R. DA JOSE &
SOCORRO B. DA JOSE, respondents.
Civil Law; Sales; Obligations; 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.—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. 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 nonexistent, the
suspensive condition not having occurred as yet. 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.
Same; Same; Contracts; 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. If the suspensive condition does not take place, the parties would stand as if
the conditional obligation had never existed.—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. If the
suspensive condition does not take place, the parties would stand as if the conditional
obligation had never existed.
Same; Same; Same; The act of a party in treating a contract as cancelled should be made
known to the other.—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, 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. For such act is always
S a l e s P a r t V I P a g e | 99
provisional. It is always subject to scrutiny and review by the courts in case the alleged
defaulter brings the matter to the proper courts.
Same; Same; Same; Appeals; An issue which was not raised during the trial in the court
below cannot be raised for the first time on appeal.—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. 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. 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.
Same; Same; Same; When the requisites of a valid contract of sale are lacking in said
receipt, therefore the “sale” is neither valid nor enforceable.—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 the 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 nor enforceable.
Same; Same; Same; The contract to be binding upon the obligee or the vendor depends
upon the fulfillment or non-fulfillment of an event.—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’s contention in his pleadings before the said courts.
Consequently, both agreements, between Genato and the Da Jose spouses, on the one hand,
and that of Genato and Cheng, on the other hand, actually, involve two contracts to sell. The
provisions of Art. 1544 of the Civil Code on double sales come to mind, which read: “Article
1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it
should be movable property. Should it be immovable property, the ownership shall belong to
the person acquiring it who in good faith first recorded it in the Registry of Property. Should
there be no inscription, the ownership shall pertain to the person who in good faith was first
in possession; and in the absence thereof, to the person who presents the 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.
Same; Same; Same; Land Registration; Words and Phrases; “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. 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.—“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. 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. We have ruled 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 to the annotation made by the Da Jose spouses with respect to their Contract to Sell
dated September 6, 1989.
Same; Same; Damages; 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.”—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.” 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 gridlock” on both the land itself and the
respondents’ rights provides ample basis for the damages awarded. Based on these
S a l e s P a r t V I P a g e | 100
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.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Francisco B. Bayona for petitioner.
     Magsalin, Pobre, Lapid & Villanueva for R.B. Genato.
     Benitez, Parlade, Africa, Herrera, Parlade & Panga Law Offices for Ernesto and Socorro Da
Jose. Cheng vs. Genato, 300 SCRA 722, G.R. No. 129760 December 29, 1998
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.
x x x           x x x          x x x
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
S a l e s P a r t V I P a g e | 101
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;
x x x           x x x          x x x
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.
S a l e s P a r t V I P a g e | 102
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;
S a l e s P a r t V I P a g e | 103
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.
x x x           x x x          x x x
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:
S a l e s P a r t V I P a g e | 104
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 admissions 30 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 testimony 32 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.
S a l e s P a r t V I P a g e | 105
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
S a l e s P a r t V I P a g e | 106
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 gridlock 47 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.

G.R. No. 132161. January 17, 2005.*
CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC., petitioner, vs. THE
HONORABLE COURT OF APPEALS and HEIRS OF TEODORO DELA CRUZ,
respondents.
Sales; Double Sales; Article 1544 of the Civil Code cannot be invoked where the two different
contracts of sale are made by two different persons, one of them not being the owner of the
property sold, and even if the sale was made by the same person, if the second sale was
made when such person was no longer the owner of the property.—The provision is not
applicable in the present case. It contemplates a case of double or multiple sales by a single
vendor. More specifically, it covers a situation where a single vendor sold one and the same
immovable property to two or more buyers. According to a noted civil law author, it is
necessary that the conveyance must have been made by a party who has an existing right in
the thing and the power to dispose of it. It cannot be invoked where the two different
contracts of sale are made by two different persons, one of them not being the owner of the
property sold. And even if the sale was made by the same person, if the second sale was
made when such person was no longer the owner of the property, because it had been
acquired by the first purchaser in full dominion, the second purchaser cannot acquire any
right.
Same; Same; In a situation where not all the requisites are present which would warrant the
application of Art. 1544, the principle of prior tempore, potior jure or simply “he who is first
in time is preferred in right,” should apply.—In a situation where not all the requisites are
present which would warrant the application of Art. 1544, the principle of prior tempore,
potior jure or simply “he who is first in time is preferred in right,” should apply. The only
essential requisite of this rule is priority in time; in other words, the only one who can invoke
this is the first vendee. Undisputedly, he is a purchaser in good faith because at the time he
bought the real property, there was still no sale to a second vendee. In the instant case, the
sale to the Heirs by Gamiao and Dayag, who first bought it from Rizal Madrid, was anterior to
the sale by the Madrid brothers to Marquez. The Heirs also had possessed the subject
property first in time. Thus, applying the principle, the Heirs, without a scintilla of doubt,
have a superior right to the subject property.
Same; Same; One can sell only what one owns or is authorized to sell, and the buyer can
acquire no more than what the seller can transfer legally.—It is an established principle that
no one can give what one does not have—nemo dat quod non habet. Accordingly, one can
sell only what one owns or is authorized to sell, and the buyer can acquire no more than
S a l e s P a r t V I P a g e | 107
what the seller can transfer legally. In this case, since the Madrid brothers were no longer
the owners of the subject property at the time of the sale to Marquez, the latter did not
acquire any right to it.
Same; Same; Prior registration of the subject property does not by itself confer ownership or
a better right over the property—before the second buyer can obtain priority over the first,
he must show that he acted in good faith throughout (i.e., in ignorance of the first sale and
of the first buyer’s rights) from the time of acquisition until the title is transferred to him by
registration.—Following Article 1544, in the double sale of an immovable, the rules of
preference are:  (a) the first registrant in good faith; (b) should there be no entry, the first in
possession in good faith; and (c) in the absence thereof, the buyer who presents the oldest
title in good faith. Prior registration of the subject property does not by itself confer
ownership or a better right over the property. Article 1544 requires that before the second
buyer can obtain priority over the first, he must show that he acted in good faith throughout
(i.e., in ignorance of the first sale and of the first buyer’s rights)—from the time of acquisition
until the title is transferred to him by registration or failing registration, by delivery of
possession.
Same; Same; Caveat Emptor; One who purchases real property which is in actual possession
of others should, at least, make some inquiry concerning the rights of those in possession.—
One who purchases real property which is in actual possession of others should, at least,
make some inquiry concerning the rights of those in possession. The actual possession by
people other than the vendor should, at least, put the purchaser upon inquiry. He can
scarcely, in the absence of such inquiry, be regarded as a bona fide purchaser as against
such possessions. The rule of caveat emptor requires thE purchaser to be aware of the
supposed title of the vendor and one who buys without checking the vendor’s title takes all
the risks and losses consequent to such failure.
Same; Same; Same; It is a well-settled rule that a purchaser or mortgagee cannot close his
eyes to facts which should put a reasonable man upon his guard, and then claim that he
acted in good faith under the belief that there was no defect in the title of the vendor or
mortgagor.—This rule equally applies to mortgagees of real property. In the case of
Crisostomo v. Court of Appeals, the Court held: It is a well-settled rule that a purchaser or
mortgagee cannot close his eyes to facts which should put a reasonable man upon his guard,
and then claim that he acted in good faith under the belief that there was no defect in the
title of the vendor or mortgagor. His mere refusal to believe that such defect exists, or his
willful closing of his eyes to the possibility of the existence of a defect in the vendor’s or

mortgagor’s title, will not make him an innocent purchaser or mortgagee for value, if it
afterwards develops that the title was in fact defective, and it appears that he had such
notice of the defects as would have led to its discovery had he acted with the measure of a
prudent man in a like situation.
Same; Same; Banks and Banking; Banks, their business being impressed with public interest,
are expected to exercise more care and prudence than private individuals in their dealings,
even those involving registered lands.—Banks, their business being impressed with public
interest, are expected to exercise more care and prudence than private individuals in their
dealings, even those involving registered lands. Hence, for merely relying on the certificates
of title and for its failure to ascertain the status of the mortgaged properties as is the
standard procedure in its operations, we agree with the Court of Appeals that CRB is a
mortgagee in bad faith.
Same; Same; Land Titles; In a situation where a party has actual knowledge of the claimant’s
actual, open and notorious possession of a disputed property at the time of registration, the
actual notice and knowledge are equivalent to registration, because to hold otherwise would
be to tolerate fraud and the Torrens system cannot be used to shield fraud—while certificates
of title are indefeasible, unassailable and binding against the whole world, they merely
confirm or record title already existing and vested.—In this connection, Marquez’s obstention
of title to the property and the subsequent transfer thereof to CRB cannot help the latter’s
cause. In a situation where a party has actual knowledge of the claimant’s actual, open and
notorious possession of the disputed property at the time of registration, as in this case, the
actual notice and knowledge are equivalent to registration, because to hold otherwise would
be to tolerate fraud and the Torrens system cannot be used to shield fraud. While certificates
of title are indefeasible, unassailable and binding against the whole world, they merely
confirm or record title already existing and vested. They cannot be used to protect a usurper
from the true owner, nor can they be used for the perpetration of fraud; neither do they
permit one to enrich himself at the expense of others.
Same; Same; The requirement of good faith in the possession of the property finds no
application in cases where there is no second sale.—We also find that the Court of Appeals
did not err in awarding the subject property to the Heirs absent proof of good faith in their
possession of the subject property and without any showing of possession thereof by Gamiao
and Dayag. As correctly argued by the Heirs in their Comment, the requirement of good faith
in the possession of the property finds no application in cases where there is no second sale.
In the case at bar, Teodoro dela Cruz took possession of the property in 1964 long before
S a l e s P a r t V I P a g e | 108
the sale to Marquez transpired in 1976 and a considerable length of time—eighteen (18)
years in fact —before the Heirs had knowledge of the registration of said sale in 1982. As
Article 526 of the Civil Code aptly provides, “(H)e is deemed a possessor in good faith who is
not aware that there exists in his title or mode of acquisition any flaw which invalidates it.”
Thus, there was no need for the appellate court to consider the issue of good faith or bad
faith with regard to Teodoro dela Cruz’s possession of the subject property.
Tax Declarations; Tax declarations are good indicia of possession in the concept of an owner,
for no one in his right mind would be paying taxes for a property that is not in his actual or
constructive possession.—As this Court declared in the case of Heirs of Simplicio Santiago v.
Heirs of Mariano E. Santiago, tax declarations “are good indicia of possession in the concept
of an owner, for no one in his right mind would be paying taxes for a property that is not in
his actual or constructive possession.”
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
   The facts are stated in the opinion of the Court.
  Benjamin B. Hermosura for petitioner.
  Ronald Oliver Solis for private respondents. Consolidated Rural Bank (Cagayan Valley), Inc.
vs. Court of Appeals, 448 SCRA 347, G.R. No. 132161 January 17, 2005.
DECISION
TINGA, J.:
Petitioner Consolidated Rural Bank, Inc. of Cagayan Valley filed the instant Petition for
Certiorari1 under Rule 45 of the Revised Rules of Court, seeking the review of the Decision2 of
the Court of Appeals Twelfth Division in CA-G.R. CV No. 33662, promulgated on 27 May
1997, which reversed the judgment 3 of the lower court in favor of petitioner; and
the Resolution4 of the Court of Appeals, promulgated on 5 January 1998, which reiterated its
Decision insofar as respondents Heirs of Teodoro dela Cruz (the Heirs) are concerned.
From the record, the following are the established facts:
Rizal, Anselmo, Gregorio, Filomeno and Domingo, all surnamed Madrid (hereafter the Madrid
brothers), were the registered owners of Lot No. 7036-A of plan Psd-10188, Cadastral Survey

211, situated in San Mateo, Isabela per Transfer Certificate of Title (TCT) No. T-8121 issued
by the Register of Deeds of Isabela in September 1956.5
On 23 and 24 October 1956, Lot No. 7036-A was subdivided into several lots under
subdivision plan Psd- 50390. One of the resulting subdivision lots was Lot No. 7036-A-7 with
an area of Five Thousand Nine Hundred Fifty-Eight (5,958) square meters. 6
On 15 August 1957, Rizal Madrid sold part of his share identified as Lot No. 7036-A-7, to
Aleja Gamiao (hereafter Gamiao) and Felisa Dayag (hereafter, Dayag) by virtue of a  Deed of
Sale,7 to which his brothers Anselmo, Gregorio, Filomeno and Domingo offered no objection
as evidenced by their Joint Affidavit dated 14 August 1957.8 The deed of sale was not
registered with the Office of the Register of Deeds of Isabela. However, Gamiao and Dayag
declared the property for taxation purposes in their names on March 1964 under Tax
Declaration No. 7981.9
On 28 May 1964, Gamiao and Dayag sold the southern half of Lot No. 7036-A-7,
denominated as Lot No. 7036-A-7-B, to Teodoro dela Cruz, 10 and the northern half, identified
as Lot No. 7036-A-7-A,11 to Restituto Hernandez.12Thereupon, Teodoro dela Cruz and
Restituto Hernandez took possession of and cultivated the portions of the property
respectively sold to them.13
Later, on 28 December 1986, Restituto Hernandez donated the northern half to his daughter,
Evangeline Hernandez-del Rosario.14 The children of Teodoro dela Cruz continued possession
of the southern half after their father’s death on 7 June 1970.
In a Deed of Sale15 dated 15 June 1976, the Madrid brothers conveyed all their rights and
interests over Lot No. 7036-A-7 to Pacifico Marquez (hereafter, Marquez), which the former
confirmed16 on 28 February 1983.17 The deed of sale was registered with the Office of the
Register of Deeds of Isabela on 2 March 1982.18
Subsequently, Marquez subdivided Lot No. 7036-A-7 into eight (8) lots, namely: Lot Nos.
7036-A-7-A to 7036-A-7-H, for which TCT Nos. T-149375 to T-149382 were issued to him on
29 March 1984.19 On the same date, Marquez and his spouse, Mercedita Mariana, mortgaged
Lots Nos. 7036-A-7-A to 7036-A-7-D to the Consolidated Rural Bank, Inc. of Cagayan Valley
(hereafter, CRB) to secure a loan of One Hundred Thousand Pesos (₱100,000.00). 20These
deeds of real estate mortgage were registered with the Office of the Register of Deeds on 2
April 1984.
On 6 February 1985, Marquez mortgaged Lot No. 7036-A-7-E likewise to the Rural Bank of
Cauayan (RBC) to secure a loan of Ten Thousand Pesos (₱10,000.00).21
S a l e s P a r t V I P a g e | 109
As Marquez defaulted in the payment of his loan, CRB caused the foreclosure of the
mortgages in its favor and the lots were sold to it as the highest bidder on 25 April 1986. 22
On 31 October 1985, Marquez sold Lot No. 7036-A-7-G to Romeo Calixto (Calixto). 23
Claiming to be null and void the issuance of TCT Nos. T-149375 to T-149382; the foreclosure
sale of Lot Nos. 7036-A-7-A to 7036-A-7-D; the mortgage to RBC; and the sale to Calixto, the
Heirs-now respondents herein-represented by Edronel dela Cruz, filed a case 24 for
reconveyance and damages the southern portion of Lot No. 7036-A (hereafter, the subject
property) against Marquez, Calixto, RBC and CRB in December 1986.
Evangeline del Rosario, the successor-in-interest of Restituto Hernandez, filed with leave of
court a Complaint in Intervention25 wherein she claimed the northern portion of Lot No.
7036-A-7.
In the Answer to the Amended Complaint,26 Marquez, as defendant, alleged that apart from
being the first registrant, he was a buyer in good faith and for value. He also argued that the
sale executed by Rizal Madrid to Gamiao and Dayag was not binding upon him, it being
unregistered. For his part, Calixto manifested that he had no interest in the subject property
as he ceased to be the owner thereof, the same having been reacquired by defendant
Marquez.27
CRB, as defendant, and co-defendant RBC insisted that they were mortgagees in good faith
and that they had the right to rely on the titles of Marquez which were free from any lien or
encumbrance.28
After trial, the Regional Trial Court, Branch 19 of Cauayan, Isabela (hereafter, RTC) handed
down a decision in favor of the defendants, disposing as follows:
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered:
1. Dismissing the amended complaint and the complaint in intervention;
2. Declaring Pacifico V. Marquez the lawful owner of Lots 7036-A-7 now Lots 7036-A-
7-A to 7036-A-7-H, inclusive, covered by TCT Nos. T-149375 to T-149382, inclusive;
3. Declaring the mortgage of Lots 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-
7-D in favor of the defendant Consolidated Rural Bank (Cagayan Valley) and of Lot
7036-A-7-E in favor of defendant Rural Bank of Cauayan by Pacifico V. Marquez
valid;

4. Dismissing the counterclaim of Pacifico V. Marquez; and
5. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the lots covered by
TCT Nos. T-33119, T-33220 and T-7583.
No pronouncement as to costs.
SO ORDERED.29
In support of its decision, the RTC made the following findings:
With respect to issues numbers 1-3, the Court therefore holds that the sale of Lot 7036-A-7
made by Rizal Madrid to Aleja Gamiao and Felisa Dayag and the subsequent conveyances to
the plaintiffs and intervenors are all valid and the Madrid brothers are bound by said
contracts by virtue of the confirmation made by them on August 14, 1957 (Exh. B).
Are the defendants Pacifico V. Marquez and Romeo B. Calixto buyers in good faith and for
value of Lot 7036-A-7?
It must be borne in mind that good faith is always presumed and he who imputes bad faith
has the burden of proving the same (Art. 527, Civil Code). The Court has carefully scrutinized
the evidence presented but finds nothing to show that Marquez was aware of the plaintiffs’
and intervenors’ claim of ownership over this lot. TCT No. T-8121 covering said property,
before the issuance of Marquez’ title, reveals nothing about the plaintiffs’ and intervenors’
right thereto for it is an admitted fact that the conveyances in their favor are not registered.
The Court is therefore confronted with two sales over the same property. Article 1544 of the
Civil Code provides:
"ART. 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good faith,
if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property. x x x " (Underscoring supplied).
From the foregoing provisions and in the absence of proof that Marquez has actual or
constructive knowledge of plaintiffs’ and intervenors’ claim, the Court has to rule that as the
vendee who first registered his sale, Marquez’ ownership over Lot 7036-A-7 must be
upheld.30
S a l e s P a r t V I P a g e | 110
The Heirs interposed an appeal with the Court of Appeals. In their Appellant’s Brief,31 they
ascribed the following errors to the RTC: (1) it erred in finding that Marquez was a buyer in
good faith; (2) it erred in validating the mortgage of the properties to RBC and CRB; and (3)
it erred in not reconveying Lot No. 7036-A-7-B to them.32
Intervenor Evangeline del Rosario filed a separate appeal with the Court of Appeals. It was,
however, dismissed in a Resolution dated 20 September 1993 for her failure to pay docket
fees. Thus, she lost her standing as an appellant. 33
On 27 May 1997, the Court of Appeals rendered its assailed Decision 34 reversing the RTC’s
judgment. The dispositive portion reads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE. Accordingly,
judgment is hereby rendered as follows:
1. Declaring the heirs of Teodoro dela Cruz the lawful owners of the southern half
portion and Evangeline Hernandez-del Rosario the northern half portion of Lot No.
7036-A-7, now covered by TCT Nos. T-149375 to T-149382, inclusive;
2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V.
Marquez and the Madrid brothers covering said Lot 7036-A-7;
3. Declaring null and void the mortgage made by defendant Pacifico V. Marquez of
Lot Nos. 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-D in favor of the
defendant Consolidated Rural Bank and of Lot 7036-A-7-E in favor of defendant Rural
Bank of Cauayan; and
4. Ordering Pacifico V. Marquez to reconvey Lot 7036-A-7 to the heirs of Teodoro
dela Cruz and Evangeline Hernandez-del Rosario.
No pronouncement as to costs.
SO ORDERED.35
In upholding the claim of the Heirs, the Court of Appeals held that Marquez failed to prove
that he was a purchaser in good faith and for value. It noted that while Marquez was the first
registrant, there was no showing that the registration of the deed of sale in his favor was
coupled with good faith. Marquez admitted having knowledge that the subject property was
"being taken" by the Heirs at the time of the sale. 36 The Heirs were also in possession of the
land at the time. According to the Decision, these circumstances along with the subject

property’s attractive location—it was situated along the National Highway and was across a
gasoline station—should have put Marquez on inquiry as to its status. Instead, Marquez
closed his eyes to these matters and failed to exercise the ordinary care expected of a buyer
of real estate.37
Anent the mortgagees RBC and CRB, the Court of Appeals found that they merely relied on
the certificates of title of the mortgaged properties. They did not ascertain the status and
condition thereof according to standard banking practice. For failure to observe the ordinary
banking procedure, the Court of Appeals considered them to have acted in bad faith and on
that basis declared null and void the mortgages made by Marquez in their favor. 38
Dissatisfied, CRB filed a Motion for Reconsideration39 pointing out, among others, that the
Decision promulgated on 27 May 1997 failed to establish good faith on the part of the Heirs.
Absent proof of possession in good faith, CRB avers, the Heirs cannot claim ownership over
the subject property.
In a Resolution40 dated 5 January 1998, the Court of Appeals stressed its disbelief in CRB’s
allegation that it did not merely rely on the certificates of title of the properties and that it
conducted credit investigation and standard ocular inspection. But recalling that intervenor
Evangeline del Rosario had lost her standing as an appellant, the Court of Appeals
accordingly modified its previous Decision, as follows:
WHEREFORE, the decision dated May 27, 1997, is hereby MODIFIED to read as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE insofar as
plaintiffs-appellants are concerned. Accordingly, judgment is hereby rendered as follows:
1. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the southern half
portion of Lot No. 7036-A-7;
2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V.
Marquez and the Madrid brothers insofar as the southern half portion of Lot NO. (sic)
7036-A-7 is concerned;
3. Declaring the mortgage made by defendant Pacifico V. Marquez in favor of
defendant Consolidated Rural Bank (Cagayan Valley) and defendant Rural Bank of
Cauayan as null and void insofar as the southern half portion of Lot No. 7036-A-7 is
concerned;
S a l e s P a r t V I P a g e | 111
4. Ordering defendant Pacifico V. Marquez to reconvey the southern portion of Lot
No. 7036-A-7 to the Heirs of Teodoro dela Cruz.
No pronouncement as to costs.
SO ORDERED.41
Hence, the instant CRB petition. However, both Marquez and RBC elected not to challenge
the Decision of the appellate court.
Petitioner CRB, in essence, alleges that the Court of Appeals committed serious error of law
in upholding the Heirs’ ownership claim over the subject property considering that there was
no finding that they acted in good faith in taking possession thereof nor was there proof that
the first buyers, Gamiao and Dayag, ever took possession of the subject property. CRB also
makes issue of the fact that the sale to Gamiao and Dayag was confirmed a day ahead of the
actual sale, clearly evincing bad faith, it adds. Further, CRB asserts Marquez’s right over the
property being its registered owner.
The petition is devoid of merit. However, the dismissal of the petition is justified by reasons
different from those employed by the Court of Appeals.
Like the lower court, the appellate court resolved the present controversy by applying the
rule on double sale provided in Article 1544 of the Civil Code. They, however, arrived at
different conclusions. The RTC made CRB and the other defendants win, while the Court of
Appeals decided the case in favor of the Heirs.
Article 1544 of the Civil Code reads, thus:
ART. 1544. If the same thing should have been sold to different vendees, the ownership shall
be transferred to the person who may have first taken possession thereof in good faith, if it
should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in possession; and, in the absence thereof, to the person who presents the oldest
title, provided there is good faith.

The provision is not applicable in the present case. It contemplates a case of double or
multiple sales by a single vendor. More specifically, it covers a situation where a single
vendor sold one and the same immovable property to two or more buyers. 42 According to a
noted civil law author, it is necessary that the conveyance must have been made by a party
who has an existing right in the thing and the power to dispose of it. 43 It cannot be invoked
where the two different contracts of sale are made by two different persons, one of them not
being the owner of the property sold.44 And even if the sale was made by the same person, if
the second sale was made when such person was no longer the owner of the property,
because it had been acquired by the first purchaser in full dominion, the second purchaser
cannot acquire any right.45
In the case at bar, the subject property was not transferred to several purchasers by a single
vendor. In the first deed of sale, the vendors were Gamiao and Dayag whose right to the
subject property originated from their acquisition thereof from Rizal Madrid with the
conformity of all the other Madrid brothers in 1957, followed by their declaration of the
property in its entirety for taxation purposes in their names. On the other hand, the vendors
in the other or later deed were the Madrid brothers but at that time they were no longer the
owners since they had long before disposed of the property in favor of Gamiao and Dayag.
Citing Manresa, the Court of Appeals in 1936 had occasion to explain the proper application
of Article 1473 of the Old Civil Code (now Article 1544 of the New Civil Code) in the case
of Carpio v. Exevea,46 thus:
In order that tradition may be considered performed, it is necessary that the requisites which
it implies must have been fulfilled, and one of the indispensable requisites, according to the
most exact Roman concept, is that the conveyor had the right and the will to convey the
thing. The intention to transfer is not sufficient; it only constitutes the will. It is, furthermore,
necessary that the conveyor could juridically perform that act; that he had the right to do so,
since a right which he did not possess could not be vested by him in the transferee.
This is what Article 1473 has failed to express: the necessity for the preexistence of the right
on the part of the conveyor. But even if the article does not express it, it would be
understood, in our opinion, that that circumstance constitutes one of the assumptions upon
which the article is based.
This construction is not repugnant to the text of Article 1473, and not only is it not contrary
to it, but it explains and justifies the same. (Vol. 10, 4th ed., p. 159) 47
In that case, the property was transferred to the first purchaser in 1908 by its original owner,
Juan Millante. Thereafter, it was sold to plaintiff Carpio in June 1929. Both conveyances were
unregistered. On the same date that the property was sold to the plaintiff, Juan Millante sold
S a l e s P a r t V I P a g e | 112
the same to defendant Exevea. This time, the sale was registered in the Registry of Deeds.
But despite the fact of registration in defendant’s favor, the Court of Appeals found for the
plaintiff and refused to apply the provisions of Art. 1473 of the Old Civil Code, reasoning that
"on the date of the execution of the document, Exhibit 1, Juan Millante did not and could not
have any right whatsoever to the parcel of land in question." 48
Citing a portion of a judgment dated 24 November 1894 of the Supreme Court of Spain, the
Court of Appeals elucidated further:
Article 1473 of the Civil Code presupposes the right of the vendor to dispose of the thing
sold, and does not limit or alter in this respect the provisions of the Mortgage Law in force,
which upholds the principle that registration does not validate acts or contracts which are
void, and that although acts and contracts executed by persons who, in the Registry, appear
to be entitled to do so are not invalidated once recorded, even if afterwards the right of such
vendor is annulled or resolved by virtue of a previous unrecorded title, nevertheless this
refers only to third parties.49
In a situation where not all the requisites are present which would warrant the application of
Art. 1544, the principle of prior tempore, potior jure or simply "he who is first in time is
preferred in right,"50 should apply.51 The only essential requisite of this rule is priority in time;
in other words, the only one who can invoke this is the first vendee. Undisputedly, he is a
purchaser in good faith because at the time he bought the real property, there was still no
sale to a second vendee.52 In the instant case, the sale to the Heirs by Gamiao and Dayag,
who first bought it from Rizal Madrid, was anterior to the sale by the Madrid brothers to
Marquez. The Heirs also had possessed the subject property first in time. Thus, applying the
principle, the Heirs, without a scintilla of doubt, have a superior right to the subject property.
Moreover, it is an established principle that no one can give what one does not have¾ nemo
dat quod non habet. Accordingly, one can sell only what one owns or is authorized to sell,
and the buyer can acquire no more than what the seller can transfer legally. 53 In this case,
since the Madrid brothers were no longer the owners of the subject property at the time of
the sale to Marquez, the latter did not acquire any right to it.
In any event, assuming arguendo that Article 1544 applies to the present case, the claim of
Marquez still cannot prevail over the right of the Heirs since according to the evidence he
was not a purchaser and registrant in good faith.
Following Article 1544, in the double sale of an immovable, the rules of preference are:
(a) the first registrant in good faith;

(b) should there be no entry, the first in possession in good faith; and
(c) in the absence thereof, the buyer who presents the oldest title in good faith. 54
Prior registration of the subject property does not by itself confer ownership or a better right
over the property. Article 1544 requires that before the second buyer can obtain priority over
the first, he must show that he acted in good faith throughout ( i.e., in ignorance of the first
sale and of the first buyer’s rights)¾from the time of acquisition until the title is transferred
to him by registration or failing registration, by delivery of possession. 55
In the instant case, the actions of Marquez have not satisfied the requirement of good faith
from the time of the purchase of the subject property to the time of registration. Found by
the Court of Appeals, Marquez knew at the time of the sale that the subject property was
being claimed or "taken" by the Heirs. This was a detail which could indicate a defect in the
vendor’s title which he failed to inquire into. Marquez also admitted that he did not take
possession of the property and at the time he testified he did not even know who was in
possession. Thus, he testified on direct examination in the RTC as follows:
ATTY. CALIXTO –
Q Can you tell us the circumstances to your buying the land in question?
A In 1976 the Madrid brothers confessed to me their problems about their lots in San
Mateo that they were being taken by Teodoro dela Cruz and Atty. Teofilo A. Leonin;
that they have to pay the lawyer’s fee of ₱10,000.00 otherwise Atty. Leonin will
confiscate the land. So they begged me to buy their properties, some of it. So that
on June 3, 1976, they came to Cabagan where I was and gave them ₱14,000.00, I
think. We have talked that they will execute the deed of sale.
Q Why is it, doctor, that you have already this deed of sale, Exh. 14, why did you
find it necessary to have this Deed of Confirmation of a Prior Sale, Exh. 15?
A Because as I said a while ago that the first deed of sale was submitted to the
Register of Deeds by Romeo Badua so that I said that because when I became a
Municipal Health Officer in San Mateo, Isabela, I heard so many rumors, so many
things about the land and so I requested them to execute a deed of confirmation. 56
...
ATTY. CALIXTO-
S a l e s P a r t V I P a g e | 113
Q At present, who is in possession on the Riceland portion of the lot in question?
A I can not say because the people working on that are changing from time to time.
Q Why, have you not taken over the cultivation of the land in question?
A Well, the Dela Cruzes are prohibiting that we will occupy the place.
Q So, you do not have any possession?
A None, sir.57
One who purchases real property which is in actual possession of others should, at least,
make some inquiry concerning the rights of those in possession. The actual possession by
people other than the vendor should, at least, put the purchaser upon inquiry. He can
scarcely, in the absence of such inquiry, be regarded as a bona fidepurchaser as against such
possessions.58 The rule of caveat emptor requires the purchaser to be aware of the supposed
title of the vendor and one who buys without checking the vendor’s title takes all the risks
and losses consequent to such failure.59
It is further perplexing that Marquez did not fight for the possession of the property if it were
true that he had a better right to it. In our opinion, there were circumstances at the time of
the sale, and even at the time of registration, which would reasonably require a purchaser of
real property to investigate to determine whether defects existed in his vendor’s title.
Instead, Marquez willfully closed his eyes to the possibility of the existence of these flaws.
For failure to exercise the measure of precaution which may be required of a prudent man in
a like situation, he cannot be called a purchaser in good faith. 60
As this Court explained in the case of Spouses Mathay v. Court of Appeals:61
Although it is a recognized principle that a person dealing on a registered land need not go
beyond its certificate of title, it is also a firmly settled rule that where there are circumstances
which would put a party on guard and prompt him to investigate or inspect the property
being sold to him, such as the presence of occupants/tenants thereon, it is, of course,
expected from the purchaser of a valued piece of land to inquire first into the status or
nature of possession of the occupants, i.e., whether or not the occupants possess the land
en concepto de dueño, in concept of owner. As is the common practice in the real estate
industry, an ocular inspection of the premises involved is a safeguard a cautious and prudent
purchaser usually takes. Should he find out that the land he intends to buy is occupied by
anybody else other than the seller who, as in this case, is not in actual possession, it would

then be incumbent upon the purchaser to verify the extent of the occupant’s possessory
rights. The failure of a prospective buyer to take such precautionary steps would mean
negligence on his part and would thereby preclude him from claiming or invoking the rights
of a "purchaser in good faith."62
This rule equally applies to mortgagees of real property. In the case of Crisostomo v. Court of
Appeals,63 the Court held:
It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which
should put a reasonable man upon his guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of the vendor or mortgagor. His mere
refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of
the existence of a defect in the vendor’s or mortgagor’s title, will not make him an innocent
purchaser or mortgagee for value, if it afterwards develops that the title was in fact
defective, and it appears that he had such notice of the defects as would have led to its
discovery had he acted with the measure of a prudent man in a like situation. 64
Banks, their business being impressed with public interest, are expected to exercise more
care and prudence than private individuals in their dealings, even those involving registered
lands. Hence, for merely relying on the certificates of title and for its failure to ascertain the
status of the mortgaged properties as is the standard procedure in its operations, we agree
with the Court of Appeals that CRB is a mortgagee in bad faith.
In this connection, Marquez’s obstention of title to the property and the subsequent transfer
thereof to CRB cannot help the latter’s cause. In a situation where a party has actual
knowledge of the claimant’s actual, open and notorious possession of the disputed property
at the time of registration, as in this case, the actual notice and knowledge are equivalent to
registration, because to hold otherwise would be to tolerate fraud and the Torrens system
cannot be used to shield fraud. 65
While certificates of title are indefeasible, unassailable and binding against the whole world,
they merely confirm or record title already existing and vested. They cannot be used to
protect a usurper from the true owner, nor can they be used for the perpetration of fraud;
neither do they permit one to enrich himself at the expense of others. 66
We also find that the Court of Appeals did not err in awarding the subject property to the
Heirs absent proof of good faith in their possession of the subject property and without any
showing of possession thereof by Gamiao and Dayag.
As correctly argued by the Heirs in their Comment,67 the requirement of good faith in the
possession of the property finds no application in cases where there is no second sale. 68 In
S a l e s P a r t V I P a g e | 114
the case at bar, Teodoro dela Cruz took possession of the property in 1964 long before the
sale to Marquez transpired in 1976 and a considerable length of time—eighteen (18) years in
fact¾before the Heirs had knowledge of the registration of said sale in 1982. As Article 526
of the Civil Code aptly provides, "(H)e is deemed a possessor in good faith who is not aware
that there exists in his title or mode of acquisition any flaw which invalidates it." Thus, there
was no need for the appellate court to consider the issue of good faith or bad faith with
regard to Teodoro dela Cruz’s possession of the subject property.
Likewise, we are of the opinion that it is not necessary that there should be any finding of
possession by Gamiao and Dayag of the subject property. It should be recalled that the
regularity of the sale to Gamiao and Dayag was never contested by Marquez. 69 In fact the
RTC upheld the validity of this sale, holding that the Madrid brothers are bound by the sale
by virtue of their confirmation thereof in the Joint Affidavit dated 14 August 1957. That this
was executed a day ahead of the actual sale on 15 August 1957 does not diminish its
integrity as it was made before there was even any shadow of controversy regarding the
ownership of the subject property.
Moreover, as this Court declared in the case of Heirs of Simplicio Santiago v. Heirs of
Mariano E. Santiago ,70 tax declarations "are good indicia of possession in the concept of an
owner, for no one in his right mind would be paying taxes for a property that is not in his
actual or constructive possession."71
WHEREFORE, the Petition is DENIED. The dispositive portion of the Court of Appeals’
Decision, as modified by its Resolution dated 5 January 1998, is AFFIRMED. Costs against
petitioner.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

G.R. No. 154409. June 21, 2004.*
Spouses NOEL and JULIE ABRIGO, petitioners, vs. ROMANA DE VERA, respondent.
Sales; Double Sales; Land Titles and Deeds; A double sale of immovables transfers ownership
to (1) the first registrant in good faith; (2) then, the first possessor in good faith; and (3)
finally, the buyer who in good faith presents the oldest title.—The law provides that a double
sale of immovables transfers ownership to (1) the first registrant in good faith; (2) then, the
first possessor in good faith; and (3) finally, the buyer who in good faith presents the oldest
title. There is no ambiguity in the application of this law with respect to lands registered
under the Torrens system. This principle is in full accord with Section 51 of PD 1529 which
provides that no deed, mortgage, lease or other voluntary instrument—except a will—
purporting to convey or affect registered land shall take effect as a conveyance or bind the
land until its registration. Thus, if the sale is not registered, it is binding only between the
seller and the buyer but it does not affect innocent third persons.
Same; Same; Same; A registration must be done in the proper registry in order to bind the
land—where the property in dispute is already registered under the Torrens system,
registration of the sale under Act 3344 is not effective for purposes of Article 1544 of the Civil
Code.—It is undisputed that Villafania had been issued a free patent registered as Original
Certificate of Title (OCT) No. P-30522. The OCT was later cancelled by Transfer Certificate of
Title (TCT) No. 212598, also in Villafania’s name. As a consequence of the sale, TCT No.
212598 was subsequently cancelled and TCT No. 22515 thereafter issued to respondent.
Soriano v. Heirs of Magali held that registration must be done in the proper registry in order
to bind the land. Since the property in dispute in the present case was already registered
under the Torrens system, petitioners’ registration of the sale under Act 3344 was not
effective for purposes of Article 1544 of the Civil Code.
Same; Same; Same; A Torrens title, once registered, serves as a notice, and no one can
plead ignorance of the registration.—Petitioners cannot validly argue that they were
fraudulently misled into believing that the property was unregistered. A Torrens title, once
registered, serves as a notice to the whole world. All persons must take notice, and no one
can plead ignorance of the registration.
Same; Same; Same; Article 1544 of the Civil Code requires the second buyer to acquire the
immovable in good faith and to register it in good faith.—We have consistently held that
Article 1544 requires the second buyer to acquire the immovable in good faith and to register
it in good faith. Mere registration of title is not enough; good faith must concur with the
S a l e s P a r t V I P a g e | 115
registration. We explained the rationale in Uraca v. Court of Appeals, which we quote: “Under
the foregoing, the prior registration of the disputed property by the second buyer does not
by itself confer ownership or a better right over the property. Article 1544 requires that such
registration must be coupled with good faith. Jurisprudence teaches us that ‘(t)he governing
principle is primus tempore, potior jure (first in time, stronger in right). Knowledge gained by
the first buyer of the second sale cannot defeat the first buyer’s rights except where the
second buyer registers in good faith the second sale ahead of the first, as provided by the
Civil Code. Such knowledge of the first buyer does not bar her from availing of her rights
under the law, among them, to register first her purchase as against the second buyer. But in
converso, knowledge gained by the second buyer of the first sale defeats his rights even if he
is first to register the second sale, since such knowledge taints his prior registration with bad
faith. This is the price exacted by Article 1544 of the Civil Code for the second buyer being
able to displace the first buyer; that before the second buyer can obtain priority over the
first, he must show that he acted in good faith throughout (i.e. in ignorance of the first sale
and of the first buyer’s rights)—from the time of acquisition until the title is transferred to
him by registration, or failing registration, by delivery of possession.’ ” (Italics supplied)
Same; Same; Same; Under Section 44 of PD 1529, every registered owner receiving a
certificate of title pursuant to a decree of registration, and every subsequent purchaser of
registered land taking such certificate for value and in good faith shall hold the same free
from all encumbrances, except those noted and enumerated in the certificate.—Equally
important, under Section 44 of PD 1529, every registered owner receiving a certificate of title
pursuant to a decree of registration, and every subsequent purchaser of registered land
taking such certificate for value and in good faith shall hold the same free from all
encumbrances, except those noted and enumerated in the certificate. Thus, a person dealing
with registered land is not required to go behind the registry to determine the condition of
the property, since such condition is noted on the face of the register or certificate of title.
Following this principle, this Court has consistently held as regards registered land that a
purchaser in good faith acquires a good title as against all the transferees thereof whose
rights are not recorded in the Registry of Deeds at the time of the sale.
Same; Same; Same; Constructive notice to the second buyer through registration under Act
3344 does not apply if the property is registered under the Torrens system.—Constructive
notice to the second buyer through registration under Act 3344 does not apply if the property
is registered under the Torrens system, as in this case. We quote below the additional
commentary of Justice Vitug, which was omitted in Santiago. This omission was evidently the
reason why petitioner misunderstood the context of the citation therein: “The registration
 S a l e s P a r t V I P a g e | 116

contemplated under Art. 1544 has been held to refer to registration under Act 496 Land entered AFFIRMING in part and REVERSING in part the judgment appealed from,
Registration Act (now PD 1529) which considers the act of registration as the operative act as follows:
that binds the land (see Mediante vs. Rosabal, 1 O.G. [12] 900, Garcia vs. Rosabal, 73 Phil.
694). On lands covered by the Torrens System, the purchaser acquires such rights and "1. Declaring [Respondent] Romana de Vera the rightful owner and with
better right to possess the property in question, being an innocent purchaser
interest as they appear in the certificate of title, unaffected by any prior lien or encumbrance
for value therefor;
not noted therein. The purchaser is not required to explore farther than what the Torrens
title, upon its face, indicates. The only exception is where the purchaser has actual
"2. Declaring Gloria Villafania [liable] to pay the following to [Respondent]
knowledge of a flaw or defect in the title of the seller or of such liens or encumbrances Romana de Vera and to [Petitioner-]Spouses [Noel and Julie] Abrigo, to wit:
which, as to him, is equivalent to registration (see Sec. 39, Act 496; Bernales vs. IAC, G.R.
75336, 18 October 1988; Hernandez vs. Sales, 69 Phil 744; Tajonera vs. Court of Appeals, L- As to [Respondent] Romana de Vera:
26677, 27 March 1981).”
1. ₱300,000.00 plus 6% per annum as actual damages;
PETITION for review on certiorari of the amended decision and resolution of the Court.
2. ₱50,000.00 as moral damages;
The facts are stated in the opinion of the Court.
3. ₱50,000.00 as exemplary damages;
     Villamor A. Tolete for petitioners.

     Daniel C. Macaraeg for private respondents. Abrigo vs. De Vera, 432 SCRA 544, G.R. No. 4. ₱30,000.00 as attorney’s fees; and
154409 June 21, 2004.
5. Cost of suit.
DECISION
As to [Petitioner-]Spouses [Noel and Julie] Abrigo:
PANGANIBAN, J.:
1. ₱50,000.00 as moral damages;
Between two buyers of the same immovable property registered under the Torrens system,
2. ₱50,000.00 as exemplary damages;
the law gives ownership priority to (1) the first registrant in good faith; (2) then, the first
possessor in good faith; and (3) finally, the buyer who in good faith presents the oldest title.
This provision, however, does not apply if the property is not registered under the Torrens 3. ₱30,000.00 as attorney’s fees;
system.
4. Cost of suit."4
The Case
The assailed Resolution denied reconsideration.
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, seeking to set aside
the March 21, 2002 Amended Decision 2 and the July 22, 2002 Resolution 3 of the Court of The Facts
Appeals (CA) in CA-GR CV No. 62391. The Amended Decision disposed as follows:
Quoting the trial court, the CA narrated the facts as follows:
"WHEREFORE, the dispositive part of the original D E C I S I O N of this case,
promulgated on November 19, 2001, is SET ASIDE and another one is

"As culled from the records, the following are the pertinent antecedents amply summarized
by the trial court:
‘On May 27, 1993, Gloria Villafania sold a house and lot located at Banaoang, Mangaldan,
Pangasinan and covered by Tax Declaration No. 1406 to Rosenda Tigno-Salazar and Rosita
Cave-Go. The said sale became a subject of a suit for annulment of documents between the
vendor and the vendees.
‘On December 7, 1993, the Regional Trial Court, Branch 40 of Dagupan City rendered
judgment approving the Compromise Agreement submitted by the parties. In the said
Decision, Gloria Villafania was given one year from the date of the Compromise Agreement to
buy back the house and lot, and failure to do so would mean that the previous sale in favor
of Rosenda Tigno-Salazar and Rosita Cave-Go shall remain valid and binding and the plaintiff
shall voluntarily vacate the premises without need of any demand. Gloria Villafania failed to
buy back the house and lot, so the [vendees] declared the lot in their name.
‘Unknown, however to Rosenda Tigno-Salazar and Rosita Cave-Go, Gloria Villafania obtained
a free patent over the parcel of land involved [on March 15, 1988 as evidenced by OCT No.
P-30522]. The said free patent was later on cancelled by TCT No. 212598 on April 11, 1996.
‘On October 16, 1997, Rosenda Tigno-Salazar and Rosita Cave-Go, sold the house and lot to
the herein [Petitioner-Spouses Noel and Julie Abrigo].
‘On October 23, 1997, Gloria Villafania sold the same house and lot to Romana de Vera x x x.
Romana de Vera registered the sale and as a consequence, TCT No. 22515 was issued in her
name.
‘On November 12, 1997, Romana de Vera filed an action for Forcible Entry and Damages
against [Spouses Noel and Julie Abrigo] before the Municipal Trial Court of Mangaldan,
Pangasinan docketed as Civil Case No. 1452. On February 25, 1998, the parties therein
submitted a Motion for Dismissal in view of their agreement in the instant case that neither
of them can physically take possession of the property in question until the instant case is
terminated. Hence the ejectment case was dismissed.’ 5
"Thus, on November 21, 1997, [petitioners] filed the instant case [with the Regional Trial
Court of Dagupan City] for the annulment of documents, injunction, preliminary injunction,
restraining order and damages [against respondent and Gloria Villafania].
"After the trial on the merits, the lower court rendered the assailed Decision dated January 4,
1999, awarding the properties to [petitioners] as well as damages. Moreover, x x x Gloria
S a l e s P a r t V I P a g e | 117
Villafania was ordered to pay [petitioners and private respondent] damages and attorney’s
fees.
"Not contented with the assailed Decision, both parties [appealed to the CA]." 6
Ruling of the Court of Appeals
In its original Decision promulgated on November 19, 2001, the CA held that a void title
could not give rise to a valid one and hence dismissed the appeal of Private Respondent
Romana de Vera.7 Since Gloria Villafania had already transferred ownership to Rosenda
Tigno-Salazar and Rosita Cave-Go, the subsequent sale to De Vera was deemed void.
The CA also dismissed the appeal of Petitioner-Spouses Abrigo and found no sufficient basis
to award them moral and exemplary damages and attorney’s fees.
On reconsideration, the CA issued its March 21, 2002 Amended Decision, finding Respondent
De Vera to be a purchaser in good faith and for value. The appellate court ruled that she had
relied in good faith on the Torrens title of her vendor and must thus be protected. 8
Hence, this Petition.9
Issues
Petitioners raise for our consideration the issues below:
"1. Whether or not the deed of sale executed by Gloria Villafania in favor of
[R]espondent Romana de Vera is valid.
"2. Whether or not the [R]espondent Romana de Vera is a purchaser for value in
good faith.
"3. Who between the petitioners and respondent has a better title over the property
in question."10
In the main, the issues boil down to who between petitioner-spouses and respondent has a
better right to the property.
The Court’s Ruling
The Petition is bereft of merit.

Main Issue:
Better Right over the Property
Petitioners contend that Gloria Villafania could not have transferred the property to
Respondent De Vera because it no longer belonged to her. 11 They further claim that the sale
could not be validated, since respondent was not a purchaser in good faith and for value. 12
Law on Double Sale
The present case involves what in legal contemplation was a double sale. On May 27, 1993,
Gloria Villafania first sold the disputed property to Rosenda Tigno-Salazar and Rosita Cave-
Go, from whom petitioners, in turn, derived their right. Subsequently, on October 23, 1997, a
second sale was executed by Villafania with Respondent Romana de Vera.
Article 1544 of the Civil Code states the law on double sale thus:
"Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property.
"Should it be immovable property, the ownership shall belong to the person acquiring
it who in good faith first recorded it in the Registry of Property.
"Should there be no inscription, the ownership shall pertain to the person who in
good faith was first in the possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith."
Otherwise stated, the law provides that a double sale of immovables transfers ownership to
(1) the first registrant in good faith; (2) then, the first possessor in good faith; and (3) finally,
the buyer who in good faith presents the oldest title. 13 There is no ambiguity in the
application of this law with respect to lands registered under the Torrens system.
This principle is in full accord with Section 51 of PD 1529 14 which provides that no deed,
mortgage, lease or other voluntary instrument -- except a will -- purporting to convey or
affect registered land shall take effect as a conveyance or bind the land until its
registration.15 Thus, if the sale is not registered, it is binding only between the seller and the
buyer but it does not affect innocent third persons.16
S a l e s P a r t V I P a g e | 118
In the instant case, both Petitioners Abrigo and respondent registered the sale of the
property. Since neither petitioners nor their predecessors (Tigno-Salazar and Cave-Go) knew
that the property was covered by the Torrens system, they registered their respective sales
under Act 3344.17 For her part, respondent registered the transaction under the Torrens
system18 because, during the sale, Villafania had presented the transfer certificate of title
(TCT) covering the property.19
Respondent De Vera contends that her registration under the Torrens system should prevail
over that of petitioners who recorded theirs under Act 3344. De Vera relies on the following
insight of Justice Edgardo L. Paras:
"x x x If the land is registered under the Land Registration Act (and has therefore a
Torrens Title), and it is sold but the subsequent sale is registered not under the Land
Registration Act but under Act 3344, as amended, such sale is not considered
REGISTERED, as the term is used under Art. 1544 x x x."20
We agree with respondent. It is undisputed that Villafania had been issued a free patent
registered as Original Certificate of Title (OCT) No. P-30522. 21 The OCT was later cancelled
by Transfer Certificate of Title (TCT) No. 212598, also in Villafania’s name. 22 As a
consequence of the sale, TCT No. 212598 was subsequently cancelled and TCT No. 22515
thereafter issued to respondent.
Soriano v. Heirs of Magali 23 held that registration must be done in the proper registry in order
to bind the land. Since the property in dispute in the present case was already registered
under the Torrens system, petitioners’ registration of the sale under Act 3344 was not
effective for purposes of Article 1544 of the Civil Code.
More recently, in Naawan Community Rural Bank v. Court of Appeals ,24 the Court upheld the
right of a party who had registered the sale of land under the Property Registration Decree,
as opposed to another who had registered a deed of final conveyance under Act 3344. In
that case, the "priority in time" principle was not applied, because the land was already
covered by the Torrens system at the time the conveyance was registered under Act 3344.
For the same reason, inasmuch as the registration of the sale to Respondent De Vera under
the Torrens system was done in good faith, this sale must be upheld over the sale registered
under Act 3344 to Petitioner-Spouses Abrigo.
Radiowealth Finance Co. v. Palileo25 explained the difference in the rules of registration under
Act 3344 and those under the Torrens system in this wise:
"Under Act No. 3344, registration of instruments affecting unregistered lands is
‘without prejudice to a third party with a better right.’ The aforequoted phrase has

been held by this Court to mean that the mere registration of a sale in one’s favor
does not give him any right over the land if the vendor was not anymore the owner
of the land having previously sold the same to somebody else even if the earlier sale
was unrecorded.
"The case of Carumba vs. Court of Appeals 26 is a case in point. It was held therein
that Article 1544 of the Civil Code has no application to land not registered under Act
No. 496. Like in the case at bar, Carumba dealt with a double sale of the same
unregistered land. The first sale was made by the original owners and was
unrecorded while the second was an execution sale that resulted from a complaint
for a sum of money filed against the said original owners. Applying [Section 33], Rule
39 of the Revised Rules of Court, 27 this Court held that Article 1544 of the Civil Code
cannot be invoked to benefit the purchaser at the execution sale though the latter
was a buyer in good faith and even if this second sale was registered. It was
explained that this is because the purchaser of unregistered land at a sheriff’s
execution sale only steps into the shoes of the judgment debtor, and merely acquires
the latter’s interest in the property sold as of the time the property was levied upon.
"Applying this principle, x x x the execution sale of unregistered land in favor of
petitioner is of no effect because the land no longer belonged to the judgment
debtor as of the time of the said execution sale."28
Petitioners cannot validly argue that they were fraudulently misled into believing that the
property was unregistered. A Torrens title, once registered, serves as a notice to the whole
world.29 All persons must take notice, and no one can plead ignorance of the registration. 30
Good-Faith Requirement
We have consistently held that Article 1544 requires the second buyer to acquire the
immovable in good faith and to register it in good faith. 31 Mere registration of title is not
enough; good faith must concur with the registration. 32 We explained the rationale in Uraca
v. Court of Appeals,33 which we quote:
"Under the foregoing, the prior registration of the disputed property by the second
buyer does not by itself confer ownership or a better right over the property. Article
1544 requires that such registration must be coupled with good faith. Jurisprudence
teaches us that ‘(t)he governing principle is primus tempore, potior jure (first in time,
stronger in right). Knowledge gained by the first buyer of the second sale cannot
defeat the first buyer’s rights except where the second buyer registers in good faith
the second sale ahead of the first, as provided by the Civil Code. Such knowledge of
the first buyer does not bar her from availing of her rights under the law, among
S a l e s P a r t V I P a g e | 119
them, to register first her purchase as against the second buyer. But in converso,
knowledge gained by the second buyer of the first sale defeats his rights even if he is
first to register the second sale, since such knowledge taints his prior registration
with bad faith. This is the price exacted by Article 1544 of the Civil Code for the
second buyer being able to displace the first buyer; that before the second buyer can
obtain priority over the first, he must show that he acted in good faith throughout
(i.e. in ignorance of the first sale and of the first buyer’s rights) ---- from the time of
acquisition until the title is transferred to him by registration, or failing registration,
by delivery of possession.’"34 (Italics supplied)
Equally important, under Section 44 of PD 1529, every registered owner receiving a
certificate of title pursuant to a decree of registration, and every subsequent purchaser of
registered land taking such certificate for value and in good faith shall hold the same free
from all encumbrances, except those noted and enumerated in the certificate. 35Thus, a
person dealing with registered land is not required to go behind the registry to determine the
condition of the property, since such condition is noted on the face of the register or
certificate of title.36 Following this principle, this Court has consistently held as regards
registered land that a purchaser in good faith acquires a good title as against all the
transferees thereof whose rights are not recorded in the Registry of Deeds at the time of the
sale.37
Citing Santiago v. Court of Appeals,38 petitioners contend that their prior registration under
Act 3344 is constructive notice to respondent and negates her good faith at the time she
registered the sale. Santiago affirmed the following commentary of Justice Jose C. Vitug:
"The governing principle is prius tempore, potior jure (first in time, stronger in right).
Knowledge by the first buyer of the second sale cannot defeat the first buyer's rights
except when the second buyer first registers in good faith the second sale ( Olivares
vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of
the first sale defeats his rights even if he is first to register, since such knowledge
taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No
58530, 26 December 1984) In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984; 129
SCRA 656), it was held that it is essential, to merit the protection of Art. 1544,
second paragraph, that the second realty buyer must act in good faith in registering
his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs.
CA, G.R. 95843, 02 September 1992).
xxx     xxx     xxx
"Registration of the second buyer under Act 3344, providing for the registration of all
instruments on land neither covered by the Spanish Mortgage Law nor the Torrens

System (Act 496), cannot improve his standing since Act 3344 itself expresses that
registration thereunder would not prejudice prior rights in good faith (see Carumba
vs. Court of Appeals, 31 SCRA 558). Registration, however, by the first buyer
under Act 3344 can have the effect of constructive notice to the second
buyer that can defeat his right as such buyer in good faith (see Arts. 708-
709, Civil Code; see also Revilla vs. Galindez, 107 Phil. 480; Taguba vs. Peralta, 132
SCRA 700). Art. 1544 has been held to be inapplicable to execution sales of
unregistered land, since the purchaser merely steps into the shoes of the debtor and
acquires the latter's interest as of the time the property is sold ( Carumba vs. Court of
Appeals, 31 SCRA 558; see also Fabian vs. Smith, Bell & Co., 8 Phil. 496) or when
there is only one sale (Remalante vs. Tibe, 158 SCRA 138)."39 (Emphasis supplied)
Santiago was subsequently applied in Bayoca v. Nogales,40 which held:
"Verily, there is absence of prior registration in good faith by petitioners of the
second sale in their favor. As stated in the Santiago case, registration by the first
buyer under Act No. 3344 can have the effect of constructive notice to the second
buyer that can defeat his right as such buyer. On account of the undisputed fact of
registration under Act No. 3344 by [the first buyers], necessarily, there is absent
good faith in the registration of the sale by the [second buyers] for which they had
been issued certificates of title in their names. x x x."41
Santiago and Bayoca are not in point. In Santiago, the first buyers registered the sale under
the Torrens system, as can be inferred from the issuance of the TCT in their names. 42 There
was no registration under Act 3344. In Bayoca, when the first buyer registered the sale
under Act 3344, the property was still unregistered land. 43 Such registration was therefore
considered effectual.
Furthermore, Revilla and Taguba, which are cited in Santiago, are not on all fours with the
present case. In Revilla, the first buyer did not register the sale. 44 In Taguba, registration was
not an issue.45
As can be gathered from the foregoing, constructive notice to the second buyer through
registration under Act 3344 does not apply if the property is registered under the Torrens
system, as in this case.
We quote below the additional commentary of Justice Vitug, which was omitted in Santiago.
This omission was evidently the reason why petitioner misunderstood the context of the
citation therein:
S a l e s P a r t V I P a g e | 120
"The registration contemplated under Art. 1544 has been held to refer to registration
under Act 496 Land Registration Act (now PD 1529) which considers the act of
registration as the operative act that binds the land (see Mediante vs. Rosabal, 1
O.G. [12] 900, Garcia vs. Rosabal, 73 Phil 694). On lands covered by the Torrens
System, the purchaser acquires such rights and interest as they appear in the
certificate of title, unaffected by any prior lien or encumbrance not noted therein.
The purchaser is not required to explore farther than what the Torrens title, upon its
face, indicates. The only exception is where the purchaser has actual knowledge of a
flaw or defect in the title of the seller or of such liens or encumbrances which, as to
him, is equivalent to registration (see Sec. 39, Act 496; Bernales vs. IAC, G.R. 75336,
18 October 1988; Hernandez vs. Sales, 69 Phil 744; Tajonera vs. Court of Appeals, L-
26677, 27 March 1981),"46
Respondent in Good Faith
The Court of Appeals examined the facts to determine whether respondent was an innocent
purchaser for value.47After its factual findings revealed that Respondent De Vera was in good
faith, it explained thus:
"x x x. Gloria Villafania, [Respondent] De Vera’s vendor, appears to be the registered owner.
The subject land was, and still is, registered in the name of Gloria Villafania. There is nothing
in her certificate of title and in the circumstances of the transaction or sale which warrant
[Respondent] De Vera in supposing that she need[ed] to look beyond the title. She had no
notice of the earlier sale of the land to [petitioners]. She ascertained and verified that her
vendor was the sole owner and in possession of the subject property by examining her
vendor’s title in the Registry of Deeds and actually going to the premises. There is no
evidence in the record showing that when she bought the land on October 23, 1997, she
knew or had the slightest notice that the same was under litigation in Civil Case No. D-10638
of the Regional Trial Court of Dagupan City, Branch 40, between Gloria Villafania and
[Petitioners] Abrigo. She was not even a party to said case. In sum, she testified clearly and
positively, without any contrary evidence presented by the [petitioners], that she did not
know anything about the earlier sale and claim of the spouses Abrigo, until after she had
bought the same, and only then when she bought the same, and only then when she
brought an ejectment case with the x x x Municipal Court of Mangaldan, known as Civil Case
No. 1452. To the [Respondent] De Vera, the only legal truth upon which she had to rely was
that the land is registered in the name of Gloria Villafania, her vendor, and that her title
under the law, is absolute and indefeasible. x x x."48
We find no reason to disturb these findings, which petitioners have not rebutted. Spouses
Abrigo base their position only on the general averment that respondent should have been
 S a l e s P a r t V I P a g e | 121

more vigilant prior to consummating the sale. They argue that had she inspected the
property, she would have found petitioners to be in possession. 49

This argument is contradicted, however, by the spouses’ own admission that the parents and
the sister of Villafania were still the actual occupants in October 1997, when Respondent De
Vera purchased the property. 50 The family members may reasonably be assumed to be
Villafania’s agents, who had not been shown to have notified respondent of the first sale
when she conducted an ocular inspection. Thus, good faith on respondent’s part stands.

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

petitioners.

SO ORDERED.

Davide, Jr., Ynares-Santiago*, Carpio,  and Azcuna, JJ., concur.


No. L-18497. May 31, 1965.
DAGUPAN TRADING COMPANY, petitioner, vs. RUSTICO MACAM, respondent.
Sales; Conflicting sales; One sale before registration of land and the other an execution sale
after registration of land; Law governing.—Where one of two conflicting sales of a piece of
land was executed before the land was registered, while the other was an execution sale in
favor of the judgment creditor of the owner made after the same property had been
registered, what should determine the issue are the provisions of the last paragraph of
Section 35, Rule 39 of the Rules of Court to the effect that, upon the execution and delivery
of the final certificate of sale in favor of the purchaser of land sold in an execution sale, such
purchaser “shall be substituted to and acquire all the rights, title, interest and claim of the
judgment debtor to the property as of the time of the levy.”
Same; Same; Same; Unregistered sale cannot be defeated by subsequent execution sale and
registration of latter.—Where for a considerable time prior to the levy on execution interest
of the owner of the land levied upon had already been convened to another who took
possession thereof and introduced improvements thereon, the aforesaid levy is void. The
prior sale, albeit unregistered, cannot be deemed automatically cancelled upon the
subsequent issuance of the Torrens Title over the land.
Same; Same; Same; Right of ownership already fixed under Civil Law and/or Mortgage Law
cannot be overthrown by law.—As between a right of ownership already fixed and
established under the Civil Law and/or the Spanish Mortgage Law, and a new law or system
which would make possible the overthrowing of such ownership on admittedly artificial and
technical grounds, the former must be upheld.
APPEAL from a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Angel Sanchez for petitioner.
     Manuel L. Fernandez for respondent. Dagupan Trading Co. vs. Macam, 14 SCRA 179, No.
L-18497 May 31, 1965
DIZON, J.:
S a l e s P a r t V I P a g e | 122
Appeal taken by the Dagupan Trading Company from the decision of the Court of Appeals
affirming the one rendered by the Court of First Instance of Pangasinan in Civil Case No.
13772, dismissing its complaint.
On September 4, 1958, appellant commenced the action mentioned above against appellee
Rustico Macam, praying that it be declared owner of one-eighth portion of the land described
in paragraph 2 of the complaint; that a partition of the whole property be made; that
appellee be ordered to pay it the amount of P500.00 a year as damages from 1958 until said
portion is delivered, plus attorney's fees and costs.
Answering the complaint, appellee alleged, in the main, that Sammy Maron's share in the
property described in the complaint, as well as that of all his co-heirs, had been acquired by
purchase by appellee since June 19 and September 21, 1955, before the issuance of the
original certificate of title in their name; that at the time the levy in execution was made on
Sammy Maron's share therein, the latter had no longer any right or interest in said property;
that appellant and its predecessor in interest were cognizant of the facts already mentioned;
that since the sales made in his favor, he had enjoyed uninterrupted possession of the
property and introduced considerable improvements thereon. Appellee likewise sought to
recover damages by way of counterclaim.
After trial upon the issue thus joined, the court rendered judgment dismissing the complaint,
which, on appeal, was affirmed by the Court of Appeals.
The facts of the case are not disputed.
In the year 1955, Sammy Maron and his seven brothers and sisters were pro-indiviso owners
of a parcel of unregistered land located in barrio Parayao, Municipality of Binmaley,
Pangasinan. While their application for registration of said land under Act No. 496 was
pending, they executed, on June 19 and September 21, 1955, two deeds of sale conveying
the property to appellee, who thereafter took possession thereof and proceeded to introduce
substantial improvements therein. One month later, that is, on October 14, 1955, Original
Certificate of Title No. 6942 covering the land was issued in the name of the Maron's, free
from all liens and encumbrances.
On August 4, 1956, by virtue of a final judgment rendered in Civil Case No. 42215 of the
Municipal Court of Manila against Sammy Maron in favor of the Manila Trading and Supply
Company, levy was made upon whatever interest he had in the aforementioned property,
and thereafter said interest was sold at public auction to the judgment creditor. The
corresponding notice of levy, certificate of sale and the Sheriff's certificate of final sale in
favor of the Manila Trading and Supply Co. — because nobody exercised the right of
 S a l e s P a r t V I P a g e | 123

redemptions — were duly registered. On March 1, 1958, the latter sold all its rights and title
to the property to appellant.
The question before Us now is: Who has the better right as between appellant Dagupan
Trading Company, on the one hand, and appellee Rustico Macam, on the other, to the one-
eighth share of Sammy Maron in the property mentioned heretofore?
If the property covered by the conflicting sales were unregistered land, Macam would
undoubtedly have the better right in view of the fact that his claim is based on a prior sale
coupled with public, exclusive and continuous possession thereof as owner. On the other
hand, were the land involved in the conflicting transactions duly registered land, We would
be inclined to hold that appellant has the better right because, as We have consistently held,
in case of conveyance of registered real estate, the registration of the deed of sale is the
operative act that gives validity to the transfer. This would be fatal to appellee's claim, the
deeds of sale executed in his favor by the Maron's not having been registered, while the levy
in execution and the provisional certificate of sale as well as the final deed of sale in favor of
appellant were registered. Consequently, this registered conveyance must prevail although
posterior to the one executed in favor of appellee, and appellant must be deemed to have
acquired such right, title and interest as appeared on the certificate of title issued in favor of
Sammy Maron, subject to no lien, encumbrance or burden not noted thereon. (Anderson &
Co. vs. Garcia, 64 Phil. 506; Reynes, et al. vs. Barrera, et al., 68 Phil. 656; Banco Nacional,
etc. vs. Camus, 70 Phil. 289)
conveyance of title and ownership in favor of appellee could not have been cancelled and
rendered of no effect upon the subsequent issuance of the Torrens title over the entire parcel
of land. We cannot, therefore, but agree with the following statement contained in the
appealed decision:
... . Separate and apart from this however, we believe that in the inevitable conflict
between a right of ownership already fixed and established under the Civil Law
and/or the Spanish Mortgage Law — which cannot be affected by any subsequent
levy or attachment or execution — and a new law or system which would make
possible the overthrowing of such ownership on admittedly artificial and technical
grounds, the former must be upheld and applied.1äwphï1.ñët
But to the above considerations must be added the important circumstance that, as already
stated before, upon the execution of the deed of sale in his favor by Sammy Maron, appellee
took possession of the land conveyed as owner thereof, and introduced considerable
improvements thereon. To deprive him now of the same by sheer force of technicality would
be against both justice and equity.
IN VIEW OF ALL THE FOREGOING, the decision appealed from is affirmed, with costs.
Bengzon, C.J., Bautista Angelo, Barrera, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ.,
concur.

The present case, however, does not fall within either, situation. Here the sale in favor of
appellee was executed before the land subject-matter thereof was registered, while the
conflicting sale in favor of appellant was executed after the same property had been
registered. We cannot, therefore, decide the case in the light of whatever adjudicated cases
there are covering the two situations mentioned in the preceding paragraph. It is our
considered view that what should determine the issue are the provisions of the last
paragraph of Section 35, Rule 39 of the Rules of Court, to the effect that upon the execution
and delivery of the final certificate of sale in favor of the purchaser of land sold in an
execution sale, such purchaser "shall be substituted to and acquire all the right, title, interest
and claim of the judgment debtor to the property as of the time of the levy." Now We ask:
What was the interest and claim of Sammy Maron on the one-eighth portion of the property
inherited by him and his co-heirs, at the time of the levy? The answer must necessarily be
that he had none, because for a considerable time prior to the levy, his interest had already
been conveyed to appellee, "fully and retrievably — as the Court of Appeals held.
Consequently, subsequent levy made on the property for the purpose of satisfying the
judgment rendered against Sammy Maron in favor of the Manila Trading Company was void
and of no effect (Buson vs. Licuaco, 13 Phil. 357-358; Landig vs. U.S. Commercial Company,
G.R. No. L-3597, July 31, 1951). Needless to say, the unregistered sale and the consequent

No. L-27687. February 18, 1970.
AMADO CARUMBA, petitioner, vs. THE COURT OF APPEALS, SANTIAGO BALBUENA
and ANGELES BOAQUINA,as Deputy Provincial Sheriff, respondents.
Civil law; Sale; Double sale; Article 15UU of Civil Code does not apply to unregistered land.—
The rule in Article 1544 of the Civil Code applies to lands covered by Torrens title, where the
prior sale is neither recorded nor known to the execution purchaser prior to the levy. But
where the land in question is not registered under Act No. 496, the rule is different. While
under Article 1544 of Civil Code registration in good faith prevails over possession in the
event of a double sale by the vendor of the same piece of land to different vendees, said
article is not applicable even if the later vendee was ignorant of the prior sale made by his
judgment debtor in favor of another vendee. The reason is that the purchaser of
unregistered land at a sheriff’s execution sale only steps into the shoes of the judgment
debtor, and merely acquires the latter’s interest in the property sold as of the time the
property was levied upon, as provided in Sec. 35 of Rule 39 of the Revised Rules of Court.
Remedial law; Civil procedure; Execution; Purchaser acquires interest of judgment debtor as
of the time of the levy.—The purchaser of unregistered land at a sheriff’s execution sale only
steps into the shoes of the judgment debtor, and merely acquires the latter’s interest in the
property sold as of the time the property was levied upon. This is specifically provided by
Section 35 of Rule 39 of the Revised Rules of Court.
PETITION for certiorari to review a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Luis N. de Leon for petitioner.
     Reno R. Gonzales for respondents. Carumba vs. Court of Appeals, 31 SCRA 558, No. L-
27687 February 18, 1970
REYES, J.B.L., J.:
Amado Carumba petitions this Supreme Court for a certiorari to review a decision of the
Court of Appeals, rendered in its Case No. 36094-R, that reversed the judgment in his favor
rendered by the Court of First Instance of Camarines Sur (Civil Case 4646).
S a l e s P a r t V I P a g e | 124
The factual background and history of these proceedings is thus stated by the Court of
Appeals (pages 1-2):
On April 12, 1955, the spouses Amado Canuto and Nemesia Ibasco, by virtue
of a "Deed of Sale of Unregistered Land with Covenants of Warranty" (Exh.
A), sold a parcel of land, partly residential and partly coconut land with a
periphery (area) of 359.09 square meters, more or less, located in the barrio
of Santo Domingo, Iriga, Camarines Sur, to the spouses Amado Carumba
and Benita Canuto, for the sum of P350.00. The referred deed of sale was
never registered in the Office of the Register of Deeds of Camarines Sur, and
the Notary, Mr. Vicente Malaya, was not then an authorized notary public in
the place, as shown by Exh. 5. Besides, it has been expressly admitted by
appellee that he is the brother-in-law of Amado Canuto, the alleged vendor
of the property sold to him. Amado Canuto is the older brother of the wife of
the herein appellee, Amado Carumba.
On January 21, 1957, a complaint (Exh. B) for a sum or money was filed by
Santiago Balbuena against Amado Canuto and Nemesia Ibasco before the
Justice of the Peace Court of Iriga, Camarines Sur, known as Civil Case No.
139 and on April 15, 1967, a decision (Exh. C) was rendered in favor of the
plaintiff and against the defendants. On October 1, 1968, the ex-
officio Sheriff, Justo V. Imperial, of Camarines Sur, issued a "Definite Deed of
Sale (Exh. D) of the property now in question in favor of Santiago Balbuena,
which instrument of sale was registered before the Office of the Register of
Deeds of Camarines Sur, on October 3, 1958. The aforesaid property was
declared for taxation purposes (Exh. 1) in the name of Santiago Balbuena in
1958.
The Court of First instance, finding that after execution of the document Carumba had taken
possession of the land, planting bananas, coffee and other vegetables thereon, declared him
to be the owner of the property under a consummated sale; held void the execution levy
made by the sheriff, pursuant to a judgment against Carumba's vendor, Amado Canuto; and
nullified the sale in favor of the judgment creditor, Santiago Balbuena. The Court, therefore,
declared Carumba the owner of the litigated property and ordered Balbuena to pay P30.00,
as damages, plus the costs.
The Court of Appeals, without altering the findings of fact made by the court of origin,
declared that there having been a double sale of the land subject of the suit Balbuena's title
was superior to that of his adversary under Article 1544 of the Civil Code of the Philippines,
since the execution sale had been properly registered in good faith and the sale to Carumba
was not recorded.
 S a l e s P a r t V I P a g e | 125

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

Upon the execution and delivery of said (final) deed the purchaser,

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

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

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

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando, Teehankee,

Barredo and Villamor, JJ., concur.

G.R. No. 148376. March 31, 2005.*
LEONARDO ACABAL and RAMON NICOLAS, petitioners, vs. VILLANER ACABAL,
EDUARDO ACABAL, SOLOMON ACABAL, GRACE ACABAL, MELBA ACABAL, EVELYN
ACABAL, ARMIN ACABAL, RAMIL ACABAL, and BYRON ACABAL, respondents.
Actions; Pleadings and Practice; Evidence; The failure to deny the genuineness and due
execution of an actionable document does not preclude a party from arguing against it by
evidence of fraud, mistake, compromise, payment, statute of limitations, estoppel, and want
of consideration.—Procedurally, petitioners contend that the Court of Appeals erred when it
failed to apply Section 8, Rule 8 of the Rules of Court, respondent Villaner having failed to
deny under oath the genuineness and due execution of the April 19, 1990 Deed of Absolute
Sale. Petitioners’ contention does not persuade. The failure to deny the genuineness and due
execution of an actionable document does not preclude a party from arguing against it by
evidence of fraud, mistake, compromise, payment, statute of limitations, estoppel, and want
of consideration.
Same; Same; Same; It is a basic rule in evidence that the burden of proof lies on the party
who makes the allegations—ei incumbit probatio, qui dicit, non qui negat; cum per rerum
natruam factum negantis probatio nulla sit (the proof lies upon him who affirms, not upon
him who denies; since by the nature of things, he who denies a fact cannot produce any
proof); Facts not conjectures decide cases.—It is a basic rule in evidence that the burden of
proof lies on the party who makes the allegations—ei incumbit probatio, qui dicit, non qui
negat; cum per rerum naturam factum negantis probatio nulla sit. If he claims a right
granted by law, he must prove it by competent evidence, relying on the strength of his own
evidence and not upon the weakness of that of his opponent. More specifically, allegations of
a defect in or lack of valid consent to a contract by reason of fraud or undue influence are
never presumed but must be established not by mere preponderance of evidence but by
clear and convincing evidence. For the circumstances evidencing fraud and misrepresentation
are as varied as the people who perpetrate it in each case, assuming different shapes and
forms and may be committed in as many different ways. In the case at bar, it was incumbent
on the plaintiff-herein respondent Villaner to prove that he was deceived into executing the
Deed of Absolute Sale. Except for his bare allegation that the transaction was one of lease,
he failed to adduce evidence in support thereof. His conjecture that “perhaps those copies of
the deed of sale were placed by Mr. Cadalin under the documents which I signed the
contract of lease,” must fail, for facts not conjectures decide cases.
S a l e s P a r t V I P a g e | 126
Sales; Absent any evidence of the fair market value of a land as of the time of its sale, it
cannot be concluded that the price at which it was sold was inadequate.—It bears noting,
however, that Villaner failed to present evidence on the fair market value of the property as
of April 19, 1990, the date of execution of the disputed deed. Absent any evidence of the fair
market value of a land as of the time of its sale, it cannot be concluded that the price at
which it was sold was inadequate. Inadequacy of price must be proven because mere
speculation or conjecture has no place in our judicial system.
Same; Mere inadequacy of the price per se will not rule out the transaction as one of sale—
the price must be grossly inadequate or shocking to the conscience.—Even, however, on the
assumption that the price of P10,000.00 was below the fair market value of the property in
1990, mere inadequacy of the price per se will not rule out the transaction as one of sale. For
the price must be grossly inadequate or shocking to the conscience such that the mind
revolts at it and such that a reasonable man would neither directly nor indirectly be likely to
consent to it.
Sales; Pari Delicto; A party in pari delicto is not entitled to affirmative relief—one who seeks
equity and justice must come to court with clean hands.—Even assuming that the disposition
of the property by Villaner was contrary to law, he would still have no remedy under the law
as he and Leonardo were in pari delicto, hence, he is not entitled to affirmative relief—one
who seeks equity and justice must come to court with clean hands. In pari delicto potior est
conditio defendentis. The proposition is universal that no action arises, in equity or at law,
from an illegal contract; no suit can be maintained for its specific performance, or to recover
the property agreed to be sold or delivered, or the money agreed to be paid, or damages for
its violation. The rule has sometimes been laid down as though it were equally universal, that
where the parties are in pari delicto, no affirmative relief of any kind will be given to one
against the other.
Same; Same; The principle of pari delicto is grounded on two premises—first, that courts
should not lend their good offices to mediating disputes among wrongdoers, and second,
that denying relief to an admitted wrongdoer is an effective means of deterring illegality; This
principle of ancient vintage is not a principle of justice but one of policy.—The principle of
pari delicto is grounded on two premises: first, that courts should not lend their good offices
to mediating disputes among wrongdoers; and second, that denying judicial relief to an
admitted wrongdoer is an effective means of deterring illegality. This doctrine of ancient
vintage is not a principle of justice but one of policy as articulated in 1775 by Lord Mansfield
in Holman v. Johnson: The objection, that a contract is immoral or illegal as between the

plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for
his sake, however, that the objection is ever allowed; but it is founded in general principles
of policy, which the defendant has the advantage of, contrary to the real justice, as between
him and the plaintiff, by accident, if I may so say. The principle of public policy is this; ex
dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action
upon an immoral or an illegal act. If, from the plaintiff’s own stating or otherwise, the cause
of action appears to arise ex turpi causa, or the transgression of a positive law of this
country, there the court says he has no right to be assisted. It is upon that ground the court
goes; not for the sake of the defendant, but because they will not lend their aid to such a
plaintiff. So if the plaintiff and the defendant were to change sides, and the defendant was to
bring his action against the plaintiff, the latter would then have the advantage of it; for
where both are equally in fault potior est conditio defendentis. Thus, to serve as both a
sanction and as a deterrent, the law will not aid either party to an illegal agreement and will
leave them where it finds them.
Same; Same; An exception to the principle of pari delicto is that provided for in Article 1416
of the Civil Code; Requisites.—The principle of pari delicto, however, is not absolute,
admitting an exception under Article 1416 of the Civil Code. ART. 1416. When the agreement
is not illegal per se but is merely prohibited, and the prohibition by the law is designed for
the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he
has paid or delivered. Under this article, recovery for what has been paid or delivered
pursuant to an inexistent contract is allowed only when the following requisites are met: (1)
the contract is not illegal per se but merely prohibited; (2) the prohibition is for the
protection of the plaintiffs; and (3) if public policy is enhanced thereby. The exception is
unavailing in the instant case, however, since the prohibition is clearly not for the protection
of the plaintiff-landowner but for the beneficiary farmers.
Same; Co-Ownership; Every co-owner has absolute ownership of his undivided interest in the
co-owned property and is free to alienate, assign or mortgage his interest except as to purely
personal rights.—While Villaner owns five-ninths (5/9) of the disputed property, he could not
claim title to any definite portion of the community property until its actual partition by
agreement or judicial decree. Prior to partition, all that he has is an ideal or abstract quota or
proportionate share in the property. Villaner, however, as a co-owner of the property has the
right to sell his undivided share thereof. The Civil Code provides so: ART. 493. Each co-owner
shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and
he may therefore alienate, assign or mortgage it, and even substitute another person in its
enjoyment, except when personal rights are involved. But the effect of the alienation or the
S a l e s P a r t V I P a g e | 127
mortgage, with respect to the co-owners, shall be limited to the portion which may be
allotted to him in the division upon the termination of the co-ownership. Thus, every co-
owner has absolute ownership of his undivided interest in the co-owned property and is free
to alienate, assign or mortgage his interest except as to purely personal rights. While a co-
owner has the right to freely sell and dispose of his undivided interest, nevertheless, as a co-
owner, he cannot alienate the shares of his other co-owners—nemo dat qui non habet.
Same; Same; Following the well-established principle that the binding force of a contract
must be recognized as far as it is legally possible to do so, the disposition by a co-owner
affects only his share pro indiviso, and the transferee gets only what corresponds to his
grantor’s share in the partition of the property owned in common.— Villaner, however, sold
the entire property without obtaining the consent of the other co-owners. Following the well-
established principle that the binding force of a contract must be recognized as far as it is
legally possible to do so—quando res non valet ut ago, valeat quantum valere potest—the
disposition affects only Villaner’s share pro indiviso, and the transferee gets only what
corresponds to his grantor’s share in the partition of the property owned in common.
Same; Same; Land Registration; The issue of good faith or bad faith of a buyer is relevant
only where the subject of the sale is a registered land but not where the property is an
unregistered land.— This Court is not unmindful of its ruling in Cruz v. Leis where it held: It
is conceded that, as a rule, a co-owner such as Gertrudes could only dispose of her share in
the property owned in common. Article 493 of the Civil Code provides: x x x Unfortunately for
private respondents, however, the property was registered in TCT No. 43100 solely in the
name of “Gertrudes Isidro, widow.” Where a parcel of land, forming part of the undistributed
properties of the dissolved conjugal partnership of gains, is sold by a widow to a purchaser
who merely relied on the face of the certificate of title thereto, issued solely in the name of
the widow, the purchaser acquires a valid title to the land even as against the heirs of the
deceased spouse. The rationale for this rule is that “a person dealing with registered land is
not required to go behind the register to determine the condition of the property. He is only
charged with notice of the burdens on the property which are noted on the face of the
register or the certificate of title. To require him to do more is to defeat one of the primary
objects of the Torrens system.” (Citation omitted) Cruz, however, is not applicable for the
simple reason that in the case at bar the property in dispute is unregistered. The issue of
good faith or bad faith of a buyer is relevant only where the subject of the sale is a
registered land but not where the property is an unregistered land. One who purchases an
unregistered land does so at his peril. Nicolas’ claim of having bought the land in good faith
is thus irrelevant.
 S a l e s P a r t V I P a g e | 128

PETITION for review on certiorari of a decision of the Court of Appeals. Villaner thus filed on October 11, 1993 a complaint 13 before the Dumaguete RTC against
Leonardo and Ramon Nicolas to whom Leonardo in turn conveyed the property, for
The facts are stated in the opinion of the Court. annulment of the deeds of sale.

     Edlaw Office for petitioners. At the witness stand, Villaner declared:

Leo Diocos for respondents. Q: It appears, Mr. Acabal, that you have signed a document of sale with the defendant
Leonardo Acabal on April 19, 1990, please tell the court whether you have really agreed to
DECISION sell this property to the defendant on or before April 19, 1990?

CARPIO MORALES, J.: A: We had some agreement but not about the selling of this property.

Before this Court is a Petition for Review on Certiorari of the February 15, 2001 Decision 1 of Q: What was your agreement with the defendant Leonardo Acabal?
the Court of Appeals reversing that of the Regional Trial Court (RTC) of Dumaguete City,
Branch 35.2 A: Our agreement [was] that he will just rent.14

In dispute is the exact nature of the document 3 which respondent Villaner Acabal (Villaner) xxx
executed in favor of his godson-nephew-petitioner Leonardo Acabal (Leonardo) on April 19,
1990. Q: Now, please tell the court how were you able to sign this document on April 19, 1990?

Villaner’s parents, Alejandro Acabal and Felicidad Balasabas, owned a parcel of land situated A: I do not know why I signed that, that is why I am puzzled.
in Barrio Tanglad, Manjuyod, Negros Oriental, containing an area of 18.15 hectares more or
less, described in Tax Declaration No. 15856. 4 By a Deed of Absolute Sale dated July 6,
Q: Why, did you not read the contents of this document?
1971,5 his parents transferred for P2,000.00 ownership of the said land to him, who was then
married to Justiniana Lipajan. 6
A: I have not read that. I only happened to read the title of the Lease Contract.
Sometime after the foregoing transfer, it appears that Villaner became a widower.
Q: And do you recall who were the witnesses of the document which you signed in
favor of Leonardo Acabal?
Subsequently, he executed on April 19, 1990 a deed  conveying the same property  in favor
7 8

of Leonardo.
A: Employees of Judge Villegas of Bais City.
Villaner was later to claim that while the April 19, 1990 document he executed now appears
to be a "Deed of Absolute Sale" purportedly witnessed by a Bais City trial court clerk Carmelo Q: Did you see them sign that document?
Cadalin and his wife Lacorte, what he signed was a document captioned "Lease
Contract"9 (modeled after a July 1976 lease agreement 10 he had previously executed with A: Yes, sir.
previous lessee, Maria Luisa Montenegro 11) wherein he leased for 3 years the property to
Leonardo at ₱1,000.00 per hectare 12 and which was witnessed by two women employees of Q: These signatures appearing in this document marked as Exhibit "C" for the
one Judge Villegas of Bais City. plaintiff and Exhibit "1" for the defendant, please examine over (sic) these
signatures if these were the signatures of these witnesses who signed this
document?
 S a l e s P a r t V I P a g e | 129

A: These are not the signatures of the two women. Q: And what document did you give to him in order that that document will be
prepared?
Q: And after signing this document on April 19, 1990, did you appear before a notary public
to have this notarized? A: I have given (sic) some papers and contract of lease that I have signed to (sic)
Mrs. Montenegro.17(Emphasis and underscoring supplied)
A: No, I went home to San Carlos.15
xxx
xxx
Q: Now, Carmelo Cadalin ["Mellie"] also testified before this court that in fact he identified
Q: According to this document, you sell (sic) this property at ₱10,000.00, did you sell this the document marked as Exhibit "C" for the plaintiff that what you executed on April 19,
property to Leonardo Acabal? 1990 was a deed of sale and not a contract of lease, what can you say to that statement?

A: No, sir. A: That is a lie.

Q: How about after April 19, 1990, did you receive this amount from Leonardo Acabal? Q: And what’s the truth then?

A: No, sir.16 A: What really (sic) I have signed was the document of lease contract.

xxx
Q: Now you said that on May 25, 1990, Leonardo Acabal did not pay the amount that he
promised to you, what did you do of (sic) his refusal to pay that amount?
A: I went to Mr. [Carmelo] Mellie Cadalin because he was the one who prepared
the papers and to ask Leonardo Acabal why he will not comply with our
agreement.
Q: By the way, who is this Mellie Cadalin?
A: Mellie Cadalin is also working in the sala of Judge Villegas.
Q: Who requested Mellie Cadalin to prepare this document?
A: Maybe it was Leonardo Acabal.
Q: Now, can you explain to the Honorable Court why it so happened that on April
19, you were able to sign a deed of sale?
A: What I can see now is that perhaps those copies of the deed of sale were
placed by Mr. Cadalin under the documents which I signed the lease contract. But
why is it that it has already a deed of sale when what I have signed was only the lease of
contract or the contract of lease.
Q: Now, Mr. Cadalin also stated before this court that he handed over to you this Deed of
Sale marked as Exhibit "C" and according to him you read this document, what can you say
to this statement?
A: Yes, there was a document that he gave me to read it (sic)but it was a contract of lease.
Q: How sure are you that what you signed on April 19, 1990 was really a contract of lease
and not a contract of sale?

A: Because when I signed the contract of lease the witnesses that witnessed my
Q: By the way, when for the first time did you talk to Leonardo Acabal regarding your
signing the document were the employees of Judge Villegas and then I am now
agreement to lease this property to him?
surprised why in the deed of sale which I purportedly signed are witnessed by
Carmelo Cadalin and his wife Lacorte.18 (Emphasis and underscoring supplied)
A: March 14, 1990, in San Carlos.

On the other hand, Leonardo asserts that what Villaner executed was a Deed of Absolute
Sale for a consideration of ₱10,000.00 which he had already paid, 19 and as he had become
the absolute owner of the property, he validly transferred it to Ramon Nicolas on May 19,
1990.20
Carmelo Cadalin who admittedly prepared the deed of absolute sale and who appears as a
witness, along with his wife, to the execution of the document corroborated Leonardo’s
claim:
Q: Mr. Cadalin, do you know the plaintiff Villaner Acabal?
A: Yes, I know.21
xxx
Q: And I would like to ask you Mr. witness why do you know Villaner Acabal?
A: At the time that he went to our house together with Leonardo Acabal he
requested me to prepare a deed of sale as regards to a sale of the property. 22
xxx
Q: And after they requested you to prepare a document of sale, what did you do?
A: At first I refused to [do] it because I have so many works to do, but then they
insisted so I prepared the deed.
Q: After you prepared the document, what did you do?
A: After I prepared it I gave it to him so that he could read the same.
Q: When you say "him," whom do you refer to?
A: Villaner Acabal.
Q: And did Villaner Acabal read the document you prepared?
A: Yes, he read it.
S a l e s P a r t V I P a g e | 130
Q: And after reading it what did Villaner Acabal do?
A: He signed the document.
Q: Showing to you a document which is marked Exhibit C for the plaintiff and
Exhibit 1 for the defendants, please tell the Honorable Court what relation this
document has to the document which you described earlier?
COURT INTERPRETER:
Witness is confronted with the said document earlier marked as Exhibit C for the
prosecution and Exhibit 1 for the defense.
A: Yes, this is the one.23
xxx
Q: Also stated in the document is the phrase "Signed in the presence of" and there
is a number and then two signatures, could you please examine the document and
say whether these signatures are familiar to you?
A: Yes, number one is my signature and number 2 is the signature of my wife as
witness.24
xxx
Q: After Villaner Acabal signed the document, what did Villaner Acabal do?
A: He was given the payment by Leonardo Acabal. 25
xxx
Q: Aside from the document, deed of absolute sale, that you mentioned earlier that you
prepared for Villaner Acabal and Leonardo Acabal, what other documents, if any, did you
prepare for them?
A: Affidavit of non-tenancy and aggregate area.26 (Emphasis and underscoring supplied)

The complaint was later amended27 to implead Villaner’s eight children as party plaintiffs,
they being heirs of his deceased wife.
By Decision of August 8, 1996, the trial court found for the therein defendants-herein
petitioners Leonardo and Ramon Nicolas and accordingly dismissed the complaint.
Villaner et al. thereupon brought the case on appeal to the Court of Appeals which reversed
the trial court, it holding that the Deed of Absolute Sale executed by Villaner in favor of
Leonardo was simulated and fictitious."28
Hence, Leonardo and Ramon Nicolas’ present petition for review on certiorari,29 anchored on
the following assignments of error:
I.
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT
RESPONDENT VILLANER ACABAL WAS DECEIVED INTO SIGNING THE DEED OF ABSOLUTE
SALE WHEN THE LATTER KNOWINGLY, FREELY AND VOLUNTARILY EXECUTED THE SAME
IN FAVOR OF PETITIONER LEONARDO ACABAL.
II.
THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE CONSIDERATION OF THE
DEED OF ABSOLUTE SALE IN THE AMOUNT OF TEN THOUSAND PESOS (P10,0000.00) WAS
"UNUSUALLY LOW AND INADEQUATE," ESPECIALLY TAKING INTO ACCOUNT THE
LOCATION OF THE SUBJECT PROPERTY.
III.
THE COURT OF APPEALS ERRED WHEN IT FAILED TO CONSIDER WHY RESPONDENT
VILLANER ACABAL ONLY QUESTIONED THE POSSESSION AND OWNERSHIP OF PETITIONER
RAMON NICOLAS IN COURT AFTER THE LATTER WAS IN OPEN, CONTINUOUS AND
PEACEFUL POSSESSION OF THE SUBJECT PROPERTY FOR ALMOST THREE (3) YEARS.
IV.
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN LAW WHEN IT FAILED TO
DECLARE PETITIONER RAMON NICOLAS AS A BUYER IN GOOD FAITH AS THE LATTER
TOOK THE NECESSARY STEPS AN ORDINARY AND PRUDENT MAN WOULD HAVE TAKEN
BEFORE BUYING THE QUESTIONED PROPERTY.
S a l e s P a r t V I P a g e | 131
V.
THE COURT OF APPEALS ERRED IN RULING IN FAVOR OF RESPONDENT VILLANER ACABAL
WHEN THE LATTER DID NOT PRESENT A SINGLE WITNESS TO TESTIFY ON THE ALLEGED
CONTRACT OF LEASE WHICH HE ALLEGEDLY SIGNED AND WITNESSED BY THE EMPLOYEES
OF JUDGE VILLEGAS.
VI.
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN LAW WHEN IT RULED THAT
RULE 8, SECTION 8 OF THE 1987 (sic) RULE (sic) OF CIVIL PROCEDURE IS NOT APPLICABLE
IN THE CASE AT BAR, CONTRARY TO THE RULING OF THE LOWER COURT.
VII.
THE COURT OF APPEALS ERRED WHEN IT ORDERED PETITIONERS TO PAY RESPONDENTS
"JOINTLY AND SEVERALLY BY WAY OF RENTAL THE SUM OF P10,000.00 PER YEAR FROM
1990 UP TO THE TIME THEY VACATE THE PREMISES."30
Procedurally, petitioners contend that the Court of Appeals erred when it failed to apply
Section 8, Rule 8 of the Rules of Court, respondent Villaner having failed to deny under oath
the genuineness and due execution of the April 19, 1990 Deed of Absolute Sale.
Petitioners’ contention does not persuade. The failure to deny the genuineness and due
execution of an actionable document does not preclude a party from arguing against it by
evidence of fraud, mistake, compromise, payment, statute of limitations, estoppel, and want
of consideration.31
On the merits, this Court rules in petitioners’ favor.
It is a basic rule in evidence that the burden of proof lies on the party who makes the
allegations32 – ei incumbit probatio, qui dicit, non qui negat; cum per rerum naturam factum
negantis probatio nulla sit.33 If he claims a right granted by law, he must prove it by
competent evidence, relying on the strength of his own evidence and not upon the weakness
of that of his opponent.
More specifically, allegations of a defect in or lack of valid consent to a contract by reason of
fraud or undue influence are never presumed but must be established not by mere
preponderance of evidence but by clear and convincing evidence. 34 For the circumstances
evidencing fraud and misrepresentation are as varied as the people who perpetrate it in each

case, assuming different shapes and forms and may be committed in as many different
ways.35
In the case at bar, it was incumbent on the plaintiff-herein respondent Villaner to prove that
he was deceived into executing the Deed of Absolute Sale. Except for his bare allegation that
the transaction was one of lease, he failed to adduce evidence in support thereof. His
conjecture that "perhaps those copies of the deed of sale were placed by Mr. Cadalin under
the documents which I signed the contract of lease," 36 must fail, for facts not conjectures
decide cases.
Attempting to seek corroboration of his account, Villaner presented Atty. Vicente Real who
notarized the document. While on direct examination, Atty. Real virtually corroborated
Villaner’s claim that he did not bring the document to him for notarization, 37 on cross-
examination, Atty. Real conceded that it was impossible to remember every person who
would ask him to notarize documents:
Q: And in the course of your notarization, can you remember each and every face
that come (sic) to you for notarization?
A: No, it is impossible.
Q: In the case of Villaner Acabal which you have his document notarized (sic) in
1990, can you remember his face when he came to you?
A: No.
Q: And can you also say, if a person who came to you having a document to be
notarized and if he will appear again after a month, can you remember whether
he was the one who came to you?
A: Not so much because everyday there are many people who appear with
documents to be notarized,
Q: So, it is safe to say that if Villaner Acabal came to you on April 25 or rather
April 16, 1990 andhave (sic) his document notarized if he comes back in, say May
25, can you still remember if he was the one who came to you?
A: I cannot be sure but at least, there are times I can remember persons because
he seems to be close to me already.
S a l e s P a r t V I P a g e | 132
Q: Is this Villaner close to you?
A: Because he has been frequenting the house/asking for a copy of the document.
Q: So, he became close to you after you notarized the document?
A: Yes.38 (Emphasis and underscoring supplied)
On Villaner’s claim that two women employees of Judge Villegas signed as witnesses to the
deed39 but that the signatures appearing thereon are not those of said witnesses, 40 the same
must be discredited in light of his unexplained failure to present such alleged women
employee-witnesses.
In another vein, Villaner zeroes in on the purchase price of the property — ₱10,000.00 —
which to him was unusually low if the transaction were one of sale. To substantiate his claim,
Villaner presented Tax Declarations covering the property for the years
1971,41 1974,42 1977,43 1980,44 1983,45 1985,46 as well as a Declaration of Real Property
executed in 1994.47
It bears noting, however, that Villaner failed to present evidence on the fair market value of
the property as of April 19, 1990, the date of execution of the disputed deed. Absent any
evidence of the fair market value of a land as of the time of its sale, it cannot be concluded
that the price at which it was sold was inadequate. 48 Inadequacy of price must be proven
because mere speculation or conjecture has no place in our judicial system. 49
Victor Ragay, who was appointed by the trial court to conduct an ocular inspection 50 of the
property and to investigate matters relative to the case, 51 gave an instructive report dated
December 3, 1994,52 the pertinent portions of which are hereby reproduced verbatim:
a) Only three (3) to four (4) hectares of the eighteen (18) were planted to sugar cane, the
rest was never cultivated;
b) the soil is reddish and somewhat sandy in composition;
c) the soil contains so much limestones (rocks consisting mainly of calcium carbonate);
d) no part of the land in question is plain or flat, contrary to claim of the plaintiff that almost
10 hectares of the land in question is plain or flat;

e) some areas, eastward of and adjacent of the land in question (mistakenly to be owned by
the defendant Nicolas) were planted to sugar cane by the owners – Kadusales;
f) the road going to the land in question (as claimed to be the road) is no longer passable
because it has been abandoned and not maintained by anyone, thus it makes everything
impossible for anybody to get and haul the sugar cane from the area;
g) the Commissioner has discovered some stockpiles of abandoned harvested sugar canes
left to rot, along the side of the road, undelivered to the milling site because of the difficulty
in bringing up trucks to the scene of the harvest;
h) the sugarcanes presently planted on the land in question at the time of the ocular
inspection were three (3) feet in height and their structural built was thin or lean;
i) Most of the part of the 18 hectares is not planted or cultivated because the same is too
rocky and not suitable for planting to sugarcane.53
Additionally, Ragay reported that one Anatolio Cabusog recently purchased a 6-hectare
property adjoining that of the subject property for only ₱1,600.00 54 or ₱266.67 per hectare.
Given that, had the 18-hectare subject property been sold at about the same time, it would
have fetched the amount of ₱4,800.00, 55 hence, the ₱10,000.00 purchase price appearing in
the questioned April 19, 1990 document is more than reasonable.
Even, however, on the assumption that the price of ₱10,000.00 was below the fair market
value of the property in 1990, mere inadequacy of the price per se will not rule out the
transaction as one of sale. For the price must be grossly inadequate or shocking to the
conscience such that the mind revolts at it and such that a reasonable man would neither
directly nor indirectly be likely to consent to it.56
Still in another vein, Villaner submits that Leonardo’s transfer of the property to Nicolas in a
span of one month for a profit of ₱30,000.00 conclusively reflects Leonardo’s fraudulent
intent. This submission is a non sequitur.
As for Villaner’s argument that the sale of the property to Leonardo and the subsequent sale
thereof to Nicolas are void for being violative of the retention limits imposed by Republic Act
No. 6657, otherwise known as the Comprehensive Agrarian Reform Law, the same fails. The
pertinent provisions of said law read:
SECTION 6. Retention Limits. – Except as otherwise provided in this Act, no person may
retain, directly or indirectly, any public or agricultural land, the size of which may vary
S a l e s P a r t V I P a g e | 133
according to factors governing a viable family-sized farm, such as commodity produced,
terrain, infrastructure, and soil fertility as determined by the Presidential Agrarian Reform
Council (PARC) created hereunder, but in no case shall retention by the landowner
exceed five (5) hectares. Three (3) hectares may be awarded to each child of the
landowner, subject to the following qualifications: (1) that he is at least fifteen (15) years of
age; and (2) that he is tilling the land or directly managing the farm: Provided, That
landowners whose lands have been covered by Presidential Decree No. 27 shall be allowed to
keep the areas originally retained by them thereunder: 57 Provided further, That original
homestead grantees or direct compulsory heirs who still own the original homestead at the
time of the approval of this Act shall retain the same areas as long as they continue to
cultivate said homestead.
xxx
Upon the effectivity of this Act, any sale, disposition, lease, management, contract
or transfer of possession of private lands executed by the original landowner in
violation of this Act shall be null and void: Provided, however, that those executed prior
to this Act shall be valid only when registered with the Register of Deeds within a period of
three (3) months after the effectivity of this Act. Thereafter, all Registers of Deeds shall
inform the DAR within thirty (30) days of any transaction involving agricultural lands in
excess of five (5) hectares.
xxx
SECTION 70. Disposition of Private Agricultural Lands. – The sale or disposition of agricultural
lands retained by a land owner as a consequence of Section 6 hereof shall be valid as long as
the total landholdings that shall be owned by the transferee thereof inclusive of the land to
be acquired shall not exceed the landholding ceilings provided for in this Act.
Any sale or disposition of agricultural lands after the effectivity of this Act found
to be contrary to the provisions hereof shall be null and void.
Transferees of agricultural lands shall furnish the appropriate Register of Deeds and the
BARC an affidavit attesting that his total landholdings as a result of the said acquisition do
not exceed the landholding ceiling. The Register of Deeds shall not register the transfer of
any agricultural land without the submission of his sworn statement together with proof of
service of a copy thereof to the BARC. (Emphasis and underscoring supplied)
As the above-quoted provisions of the Comprehensive Agrarian Reform Law show, only those
private lands devoted to or suitable for agriculture are covered by it. 58 As priorly related,
Victor Ragay, who was appointed by the trial court to conduct an ocular inspection of the

property, observed in his report that only three (3) to four (4) hectares were planted with
sugarcane while the rest of the property was not suitable for planting as the soil was full of
limestone.59 He also remarked that the sugarcanes were only 3 feet in height and very
lean,60 whereas sugarcanes usually grow to a height of 3 to 6 meters (about 8 to 20 feet)
and have stems 2 to 5 centimeters (1-2 inches) thick.61
It is thus gathered that the property was not suitable for agricultural purposes. In any event,
since the area devoted to the planting of sugarcane, hence, suitable for agricultural
purposes, comprises only 4 hectares at the most, it is less than the maximum retention limit
prescribed by law. There was then no violation of the Comprehensive Agrarian Reform Law.
Even assuming that the disposition of the property by Villaner was contrary to law, he would
still have no remedy under the law as he and Leonardo were in pari delicto, hence, he is not
entitled to afirmative relief – one who seeks equity and justice must come to court with clean
hands. In pari delicto potior est conditio defendentis.62
The proposition is universal that no action arises, in equity or at law, from an
illegal contract; no suit can be maintained for its specific performance, or to
recover the property agreed to be sold or delivered, or the money agreed to be
paid, or damages for its violation. The rule has sometimes been laid down as though it
were equally universal, that where the parties are in pari delicto, no affirmative relief of any
kind will be given to one against the other.63 (Emphasis and underscoring supplied)
The principle of pari delicto is grounded on two premises: first, that courts should not lend
their good offices to mediating disputes among wrongdoers; 64 and second, that denying
judicial relief to an admitted wrongdoer is an effective means of deterring illegality. 65 This
doctrine of ancient vintage is not a principle of justice but one of policy as articulated in 1775
by Lord Mansfield in Holman v. Johnson:66
The objection, that a contract is immoral or illegal as between the plaintiff and defendant,
sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that
the objection is ever allowed; but it is founded in general principles of policy, which the
defendant has the advantage of, contrary to the real justice, as between him and the
plaintiff, by accident, if I may so say. The principle of public policy is this; ex dolo malo non
oritur actio.67 No court will lend its aid to a man who founds his cause of action upon an
immoral or an illegal act. If, from the plaintiff’s own stating or otherwise, the cause of action
appears to arise ex turpi causa,68 or the transgression of a positive law of this country, there
the court says he has no right to be assisted. It is upon that ground the court goes; not for
the sake of the defendant, but because they will not lend their aid to such a plaintiff. So if
the plaintiff and the defendant were to change sides, and the defendant was to bring his
S a l e s P a r t V I P a g e | 134
action against the plaintiff, the latter would then have the advantage of it; for where both are
equally in fault potior est conditio defendentis.69
Thus, to serve as both a sanction and as a deterrent, the law will not aid either party to an
illegal agreement and will leave them where it finds them.
The principle of pari delicto, however, is not absolute, admitting an exception under Article
1416 of the Civil Code.
ART. 1416. When the agreement is not illegal per se but is merely prohibited, and the
prohibition by the law is designed for the protection of the plaintiff, he may, if public policy is
thereby enhanced, recover what he has paid or delivered.
Under this article, recovery for what has been paid or delivered pursuant to an inexistent
contract is allowed only when the following requisites are met: (1) the contract is not illegal
per se but merely prohibited; (2) the prohibition is for the protection of the plaintiffs; and (3)
if public policy is enhanced thereby. 70 The exception is unavailing in the instant case,
however, since the prohibition is clearly not for the protection of the plaintiff-landowner but
for the beneficiary farmers.71
In fine, Villaner is estopped from assailing and annulling his own deliberate acts. 72
More. Villaner cannot feign ignorance of the law, nor claim that he acted in good faith, let
alone assert that he is less guilty than Leonardo. Under Article 3 of the Civil Code, "ignorance
of the law excuses no one from compliance therewith."
And now, Villaner’s co-heirs’ claim that as co-owners of the property, the Deed of Absolute
Sale executed by Villaner in favor of Leonardo does not bind them as they did not consent to
such an undertaking. There is no question that the property is conjugal. Article 160 of the
Civil Code73 provides:
ART. 160. All property of the marriage is presumed to belong to the conjugal partnership,
unless it be proved that it pertains exclusively to the husband or to the wife. 74
The presumption, this Court has held, applies to all properties acquired during marriage. For
the presumption to be invoked, therefore, the property must be shown to have been
acquired during the marriage.75
In the case at bar, the property was acquired on July 6, 1971 during Villaner’s marriage with
Justiniana Lipajan. It cannot be seriously contended that simply because the tax declarations

covering the property was solely in the name of Villaner it is his personal and exclusive
property.
In Bucoy v. Paulino76 and Mendoza v. Reyes77 which both apply by analogy, this Court held
that registration alone of the properties in the name of the husband does not destroy the
conjugal nature of the properties.78 What is material is the time when the land was acquired
by Villaner, and that was during the lawful existence of his marriage to Justiniana.
Since the property was acquired during the existence of the marriage of Villaner and
Justiniana, the presumption under Article 160 of the Civil Code is that it is the couple’s
conjugal property. The burden is on petitioners then to prove that it is not. This they failed to
do.
The property being conjugal, upon the death of Justiniana Lipajan, the conjugal partnership
was terminated.79 With the dissolution of the conjugal partnership, Villaner’s interest in the
conjugal partnership became actual and vested with respect to an undivided one-half
portion.80 Justiniana's rights to the other half, in turn, vested upon her death to her
heirs81 including Villaner who is entitled to the same share as that of each of their eight
legitimate children.82 As a result then of the death of Justiniana, a regime of co-ownership
arose between Villaner and his co-heirs in relation to the property. 83
With respect to Justiniana’s one-half share in the conjugal partnership which her heirs
inherited, applying the provisions on the law of succession, her eight children and Villaner
each receives one-ninth (1/9) thereof. Having inherited one-ninth (1/9) of his wife’s share in
the conjugal partnership or one eighteenth (1/18)84 of the entire conjugal partnership and is
himself already the owner of one half (1/2) or nine-eighteenths (9/18), Villaner’s total
interest amounts to ten-eighteenths (10/18) or five-ninths (5/9).
While Villaner owns five-ninths (5/9) of the disputed property, he could not claim title to any
definite portion of the community property until its actual partition by agreement or judicial
decree. Prior to partition, all that he has is an ideal or abstract quota or proportionate share
in the property.85 Villaner, however, as a co-owner of the property has the right to sell his
undivided share thereof. The Civil Code provides so:
ART. 493. Each co-owner shall have the full ownership of his part and of the fruits and
benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even
substitute another person in its enjoyment, except when personal rights are involved. But the
effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the
portion which may be allotted to him in the division upon the termination of the co-
ownership.
S a l e s P a r t V I P a g e | 135
Thus, every co-owner has absolute ownership of his undivided interest in the co-owned
property and is free to alienate, assign or mortgage his interest except as to purely personal
rights. While a co-owner has the right to freely sell and dispose of his undivided interest,
nevertheless, as a co-owner, he cannot alienate the shares of his other co-owners –  nemo
dat qui non habet.86
Villaner, however, sold the entire property without obtaining the consent of the other co-
owners. Following the well-established principle that the binding force of a contract must be
recognized as far as it is legally possible to do so – quando res non valet ut ago, valeat
quantum valere potest87 – the disposition affects only Villaner’s share pro indiviso, and the
transferee gets only what corresponds to his grantor’s share in the partition of the property
owned in common.88
As early as 1923, this Court has ruled that even if a co-owner sells the whole property as
his, the sale will affect only his own share but not those of the other co-owners who did not
consent to the sale. This is because under the aforementioned codal provision, the sale or
other disposition affects only his undivided share and the transferee gets only what would
correspond to this grantor in the partition of the thing owned in common. Consequently, by
virtue of the sales made by Rosalia and Gaudencio Bailon which are valid with respect to
their proportionate shares, and the subsequent transfers which culminated in the sale to
private respondent Celestino Afable, the said Afable thereby became a co-owner of the
disputed parcel of land as correctly held by the lower court since the sales produced the
effect of substituting the buyers in the enjoyment thereof.
From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided
share, a sale of the entire property by one co-owner without the consent of the other co-
owners is not null and void. However, only the rights of the co-owner-seller are transferred.,
thereby making the buyer a co-owner of the property.
The proper action in cases like this is not for the nullification of the sale or the recovery of
possession of the thing owned in common from the third person who substituted the co-
owner or co-owners who alienated their shares, but the DIVISION of the common property
as if it continued to remain in the possession of the co-owners who possessed and
administered it.89
Thus, it is now settled that the appropriate recourse of co-owners in cases where their
consent were not secured in a sale of the entire property as well as in a sale merely of the
undivided shares of some of the co-owners is an action for PARTITION under Rule 69 of the
Revised Rules of Court. Neither recovery of possession nor restitution can be granted since
the defendant buyers are legitimate proprietors and possessors in joint ownership of the
common property claimed.90 (Italics in the original; citations omitted; underscoring supplied)
 S a l e s P a r t V I P a g e | 136

This Court is not unmindful of its ruling in Cruz v. Leis91 where it held:

It is conceded that, as a rule, a co-owner such as Gertrudes could only dispose of her share
in the property owned in common. Article 493 of the Civil Code provides:

xxx

Unfortunately for private respondents, however, the property was registered in TCT No.
43100 solely in the name of "Gertrudes Isidro, widow." Where a parcel of land, forming part
of the undistributed properties of the dissolved conjugal partnership of gains, is sold by a
widow to a purchaser who merely relied on the face of the certificate of title thereto, issued
solely in the name of the widow, the purchaser acquires a valid title to the land even as
against the heirs of the deceased spouse. The rationale for this rule is that "a person dealing
with registered land is not required to go behind the register to determine the condition of
the property. He is only charged with notice of the burdens on the property which are noted
on the face of the register or the certificate of title. To require him to do more is to defeat
one of the primary objects of the Torrens system."92 (Citation omitted)

Cruz, however, is not applicable for the simple reason that in the case at bar the property in
dispute is unregistered. The issue of good faith or bad faith of a buyer is relevant only where
the subject of the sale is a registered land but not where the property is an unregistered
land.93 One who purchases an unregistered land does so at his peril. 94Nicolas’ claim of having
bought the land in good faith is thus irrelevant. 95

WHEREFORE, the petition is GRANTED. The Court of Appeals February 15, 2001 Decision in
CA-G.R. CV No. 56148 is REVERSED and SET ASIDE and another is rendered declaring the
sale in favor of petitioner Leonardo Acabal and the subsequent sale in favor of petitioner
Ramon Nicolas valid but only insofar as five-ninths (5/9) of the subject property is concerned.

No pronouncement as to costs.

SO ORDERED.

Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.