Sales Cases from August 14

1
SALES CASES FOR AUGUST 14

G.R. NO. 124242, January 21, 2005
SAN LORENZO DEVELOPMENT CORPORATION VS. CA

FACTS: On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta. The
latter made a downpayment of fifty thousand pesos (P50,000.00) as evidenced by a memorandum receipt issued by Pacita
Lu of the same date. Several other payments totaling two hundred thousand pesos (P200,000.00) were made by
Babasanta. He demanded the execution of a Final Deed of Sale in his favor so he may effect full payment of the purchase
price; however, the spouses declined to push through with the sale. They claimed that when he requested for a discount
and they refused, he rescinded the agreement. Thus, Babasanta filed a case for Specific Performance.
On the other hand, San Lorenzo Development Corporation (SLDC) alleged that 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. 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.

ISSUE:Who between SLDC and Babasanta has a better right over the two parcels of land?

RULING: 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.
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (P50,000.00) from
Babasanta as partial payment of 3.6 hectares of farm lot. While there is no stipulation that the seller reserves the ownership
of the property until full payment of the price which is a distinguishing feature of a contract to sell, the subsequent acts of
the parties convince us that the Spouses Lu never intended to transfer ownership to Babasanta except upon full payment of
the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for
the execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly
refused to do so. In effect, Babasanta himself recognized that ownership of the property would not be transferred to him
until such time as he shall have effected full payment of the price. Doubtlessly, the receipt signed by Pacita Lu should legally
be considered as a perfected contract to sell.
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. 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.
There was no double sale in this case because the contract in favor of Babasanta was a mere contract to sell;
hence, Art. 1544 is not applicable. There was neither actual nor constructive delivery as his title is based on a mere receipt.
Based on this alone, the right of SLDC must be preferred.
SAN LORENZO DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS, PABLO S. BABASANTA, SPS.
MIGUEL LU and PACITA ZAVALLA LU, respondents.
D E C I S I O N
TINGA, J.:
From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita Zavalla, (hereinafter,
the Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-
39023 both measuring 15,808 square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta,
(hereinafter, Babasanta) for the price of fifteen pesos (P15.00) per square meter. Babasanta made a downpayment of fifty
thousand pesos (P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other
payments totaling two hundred thousand pesos (P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final deed of sale in his
favor so that he could effect full payment of the purchase price. In the same letter, Babasanta notified the spouses about
having received information that the spouses sold the same property to another without his knowledge and consent. He
demanded that the second sale be cancelled and that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to sell the property to him
at fifteen pesos (P15.00) per square meter. She, however, reminded Babasanta that when the balance of the purchase price
became due, he requested for a reduction of the price and when she refused, Babasanta backed out of the sale. Pacita
added that she returned the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court (RTC), Branch 31, of San
Pedro, Laguna, a Complaint for Specific Performance and Damages
[1]
against his co-respondents herein, the Spouses Lu.
Babasanta alleged that the lands covered by TCT No. T- 39022 and T-39023 had been sold to him by the spouses at fifteen
pesos (P15.00) per square meter. Despite his repeated demands for the execution of a final deed of sale in his favor,
respondents allegedly refused.
2

In their Answer,
[2]
the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and when the total advances
of Pacita reached fifty thousand pesos (P50,000.00), the latter and Babasanta, without the knowledge and consent of Miguel
Lu, had verbally agreed to transform the transaction into a contract to sell the two parcels of land to Babasanta with the
fifty thousand pesos (P50,000.00) to be considered as the downpayment for the property and the balance to be paid on or
before 31 December 1987. Respondents Lu added that as of November 1987, total payments made by Babasanta amounted
to only two hundred thousand pesos (P200,000.00) and the latter allegedly failed to pay the balance of two hundred sixty
thousand pesos (P260,000.00) despite repeated demands. Babasanta had purportedly asked Pacita for a reduction of the
price from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter and when the Spouses Lu refused to grant
Babasantas request, the latter rescinded the contract to sell and declared that the original loan transaction just be carried
out in that the spouses would be indebted to him in the amount of two hundred thousand pesos (P200,000.00).
Accordingly, on 6 July 1989, they purchased Interbank Managers Check No. 05020269 in the amount of two hundred
thousand pesos (P200,000.00) in the name of Babasanta to show that she was able and willing to pay the balance of her
loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 1990
[3]
wherein he prayed for the issuance of a writ of
preliminary injunction with temporary restraining order and the inclusion of the Register of Deeds of Calamba, Laguna as
party defendant. He contended that the issuance of a preliminary injunction was necessary to restrain the transfer or
conveyance by the Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition
[4]
to the amended complaint contending that it raised new matters which
seriously affect their substantive rights under the original complaint. However, the trial court in its Order dated 17 January
1990
[5]
admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a Motion for
Intervention
[6]
before the trial court. SLDC alleged that it had legal interest in the subject matter under litigation because
on 3 May 1989, the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute
Sale with Mortgage.
[7]
It alleged that it was a buyer in good faith and for value and therefore it had a better right over the
property in litigation.
In his Opposition to SLDCs motion for intervention,
[8]
respondent Babasanta demurred and argued that the latter had
no legal interest in the case because the two parcels of land involved herein had already been conveyed to him by the
Spouses Lu and hence, the vendors were without legal capacity to transfer or dispose of the two parcels of land to the
intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene. SLDC filed its Complaint-in-
Intervention on 19 April 1990.
[9]
Respondent Babasantas motion for the issuance of a preliminary injunction was likewise
granted by the trial court in its Order dated 11 January 1991
[10]
conditioned upon his filing of a bond in the amount of fifty
thousand pesos (P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu executed in its favor
an Option to Buy the lots subject of the complaint. Accordingly, it paid an option money in the amount of three hundred
sixteen thousand one hundred sixty pesos (P316,160.00) out of the total consideration for the purchase of the two lots of
one million two hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After the Spouses Lu received a total
amount of six hundred thirty-two thousand three hundred twenty pesos (P632,320.00) they executed on 3 May 1989
a Deed of Absolute Sale with Mortgage in its favor. SLDC added that the certificates of title over the property were
delivered to it by the spouses clean and free from any adverse claims and/or notice of lis pendens. SLDC further alleged
that it only learned of the filing of the complaint sometime in the early part of January 1990 which prompted it to file the
motion to intervene without delay. Claiming that it was a buyer in good faith, SLDC argued that it had no obligation to look
beyond the titles submitted to it by the Spouses Lu particularly because Babasantas claims were not annotated on the
certificates of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the property to SLDC. It
ordered the Spouses Lu to pay Babasanta the sum of two hundred thousand pesos (P200,000.00) with legal interest plus
the further sum of fifty thousand pesos (P50,000.00) as and for attorneys fees. On the complaint-in-intervention, the trial
court ordered the Register of Deeds of Laguna, Calamba Branch to cancel the notice of lis pendens annotated on the original
of the TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and SLDC did not register the
respective sales in their favor, ownership of the property should pertain to the buyer who first acquired possession of the
property. The trial court equated the execution of a public instrument in favor of SLDC as sufficient delivery of the property
to the latter. It concluded that symbolic possession could be considered to have been first transferred to SLDC and
consequently ownership of the property pertained to SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals alleging in the main that the trial
court erred in concluding that SLDC is a purchaser in good faith and in upholding the validity of the sale made by the
Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the trial court erred in
failing to consider that the contract to sell between them and Babasanta had been novated when the latter abandoned the
3

verbal contract of sale and declared that the original loan transaction just be carried out. The Spouses Lu argued that since
the properties involved were conjugal, the trial court should have declared the verbal contract to sell between Pacita Lu and
Pablo Babasanta null and void ab initio for lack of knowledge and consent of Miguel Lu. They further averred that the trial
court erred in not dismissing the complaint filed by Babasanta; in awarding damages in his favor and in refusing to grant
the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision
[11]
which set aside the judgment of the trial court. It
declared that the sale between Babasanta and the Spouses Lu was valid and subsisting and ordered the spouses to execute
the necessary deed of conveyance in favor of Babasanta, and the latter to pay the balance of the purchase price in the
amount of two hundred sixty thousand pesos (P260,000.00). The appellate court ruled that the Absolute Deed of Sale with
Mortgage in favor of SLDC was null and void on the ground that SLDC was a purchaser in bad faith. The Spouses Lu were
further ordered to return all payments made by SLDC with legal interest and to pay attorneys fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate court.
[12]
However, in
a Manifestation dated 20 December 1995,
[13]
the Spouses Lu informed the appellate court that they are no longer contesting
the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,
[14]
the appellate court considered as withdrawn the motion for reconsideration
filed by the Spouses Lu in view of their manifestation of 20 December 1995. The appellate court denied SLDCs motion for
reconsideration on the ground that no new or substantial arguments were raised therein which would warrant modification
or reversal of the courts decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A BUYER IN GOOD FAITH BECAUSE WHEN THE
SELLER PACITA ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE OFP200,000.00, SAN LORENZO WAS PUT ON
INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED FACT THAT THE ALLEGED FIRST BUYER,
RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND
TOOK POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN, ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED
ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT RESPONDENT BABASANTA HAS SUBMITTED
NO EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL CONCURRENCE ON THE FINDINGS OF
FACT OF THE TRIAL COURT, IT REVERSED AND SET ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF
SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH.
[15]

SLDC contended that the appellate court erred in concluding that it had prior notice of Babasantas claim over the
property merely on the basis of its having advanced the amount of two hundred thousand pesos (P200,000.00) to Pacita Lu
upon the latters representation that she needed the money to pay her obligation to Babasanta. It argued that it had no
reason to suspect that Pacita was not telling the truth that the money would be used to pay her indebtedness to Babasanta.
At any rate, SLDC averred that the amount of two hundred thousand pesos (P200,000.00) which it advanced to Pacita Lu
would be deducted from the balance of the purchase price still due from it and should not be construed as notice of the prior
sale of the land to Babasanta. It added that at no instance did Pacita Lu inform it that the lands had been previously sold to
Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took possession of the property
and asserted its rights as new owner as opposed to Babasanta who has never exercised acts of ownership. Since the titles
bore no adverse claim, encumbrance, or lien at the time it was sold to it, SLDC argued that it had every reason to rely on
the correctness of the certificate of title and it was not obliged to go beyond the certificate to determine the condition of the
property. Invoking the presumption of good faith, it added that the burden rests on Babasanta to prove that it was aware of
the prior sale to him but the latter failed to do so. SLDC pointed out that the notice of lis pendens was annotated only on 2
June 1989 long after the sale of the property to it was consummated on 3 May 1989.
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
4

the property made as early as 2 June 1989. Hence, petitioners registration of the sale did not confer upon it any right.
Babasanta further asserted that petitioners bad faith in the acquisition of the property is evident from the fact that it failed
to make necessary inquiry regarding the purpose of the issuance of the two hundred thousand pesos (P200,000.00)
managers check in his favor.
The core issue presented for resolution in the instant petition is who between SLDC and Babasanta has a better right
over the two parcels of land subject of the instant case in view of the successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a document signed by Pacita Lu
acknowledging receipt of the sum of fifty thousand pesos (P50,000.00) as partial payment for 3.6 hectares of farm lot
situated at Barangay Pulong, Sta. Cruz, Sta. Rosa, Laguna.
[17]
While the receipt signed by Pacita did not mention the price
for which the property was being sold, this deficiency was supplied by Pacita Lus letter dated 29 May 1989
[18]
wherein she
admitted that she agreed to sell the 3.6 hectares of land to Babasanta for fifteen pesos (P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads to the
conclusion that the agreement between Babasanta and the Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,
[19]
which is manifested by the meeting of the offer and the
acceptance upon the thing which are to constitute the contract. The offer must be certain and the acceptance
absolute.
[20]
Moreover, contracts shall be obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present.
[21]

The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (P50,000.00) from
Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While there is no stipulation that the
seller reserves the ownership of the property until full payment of the price which is a distinguishing feature of a contract to
sell, the subsequent acts of the parties convince us that the Spouses Lu never intended to transfer ownership to Babasanta
except upon full payment of the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for the
execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly refused to
do so. In effect, Babasanta himself recognized that ownership of the property would not be transferred to him until such
time as he shall have effected full payment of the price. Moreover, had the sellers intended to transfer title, they could have
easily executed the document of sale in its required form simultaneously with their acceptance of the partial payment, but
they did not. Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane. In a contract of sale, title passes to
the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the
vendor and is not to pass until the full payment of the price.
[22]
In a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor
until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach
but an event that prevents the obligation of the vendor to convey title from becoming effective.
[23]

The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase price. There
being an obligation to pay the price, Babasanta should have made the proper tender of payment and consignation of the
price in court as required by law. Mere sending of a letter by the vendee expressing the intention to pay without the
accompanying payment is not considered a valid tender of payment.
[24]
Consignation of the amounts due in court is
essential in order to extinguish Babasantas obligation to pay the balance of the purchase price. Glaringly absent from the
records is any indication that Babasanta even attempted to make the proper consignation of the amounts due, thus, the
obligation on the part of the sellers to convey title never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not a contract to sell, Babasantas
claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere 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.
5

Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from the moment it is
delivered to him in any of the ways specified in Article 1497 to 1501.
[30]
The word delivered should not be taken
restrictively to mean transfer of actual physical possession of the property. The law recognizes two principal modes of
delivery, to wit: (1) actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the vendee.
[31]
Legal or constructive
delivery, on the other hand, may be had through any of the following ways: the execution of a public instrument evidencing
the sale;
[32]
symbolical tradition such as the delivery of the keys of the place where the movable sold is being
kept;
[33]
traditio longa manu or by mere consent or agreement if the movable sold cannot yet be transferred to the
possession of the buyer at the time of the sale;
[34]
traditio brevi manu if the buyer already had possession of the object even
before the sale;
[35]
and traditio constitutum possessorium, where the seller remains in possession of the property in a
different capacity.
[36]

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

However, it must be stressed that the juridical relationship between the parties in a double sale is primarily governed
by Article 1544 which lays down the rules of preference between the two purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person
who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in
the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and,
in the absence thereof, to the person who presents the oldest title, provided there is good faith.
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of double
sale of immovable property. When the thing sold twice is an immovable, the one who acquires it and first records it in the
Registry of Property, both made in good faith, shall be deemed the owner.
[38]
Verily, the act of registration must be coupled
with good faith that is, the registrant must have no knowledge of the defect or lack of title of his vendor or must not have
been aware of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him
with the defects in the title of his vendor.
[39]

Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge of Babasantas claim.
Babasanta, however, strongly argues that the registration of the sale by SLDC was not sufficient to confer upon the latter
any title to the property since the registration was attended by bad faith. Specifically, he points out that at the time SLDC
registered the sale on 30 June 1990, there was already a notice of lis pendens on the file with the Register of Deeds, the
same having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis pendens obliterate the effects of delivery and
possession in good faith which admittedly had occurred prior to SLDCs knowledge of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to Buy in favor of SLDC
upon receiving P316,160.00 as option money from SLDC. After SLDC had paid more than one half of the agreed purchase
price of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC. At
the time both deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses Lu with Babasanta.
Simply stated, from the time of execution of the first deed up to the moment of transfer and delivery of possession of the
lands to SLDC, it had acted in good faith and the subsequent annotation of lis pendens has no effect at all on the
consummated sale between SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of another without notice that some other person has a right to, or
interest in, such property and pays a full and fair price for the same at the time of such purchase, or before he has notice of
the claim or interest of some other person in the property.
[40]
Following the foregoing definition, we rule that SLDC qualifies
as a buyer in good faith since there is no evidence extant in the records that it had knowledge of the prior transaction in
favor of Babasanta. At the time of the sale of the property to SLDC, the vendors were still the registered owners of the
6

property and were in fact in possession of the lands. Time and again, this Court has ruled that a person dealing with the
owner of registered land is not bound to go beyond the certificate of title as he is charged with notice of burdens on the
property which are noted on the face of the register or on the certificate of title.
[41]
In assailing knowledge of the transaction
between him and the Spouses Lu, Babasanta apparently relies on the principle of constructive notice incorporated in Section
52 of the Property Registration Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment, order, judgment,
instrument or entry affecting registered land shall, if registered, filed, or entered in the office of the Register of Deeds for
the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such
registering, filing, or entering.
of the notice of lis pendens which in this case was effected only on 2 June 1989, at which time the sale in favor of SLDC had
long been consummated insofar as the obligation of the Spouses Lu to transfer ownership over the property to SLDC is
concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the annotation of the notice
of lis pendens cannot help Babasantas position a bit and it is irrelevant to the good or bad faith characterization of SLDC as
a purchaser. A notice of lis pendens, as the Court held in Natao v. Esteban,
[42]
serves as a warning to a prospective
purchaser or incumbrancer that the particular property is in litigation; and that he should keep his hands off the same,
unless he intends to gamble on the results of the litigation. Precisely, in this case SLDC has intervened in the pending
litigation to protect its rights. Obviously, SLDCs faith in the merit of its cause has been vindicated with the Courts present
decision which is the ultimate denouement on the controversy.
The Court of Appeals has made capital
[43]
of SLDCs averment in its Complaint-in-Intervention
[44]
that at the instance of
Pacita Lu it issued a check for P200,000.00 payable to Babasanta and the confirmatory testimony of Pacita Lu herself on
cross-examination.
[45]
However, there is nothing in the said pleading and the testimony which explicitly relates the amount
to the transaction between the Spouses Lu and Babasanta for what they attest to is that the amount was supposed to pay
off the advances made by Babasanta to Pacita Lu. In any event, the incident took place after the Spouses Lu had already
executed theDeed of Absolute Sale with Mortgage in favor of SLDC and therefore, as previously explained, it has no effect
on the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted by the prior notice of lis
pendens and assuming further for the same nonce that this is a case of double sale, still Babasantas claim could not prevail
over that of SLDCs. In Abarquez v. Court of Appeals,
[46]
this Court had the occasion to rule that if a vendee in a double sale
registers the sale after he has acquired knowledge of a previous sale, the registration constitutes a registration in bad faith
and does not confer upon him any right. If the registration is done in bad faith, it is as if there is no registration at all, and
the buyer who has taken possession first of the property in good faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only after the second vendee, Abarquez,
registered their deed of sale with the Registry of Deeds, but the Israels were first in possession. This Court awarded the
property to the Israels because registration of the property by Abarquez lacked the element of good faith. While the facts in
the instant case substantially differ from that inAbarquez, we would not hesitate to rule in favor of SLDC on the basis of its
prior possession of the property in good faith. Be it noted that delivery of the property to SLDC was immediately effected
after the execution of the deed in its favor, at which time SLDC had no knowledge at all of the prior transaction by the
Spouses Lu in favor of Babasanta.
The law speaks not only of one criterion. The first criterion is priority of entry in the registry of property; there being
no priority of such entry, the second is priority of possession; and, in the absence of the two priorities, the third priority is of
the date of title, with good faith as the common critical element. Since SLDC acquired possession of the property in good
faith in contrast to Babasanta, who neither registered nor possessed the property at any time, SLDCs right is definitely
superior to that of Babasantas.
At any rate, the above discussion on the rules on double sale would be purely academic for as earlier stated in this
decision, the contract between Babasanta and the Spouses Lu is not a contract of sale but merely a contract to sell.
In Dichoso v. Roxas,
[47]
we had the occasion to rule that Article 1544 does not apply to a case where there was a sale to one
party of the land itself while the other contract was a mere promise to sell the land or at most an actual assignment of the
right to repurchase the same land. Accordingly, there was no double sale of the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals appealed from is
REVERSED and SET ASIDE and the decision of the Regional Trial Court, Branch 31, of San Pedro, Laguna is REINSTATED.
No costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

7

G.R. No. L-13125 February 11, 1919
ROSALIO BAUTISTA, plaintiff-appellee,
vs.
FRANCISCO SIOSON, ET AL., defendants.
RAYMUNDO DE LA CRUZ, appellant.
Agapito Ignacio for appellant.
A. Cruz Herrera for appellee.
TORRES, J.:
This appeal through bill of exceptions was filed by counsel for the defendant Raymundo de la Cruz from the judgment of
December 29, 1916, whereby the judge of the Court of First Instance of Rizal held (1) that Rosalio Bautista, the plaintiff,
was by merger the owner of the properties described in subparagraphs (a) and (b) of paragraph 2 of the complaint; (2)
ordered Raymundo de la Cruz to deliver to the plaintiff Bautista the camarin or warehouse, built of strong materials,
described in the subparagraph (a) above mentioned; (3) ordered Francisco Sioson to pay to said plaintiff Bautista the sum
of P200, the amount of the rent due; (4) absolved Francisco Santos Paulino from the compliant, as the evidence did not
show that he had taken possession of the house described in said subparagraph (b); and, finally (5) ordered each of the
defendants Francisco Sioson and Raymundo de la Cruz to pay one-half of the costs. The appellant moved for a new trial,
which motion being denied, he entered an exception, and, upon filing the proper bill of exceptions, the same was approved
and forwarded, together with a transcript of all the evidence to the office of the clerk of this court.
On June 30, 1916, counsel for the plaintiff filed complaint in the Court of First Instance of Rizal, in which he alleged that on
September 4, 1912, by virtue of a contract of sale executed on September 4, 1912, between the plaintiff Rosalio Bautista
and the spouses Francisco Sioson and Lorenza de la Cruz, for the sale of a camarin or warehouse of strong materials with
an iron roof and a house of mixed materials with a nipa roof both buildings constructed on lots situated in the town of
Malabon, Rizal, and belonging to the chaplaincy known by the name of Concepcion said buildings were delivered to him
on the date of the contract, which was drawn up before a notary, under the condition that the vendors might repurchase
them within the term of two years, counted from the date of the contract; that immediately after the sale of the plaintiff
leased the purchased buildings to said vendor spouses, who had not paid the price of the lease, nor repurchased said
buildings, notwithstanding that the term of the contract had elapsed with the result that the other defendant Raymundo de
la Cruz was then (at the time of the filing of the complaint) in material possession of said camarin under title of owner, and
Francisco Santos Paulino was in possession of the house, also under a like title. Therefore he prayed the court to hold that
the plaintiff's ownership in said buildings was consolidated, to order the defendants to deliver them to the plaintiff, and to
order Francisco Sioson to pay to the plaintiff the price of the lease and to pay the costs.
The defendants Francisco Sioson and Francisco Santos Paulino did not put in an appearance to answer the complaint,
notwithstanding that they were duly summoned. They were therefore declared in default.
Counsel for the defendant Raymundo de la Cruz admitted paragraphs 1 and 6 of the complaint, and denied generally and
specifically the other paragraphs thereof. In special defense he alleged that the camarin described in subparagraph (a) ,
paragraph 2 of the complaint, was of the exclusive ownership of the defendant Raymundo de la Cruz. He therefore asked
that his client be absolved from the complaint, with the costs against the plaintiff.
Upon the hearing of the case and the introduction of the evidence by the parties, the court decided the suit in the manner
aforesaid.
It now behooves us to determine who is the owner of the camarin of strong materials with an iron roof, to which reference
is made in subparagraph (a) of paragraph 2 of the complaint: Whether it belongs to Rosalio Bautista, in whose favor its
ownership became consolidated by the lapse of the term of two years without its having been repurchased by the vendors;
or to Raymundo de la Cruz, to whom Francisco Sioson likewise sold the saidcamarin on August 5, 1914, one year and
eleven months after the sale of this building to the plaintiff Bautista, effected on September 4, 1912.
In order that the issue raised in this suit may be properly decided we shall herein make a statement of the contracts
executed by and between the litigants.
On September 4, 1912, the defendant Francisco Sioson and his wife Lorenza de la Cruz, through a notarial instrument, sold
to the plaintiff Rosalio Bautista the camarin in question, besides some other property, under the right of repurchase. It was
stipulated that if within two years from the date of the contract the vendors or their successors in interest should not
repurchase said properties for the sum of P400, the price of the sale, such sale should become absolute and thenceforth the
8

ownership in the properties sold should be consolidated, the execution of another instrument being unnecessary. (Exhibit A,
p. 10.)
On the same date, September 4, 1912, Rosalio Bautista, through a notarial instrument, leased the properties sold to him to
the vendors Francisco Sioson and Lorenza de la Cruz, for the price of P100 per annum, for the period of two years counted
from the date of the instrument. (Exhibit D, p. 15.)
On June 12, 1913, Lorenza de la Cruz died (Sten. notes, p. 29) and on August 5, 1914, Francisco Sioson executed before a
notary a document by which he sold under right of repurchase to the defendant Raymundo de la Cruz, the camarin in
question. It was stipulated in this instrument that if within six months, counted from the 1st of August, 1914, the vendor
Francisco Sioson should return to the purchase Raymundo de la Cruz the sum of P422, the price of the purchase, then the
purchaser Raymundo de la Cruz would be obliged to execute in favor of said vendor Francisco Sioson an instrument of
resale, but that if within the period mentioned he should not make the redemption stipulated, said sale should become
absolute, the execution of another instrument being unnecessary. (Exhibit 1, p. 17.)
From the instrument referred to in the preceding paragraphs it is concluded that the original owner of the buildings in
dispute, Francisco Sioson, and his wife, Lorenza de la Cruz, sold, on September 4, 1912, the house and the camarin to the
plaintiff Rosalio Bautista for P400, under agreement of their resale within the term of two years counted from said date; and
that, on the same date, by means of a constitutum possessorium agreement, and in another new notarial instrument, the
purchaser Bautista leased the properties sold to the vendors Francisco Sioson and Lorenza de la Cruz at an annual rent of
P100, for a period of two years counted from the date above mentioned.
After the lessee, Francisco Sioson, had been in possession of the properties leased for one year and eleven months, he sold
the camarin, one of them, by virtue of a notarial instrument to Raymundo de la Cruz, under the agreement that if he did not
redeem the camarin so sold within six months from the 1st of August, 1914, and return the sum of P422, such sale under
right of repurchase should become absolute, the execution of another instrument being unnecessary.
As a result of the two said alienation, both set forth in notarial instruments though not recorded in the registry of property
the issue raised and to be decided is, which of the two purchasers, the plaintiff Bautista and the defendant Cruz, is the
lawful owner of the camarin successively sold to the former and to the latter by the other defendant Francisco Sioson, its
original owner, in accordance with the provisions contained in article 1473 of the Civil Code, the last paragraph of which,
among other things, prescribed:
Should there be no entry, the property shall belong to the person who first took possession of its in good faith . . .
In view of the fact that the deed of sale executed by Francisco Sioson, the owner of the camarin, and his wife, Lorenza de la
Cruz, on September 4, 1912, in favor of Rosalio Bautista, was not entered in the registry of property, and of the further fact
that, upon the execution of the second sale of the same camarin by the said Sioson, which sale was made after the death of
his wife Lorenza by virtue of an instrument dated August 5, 1914, in favor of Raymundo de la Cruz, under agreement of
repurchase for the price of P422 the term of two years fixed for the redemption of the camarin so sold had not yet expired,
it may be presumed, in the absence of proof to the contrary, that the second purchaser Raymundo de la Cruz, on acquiring
the camarin of its original owner Francisco Sioson, who, according to the written contract, became a tenant or lessee of
the camarin, was not aware of said first sale to Bautista, and believed that Sioson, who was in possession of the camarin,
was still the owner thereof. Therefore, Cruz acted in good faith in acquiring it, inasmuch as, through failure to enter the
property in the registry, there was no reason why the previous alienation of the camarin should have been known. But be all
this as it may, nevertheless, the actual and material possession of the camarin by Cruz does not constitute a sufficient legal
reason for holding the he has a better right to the building than the first purchaser Rosalio Bautista, although the latter was
not in actual, physical, and material of the camarin that he had purchased. This conclusion is derived from a strict
application of the provisions of said article 1473 of the Civil Code.
Both alienations, effected successively by Francisco Sioson in favor of Bautista and Cruz, are recorded in notarial
instruments, though they were not entered in the registry of property. To determine who is the lawful owner of
the camarin sold, if the provisions of said article of the Code are to be observed, we have first to determine the contention
in regard to which of the two purchasers is in possession thereof, and if, on the execution of the contract of lease by the
first purchaser in favor of the vendor himself, the constitutum possessorium agreement is to be considered to have been
stipulated, the conclusion must necessarily be reached as to which of the two purchasers first took possession of
the camarin sold, and also whether the material possession of the tenant is of a precarious nature, enjoyed in the same and
representation of the owner Bautista.
Article 1462 of the Civil Code reads:
A thing sold shall be considered as delivered, when it is placed in the hands and possession of the vendee.
9

When the sale should be made by means of a public instrument, the execution thereof shall be equivalent to the
delivery of the thing which is the object of the contract, if in said instrument the contrary does not appear or may
be clearly inferred.
From the contest of this article it is deduced that the delivery or tradition of the thing sold may be real or actual, and
feigned. The execution of a public instrument constitutes one of the kinds of symbolic tradition, but, in all the different
manners by which the thing sold may be delivered, it is necessary that the record bear proof and that it may be held that
such delivery or tradition was determined by the will of the parties to deliver and receive, respectively, the thing that is the
subject of the contract.
In the contract of lease (Exhibit D, record, p. 15) the lessor, Rosalio Bautista, states that in his capacity as owner he leased
to the spouses Francisco Sioson and Lorenza de la Cruz, among other properties, a camarin of strong material with an iron
roof, at an annual rent of P100, the lessees binding themselves to report to the lessor any act of disturbance committed by
any other person, and all defects that might be occasioned to the building. The execution of this instrument of lease shows
that the camarin would be continued to be occupied by its previous owner and vendor after it had been delivered,
symbolically, by means of the instrument executed for the purpose in favor of the purchaser, in order that he might hold it
in the capacity of lessee, it being supposed, by a legal fiction, that the purchaser entered into possession of
the camarin sold, a form of possession utilized by the purchaser by virtue of the clause known in law as constitutum
possessorium, stipulated between the contracting parties.
So that by the execution of the deed of sale of September 4, 1912, Rosalio Bautista entered into the material possession
under title of owner, of the camarin sold to him by Francisco Sioson, and, by virtue of another instrument of lease, of the
same date, the purchaser and owner of the camarin conveyed and delivered this building to the lessee in view of said
contract. Under these perfectly legal suppositions it is unquestionable that the purchaser Rosalio Bautista was the first
person who entered into the possession of the camarin as soon as soon as he acquired it by virtue of said sale.
The material possession which the other defendant, Raymundo de la Cruz, now enjoys, not only was subsequent by one
year and eleven months, but also, on the other hand, is an unlawful possession which was transmitted to him by Francisco
Sioson, who held the camarin precariously and in the capacity of tenant, and, consequently, without any right whatever to
convey to Raymundo de la Cruz the possession under title of owner referred to in article 1473, aforementioned of the Civil
Code.
This article says: "If the same thing should have been sold to different vendees. . .;" but it must be understood that said
sale was made by its original owner. In the instant case Francisco Sioson, on affecting the second sale in favor of Raymundo
de la Cruz, was in possession of the camarin and occupied it, not in the capacity of owner, but in that of lessee or tenant,
and therefore absolutely had no right to dispose of the building in the capacity of owner thereof; consequently Sioson could
not convey to the second purchaser the lawful possession of the disputed camarin.
After the foregoing elucidation of the main issue submitted to this court for decision, we deem it unnecessary to pass upon
the other issues relative to whether Francisco Sioson could have sold, only after the death of his wife, the said camarin to
Raymundo de la Cruz, and whether the price of the second sale was part of a larger sum that pertained to the second
purchaser, as proceeds derived from the game of jueteng, inasmuch as, for the reasons above stated, it has been shown
that Raymundo de la Cruz could not have acquired any right in thecamarin involved in this suit; for Francisco Sioson, who
sold to Cruz, occupied it as a mere tenant and not as owner, and, consequently, was unable to transmit to the purchaser
any property right whatever or lawful possession under title of owner.
For all the foregoing reasons, whereby the errors assigned to the judgment appealed from have been duly refuted, said
judgment, being in conformity with the evidence of record, should be, as it hereby is, affirmed, with the costs against the
appellant Raymundo de la Cruz. So ordered.
Arellano, C.J., Johnson, Araullo, Street and Avancea, JJ., concur.

Separate Opinions
CARSON, J., dissenting:
I dissent. Manresa, in his commentaries, on article 1473 of the Civil Code, clearly indicates that the possession referred to in
that article is the real, the physical possession of the property; and certain it is that to hold that the possession
10

contemplated in this article may be secured without the performance of some act which will give notice to innocent
subsequent purchasers, or of which subsequent purchasers may inform themselves by due diligence tends to defeats the
just and equitable provisions of the law.
G.R. No. L-15155 December 29, 1960
BOARD OF LIQUIDATORS, petitioner-appellant,
vs.
EXEQUIEL FLORO, ET AL., oppositors-appellees.
Godofredo Zandueta for appellant.
Isidero A. Vera for appellee.

REYES, J.B.L., J.:
From the order of the Court of First Instance of Manila, dated August 10, 1955, denying its petition to exclude certain pieces
of steel matting from the assets of the insolvent M. P. Malabanan, the Board of Liquidators appealed to the Court of
Appeals. The latter certified the case to this Court on the ground that only questions of law are involved.
The Board of Liquidators (hereinafter referred to as the Board) is an agency of the Government created under Executive
Order No. 372 (November 24, 1950), and, pursuant to Executive Order No. 377 (December 1, 1950), took over the
functions of the defunct Surplus Property Liquidating Committee.
On June 14, 1952 Melecio Malabanan entered into an agreement with the Board for the salvage of surplus properties sunk in
territorial waters off the provinces of Mindoro, La Union, and Batangas (Exhibit "A"). By its terms, Malabanan was to
commence operations within 30 days from execution of said contract, which was to be effective for a period of one (1) year
from the start of operations, extendible for a total period of not more than six (6) months. On June 10, 1953, Malabanan
requested for an extension of one (1) year for the salvage in waters of Mindoro and Batangas; and the Board extended the
contract up to November 30, 1953. On November 18, 1953, Malabanan requested a second extension of one more year for
the waters of Occidental Mindoro, and Board again extended the contract up to August 31, 1954. Malabanan submitted a
recovery report dated July 26, 1954, wherein it is stated that he had recovered a total of 13,107 pieces of steel mattings, as
follows:
1. December, 1953-April 30, 1954 2,5552

2. May 1, 1954-June 30, 1954 10,552

13,107 (pieces)
Four months previously, Malabanan had entered into an agreement with Exequiel Floro, dated March 31, 1954 (Exhibit 1,
Floro), in which, among other things, it was agreed that Floro would advance to Malabanan certain sums of money, not to
exceed P25,000.00, repayment, thereof being secured by quantities of steel mattings which Malabanan would consign to
Floro; that said advances were to paid within a certain period, and upon default at the expiration thereof, Floro was,
authorized to sell whatever steel mattings were in his possession under said contract, in amount sufficient to satisfy the
advances. Pursuant thereto, Floro claims to have made total advances to the sum of P24,224.50.
It appears that as Malabanan was not able to repay Floro's advances, the latter, by a document dated August 4, 1954, sold
11,047 pieces of steel mattings to Eulalio Legaspi for the sum of P24,803.40.
Seventeen days later, on August 21, 1954, Malabanan filed in the Court of First Instance of Manila a petition for voluntary
insolvency, attaching thereto a Schedule of Accounts, in which the Board was listed as one of the creditors for P10,874.46,
and Exequiel Floro for P24,220.50, the origin of the obligations being described as "Manila Royalty" and "Salvaging
Operations", respectively. Also attached was an Inventory of Properties, listing certain items of personal property allegedly
aggregating P33,707.00 in value. In this list were included 11,167 pieces of steel mattings with an alleged estimated value
of P33,501.00.
Soon after, the Board, claiming to be the owner of the listed steel matting, filed a petition to exclude them from the
inventory; and to make the insolvent account for a further 1,940 pieces of steel matting, the difference between the number
11

stated in the insolvent's recovery report of July 26, 1954 and that stated in the inventory. Exequiel Floro opposed the
Board's petition and claimed that the steel matting listed had become the property of Eulalio Legaspi by virtue of a deed of
sale in his favor, executed by Floro pursuant to the latter's contract with Malabanan on March 31, 1954. The court below,
after reception of evidence as to the genuineness and due execution of the deed of sale to Legaspi, as well as of the
contract between Malabanan and Floro, denied the Board's petition, declaring that Malabanan had acquired ownership over
the steel mattings under his contract with the Board; that Exequiel Floro was properly authorized to dispose of the steel
mattings under Floro's contract with Malabanan; and that the sale to Eulalio Legaspi was valid and not contrary to the
Insolvency Law.
In this appeal, the Board contends that Malabanan did not acquire ownership over the steel mattings due to his failure to
comply with the terms of the contract, allegedly constituting conditions precedent for the transfer of title, namely: payment
of the price; audit and check as to the nature, quantity and value of properties salvaged; weighing of the salvaged
properties to be conducted jointly by representatives of the Board and of Malabanan; determination of the site for storage;
audit and verification of the recovery reports by government auditors; and firing of performance bond.
We are of the opinion, and so hold, that the contract (Exhibit "A") between Malabanan and the Board had effect of vesting
Malabanan with title to, or ownership of the steel mattings in question as soon as they were brought up from the bottom of
the sea. This is shown by pertinent provisions of the contract as follows:
10. For and in consideration of the assignment by the BOARD OF LIQUIDATORS to the CONTRACTOR (Malabanan)
of all right, title and interest in and to all surplus properties salvaged by the CONTRACTOR under this contract, the
CONTRACTOR shall pay to the Government Ninety Pesos (P90.00) per long ton(2,240 lbs.) of surplus properties
recovered.
11. Payment of the agreed price shall be made monthly during the first ten (10) days of every month on the basis
of recovery reports of sunken surplus properties salvaged during the preceding month, duly verified and audited by
the authorized representative of the BOARD OF LIQUIDATORS.
That Malabanan was required under the contract to post a bond of P10,000.00 to guarantee compliance with the terms and
conditions of the contract; that the operation for salvage were entirely at Malabanan's expense and risks; that gold, silver,
copper, coins, currency, jewelry, precious stones, etc. were excepted from the contract, and were instead required to be
turned over to the Board for disposition; that the expenses for storage, including guard service, were for Malabanan's
account all these circumstances indicated that ownership of the goods passed to Malabanan as soon as they were
recovered or salvaged (i.e., as soon as the salvor had gained effective possession of the goods), and not only after payment
of the stipulated price. .
While there can be reservation of title in the seller until full payment of the price (Article 1478, N.C.C.), or, until fulfillment
of a condition (Article 1505, N.C.C.); and while execution of a public instrument amounts to delivery only when from the
deed the contrary does not appear or cannot clearly be inferred (Article 1498, supra), there is nothing in the said contract
which may be deemed a reservation of title, or from which it may clearly be inferred that delivery was not intended.
The contention that there was no delivery is incorrect. While there was no physical tradition, there was one by agreement
(traditio longa manu) in conformity with Article 1499 of the Civil Code.lawphil.net
Art. 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. .
. .
As observed earlier, there is nothing in the terms of the public instrument in question from which an intent to withhold
delivery or transfer of title may be inferred.
The Board also contends that as no renewal of the bond required was filed for the extension of the contract, it ceased to
have any force and effect; and, as the steel mattings were recovered during the extended period of the contract, Malabanan
did not acquire any rights thereto. The pertinent portion of the contract provides:
12. Jointly with the execution of this contract, the CONTRACTOR shall file a bond in the amount of TEN THOUSAND
(P10,000.00) PESOS to guarantee his faithful compliance with the terms and conditions herein; Provided, that this
contract shall not be considered to have been executed notwithstanding the signing hereof by the parties until said
bond shall have been properly filed.
12

Malabanan filed a bond dated June 10, 1952, effective for one (1) year, or up to June 10, 1953. The principal contract,
executed on June 14, 1952, was first extended to November 30, 1953, and finally, to August 31, 1954. As can be seen,
there was no longer any bond from June 11, 1953 to August 31, 1954.
The lapse of the bond did not extinguish the contract between Malabanan and the Board. The requirement that a bond be
posted was already complied with when Malabanan filed the bond dated June 10, 1952. A bond merely stands as guaranty
for a principal obligation which exist independently of said bond, the latter being an accessory contract (Valencia vs. RFC &
C.A., 103 Phil., 444). Significantly, its purpose, as per the terms of the contract, was "to guarantee his (Malabanan's)
faithful compliance with the terms and conditions herein" and, for violation of the contract, the Board may declare "the bond
forfeited" (par. 13). Being for its benefit, the Board could legally waive the bond requirement (Valencia vs. RFC, et
al., supra.), and it did so when, the bond already having expired, it extended the contract not only once, but twice. In none
of the resolutions extending contract (Annexes "C" & "E", pp. 108-112, Record on Appeal) was there a requirement that the
bond be renewed, in the face of the first indorsement by the Executive Officer recommending that Malabanan's request for a
second extension be granted "provided the bond be originally posted should continue."
There is no merit to the suggestion that there being a novation, Article 1299 of the Civil Code should govern. Novation is
never presumed, it being required that the intent to novate be expressed clearly and unequivocally, or that the terms of the
new agreement be incompatible with the old contract (Article 1292, N.C.C.; Martinez vs. Cavives, 25 Phil. 581; Tiu Siuce vs.
Habaa, 45 Phil. 707; Pablo vs. Sapungan, 71 Phil. 145; Young vs. Villa, 93 Phil., 21; 49 Off. Gaz., [5] 1818.) Here there
was neither express novation nor incompatibility from which it could be implied. Moreover, a mere extension of the term
(period) for payment or performance is not novation (Inchausti vs. Yulo, 34 Phil. 978; Zapanta vs. De Rotaeche, 21 Phil.
154; Pablo vs. Sapungan, Supra); and, while the extension covered only some of the areas originally agreed upon, this
change did not alter the essence of the contract (cf. Ramos vs. Gibbon, 67 Phil., 371; Bank of P.I. vs. Herridge, 47 Phil.,
57).
It is next contended that the sale by Floro to Legaspi on August 4, 1954 (within 30 days prior to petition for insolvency)
was void as a fraudulent transfer under Section 70 of the Insolvency Law. The court below held that the sale to Legaspi was
valid and not violative of Section 70; but there having been no proceedings to determine whether the sale was fraudulent,
we think it was premature for the court below to decide this point, especially because under section 36, No. 8. of the
Insolvency Act, all proceedings to set aside fraudulent transfers should be brought and prosecuted by the assignee, who can
legally represent all the creditors of the insolvent (Maceda, et al., vs. Hernandez, et al., 70 Phil., 261). To allow a single
creditor to bring such a proceeding would invite a multiplicity of suits, since the resolution of his case would not bind the
other creditors, who may refile the same claim independently, with diverse proofs, and possibly give rise to contradictory
rulings by the courts.
The order appealed from is hereby affirmed in so far as it declares the disputed goods to be the property of the insolvent;
but without prejudice to the right of the assignee in insolvency to take whatever action may be proper to attack the alleged
fraudulent transfer of the steel matting to Eulalio Legaspi, and to make the proper parties account for the difference
between the number of pieces of steel matting stated in the insolvent's recovery report, Annex "B" (13,107), and that
stated in his inventory (11,167). Costs against appellant.
CEBU WINLAND DEVELOPMENT G.R. No. 173215
CORPORATION,
Petitioner,

Present:

PUNO, C.J., Chairperson,
- versus - CARPIO,
CORONA,
LEONARDO-DE CASTRO, and
BERSAMIN, JJ.

ONG SIAO HUA, Promulgated:
Respondent. May 21, 2009

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

13

PUNO, C.J.:

Before us is a Petition for Review
[1]
filed under Rule 45 of the Rules of Court assailing the Decision
[2]
dated February
14, 2006 of the Court of Appeals and its Resolution
[3]
dated June 2, 2006 denying petitioners motion for reconsideration of
the said decision.

The facts are undisputed.

Petitioner, Cebu Winland Development Corporation, is the owner and developer of a condominium project called the
Cebu Winland Tower Condominium located in Juana Osmea Extension, Cebu City.

Respondent, Ong Siao Hua, is a buyer of two condominium units and four parking slots from petitioner.

Sometime before January 6, 1995 while the Cebu Winland Tower Condominium was under construction, petitioner
offered to sell to respondent condominium units at promotional prices. As an added incentive, petitioner offered a 3%
discount provided 30% of the purchase price is paid as down payment and the balance paid in 24 equal monthly
installments.

On January 6, 1995, respondent accepted the offer of petitioner and bought two condominium units designated as
Unit Nos. 2405 and 2406, as well as four parking slots designated as slots 91, 99, 101 and 103 (subject properties).

The area per condominium unit as indicated in petitioners price list is 155 square meters and the price per square
meter is P22,378.95. The price for the parking slot isP240,000 each. Respondent, therefore, paid P2,298,655.08 as down
payment and issued 24 postdated checks in the amount of P223,430.70 per check for the balance of the purchase price in
the total amount of P5,362,385.19 computed as follows:
[4]

155 sq.m./unit x 2 units x P22,378.95/sq.m. P6,937,474.50
4 parking slots at P240,000/slot 960,000.00
Sub-total P 7,897,474.50
Less: 3% discount ( 236,924.23)
Net purchase price P 7,660,550.27
30% down payment ( 2,298,165.08)
Balance at P223,430.70 per month for 24 months P 5,362,385.19

The parties did not execute any written document setting forth the said transaction.

On October 10, 1996, possession of the subject properties was turned over to respondent.
[5]

After the purchase price was fully paid with the last check dated January 31, 1997, respondent requested petitioner
for the condominium certificates of title evidencing ownership of the units. Petitioner then sent to respondent, for the
latters signature, documents denominated as Deeds of Absolute Sale for the two condominium units.

Upon examination of the deed of absolute sale of Unit No. 2405 and the identical document for Unit No. 2406,
respondent was distressed to find that the stated floor area is only 127 square meters contrary to the area indicated in the
price list which was 155 square meters. Respondent caused a verification survey of the said condominium units and
discovered that the actual area is only 110 square meters per unit. Respondent demanded from petitioner to refund the
amount of P2,014,105.50 representing excess payments for the difference in the area, computed as follows:
[6]

155 sq.m.-110 = 45 x 2 units = 90 sq.m. x P22,378.95 = P2,014,105.50

Petitioner refused to refund the said amount to respondent. Consequently, respondent filed a Complaint
[7]
on August
7, 1998 in the Regional Office of the Housing and Land Use Regulatory Board (HLURB) in Cebu City, praying for the refund
of P2,014,105.50 plus interest, moral damages and attorneys fees, including the suspension of petitioners license to
sell. The case was docketed as HLURB Case No. REM-0220-080798.

On December 6, 1999, the Housing and Land Use Arbiter (the Arbiter) rendered a Decision
[8]
dismissing the
complaint. The Arbiter found petitioner not guilty of misrepresentation. Considering further that the subject properties
have been delivered on October 10, 1996 and respondent filed his complaint only on August 7, 1998, the Arbiter further
ruled that respondents action had already prescribed pursuant to Article 1543,
[9]
in relation to Articles 1539 and 1542,
[10]
of
the Civil Code. The dispositive portion of the said decision reads:

WHEREFORE, Premises Considered, judgment is hereby rendered DISMISSING this Complaint,
and ordering the parties to do the following, to wit:

14

1. For the Complainant to SIGN the two (2) Deed[s] of Absolute Sale which this Board finds to be in
order within 30 days from finality of this decision; and

2. For the Respondent to DELIVER the corresponding condominium certificate of title for the two units
namely units 2405 and 2406 free from all liens and encumbrances.

Consequently, the counterclaim is likewise dismissed for it finds no evidence that Complainant acted
in bad faith in filing this complaint.

Cost against the parties.

SO ORDERED.
[11]

Aggrieved, respondent filed a Petition for Review of said decision with the Board of Commissioners of the HLURB (the
Board). In the course of its proceedings, the Board ordered that an ocular inspection of Unit Nos. 2405 and 2406 be
conducted by an independent engineer. The Board further ordered that there should be two measurements of the areas in
controversy, one based on the master deed and another based on the internal surface of the perimeter wall. After the
ocular inspection, the independent geodetic engineer found the following measurements:

Unit 2405- Based on internal face of perimeter wall = 109 sq. m. Based on master
deed = 115 sq. m.

Unit 2406- Based on internal face of perimeter wall = 110 sq. m.
Based on master deed = 116 sq. m.
[12]

Thereafter, the Board rendered its Decision
[13]
dated June 8, 2004 affirming the Arbiters finding that respondents
action had already prescribed. However, the Board found that there was a mistake regarding the object of the sale
constituting a ground for rescission based on Articles 1330 and 1331
[14]
of the Civil Code. Hence, the Board modified the
decision
15

of the Arbiter as follows:

Wherefore[,] the decision of the [O]ffice below is hereby modified with the following additional
directive:

In the alternative, and at the option of the complainant, the contract is rescinded and the
respondent is directed to refund to (sic) P7,660,550[.]27 while complainant is directed to turn over
possession of the units 2405, 2406 and the four parking lots to the respondent.

So ordered.
[15]

Not satisfied with the decision of the Board, petitioner filed an appeal to the Office of the President arguing that the
Board erred in granting relief to respondent considering that the latters action had already prescribed. On March 11, 2005,
the Office of the President rendered a Decision
[16]
finding that respondents action had already prescribed pursuant to Article
1543 of the Civil Code. The dispositive portion of said decision reads as follows:

WHEREFORE, premises considered, the Decision dated June 8, 2004 of the HLURB is
hereby MODIFIED and the Decision dated December 6, 1999 of the Housing and Land Use Arbiter is
hereby REINSTATED.

SO ORDERED.
[17]

Respondent filed a Motion for Reconsideration but the same was denied by the Office of the President in a
Resolution
[18]
dated June 20, 2005. Hence, respondent filed a Petition for Review before the Court of Appeals.

On February 14, 2006, the Court of Appeals rendered the assailed Decision finding that respondents action has not
prescribed. The dispositive portion of the Decision reads:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by
usGRANTING the petition filed in this case, REVERSING and SETTING ASIDE the assailed Decision and
Resolution of the Office of the President dated March 11, 2005 and June 20, 2005, respectively, and
reinstating the Decision promulgated by the Board of Commissioners of the HLURB on June 8, 2004.

SO ORDERED.
[19]

Petitioners Motion for Reconsideration
[20]
of the assailed decision having been denied in the Resolution dated June
2, 2006, petitioner is now before us, in this petition for review raising the following grounds:

I.

The Court of Appeals Erred in Holding That in A Contract of Sale Ownership Is Not Transferred by
Delivery[.]

II.

The Court of Appeals Erred in Holding That Respondents Action Has Not Prescribed.

III.

The Court of Appeals Erred And Exceeded Its Jurisdiction When It Found Petitioner Guilty Of
Misrepresentation As The Decision Of The HLURB Board of Commissioners On The Same Matter Is Final
With Respect To Respondent Who Did Not Appeal Said Decision That Petitioner Did Not Commit
Misrepresentation.
[21]

The issue before us is whether respondents action has prescribed pursuant to Article 1543, in relation to Articles
1539 and 1542 of the Civil Code, to wit:

ARTICLE 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
16

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 same shall be done, even when the area is the same, if any part of the immovable is not of
the quality specified in the contract.
The rescission, in this case, shall only take place at the will of the vendee, when the inferior value
of the thing sold exceeds one-tenth of the price agreed upon.

Nevertheless, if the vendee would not have bought the immovable had he known of its smaller
area or inferior quality, he may rescind the sale. (1469a) [Emphasis supplied]

ARTICLE 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 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. (1471) [Emphasis supplied]

ARTICLE 1543. The actions arising from Articles 1539 and 1542 shall prescribe in six months,
counted from the day of delivery. (1472a) [Emphasis supplied]

Petitioner argues that it delivered possession of the subject properties to respondent on October 10, 1996, hence,
respondents action filed on August 7, 1998 has already prescribed.

Respondent, on the one hand, contends that his action has not prescribed because the prescriptive period has not
begun to run as the same must be reckoned from the execution of the deeds of sale which has not yet been done.

The resolution of the issue at bar necessitates a scrutiny of the concept of delivery in the context of the Law on
Sales or as used in Article 1543 of the Civil Code. Under the Civil Code, the vendor is bound to transfer the ownership of
and deliver the thing which is the object of the sale. The pertinent provisions of the Civil Code on the obligation of the
vendor to deliver the object of the sale provide:

ARTICLE 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. (1461a)

ARTICLE 1496. The ownership of the thing sold is acquired by the vendee from the moment
it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred from the vendor to the vendee. (n)

ARTICLE 1497. The thing sold shall be understood as delivered, when it is placed in the
control and possession of the vendee. (1462a)

ARTICLE 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.

xxxx

Under the Civil Code, ownership does not pass by mere stipulation but only by delivery.
[22]
Manresa explains, the
delivery of the thing . . . signifies that title has passed from the seller to the buyer."
[23]
According to Tolentino, the
purpose of delivery is not only for the enjoyment of the thing but also a mode of acquiring dominion and determines the
transmission of ownership, the birth of the real right. The delivery under any of the forms provided by Articles 1497 to
1505 of the Civil Code signifies that the transmission of ownership from vendor to vendee has taken place.
[24]

Article 1497 above contemplates what is known as real or actual delivery, when the thing sold is placed in the control
and possession of the vendee. Article 1498, on the one hand, refers to symbolic delivery by the execution of a public
instrument. It should be noted, however, that Article 1498 does not say that the execution of the deed provides a
conclusive presumption of the delivery of possession. It confines itself to providing that the execution thereof is equivalent
to delivery, which means that the presumption therein can be rebutted by means of clear and convincing evidence. Thus,
17

the presumptive delivery by the execution of a public instrument can be negated by the failure of the vendee to take actual
possession of the land sold.
[25]

In Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.,
[26]
the concept of delivery was explained as
follows:

Delivery has been described as a composite act, a thing in which both parties must join and the
minds of both parties concur. It is an act by which one party parts with the title to and the
possession of the property, and the other acquires the right to and the possession of the same.
In its natural sense, delivery means something in addition to the delivery of property or title; it means
transfer of possession. In the Law on Sales, delivery may be either actual or constructive, but
both forms of delivery contemplate "the absolute giving up of the control and custody of the
property on the part of the vendor, and the assumption of the same by the vendee." (Emphasis
supplied)

In light of the foregoing, delivery as used in the Law on Sales refers to the concurrent transfer of two
things: (1) possession and (2) ownership. This is the rationale behind the jurisprudential doctrine that presumptive
delivery via execution of a public instrument is negated by the reality that the vendee actually failed to obtain material
possession of the land subject of the sale.
[27]
In the same vein, if the vendee is placed in actual possession of the
property, but by agreement of the parties ownership of the same is retained by the vendor until the vendee has
fully paid the price, the mere transfer of the possession of the property subject of the sale is not the delivery
contemplated in the Law on Sales or as used in Article 1543 of the Civil Code.

In the case at bar, it appears that respondent was already placed in possession of the subject
properties. However, it is crystal clear that the deeds of absolute sale were still to be executed by the parties upon
payment of the last installment. This fact shows that ownership of the said properties was withheld by petitioner. Following
case law, it is evident that the parties did not intend to immediately transfer ownership of the subject properties until full
payment and the execution of the deeds of absolute sale.
[28]
Consequently, there is no delivery to speak of in this case
since what was transferred was possession only and not ownership of the subject properties.

We, therefore, hold that the transfer of possession of the subject properties on October 10, 1996 to respondent
cannot be considered as delivery within the purview of Article 1543 of the Civil Code. It follows that since there has been
no transfer of ownership of the subject properties since the deeds of absolute sale have not yet been executed by the
parties, the action filed by respondent has not prescribed.

The next issue is whether the sale in the case at bar is one made with a statement of its area or at the rate of a
certain price for a unit of measure and not for a lump sum. Article 1539 provides that 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 vendeeall 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. Article 1542, on the one hand,
provides that 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 distinction between Article 1539 and Article 1542 was explained by Manresa
[29]
as follows:

. . . If the sale was made for a price per unit of measure or number, the consideration of the
contract with respect to the vendee, is the number of such units, or, if you wish, the thing purchased as
determined by the stipulated number of units. But if, on the other hand, the sale was made for a lump
sum, the consideration of the contract is the object sold, independently of its number or measure, the
thing as determined by the stipulated boundaries, which has been called in law a determinate object.

This difference in consideration between the two cases implies a distinct regulation of the
obligation to deliver the object, because, for an acquittance delivery must be made in accordance with the
agreement of the parties, and the performance of the agreement must show the confirmation, in fact, of
the consideration which induces each of the parties to enter into the contract.

In Rudolf Lietz, Inc. v. Court of Appeals,
[30]
we held:

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
18

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.

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
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 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.

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. Thus,
the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is the entirety
thereof that distinguishes the determinate object.

In the case at bar, it is undisputed by the parties that the purchase price of the subject properties was computed
based on the price list prepared by petitioner, or P22,378.95 per square meter. Clearly, the parties agreed on a sale at a
rate of a certain price per unit of measure and not one for a lump sum. Hence, it is Article 1539 and not Article 1542 which
is the applicable law. Accordingly, respondent is entitled to the relief afforded to him under Article 1539, that is, either a
proportional reduction of the price or the rescission of the contract, at his option. Respondent chose the former remedy
since he prayed in his Complaint for the refund of the amount of P2,014,105.50 representing the proportional reduction of
the price paid to petitioner.

In its decision, the Court of Appeals held that the action filed by respondent has not prescribed and reinstated the
decision of the Board. It is an error to reinstate the decision of the Board. The Board, in its decision, held that there was a
mistake regarding the object of the sale constituting a ground for rescission based on Articles 1330 and 1331 of the Civil
Code. It then granted the relief of rescission at the option of respondent. Articles 1330 and 1331 of the Civil Code provide:

ARTICLE 1330. A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable. (1265a)

ARTICLE 1331. In order that mistake may invalidate consent, it should refer to the substance of
the thing which is the object of the contract, or to those conditions which have principally moved one or
both parties to enter into the contract.

We find that these articles are inapplicable to the case at bar. In order that mistake may invalidate consent and
constitute a ground for annulment of contract based on Article 1331, the mistake must be material as to go to the essence
of the contract; that without such mistake, the agreement would not have been made.
[31]
The effect of error must be
determined largely by its influence upon the party. If the party would have entered into the contract even if he had
knowledge of the true fact, then the error does not vitiate consent.
[32]

In the case at bar, the relief sought by respondent was for a refund and he continued to occupy the subject
properties after he found out that the same were smaller in area. All these show that respondent did not consider the error
in size significant enough to vitiate the contract. Hence, the Court of Appeals erred in affirming the Boards decision to grant
rescission based on Articles 1330 and 1331 of the Civil Code.

IN VIEW WHEREOF, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED but with the
MODIFICATION that the decision of the HLURB is not reinstated. Petitioner is ordered to refund the amount of Two Million
Fourteen Thousand One Hundred Five Pesos and Fifty Centavos (P2,014,105.50) to respondent with legal interest of six
percent (6%) per annum from August 7, 1998, the date of judicial demand. A twelve percent (12%) interest per annum, in
lieu of six percent (6%), shall be imposed on such amount from the date of promulgation of this decision until the payment
thereof. Costs against petitioner.

19

SO ORDERED.

TOMAS K. CHUA, petitioner, vs. COURT OF APPEALS and ENCARNACION VALDES-CHOY, respondents.
D E C I S I O N
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 Court
[3]
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
R E C E I P T
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 15
[5]
July 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]

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 managers check
for P480,000.00. Strangely, after securing the managers check, Chua immediately gave PBCom a verbal stop payment
order claiming that this managers check for P480,000.00 was lost and/or misplaced.
[8]
On the same day, after receipt of
Chuas verbal order, PBCom Assistant VicePresident Julie C. Pe notified in writing
[9]
the PBCom Operations Group of Chuas
stop payment order.
20

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
ofP2,800,000.00.
[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-Choys counsel. Chua handed to Valdes-Choy the
PBCom managers 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
VVVVVVVVVVVV
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 managers check to
her account with Traders Royal Bank. She then purchased a Traders Royal Bank managers 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-
Choys 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 managers check for P10,215,000.00 representing the balance of the
purchase price. Chua, however, did not give this PBCom managers 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
loss
[15]
of the PBCom Managers Check for P480,000.00. PBCom Assistant Vice-President Pe, however, testified that the
managers 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 theP10,215,000.00 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-Choys counsel promised to relay her suggestion to Chua and his
counsel, but nothing came out of it.
21

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 owners 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 owners 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 plaintiffs attorneys 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;
22

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:
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
ofP300,000.00 in the concept of exemplary damages; and
4. To pay to the plaintiff the sum of P100,000.00 as reimbursement of attorneys 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-appellants compulsory counter-claim; and
(5) Ordering the plaintiff-appellee to pay the costs.
[19]

Hence, the instant petition.
The Trial Courts 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 managers checks both payable to
Valdes-Choy. The first check forP485,000.00 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 managers 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-Choys 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 owners duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and
23

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 Chuas name.
The trial court held that Chuas non-payment of the balance of P10,215,000.00 on the agreed date was due to Valdes-
Choys fault.
The Court of Appeals Ruling
In reversing the trial court, the Court of Appeals ruled that Chuas 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 owners duplicate copy of
the TCT, the signed Deeds of Sale, the 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 Chuas showing to Valdes-Choy of the PBCom
managers check for P10,215,000.00 as compliance with Chuas 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 COURTS 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
Chuas name even before payment of the full purchase price.
The Courts Ruling
The petition is bereft of merit.
24

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 owners 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 ofP10,215,000.00 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 managers 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 managers 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 Chuas 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 Chuas 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 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 Chuas 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.
Chuas 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 Chuas 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]

25

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 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 Chuas 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:
26

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 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 owners 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 managers 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
27

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:
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) owners 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 sellers 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.
[39]
Registration 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, Chuas condition that a new TCT be first issued in his
name before he pays the balance ofP10,215,000.00, 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 owners duplicate copy
of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. There was no hindrance to
28

paying the capital gains tax as Chua himself had advanced the money to pay the same and Valdes-Choy had procured a
managers 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.

SPOUSES CAMILO L. SABIO, and MA. MARLENE A. LEDONIO-SABIO, petitioners, vs. THE INTERNATIONAL
CORPORATE BANK, INC. (now UNION BANK OF THE PHILIPPINES), GOLDENROD, INC., PAL EMPLOYEES
SAVINGS AND LOAN ASSOCIATION, INC., AYALA CORPORATION, LAS PIAS VENTURES, INC.,
FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE ASSURANCE, INC.), AYALA PROPERTY
VENTURES CORPORATION, and AYALA LAND, INC., respondents.
D E C I S I O N
YNARES-SANTIAGO, J.:
Before us is a petition for review on certiorari assailing the decision of the Court of Appeals in CA-G.R. CV No. 48870
which affirmed and modified the judgment of the Regional Trial Court of Makati, Branch 65, in Civil Case No. 18540, an
action for specific performance and damages.
The object of the controversy is a portion of a vast tract of land measuring approximately 152,454 square meters,
located at Tindig na Manga, Almanza, Las Pias City. Designated as Lots 2 and 3, and 6 (formerly covered by two
Certificates of Title, namely: TCT Nos. 65161 and 65162), this vast estate was registered in the name of Las Pias Ventures,
Incorporated (or LPVI).
[1]
In the early 1970s, the said property was the subject of several land registration, as well as civil,
cases.
On May 25, 1973, the spouses Gerardo and Emma Ledonio, one of the parties in LRC Case No. PN-107 affecting the
land, assigned to the spouses Camilo and Ma. Marlene Sabio (herein petitioners) all their rights, interests, title and
participation over a contiguous portion of the subject property measuring 119,429 square meters, particularly that which
was covered by TCT No. 65162.
[2]
For this purpose, a deed of assignment with assumption of mortgage was later executed
by the Ledonio spouses in favor of the Sabio couple on November 23, 1981.
[3]

Similarly, while the subject property was still the object of several pending cases, the International Corporate Bank,
Inc. (or Interbank) acquired from the Trans-Resource Management and Development Corporation all of the latters rights to
the subject property by virtue of a deed of assignment executed between them on July 12, 1984.
[4]

Sometime thereafter, or on March 6, 1985, the Sabios and Interbank settled their opposing claims by entering into a
Memorandum of Agreement (or MOA) whereby the Sabios assigned, conveyed and transferred all their rights over the
parcel covered by TCT No. 65162 to Interbank, with the express exception of a 58,000 square meter contiguous portion of
said lot. The MOA also provided, to wit:
x x x x x x x x x
2. That for and in consideration of the aforementioned assignment, conveyance and transfer by the FIRST PARTY (i.e., the
Sabios), the latter (SECOND PARTY, i.e., Interbank) shall:
a. PAY to the FIRST PARTY the sum of SEVEN HUNDRED FIFTY THOUSAND PESOS (P750,000.00), Philippine Currency,
receipt of which in full is hereby acknowledged by the FIRST PARTY from the SECOND PARTY;
29

b. Subject to the rights of the SECOND PARTY under the provisions of No. 4 hereunder, COMPLETE and PERFECT its
ownership and title to the afore-described three (3) parcels of land with all the improvements thereon, situated at Tindig Na
Manga (Almanza), Las Pias, Rizal (now Metro Manila), covered by Transfer Certificate of Title No. S-65161-Metro Manila,
Book T-328, Page 161 (formerly No. 190713-Rizal, Book T-1227, Page 113) and Transfer Certificate of Title No. S-65162-
Metro Manila, Book T-328, Page 162 (formerly No. 190714-Rizal, Book T-1227, Page 114), AND, ASSIGN, CONVEY and
TRANSFER unto and in favor of the FIRST PARTY a CONTIGUOUS PORTION of the afore-described parcel of land, with all the
improvements thereon, covered by the aforementioned Transfer Certificate of Title No. S-65162-Metro Manila, Book T-328,
Page 162 (formerly No. 190714-Rizal, Book T-1227, Page 114). The aforementioned CONTIGUOUS PORTION referred to in
paragraph 1 hereof with an area of FIFTY EIGHT THOUSAND (58,000) SQUARE METERS, the exact location of which is, as
far as practicable, as indicated in the sketch plan, which is hereto attached as Annex D and made an integral part hereof,
LOT 6-B;
c. Bear and defray all costs, fees and expenses incidental to and/or connected with the segregation, survey,
registration and delivery to the FIRST PARTY of a new transfer certificate of title in the name of the FIRST PARTY, free from
all liens and encumbrances, over the afore-described parcel of land herein assigned, conveyed and transferred by the
SECOND PARTY;
d. Constitute and grant and by these presents has CONSTITUTED and GRANTED without indemnity whatsoever in favor
of the FIRST PARTY and of said parcel of land to be covered by a new transfer certificate of title in the name of the FIRST
PARTY with an area of FIFTY EIGHT THOUSAND (58,000) SQUARE METERS, a permanent and perpetual RIGHT OF WAY
sufficient for all the needs of said parcel of land through out the properties already owned and/or to be acquired by the
SECOND PARTY, particularly the parcels of land covered by Transfer Certificate of Title No. 85717, Transfer Certificate of
Title No. S-65161-Metro Manila, Book T-328, Page 161 (formerly No. 190703-Rizal, Book T-127, Page 113) and Transfer
Certificate of Title No. S-65162-Metro Manila, Book T-328, Page 162 (formerly No. 190714-Rizal, Book T-1227, Page 114),
it being understood that the right of way herein contemplated shall not be less than TEN (10) meters in WIDTH.
[5]

The said MOA was annotated on TCT Nos. 65161 and 65162 on March 8, 1985 pursuant to paragraph 4 thereof. The
same paragraph also granted Interbank the right to assign all its rights and interests outlined in the MOA, provided that all
the obligations of Interbank specified in the aforequoted paragraphs 2.b, 2.c and 2.d shall also bind all of its assigns, heirs
and successors. Subsequently, Interbank transferred all its rights and interests to the Las Pias Ventures, Incorporated (or
LPVI). In turn, the portion covered by TCT No. 65161 designated as Lot Nos. 2 and 3 were acquired from LPVI by the Ayala
Group of Companies (herein respondents) through a merger between LPVI and Ayala Land, Incorporated (or ALI), in whose
favor TCT Nos. T-41263 and T-41262 were issued on April 25, 1994.
Lot No. 6, then covered by TCT No. S-65162, was also subsequently transferred first to LPVI, then to ALI, and a new
title, TCT No. T-41261, was issued also on April 25, 1994. Another contiguous parcel, then covered by TCT No. 85717, was
acquired by the Ayala Group sometime in 1993, which was eventually subdivided and retitled in favor of ALI. This entire
property became the site of what was known then as Ayala Las Pias Subdivision. Years later, this first class residential
subdivision was renamed Ayala Southvale.
Thereafter, a dispute arose concerning the 58,000 square meter contiguous portion subject of the MOA that was to be
conveyed and transferred back to the Sabios by Interbank. Also in controversy was the permanent and perpetual right of
way that Interbank was obligated to constitute in favor of the Sabios 58,000 square meter portion. The Sabios were
thereby constrained to institute an action for Specific Performance and Damages against Interbank, Goldenrod
Incorporated, PAL Employees Savings and Loan Association, Incorporated or (PESALA) and the Ayala Group of Companies
comprised of the Ayala Corporation, LPVI, Insular Life Assurance Company, Ltd., Filipinas Life Assurance Company, ALI,
Ayala Property Ventures, Incorporated (or APVI), and the Bank of the Philippine Islands (or BPI). BPI was later dropped as
a party-defendant.
The Regional Trial Court of Makati, Branch 64, in Civil Case No. 1854, summarized the Sabios claims in their
complaint, thus:
Plaintiffs claimed that defendant Interbank was obligated to complete and perfect its ownership and title to the parcels of
land so that Interbank could transfer to plaintiffs the absolute ownership and title over the contiguous portion.
They also claimed that one of the commitments of defendant Interbank which induced plaintiffs to execute the agreement
without which plaintiffs would not have executed was that defendant Interbank would clear the contiguous portion of all
occupants and wall-in the same, together with the parcels of land belonging to defendants. Allegedly, the property had
already been cleared, by defendant Ayala Group, of occupants except for the contiguous portion thereof.
Plaintiffs alleged that defendants, particularly Ayala Group, failed to comply with their commitments and obligations in the
MOA specifically those arising from the abovementioned provisions thereof. Hence, plaintiffs have been prevented from
utilizing for productive purposes the land.
30

They further alleged that they were constrained to obtain a loan from Interbank (Exhs. E, E-1, F, F-1, G and G-1) where the
contiguous portion of the property was used as collateral (Exhs. H, H-1, I, I-1, J and J-1) and this loan is now deemed
paid (Exhs. K, L, M-2, N, O, P to P-2) and plaintiffs are now considered released. Plaintiffs claimed Actual and
Compensatory damages in the amount of P500,000.00 and Exemplary Damages in the amount of P250,000.00.
[6]

The defendants answer was summed up by the trial court as follows:
Defendants disclaimed liability. Defendants Ayala Corp., Ayala Life, ALI, APVI (collectively referred to as Ayala Group),
PESALA, and LPVI, claimed that they were not privy to the MOA, the contract from which the alleged obligations arose. In
the transactions they were each involved in, subsequent to the MOA, pursuant to which they each acquired the property
which was originally transferred by the plaintiffs to defendant Interbank, said property acquired did not include the
contiguous portion which plaintiffs claimed was the subject of non-compliance of the obligations agreed upon. On the
contrary, in each transaction, the contiguous portion was expressly excluded in the corresponding contracts (Exhs. C-1, D-
2, 2-Ayala, 5-6, 2-A-PESALA), hence, plaintiffs have no cause of action against them and even assuming that defendants
were privy to the MOA, they would still have no obligation to clear the contiguous portion of the property as there was no
express or implied provision in the MOA that the party to whom the property was transferred would clear the same.
[7]

Sometime thereafter, the defendants submitted a Notice of Confession of Judgment and Motion for Partial Decision
Against Answering Defendant for the alleged purpose of securing an entry of judgment against them while avoiding the
formality, time and expense of ordinary proceedings. In particular, the defendants confessed judgment with regard to the
plaintiff spouses prayer emanating from the MOA, and asked that judgment be rendered directing the defendants to comply
with their obligations as defined in the pertinent provisions of the MOA. Moreover, the defendants signified willingness to
abide by the MOA, and complete and perfect title to the parcel of land, including that portion which was to be assigned to
the plaintiff spouses. With regard to that 58,000 square meter parcel, the defendants also acknowledged the obligation to
segregate that contiguous portion and deliver title thereto to the plaintiff spouses free from liens and encumbrances.
However, the defendants also averred that fulfillment of its obligation under the MOA became impossible due to the
plaintiff spouses own acts. First, defendants posited that they were ready to deliver the title to the 58,000 square meter
parcel and had, in fact, prepared the Deed of Conveyance
[8]
required by the Register of Deeds, but the plaintiffs themselves
refused to sign the said deed unless the subject property was cleared of all squatters and other illegal occupants. The
defendants nevertheless repudiated plaintiffs claim that they (defendants) were obligated to clear the said property of all
squatters and occupants, much less to fence the said property, arguing that no such obligation was imposed in the
MOA. Secondly, the defendants noted that the property in question became the subject of an action for recovery of
ownership filed by the Ledonio spouses against the Sabios. Consequently, the annotation of the notice of lis
pendens caused to be registered by the Ledonios on the titles hampered the delivery of the title covering the 58,000 square
meter portion to the Sabios.
The defendants further admitted the obligation to grant an easement of right of way under the MOA, manifesting that
not only did the defendants constitute and grant such right of way, but that they were also willing and prepared to provide
an alternative choice at the pleasure of the plaintiff spouses.
[9]
Moreover, the mortgage obligations of the plaintiff spouses
annotated on the titles covering the 58,000 square meter portion had already been paid off by the defendants,
[10]
prompting
the latter to seek a court order cancelling the Notice of Lis Pendens and annotation of the MOA on the titles covering the
subject parcel of land.
The issues having been joined, the trial court focused on the primordial matter of contention, that is: Whether or not
the defendants had the obligation to clear the subject 58,000 square meter portion of all occupants and to fence the said
premises, before conveyance of the property can be considered as full compliance with the obligation imposed upon the
defendants under the MOA. The trial court also sought to address the preliminary issue of whether or not an order directing
the cancellation of the annotation of the MOA and notices of lis pendens on the titles covering the subject property was
warranted.
The trial court ruled in favor of the defendants, finding that the MOA did not impose, whether expressly or impliedly,
on Interbank and its transferees the obligation to clear the subject 58,000 square meter portion of squatters and other
illegal occupants. Be that as it may, the trial court awarded actual and exemplary damages to the plaintiff spouses for
losses they incurred due to the defendants delay in complying with the MOA, considering that the defendants filed their
confession of judgment only after the lapse of six (6) years from the filing of the action. More particularly, the trial court
disposed as follows:
In view of the foregoing, Defendant Ayala Group is ordered to pay plaintiffs Camilo and Marlene Sabio P500,000.00 in actual
damages and P250,000.00 in exemplary damages. Plaintiffs, however, are directed to specifically comply with the
obligations under the MOA by executing a Deed of Conveyance upon payment by the defendant of the foregoing
amount. The Register of Deeds is directed to cancel the notice of lis pendens as regards this case, and the annotation of
the subject Memorandum of Agreement, both of which are annotated on TCTs Nos. T-5331 to T-5334, the TCTs covering the
contiguous portion of the property.
31

Costs against defendant Ayala Group.
[11]

The opposing parties filed their respective motions for reconsideration, but both were denied by the trial
court. Consequently, all the parties filed separate appeals before the Court of Appeals. Nevertheless, the trial court issued
an order granting the defendants motion for partial immediate execution pending appeal by directing the Register of Deeds
to immediately cancel and/or cause the cancellation of the notice of lis pendens and other annotations as regards this case
and the annotation of the Memorandum of Agreement on TCT Nos. T-5331 to T-5334 and titles derived therefrom.
[12]

Meanwhile, in their appeal before the Court of Appeals, the Sabios (plaintiffs-appellants) ascribed the following errors
to the trial court:
I. The trial court erroneously disregarded the other provisions and parts of the MOA which could have evinced
the reasons for, and the circumstances attendant to, the execution of the said MOA.
II. The trial court erred in not finding that the defendants-appellants (Ayala Group of Companies) are obligated
to perfect and complete ownership and title to the entire property covered by TCT No. T-5331, including that
portion which the defendant-appellants must assign, convey and transfer to the plaintiffs-appellants (Sabio
spouses).
III. The trial court erred in failing to appreciate the testimony of plaintiff-appellant Camilo L. Sabio to the effect
that Interbank and Ayala Investment and Development Corporation would enter into a joint venture to
develop the entire parcel, including the surrounding real estate, into a first class residential subdivision,
necessitating the removal of all illegal occupants and enclosing the perimeters of the said property with a wall
that would include the 58,000 square meter portion pertaining to the Sabio spouses.
IV. The trial court erred in its interpretation of the phrase free from all liens and encumbrances as appearing in
the MOA, by invoking inapplicable jurisprudence when it is the intention of the parties to the MOA, in using
said phrase, that should prevail.
V. The trial court erred in not finding that all eighteen (18) parcels of land, comprising what was then known as
the Ayala Las Pias Subdivision, covered by eighteen (18) titles in the name of LPVI, are all servient estates
referred to in paragraph 2.d of the MOA.
VI. The trial court erred in not ordering the defendants-appellants to cause the annotation of the easement of
right of way on all eighteen (18) titles.
VII. The trial court erred in ordering the cancellation of the annotation of the MOA and Notices of Lis Pendens on
LPVIs TCT Nos. T-5331 to 5334.
VIII. The trial court erred in compelling the plaintiffs-appellants Sabios to sign the draft deed of conveyance when
said document was a gross violation of paragraphs 2.b, 2.c, and 2.d of the MOA.
IX. While the trial court was right in concluding that the Sabio spouses suffered damages, their losses could not
be compensated as actual damages, the same being incapable of accurate pecuniary estimation.
X. The trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the
order dated September 21, 1994 directing the cancellation of the annotation of the MOA and the Notices of Lis
Pendens on LPVIs titles.
[13]

In contrast, the defendants-appellants merely impugned the trial courts judgment for having awarded actual and
exemplary damages to the plaintiffs-appellants Sabio spouses, while failing to award damages in their (defendants-
appellants) favor.
On April 30, 1997, the Court of Appeals rendered the decision subject of the instant petition for review, affirming with
modification the trial courts ruling. The Court of Appeals affirmed the trial courts conclusion that under the MOA, the
Interbank and the defendants-appellants did not assume the obligation to clear the subject contiguous portion of the land
of occupants and to wall in the same.
[14]
The Court of Appeals further agreed with the trial courts ruling that since the
intentions of the parties to the MOA were clearly worded in the provisions they expressly stipulated on, there was no reason
to interpret the MOA differently.
[15]

The Court of Appeals also rejected the Sabios position that the purpose and spirit of the establishment of a right of
way in their favor under paragraph 2.d was to grant them the same rights as any homeowner would have to freely pass
through all the roads in the proposed subdivision. The Court of Appeals ruled that the phrase permanent and perpetual
right of way must be construed in its ordinary and accepted signification, that is, to provide ingress to, and egress from,
the dominant estate, as well as to provide adequate and convenient passage to and from the nearest highway. The
defendants-appellants having complied with the obligation to establish the right of way, the Court of Appeals determined
that there was no need to annotate the easement on the titles not affected by said road right of way. In fact, while the
MOA mentioned only TCT Nos. 65161 and 65162, which were later replaced by TCT Nos. 5333 and 5331, no other titles
were mentioned.
32

Finally, while the Court of Appeals ruled that the defendants-appellants are not entitled to damages, the said court
reversed the trial courts award of damages to the Sabios, concluding that their claim for damages, whether actual or
exemplary, was unsubstantiated and devoid of legal basis.
Hence, the Court of Appeals rendered judgment decreeing:
WHEREFORE, the judgment appealed from is AFFIRMED with the MODIFICATION that the awards for actual and exemplary
damages in favor of the plaintiffs are hereby SET ASIDE.
SO ORDERED.
[16]

After a careful and thorough disquisition of the facts of this case and the arguments raised in this petition, we find no
reversible error on the part of the Court of Appeals. In this petition for review before us, petitioner attributed to the Court
of Appeals ten (10) alleged errors:
I. The Court of Appeals acted contrary to law and jurisprudence in affirming the decision of the trial court
directing the petitioners to affix their signatures to the draft deed of conveyance (Exhibits CC thru CC-4,
EEEE thru EEEE-4 and 4-Ayala), and in releasing respondents from their obligations under paragraphs
2.b, 2.c, and 2.d of the MOA. Petitioners are justified in refusing to affix their signatures to said draft.
II. The Court of Appeals acted contrary to law and jurisprudence in affirming the ruling of the trial court that the
mere execution of the draft deed of conveyance (Exhibits CC thru CC-4, EEEE thru EEEE-4 and 4-
Ayala) prepared sometime in January 1990 by respondents Ayala Group of Companies, successors-in-
interest of respondent The International Corporate Bank, Inc. (now Union Bank of the Philippines), pursuant
to paragraph 4 of the MOA, as second party, for the signature of the petitioners as first party, constitutes
sufficient and valid compliance with the commitment and obligation of the second party to assign, convey
and transfer unto and in favor of the first party the aforementioned contiguous portion --- Lot 6-B, Psu-
80886 (Exhibits A-34, II-1, 1-A-Ayala and 6-A-Ayala) --- with all the improvements thereon as
mandated by the provisions of paragraph 2.b of the MOA, despite the fact that, admittedly, said Lot 6-B, Psu
80886 (Exhibits A-34, II-1, 1-A-Ayala and 6-A-Ayala) is still in the hostile and adverse actual
occupation and possession of third parties. More so, because paragraph 2.b of the MOA mandates that
respondents Ayala Group of Companies shall assign, convey and transfer unto and in favor of the petitioners
not only the aforementioned Lot 6-B, Psu 80886 (Exhibits A-34, II-1, 1-A-Ayala and 6-A-Ayala) but
also all the improvements thereon.
III. The Court of Appeals acted contrary to law and jurisprudence in utterly disregarding the import and
significance of the premises or Whereases of the MOA and the various annexes thereto forming integral
parts thereof (Exhibits A-6 thru A-9, A-10 thru A-15, A-16 thru A-22, A-23 thru A-26, A-27
thru A-30, A-31 thru A-33, and, A-35 thru A-46), evidencing the reasons behind and the
circumstances surrounding the execution thereof, so that the court may be placed in the position/situation of
the parties thereto at the time the agreement was executed.
IV. The Court of Appeals acted contrary to law and jurisprudence in not holding that --- as expressly agreed and
stipulated in paragraph 2.b of the MOA (Exhibits A thru A-5 and 1-Ayala) Psu-80886 (Exhibits A-34,
II-1, 1-A-Ayala and 6-A-Ayala) with all the improvements thereon, respondents Ayala Group of
Companies are mandated to first complete and perfect their ownership and title to the entirety to the
afore-described Lot 6, Psu 80886 with all the improvements thereon, earlier covered by T.C.T. No. S-65162-
Metro Manila, Book T-328, Page 162, in the name of CPJ Corporation, later by T.C.T. No. T-5331-Las Pias,
Metro Manila, Book 27, Page 131 in the name of respondent Las Pias Ventures, Inc. (Exhibits KK thru KK-
3 and 3-Ayala) and now covered by T.C.T. No. T-41261-Las Pias, Metro Manila, Book 207, Page 61 in the
name of respondent Ayala Land, Inc., including the aforementioned Lot 6-B, Psu-80886 (Exhibits A-34, II-
1, 1-A-Ayala and 6-A-Ayala) which respondents Ayala Group of Companies are committed and obligated
to assign, convey and transfer unto and in favor of petitioners.
V. The Court of Appeals acted contrary to law and jurisprudence in disregarding the legal effect upon paragraph
IV of the second amended and supplemental complaint dated 23 April 1990 of the confession of judgment
made on 18 June 1993 and the statement made by respondents Ayala Group of Companies on 05 November
1993 --- the first day of the hearing of the above-entitled case --- both of which constitute judicial admissions
contemplated by Section 4, Rule 129, Part IV (New Rules of Evidence) of the Rules of Court.
VI. The Court of Appeals acted contrary to law and jurisprudence in disregarding the following intention of the
parties to the MOA as evidenced by the annexes thereto (Exhibits A-6 thru A-9; A-10 thru A-15; A-
16 thru A-22; A-23 thru A-26; and A-35 thru A-46) in the use of the phrase free from all liens and
encumbrances in paragraph 2.c thereof: --- free from any and all liens/encumbrances and/or problems of
whatever kind and nature, including adverse claims, notices of lis pendens, and/or claims of
occupants/possessors who were not parties to any of the cases mentioned in the aforementioned documents
referred to in the aforementioned annexes.
33

VII. The Court of Appeals acted contrary to law and jurisprudence in holding that the two roads right of way
(Exhibits 6-B and 6-C) --- confined and limited to Lot 10, Psu-80886 --- then covered by T.C.T. No. 85717
and later by T.C.T. No. T-5332-Las Pias, Metro Manila, Book 27, Page 132 (Exhibits LL thru LL-2 and 3-
Ayala) in the name of respondent Las Pias Ventures, Inc., --- proposed by respondents Ayala Group of
Companies constitute sufficient and valid compliance with the mandate of paragraph 2.d of the MOA, and, in
releasing respondents Ayala Group of Companies from their commitment and obligation of complying
therewith.
VIII. The Court of Appeals acted contrary to law and jurisprudence in affirming the decision of the trial court
directing the cancellation of the annotation of the MOA and of the notices of lis pendens on the following
Transfer Certificates of Title: T.C.T. No. T-5331-Las Pias, Metro Manila, Book 27, Page 131 (Exhibits KK
thru KK-3 and 3-Ayala); T.C.T. No. T-5332-Las Pias, Metro Manila, Book 27, Page 132 (Exhibits LL thru
LL-2 and 3-A-Ayala); T.C.T. No. T-5333 (Exhibits MM thru MM-2 and 3-B-Ayala); and T.C.T. No. T-
5334-Las Pias, Metro Manila, Book 27, Page 134 (Exhibits NN thru NN-2 and 3-C-Ayala); and, in not
directing that the judgment in the above-entitled case be annotated on all the eighteen (18) Transfer
Certificates of Title covering a total of eighteen (18) parcels of land earlier known as the Ayala Las Pias
Subdivision and now as Ayala Southvale.
IX. The Court of Appeals acted contrary to law and jurisprudence in disregarding the legal effect upon paragraphs
IV, XII, XIII and XIV of the second amended and supplemental complaint dated 23 April 1990 of the
confession of judgment made on 18 June 1993 by respondents Ayala Group of Companies and their statement
made on 05 November 1993 --- the first hearing of the above-entitled case --- both of which constitute
judicial admissions contemplated by Section 4, Rule 129, Part IV (New Rules of Evidence) of the Rules of
Court.
X. In affirming the order issued by the trial court on 21 September 1994, acting with grave abuse of discretion
amounting to lack or excess of jurisdiction, the Court of Appeals likewise acted with grave abuse of discretion
amounting to lack or excess of jurisdiction.
We shall deal with these alleged errors, not in numerical order, but by subject matter, for clarity and better articulation
of the issues involved.
The first matter of contention is the Memorandum of Agreement (MOA) between the petitioners (spouses Sabio) and
Interbank.
[17]
The petitioners posit that while the MOA is explicit in requiring Interbank, and the respondents as its
transferees, to complete and perfect ownership and title to the entire estate, including improvements thereon, the court a
quo and the Court of Appeals failed to compel the respondents to abide by their commitment to assign, convey and transfer
the subject 58,000 square meter portion to the petitioners free from all liens and encumbrances.
It is their contention that the presence of illegal occupants and the existence of unauthorized improvements on the
subject parcel negates the respondents claim that they have completed and perfected their ownership and title over said
property. The fact that the subject parcel is possessed and occupied by squatters is a clear indication that the respondents
were never in possession. Before the respondents can assign, convey and transfer title to the subject parcel, they must
also be able to place the petitioners in possession thereof since possession is a necessary attribute of ownership.
[18]
Thus,
for the petitioners, there must first be removal of the illegal occupants and unauthorized structures, and the subject parcel
should be walled-in before said property is transferred by the respondents to them. Otherwise, such transfer and
conveyance would be meaningless, illusory and impracticable.
The petitioners also contend that under the circumstances, any conveyance of the subject parcel by the respondents
would not be free from all liens and encumbrances as stipulated in paragraph 2.c of said MOA. Their premise is that the
presence of squatters and unauthorized improvements should be considered a lien or encumbrance on the subject parcel,
even including such other problems as adverse claims, notices of lis pendens, and claims of other occupants and possessors
who were not parties to the cases involving the subject parcel.
Consequently, the petitioners assail the alleged failure of the court a quo and the Court of Appeals to: (1) consider the
intention of the parties as manifested in the annexes to the MOA; and (2) to give significance to the premises and
whereas clauses of the MOA in the interpretation of the phrase free from all liens and encumbrances in paragraph 2.c of
the MOA.
[19]
These related matters concerning the intention of the parties to the MOA, the stipulations in the annexed
documents, and the interpretation of the phrase free from all liens and encumbrances were earlier raised by the
petitioners in their appeal before the Court of Appeals,
[20]
advancing the same arguments and premises already discussed in
the case below.
The trial court dealt exhaustively on these issues, finding that:
However, defendant Interbank has no obligation to clear the contiguous portion of the land of occupants and to wall-in the
same for nothing in the MOA obligates Interbank to do so. Plaintiffs alleged that the clearing and walling-in of occupants
was a principal commitment and inducement without which plaintiffs would not have executed the MOA. If such were
the case, a provision to that effect should have been expressly stipulated in the MOA or at least implied therein. Plaintiff
Camilo Sabio is a member of the bar who engaged in the practice of law for over twenty years and is currently holding
34

public office. In drafting the MOA and/or agreeing to the stipulations in the same, a person of his stature could have been
more circumspect. The occupants were already in the contiguous portion of the property when the MOA was executed and
if plaintiffs had wanted to ensure that defendant Interbank would take responsibility for clearing the property of occupants,
they could have specifically provided for it.
Plaintiffs claimed that the obligation to clear and wall-in the occupants was implied in the provisions of the MOA, to
complete and perfect ownership and title to the land and to (transfer) to plaintiffs the contiguous portion with all
improvements and to deliver the new TCT free from all liens and encumbrances. This court finds that there is no
implication of that sort. If the terms of a contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of the stipulations shall control. If the words appear contrary to the evident intention of the
parties, the latter shall prevail over the former. (Art. 1370, Civil Code of the Philippines). The evidence does not show
that the parties had intentions other than those commonly understood from the aforementioned terms in the MOA. The
plaintiffs have failed to prove that the intention of the parties was other than that expressed by the literal meaning of the
terms of the MOA.
Plaintiffs further alleged that the obligations to clear and wall-in occupants and to secure the cancellation of the Notice of Lis
Pendens regarding the case of Ledonio v. Sabio annotated on the TCTs of the contiguous portion of the property are
included in the obligation to deliver the new TCT free from all liens and encumbrances, and that the obligation to clear the
occupants shanties is deemed included in the obligation to complete and perfect ownership and title to the land and to
transfer to plaintiffs the contiguous portion with all improvements, the shanties being deemed included in the term
improvements. This allegation is untenable. Words which may have different significations shall be understood in that
which is most in keeping with the nature and object of the contract (Art. 1375, Civil Code of the Philippines), otherwise, it
is presumed the words were used in their primary and general acceptation.
Occupation by the occupants of the contiguous portion of the property is not an encumbrance which defendant Interbank is
obligated to clear the property from. The meaning of the words, free from all encumbrance does not include adverse
possession of a third person. (Yuson and De Guzman v. Diaz, 42 Phil. 22 [1921]). An adverse possession by another is not
an encumbrance in law and does not contradict the condition that the property be free from encumbrances; nor is it a
lien which connotes security for a claim. Likewise, a Notice of Lis Pendens is not a lien or encumbrance. It is a mere
cautional notice to a prospective buyer or mortgagee of a parcel of land under litigation, and cannot conceivably be the lien
or encumbrance contemplated by law. (Underscoring ours)
[21]

On appeal, the Court of Appeals affirmed and quoted with approval the above-stated findings and conclusion of the
trial court, while adding that:
Indeed, an assiduous examination of the MOA and its WHEREAS clauses yields no basis for a necessary inference that the
Interbank undertook to clear the 58,000 sq. m. portion to be assigned to plaintiffs of occupants/squatters, and to wall-in
the same before turning over the title thereto. The MOA was negotiated for more than one year (see TSN, December 3,
1993, pp. 17-19), and during the negotiations one hundred (100) to two hundred (200) squatter families were already
occupying the 58,000 sq. m. portion (TSN, December 10, 1993, p. 15). Plaintiffs assert that unless the squatters are
removed from the contiguous portion and the area is properly walled in to make their removal effective, the predominant
purpose of paragraph 2-b to transfer ownership and title without plaintiffs having to spend a single cent would be illusory
and meaningless; thus the complaint alleges that the removal of the occupants and the walling in of the 58,000 sq. m.
portion was one of the principal commitments made by Interbank which induced plaintiffs to execute the MOA.
In light of the above circumstances, it is highly inconceivable and illogical that the plaintiffs did not insist on expressly
providing the necessary stipulations and in words that leave nothing to further interpretation. Plaintiff Sabio, a lawyer, took
part personally and with the assistance of another lawyer, in the drafting of the MOA, and the negotiations took about a
year, and no reason is suggested why he refrained from including therein specific language containing what he considers the
principal commitment of the second party to remove the squatters and wall-in the 58,000 portion to be conveyed to
him. That the commitment must be implied, or inferred by interpretation or be shown by evidence outside of the document
convinces us that the plaintiffs expectations were an afterthought. (Underscoring ours)
[22]

It is a long-held cardinal rule that when the terms of an agreement are reduced to writing, it is deemed to contain all
the terms agreed upon and no evidence of such terms can be admitted other than the contents of the agreement
itself.
[23]
Accordingly, the trial court and the Court of Appeals referred to no other document but the MOA itself, the
stipulations of which are deemed the law between the contracting parties. The lower courts found that nowhere in the MOA
did Interbank commit to clear the subject parcel of squatters or illegal occupants. Neither was Interbank obliged to remove
whatever unauthorized improvements were introduced in the said property. Nor is there any stipulation that would
constrain the respondents to fence or wall-in the subject parcel along its perimeters. There being no such obligation on the
part of the respondents, they cannot be compelled by the courts, even on the petitioners adamant insistence, to first rid the
subject parcel of squatters, remove all improvements and fence the perimeter thereof, before conveyance or transfer can be
effected.
35

Indeed, it is not the province of the courts to amend a contract by construction, or to make a new contract for the
parties by interjecting material stipulations, or even to read into the contract words which it does not contain.
[24]
Since the
MOA of the parties was reduced to writing, such agreement is deemed to contain all its terms and there cannot be, between
the parties and their successors-in-interest, any evidence of the terms of the written agreement other than the contents of
the agreement itself.
[25]

Nevertheless, petitioners invoke the whereas clauses of the MOA, as well as the other documents that preceded the
execution of the MOA, arguing that these will provide proof of the real intention of the parties when they executed the
MOA. They strongly contend that these documents reflect their true intentions that Interbank, and its successors-in-
interest, are obligated to clear the subject parcel of illegal occupants and structures, then fence its boundaries. At the
outset, however, we note that petitioners, in their pleadings, never put in issue the allegation that the MOA failed to express
the true intent of the parties thereto. Instead, they adopt inconsistent positions in regard to the MOA, that by itself, it is
valid and binding on the parties and their successors-in-interest on the one hand, while they also seek the courts
cognizance of extraneous documents to radically modify or add to the terms of the written agreement on the other hand.
We have uniformly held that it is only where a party puts in issue in the pleadings the failure of the written agreement
to express the true intent of the parties thereto that said party may present evidence to modify, explain or add to the terms
of the written agreement.
[26]
The fact that the terms of the MOA are explicit and leave no doubt as to the intention of the
parties, coupled with petitioners failure to contest the contract for failing to express the true intention of the parties,
behooves the courts not to read into the MOA any other intention that would contradict its apparent import,
[27]
such that the
literal meaning of its stipulations must control.
[28]

Be that as it may, we shall, for the sake of discussion, peruse the documents referred to by petitioners as allegedly
containing the factual and legal bases for their claim that respondents are obligated to first clear the subject parcel of all
illegal occupants and structures, and then wall-in said property before there can be fulfillment of the stipulation to assign,
transfer and convey the same to petitioners.
Going by chronological order, the first document is a Deed of Assignment
[29]
dated May 25, 1973 between the Ledonio
spouses and petitioners, whereby the Ledonios absolutely assigned and transferred to the Sabios three (3) parcels of land
for and in consideration of services rendered. There is no reference therein to illegal occupants, structures, and other
obligations such as fencing in these properties.
The second document dated April 14, 1980 is an Agreement
[30]
between the CPJ Corporation, the spouses Epifanio and
Cecilia Alano, and Trans-Resource Management and Development Corporation (or TRMDC), whereby CPJ Corporation sold to
the Alanos and TRMDC, as financier of the Alanos, three (3) parcels of property, one of which later became the subject of
the MOA between Interbank and petitioners. In the said document, the Alanos and TRMDC agreed to buy the property on
an As Is basis, without warranty of any kind as to title and possession on the part of the seller, CPJ Corporation. The
Alanos and TRMDC thereby admitted:
full knowledge of all the legal incidents and adverse claims affecting the said properties which have been and are being
asserted by opposing parties in the pending cases/litigations involving the subject properties, i.e., LRC Cases Nos. PN-
107 (LRC Rec. No. N-30603) and N-6336 (LRC Rec. No. N-34761), and Civil Case No. 187222, of the Court of First
Instance of Rizal, as well as by other third persons not parties in the said pending cases/litigations, in respect of which
the SECOND PARTY hereby agree(s) to and will assume full and sole responsibility for the settlement or removal
thereof and save free and harmless the FIRST PARTY from any and all liability resulting and arising therefrom; x x
x.
[31]

A related document was the Contract to Buy and Sell
[32]
between the Alano spouses and TRMDC arising from the
agreement between CPJ Corporation, the Alanos and TRMDC. Therein, the Alanos committed to free the titles from all liens
and encumbrances on or before a certain date, but with particular reference to the litigation of any and all cases affecting
the properties, x x x especially those cases mentioned under the Deed of Cession and Assignment dated April 14, 1980
executed by the same parties. Contrary to petitioners suppositions, there is no mention of the presence and clearing of
squatters from the premises as a condition. In both documents, instead, there are definite references to the pending
cases/litigations as the source of the liens and encumbrances on the subject property, not including therein any other
extrajudicial claims of ownership or possession.
The fourth contract is a Deed of Assignment with Assumption of Mortgage
[33]
between Gerardo and Emma Ledonio as
assignors, and the Sabio couple as assignees, executed by said parties on November 23, 1981. By the very nature of the
contract, the only obligation that the Sabios assumed from the Ledonios were those under the mortgage in favor of the
Philippine National Bank. Again, there was no mention of illegal occupants and structures, and therefore, no imposition to
rid the property subject of the said mortgage of such persons and structures.
Then, there were executed on June 28, 1984, by and between TRMDC and Interbank, the Memorandum of
Agreement
[34]
and the Addendum thereto.
[35]
In the former, the property subject of this petition was among those assigned,
transferred and conveyed to Interbank (covered by TCT Nos. S-65161 and 65162), on the condition that there be
settlement within one (1) year of all the attending liens and problems enumerated as follows:
36

LIENS
Entry No. 67527/L.P. No. 1753: NOTICE OF LIS PENDENS: By virtue of the notice of lis pendens presented and filed by
Camilo L. Sabio, counsel for the plaintiffs, notice is hereby given that an action/petition for review has been
commenced and is now pending in the Court of First Instance of Rizal in Civil/LRC Rec. No. 19722, entitled Gerardo G.
Ledonio, et al. versus Eduardo C. Guico, involving the property described herein.
Entry No. 69433/L.P. No. 1763: NOTICE OF LIS PENDENS: By virtue of the notice of lis pendens presented and filed
by Camilo L. Sabio, counsel for the intervenor, notice is hereby given that an action/petition for intervention has been
commenced and is now pending in the Court of First Instance of Rizal in Civil/LRC Rec. No. 657, 758, 976 entitled E.
Mayuga, F. Baltazar, et al. vs. F. Baltazar, S. Ledonio, et al., involving the property described herein.
Entry No. 69434/L.P. No. 1762: NOTICE OF LIS PENDENS: By virtue of the notice of lis pendens presented and filed
by Camilo L. Sabio, counsel for the plaintiff/defendants, notice is hereby given that an action/petition for review has
been commenced and is now pending in the Court of First Instance of Rizal in Civil/LRC Rec. No. 657, 758, 976
entitled E. Mayuga, F. Baltazar, et al. versus F. Baltazar, G. Ledonio, et al., involving the property described herein.
Entry No. 25081/T-190713: ADVERSE CLAIM - In an affidavit duly subscribed and sworn to, the spouses EPIFANIO J.
ALANO and CECILIA P. ALANO, claim among other things, that the property described in this certificate of title is the
subject of a Letter-Agreement executed by the herein owner and the adverse claimants.
Entry No. 65120/L.P. No. 1140: LIS PENDENS: By virtue of a notice of lis pendens, presented and filed by Camilo L.
Sabio, counsel for the Respondent-Counter-Petitioners, notice is hereby given that an action has been commenced and
is now pending in the Court of First Instance of Rizal in LRC Case No. P-107, LRC Rec. No. N-30603, entitled
GERARDO G. LEDONIO, et al. versus CPJ CORPORATION, et al., involving the land described in this certificate of
title.
Entry No. 38000/S-65161: AGREEMENT - In favor of SPS. EPIFANIO J. ALANO, SR. and CECILIA P. ALANO and TRANS-
RESOURCE MANAGEMENT & DEVELOPMENT CORPORATION, in an instrument duly executed by the herein registered
owner agrees to sell, transfer and convey unto SPS. EPIFANIO J. ALANO, SR. and CECILIA P. ALANO and TRANS-
RESOURCE MANAGEMENT & DEVELOPMENT CORPORATION for the sum of P5,250,000.00 subject to the terms and
conditions set forth in Doc. No. 133, Page No. 28, Book No. II; Series of 1980 of Notary Public for Makati, Metro
Manila, Ma. Cynthia Q. Halaquea.
Entry No. 40608/S-65161: CONTRACT TO BUY AND SELL - By virtue of an instrument duly executed by and between
EPIFANIO J. ALANO and CECILIA P. ALANO and TRANS-RESOURCE MANAGEMENT & DEVELOPMENT CORPORATION,
the former have agreed to sell unto the latter the property described herein for a total consideration of FOURTEEN
MILLION FOUR HUNDRED SIXTY SEVEN THOUSAND SEVEN HUNDRED TEN PESOS (P14,467,710.00) subject to the
terms and conditions set forth in Doc. No. 148, Page 31, Book II; Series of 1980 of Notary Public for Makati, Metro
Manila, Ma. Cynthia Q. Halaquea.
[36]

In paragraph 2.c of the MOA, the parties stipulated that Interbank shall render full and free assistance to TRMDC in
exploring, negotiating and consummating appropriate settlement agreements with the parties/claimants concerned,
including defraying the required cost of such settlements with view to cleaning/settling all of said liens/problems within the
prescribed period, but with specific reference to the liens and problems enumerated in the preceding paragraph. Clearly,
the claims of third parties such as squatters were not among those enumerated as liens or problems affecting the subject
property. Neither was Interbank obligated under the terms of said agreement to clear the subject property of illegal
occupants, there being no specific mention of their presence therein. On the other hand, the Addendum to the MOA
between TRMDC and Interbank is a mere amendment to the computations of the principal debt and interests of TRMDC loan
with Interbank. There is nothing in said document that even touches on the subject of claims, liens and problems affecting
the property.
In furtherance of their stipulations in the MOA and Addendum thereto, TRMDC executed a Deed of Assignment
[37]
on
July 12, 1984 in favor of Interbank involving, among others, the parcel subject of this petition. Said documents cited the
MOA entered into by the same parties, reiterating TRMDCs undertaking to assign, transfer and convey absolute ownership
and title in fee simple over the properties described therein free from any and all liens/encumbrances and/or problems of
whatever kind and nature within a specified period of time. While the phrase, problems of whatever kind and nature may
be broadly construed, the succeeding paragraph stressed that TRMDC is obligated to execute a Deed of Assignment pending
its accomplishment and/or compliance with its obligations under the MOA and Addendum to the MOA. Thus, the obligations
of TRMDC were effectively limited to those specifically enumerated in the two preceding documents which, as mentioned
earlier, did not include clearing the property of squatters and unauthorized structures.
37

Finally, the MOA between petitioners and Interbank, as previously discussed, did not make mention of squatters and
illegal structures. Neither did they stipulate that Interbank was obligated to clear the subject property of such occupants
and structures, and neither did the said MOA impose on Interbank the obligation to wall-in the subject property.
In fine, there is no factual or legal basis for petitioners claim that the respondents are obligated to rid the subject
property of squatters and unauthorized structures. Neither is there any provision in the cited documents that sustains
petitioners contention. Consequently, the court a quo and the Court of Appeals did not err in finding that respondents were
not under compulsion to clear the subject property of squatters and unauthorized structures under the MOA, inasmuch as
there was no obligation to fence the perimeter of the subject property. The terms of the MOA and the preceding contracts
are clear and leave no doubt as to their meaning; hence, they cannot be interpreted in a way that would please the
petitioners, but should rather be fulfilled according to the literal sense of their stipulations.
[38]

However, petitioners would argue that there was no necessity to make specific provisions with respect to the removal
of the occupants and structures from, and walling-in of, the subject property. To them, it was sufficient that both parties
knew the actual condition of the property. Petitioner Camilo Sabio testified to that effect, stating that the real intention or
agreement of the parties was that the obligation to complete and perfect ownership and title included the removal of all
squatters and unauthorized structures, and to fence the perimeter of the subject property.
However, the Court of Appeals correctly concluded that petitioner Camilo Sabios testimony in this regard cannot be
taken advantage of to inject into the agreement any understanding which is contradictory to or at variance with the terms
thereof without violating the parol evidence rule x x x. The rule is that when the terms of an agreement have been
reduced to writing, it is considered as containing all the terms agreed upon and there can be between the parties and their
successors-in-interest, no evidence of such terms other than the contents of the written agreement.
[39]

There are exceptions to said rule, however, such as when:
1. There is an intrinsic ambiguity, mistake or imperfection in the writing;
2. The written agreement fails to express the true agreement and intent of the parties thereto;
3. The validity of the written agreement is in question; and
4. There exists other terms agreed by the parties or their successors-in-interest after the execution of the
written agreement.
[40]

In the instant case, the MOA between the Sabios and Interbank was never assailed for any intrinsic ambiguity, mistake
or imperfection in the writing by any of the parties. More importantly, petitioners never alleged in any of their pleadings
that the MOA failed to express the true agreement and intent of the parties thereto. In fact, petitioner Camilo Sabio would
be hard put to question the very contents of the MOA since he admittedly participated in the drafting of the MOA with the
assistance of legal counsel.
[41]
Even if he would belatedly complain that the MOA did not state the true intentions of the
parties, he is estopped from doing so. Indeed, the Court of Appeals noted, it is highly inconceivable and illogical that
petitioner Camilo Sabio, an experienced lawyer who personally took part in the preparation of the MOA with the assistance
of another lawyer, in the course of negotiations that lasted about a year, did not insist on expressly providing the
necessary stipulations and in words that leave nothing to further interpretation.
[42]

He cannot now insist that the court should accept his bare testimony that there was a verbal understanding between
the parties to the MOA, such that there was no necessity to make specific provisions concerning the removal of illegal
occupants and structures, nor even to fence the subject parcel of land. His testimony may have been unrebutted, but
unsubstantiated testimony offered as proof of verbal agreements which tend to vary the terms of a written agreement is
inadmissible under the parol evidence rule.
[43]

Furthermore, the validity of the MOA was never questioned. In fact, the petitioners are vigorously pursuing its
execution, albeit in a manner that departs from the stipulations contained therein. Since no fraud or mistake that would
vitiate the validity of the MOA has been alleged, parol evidence cannot be admitted to incorporate additional
contemporaneous conditions which are not mentioned at all in the written agreement.
[44]
Neither have petitioners shown
that after the execution of the MOA, the parties and their successors-in-interest agreed to terms other than those appearing
in the MOA.
In sum, there is no justification in the instant case to admit parol evidence to support the petitioners claims. It is a
cardinal rule of evidence, not just one of technicality but of substance, that the written document is the best evidence of its
own contents. It is also a matter of both principle and policy that when the written contract, by agreement of the parties, is
established as the repository of their stipulations, any other evidence is excluded and the same cannot be used as a
substitute for such contract, nor even to alter or contradict them. Although the parol evidence rule is inflexible, it admits of
four (4) exceptions, as earlier discussed. Since none of these exceptions was ever put in issue in the pleadings, in
accordance with Rule 130, Section 9 of the Rules of Court, the parol evidence rule must be strictly adhered to in this instant
case. Therefore, the stipulations of the contract being the law between the parties, the courts have no recourse but to
enforce them as they were agreed upon and written.
[45]

With more reason do we agree with the findings of the Court of Appeals that the existence of squatters and
unauthorized structures in the subject property is not covered by the phrase liens and encumbrances. The word lien, by
38

common acceptation, refers to a legal claim or charge on property to secure the payment of a debt or obligation, and which
may often be used interchangeably with the word encumbrance. We adopt this Courts definition of the words lien and
encumbrance as set forth in People v. RTC,
[46]
and quoted in the impugned decision of the Court of Appeals, viz:
[47]

In People v. RTC (178 SCRA 299), the Supreme Court held that not all claims against a property can be considered a lien
within the contemplation of law; it was held:
x x x. A lien is a qualified right or a propriety interest, which may be exercised over the property of another. It is a right
which the law gives to have a debt satisfied out of a particular thing. It signifies a legal claim or charge on property, either
real or personal, as a collateral or security for the payment of some debt or obligation.
Similarly, an encumbrance is a burden upon land, depreciative of its value, such as lien, easement, or servitude, which,
though adverse to (the) interest of (the) landowner, does not conflict with his conveyance of (the) land in fee.
The following are considered encumbrances: A claim, lien, charge, or liability attached to and binding real property; e.g., a
mortgage, judgment lien, lease, security interest, easement or right of way, accrued and unpaid taxes. A lien is already an
existing burden or charge on the property while a notice of lis pendens, as the very term connotes, is only a notice or
warning that a claim or possible charge on the property is pending determination by the court.
[48]

Petitioners have failed to show how squatters and unauthorized structures can fall under the definition of liens and
encumbrances. The documents relied upon by petitioners themselves enumerate the liens and encumbrances and other
claims on the subject property. However, no such burdens on the property concerning the squatters appear in said
documents. The courts cannot supply or read into these documents words which they clearly do not contain. All things
considered, the Court of Appeals did not err in concluding that the possession of squatters or any other persons occupying
the subject property without any legal right whatsoever, cannot and should not be considered a lien or encumbrance as
commonly defined and accepted.
The second object of contention is the Deed of Conveyance proposed by respondents, but rejected by petitioners.
[49]
In
said document, respondents Ayala Corporation, in accordance with the pertinent provisions of the MOA between Interbank
and the Sabios, stipulated that:
WHEREAS, the FIRST PARTY had already completed the segregation of the said 58,000-square meter portion of Lot 6 (Psd
80888) in accordance with the Bureau of Lands approved survey plan, a copy of which is hereto attached as Annex C. As
such, the FIRST PARTY is now in a position to comply with its obligation under Section 5 of the said Deed of Sale (Annex
B) to convey the property to the SECOND PARTY, now described as follows:
Lot 6-B, Psd-13-008573, TCT No. T-5331
of Las Pias Registry of Deeds
A PARCEL OF LAND (Lot 6-B of the subdivision plan Psd-13-008573, being a portion of Lot 6, Psu-80886, (Swo-20609),
LRC Record No. 43516), situated in Barrio Almanza Dos, Las Pias, Metro Manila. Bounded on the NW., & NE., along lines 1
to 6 by Lot 8; on the SE., along line 6-7 by Lot 10 both of plan Psu-80886); and on the S., & W., along lines 7-8-1 by Lot 6-
A of the subdivision plan. x x x containing an area of FIFTY EIGHT THOUSAND (58,000) SQ. METERS.
NOW, THEREFORE, for and in consideration of the foregoing, the FIRST PARTY Transfers, Assigns, Cedes and Conveys unto
the SECOND PARTY the said 58,000-square-meter portion of Lot 6-B, Psd-13-008573, covered by TCT No. T-5331 of Las
Pias Registry of Deeds and described in the above fourth WHEREAS clause.
That as part of the consideration of this Conveyance, the SECOND PARTY binds himself to file a Notice of Withdrawal of the
case entitled Sps. Camilo and Ma. Marlene A. Ledonio vs. The International Corporate Bank, et al., docketed as Civil Case
No. 18540 of the Regional Trial Court of Makati, Branch 145.
[50]

The Sabios, however, refused to sign said deed of conveyance on the ground that it was grossly violative of the law
and the MOA,
[51]
more particularly arguing that:
I. Mere execution of the deed of conveyance does not constitute sufficient and valid compliance with par. 2.b of
the MOA;
II. Ayala Corporation failed to complete and perfect ownership and title to the subject property since it was
never in actual occupation, possession, control and enjoyment of said property;
39

III. Under the law, symbolic delivery by mere execution of the deed of conveyance is not sufficient
since actual possession, control and enjoyment is a main attribute to ownership.
We do not agree, for the law is clear on this matter. Under Article 1498 of the Civil Code, when the sale is made
through a public instrument, the execution thereof shall be equivalent to the delivery of the object of the contract, if from
the deed the contrary does not appear or cannot be inferred. Possession is also transferred, along with ownership thereof,
to the petitioners by virtue of the deed of conveyance.
[52]

Parallel to our ruling in Dulay Enterprises, Inc. v. Court of Appeals,
[53]
we find that petitioners contention that
respondents never acquired ownership over the subject property since the latter was never in possession of the subject
property nor was the property ever delivered is totally without merit. Under the aforementioned Article 1498, the mere
execution of the deed of conveyance in a public document is equivalent to the delivery of the property. Since the execution
of the deed of conveyance is deemed equivalent to delivery, prior physical delivery or possession is not legally required.
It is well-established that ownership and possession are two entirely different legal concepts.
[54]
Just as possession is
not a definite proof of ownership, neither is non-possession inconsistent with ownership.
[55]
Thus, it is of no legal
consequence that respondents were never in actual possession or occupation of the subject property. They, nevertheless,
perfected and completed ownership and title to the subject property.
Notwithstanding the presence of illegal occupants on the subject property, transfer of ownership by symbolic delivery
under Article 1498 can still be effected through the execution of the deed of conveyance. As we held in Power Commercial
and Industrial Corp. v. Court of Appeals,
[56]
the key word is control, not possession, of the subject property. Considering
that the deed of conveyance proposed by respondents did not stipulate or infer that petitioners could not exercise control
over said property, delivery can be effected through the mere execution of said deed.
Petitioners, as owners, have several options. Among these, they could file ejectment suits against the occupants, or to
amicably secure the latters evacuation of the premises. Whatever mode petitioners choose, it signifies their control and
their intention as owners to obtain for themselves and to terminate said occupants actual possession thereof.
[57]
It is
sufficient that there are no legal impediments to prevent petitioners from gaining physical possession of the subject
property. As stated above, prior physical delivery or possession is not legally required and the execution of the deed of sale
or conveyance is deemed equivalent to delivery. This deed operates as a formal or symbolic delivery of the property sold
and authorizes the buyer or transferee to use the document as proof of ownership. Nothing more is required.
Petitioners cannot deny that the deed of conveyance can effectively transfer ownership as it constitutes symbolic or
constructive delivery of the subject property. Neither can they negate the fact that as owners, they can exercise control
over the said property. Respondents are not obligated to remove the occupants before conveying the subject property to
petitioners.
Petitioners argue that for them to have to spend to clear the subject property of illegal occupants and structures would
violate par. 2.c of the MOA, which imposed on Interbank and its successors-in-interest the burden to bear all costs, fees and
expenses incidental to segregation, survey, registration and delivery of a new title to the petitioners. It is patently clear
that expenses for removal of illegal occupants and structures are not among those listed in said paragraph 2.c. The Court
of Appeals noted that the obligation to defray all the costs and fees was connected with the delivery to petitioners of a new
certificate of title, free from all liens and encumbrances. Had the parties to the MOA intended for Interbank and its
successors-in-interest to be obligated to shoulder the expense of clearing the subject property of squatters and illegal
structures, language to that effect could have easily and logically have been employed. As it happened, petitioners omitted
to include this as a condition when they drafted the MOA. If the parties thereto really intended to impose on Interbank and
its successors-in-interest the obligation to eject the squatters from the subject property and defray the cost therefor, it
should have been stated in the MOA. The terms of the MOA are so clear as to leave no room for any other interpretation.
[58]

There is also no truth to petitioners allegation that the deed of conveyance merely transferred to the Sabios all the
rights and participation of respondents over the subject property. The Deed of Conveyance clearly states that the FIRST
PARTY (respondent Ayala Corporation) Transfers, Assigns, Cedes and Conveys unto the SECOND PARTY (Sabios) the said
58,000 square-meter portion of Lot 6-B, Psd-13-008573, covered by TCT No. T-5331 of Las Pias Registry of Deeds and
described in the above fourth WHEREAS clause. Thus, the deed of conveyance complied with par. 2.b of the MOA, which
provided that the said property shall be assigned and conveyed after Interbank and its successors-in-interest shall complete
and perfect ownership and title to said property.
Another object of contention is the stipulated permanent and perpetual right-of-way, which under par. 2.d of the MOA
shall be sufficient for all the needs of said parcel of land throughout the properties already owned and/or to be acquired by
the SECOND PARTY (Interbank) particularly the parcels of land covered by TCT No. 85717, TCT No. S-65161, and TCT No.
S-65162, which right-of-way shall not be less than ten (10) meters wide. Petitioners contend that it is the purpose and
spirit of the MOA that (they) shall have the same right to pass through the Ayala Corporations proposed subdivision like
any other homeowner therein.
[59]

Respondents counter that the right-of-way it has proposed is one with a definite lane and width and which is the most
convenient route to the main access road that connects Ayala-Las Pias to the Ayala-Alabang Road. Moreover, at
petitioners option, respondents were willing to provide another access road to service the subject property.
[60]
The proposed
right-of-way is particularly described in TCT No. T-5332, containing an area of approximately 370,868 square meters.
[61]

40

We agree with the Court of Appeals that the phrase permanent and perpetual right of way should be construed in its
ordinary and accepted signification, i.e., to provide ingress to and egress from the dominant estate, or to provide passage in
going to the highway from the dominant estate and back. The MOA itself does not provide that petitioners shall have free
access to all the roads within the proposed subdivision that respondents would establish on the estate. Had the parties
intended that petitioners be given such access, the same should have been incorporated in the MOA. Once again, the
courts cannot read into the MOA any other intention that would contradict the apparent agreement. The courts cannot
embellish the precise stipulations of the MOA just for the convenience of petitioners.
An easement is an abnormal restriction on respondents property rights, and the imposition thereof must be tempered
and limited to the ordinary needs of petitioners property, not to satisfy their caprices. The law requires that the right-of-
way must be at the point least prejudicial to the servient estate, and when applicable, where the distance from the
dominant estate to a public highway may be the shortest.
[62]

While the proposed right-of-way traversed respondents properties, the same should not encroach into the latters
proposed subdivision roads. Petitioners access to all the subdivision roads like any homeowner therein is not a necessity
and goes beyond mere convenience on their part. Otherwise, that would be stretching the purpose and meaning of a right-
of-way beyond its legal and general acceptation. The fact is that respondents did not lack in satisfying the requirements in
par. 2.d of the MOA. Instead of the minimum width of 10 meters, the proposed right-of-way is twenty-five (25) meters
wide,
[63]
more than double the stipulated minimum width. There is really no reason for petitioners to complain and want for
more.
While this may already be moot and academic, petitioners raise the issue that respondents confession of
judgment
[64]
did not deny certain allegations contained in paragraphs IV, XII, XIII, and XIV of the formers second amended
and supplemental complaint;
[65]
hence, they constitute express judicial admissions which the courts should have
considered.
[66]

While respondents denominated their pleading as a confession of judgment, it is more in the nature of a motion for
partial judgment on the pleadings or a summary judgment. Indeed, respondents asked the court a quo to render partial
judgment based on their admission of the genuineness and contents of certain documentary evidence offered by both
parties. It is clear that respondents made no admission that would support any of petitioners contentions that deviate from
the very stipulations in the MOA. There can be no implied admission of allegations which are extraneous to the contents of
the documents expressly admitted by respondents. Their specific denials of certain allegations in petitioners complaint still
stand in their answer. In fact, respondents did not state anything that would contradict their earlier defenses and
arguments already on record. It was a mere reiteration of their stand that the MOA, as worded, be implemented literally
and without further delay.
It cannot also be said that respondents are deemed to have admitted the allegations in Camilo Sabios testimony as to
the circumstances surrounding the execution of the MOA. As petitioners themselves noted, respondents counsel declared in
open court that: (a) they were ready to agree and admit all the documentary evidence that the counsel (Atty. Sabio) has
anyway enumerated in his pre-trial brief x x x; (b) its very clear that this case could be decided based on the pleadings
and documentary evidence x x x; and (c) it is admitted by the defendants and we are ready to admit the documentary
evidence that theyll be presenting.
[67]
Clearly, respondents only admitted all the documentary evidence, not the
testimonial evidence offered by petitioners.
We stated earlier that this issue is already moot and academic for the supposed judicial admissions referred to by
petitioners, had they been considered by the lower court, would not alter the outcome of this case. The lower courts
conclusions, insofar as the implementation of the MOA is concerned, are more than amply supported by documentary
evidence. Apart from those matters expressly admitted by respondents, there can be no implied admissions which the lower
court could properly recognize. Besides, as earlier discussed, the documents themselves are the best evidence of the
agreements between the parties in the absence of compelling evidence to the contrary.
Related to the issue of the confession of judgment is petitioners claim for damages. The trial court found that
petitioners are entitled to P500,000.00 in actual damages and P250,000.00 in exemplary damages. On appeal, however,
the Court of Appeals reversed the trial courts ruling, finding the awards for actual and exemplary damages in favor of
petitioners unwarranted, and setting the same aside.
Petitioners have failed, in this petition, to present any persuasive proof that they are entitled to the damages awarded
by the trial court. As found by the Court of Appeals, the claim for actual damages remained unsubstantiated and
unproven. It is well-settled that actual or compensatory damages must be duly proved and proved with reasonable degree
of certainty.
[68]
It is the fundamental principle of the law on damages that while one injured by a breach of contract shall be
awarded fair and just compensation commensurate with the loss sustained as a consequence of the defendants acts or
omission, a party is entitled only to such compensation for the pecuniary loss that he has duly proven. Actual damages
cannot be presumed and cannot be based on just flimsy, remote, speculative and nonsubstantial proof.
[69]

Petitioners also failed to establish that the delay in the implementation of the MOA was the sole responsibility of
respondents. In fact, no factual basis was presented to support the claim for not only actual or compensatory damages, but
also for exemplary damages. Petitioners failed to show that respondents acted in a wanton, fraudulent, reckless or
malevolent manner that would warrant the award of exemplary damages.
[70]

41

Anent the directive to cancel the annotation of the MOA and the Notices of Lis Pendens on TCT Nos. T-5331, T-5332,
T-5333 and T-5334,
[71]
petitioners argue that the maintenance of the annotation of the MOA and the notices oflis pendens is
necessary to protect their rights should the property be sold to third persons for value. They also stress that the MOA
expressly mandates the annotation of the MOA on TCT Nos. S-65161 and S-65162.
[72]

The Court of Appeals found that:
With respect to the annotation of the MOA, paragraph 4 of the MOA itself expressly provides that the obligations assumed
under paragraphs 2.b, 2.c and 2.d thereof (par. 2.d contains the right of way provision) shall be binding upon all the
assigns, heirs and successors of the parties, and that the MOA shall be annotated on TCT No. 65161 and TCT No. 65162,
which became eventually TCT No. 5333 and TCT No. 5331. No mention is made of the other titles to be owned and/or
acquired by defendant-appellant, and the omission cannot be supplied by construction.
[73]

We agree. Indeed, the MOA only require that it be annotated on TCT Nos. 65161 (now 5333) and 65162 (now
5331). Thus, there should be no reason to extend this requirement to other titles not mentioned in the MOA.
Petitioners also take exception to the refusal of the lower court to annotate the judgment in the case below on all
eighteen (18) titles covering the parcels of land comprising Ayala Southvale Subdivision. The underlying intention of
petitioners is to have the easement of right-of-way annotated on all of the titles. Respondents counter that there is no such
need because the right-of-way has been delineated and segregated and, hence, there is no reason to annotate the same on
the titles that are not affected thereby.
Again, we find no merit in petitioners contention, especially since the easement of right-of-way as offered by
respondent is more than adequate for the needs of the subject property, and that it was properly constituted without
imposing unnecessary burden on the other properties of respondents. There can really be no justification for annotation on
the titles that are not subject to the easement.
Finally, we come to the tenth and last error assigned by petitioners, i.e., that the trial court erred in ordering the
cancellation of the notice of lis pendens on TCT Nos. T-5331 to T-5334 and all titles derived therefrom. In its
Resolution,
[74]
the Court of Appeals held that:
Nevertheless, the appellants argument that the trial court committed grave abuse of discretion in ordering the cancellation
of the notices of lis pendens before finality of the assailed judgment in the absence of good reasons to justify execution
pending appeal is untenable. The order of cancellation of the notices of lis pendens was not issued by the trial court under
Section 2, Rule 38 of the Rules of Court regarding execution pending appeal which requires the existence of good reasons,
but under Section 24 of Rule 14 and Section 77 of PD 1529 which allow the trial court to cancel notice of lis pendens even
before final resolution of the case on the merits upon finding that the notice is for the purpose of molesting the adverse
party, or that it is not necessary to protect the rights of the party who caused it to be registered. (Underscoring ours)
We find no cogent reason to disturb the ruling of the Court of Appeals in this regard. In light of the foregoing
discussion, the trial court did not abuse, gravely or otherwise, its discretion when it allowed the cancellation of the
annotations. Accordingly, neither did the Court of Appeals err when it affirmed the order of the trial court on the finding
that there was no longer any necessity to protect the rights of petitioners over the titles that were either not affected by the
easement or not mentioned in the MOA.
WHEREFORE, in view of all the foregoing, the instant petition for review is DENIED and the Decision of the Court of
Appeals dated April 30, 1997 in CA-G.R. CV No. 48870 is AFFIRMED in toto. No pronouncement as to costs.
SO ORDERED.
G.R. No. 80298 April 26, 1990
EDCA PUBLISHING & DISTRIBUTING CORP., petitioner,
vs.
THE SPOUSES LEONOR and GERARDO SANTOS, doing business under the name and style of "SANTOS
BOOKSTORE," and THE COURT OF APPEALS, respondents.
Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for petitioner.
Cendana Santos, Delmundo & Cendana for private respondents.

42

CRUZ, J.:
The case before us calls for the interpretation of Article 559 of the Civil Code and raises the particular question of when a
person may be deemed to have been "unlawfully deprived" of movable property in the hands of another. The article runs in
full as follows:
Art. 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless,
one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in
possession of the same.
If the possessor of a movable lost or of which the owner has been unlawfully deprived has acquired it in
good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.
The movable property in this case consists of books, which were bought from the petitioner by an impostor who sold it to
the private respondents. Ownership of the books was recognized in the private respondents by the Municipal Trial
Court,
1
which was sustained by the Regional Trial Court,
2
which was in turn sustained by the Court of Appeals.
3
The
petitioner asks us to declare that all these courts have erred and should be reversed.
This case arose when on October 5, 1981, a person identifying himself as Professor Jose Cruz placed an order by telephone
with the petitioner company for 406 books, payable on delivery.
4
EDCA prepared the corresponding invoice and delivered
the books as ordered, for which Cruz issued a personal check covering the purchase price of P8,995.65.
5
On October 7,
1981, Cruz sold 120 of the books to private respondent Leonor Santos who, after verifying the seller's ownership from the
invoice he showed her, paid him P1,700.00.
6

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

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

Protesting this high-handed action, the private respondents sued for recovery of the books after demand for their return
was rejected by EDCA. A writ of preliminary attachment was issued and the petitioner, after initial refusal, finally
surrendered the books to the private respondents.
10
As previously stated, the petitioner was successively rebuffed in the
three courts below and now hopes to secure relief from us.
To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner in taking the law into its own
hands and forcibly recovering the disputed books from the private respondents. The circumstance that it did so with the
assistance of the police, which should have been the first to uphold legal and peaceful processes, has compounded the
wrong even more deplorably. Questions like the one at bar are decided not by policemen but by judges and with the use not
of brute force but of lawful writs.
Now to the merits
It is the contention of the petitioner that the private respondents have not established their ownership of the disputed books
because they have not even produced a receipt to prove they had bought the stock. This is unacceptable. Precisely, the first
sentence of Article 559 provides that "the possession of movable property acquired in good faith is equivalent to a title,"
thus dispensing with further proof.
The argument that the private respondents did not acquire the books in good faith has been dismissed by the lower courts,
and we agree. Leonor Santos first ascertained the ownership of the books from the EDCA invoice showing that they had
been sold to Cruz, who said he was selling them for a discount because he was in financial need. Private respondents are in
the business of buying and selling books and often deal with hard-up sellers who urgently have to part with their books at
reduced prices. To Leonor Santos, Cruz must have been only one of the many such sellers she was accustomed to dealing
43

with. It is hardly bad faith for any one in the business of buying and selling books to buy them at a discount and resell them
for a profit.
But the real issue here is whether the petitioner has been unlawfully deprived of the books because the check issued by the
impostor in payment therefor was dishonored.
In its extended memorandum, EDCA cites numerous cases holding that the owner who has been unlawfully deprived of
personal property is entitled to its recovery except only where the property was purchased at a public sale, in which event
its return is subject to reimbursement of the purchase price. The petitioner is begging the question. It is putting the cart
before the horse. Unlike in the cases invoked, it has yet to be established in the case at bar that EDCA has been unlawfully
deprived of the books.
The petitioner argues that it was, because the impostor acquired no title to the books that he could have validly transferred
to the private respondents. Its reason is that as the payment check bounced for lack of funds, there was a failure of
consideration that nullified the contract of sale between it and Cruz.
The contract of sale is consensual and is perfected once agreement is reached between the parties on the subject matter
and the consideration. According to the Civil Code:
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts.
xxx xxx xxx
Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof.
Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he
has fully paid the price.
It is clear from the above provisions, particularly the last one quoted, that ownership in the thing sold shall not pass to the
buyer until full payment of the purchase only if there is a stipulation to that effect. Otherwise, the rule is that such
ownership shall pass from the vendor to the vendee upon the actual or constructive delivery of the thing sold even if the
purchase price has not yet been paid.
Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of
bouncing checks. But absent the stipulation above noted, delivery of the thing sold will effectively transfer ownership to the
buyer who can in turn transfer it to another.
In Asiatic Commercial Corporation v. Ang,
11
the plaintiff sold some cosmetics to Francisco Ang, who in turn sold them to
Tan Sit Bin. Asiatic not having been paid by Ang, it sued for the recovery of the articles from Tan, who claimed he had
validly bought them from Ang, paying for the same in cash. Finding that there was no conspiracy between Tan and Ang to
deceive Asiatic the Court of Appeals declared:
Yet the defendant invoked Article 464
12
of the Civil Code providing, among other things that "one who
has been unlawfully deprived of personal property may recover it from any person possessing it." We do
not believe that the plaintiff has been unlawfully deprived of the cartons of Gloco Tonic within the scope of
this legal provision. It has voluntarily parted with them pursuant to a contract of purchase and sale. The
circumstance that the price was not subsequently paid did not render illegal a transaction which was valid
and legal at the beginning.
In Tagatac v. Jimenez,
13
the plaintiff sold her car to Feist, who sold it to Sanchez, who sold it to Jimenez. When the
payment check issued to Tagatac by Feist was dishonored, the plaintiff sued to recover the vehicle from Jimenez on the
ground that she had been unlawfully deprived of it by reason of Feist's deception. In ruling for Jimenez, the Court of Appeals
held:
44

The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has been unlawfully deprived of her
car. At first blush, it would seem that she was unlawfully deprived thereof, considering that she was
induced to part with it by reason of the chicanery practiced on her by Warner L. Feist. Certainly, swindling,
like robbery, is an illegal method of deprivation of property. In a manner of speaking, plaintiff-appellant
was "illegally deprived" of her car, for the way by which Warner L. Feist induced her to part with it is
illegal and is punished by law. But does this "unlawful deprivation" come within the scope of Article 559 of
the New Civil Code?
xxx xxx xxx
. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a voidable contract (Article
1390 N.C.C.). Being a voidable contract, it is susceptible of either ratification or annulment. If the contract
is ratified, the action to annul it is extinguished (Article 1392, N.C.C.) and the contract is cleansed from all
its defects (Article 1396, N.C.C.); if the contract is annulled, the contracting parties are restored to their
respective situations before the contract and mutual restitution follows as a consequence (Article 1398,
N.C.C.).
However, as long as no action is taken by the party entitled, either that of annulment or of ratification, the
contract of sale remains valid and binding. When plaintiff-appellant Trinidad C. Tagatac delivered the car
to Feist by virtue of said voidable contract of sale, the title to the car passed to Feist. Of course, the title
that Feist acquired was defective and voidable. Nevertheless, at the time he sold the car to Felix Sanchez,
his title thereto had not been avoided and he therefore conferred a good title on the latter, provided he
bought the car in good faith, for value and without notice of the defect in Feist's title (Article 1506,
N.C.C.). There being no proof on record that Felix Sanchez acted in bad faith, it is safe to assume that he
acted in good faith.
The above rulings are sound doctrine and reflect our own interpretation of Article 559 as applied to the case before us.
Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly transfer
to the private respondents. The fact that he had not yet paid for them to EDCA was a matter between him and EDCA and
did not impair the title acquired by the private respondents to the books.
One may well imagine the adverse consequences if the phrase "unlawfully deprived" were to be interpreted in the manner
suggested by the petitioner. A person relying on the seller's title who buys a movable property from him would have to
surrender it to another person claiming to be the original owner who had not yet been paid the purchase price therefor. The
buyer in the second sale would be left holding the bag, so to speak, and would be compelled to return the thing bought by
him in good faith without even the right to reimbursement of the amount he had paid for it.
It bears repeating that in the case before us, Leonor Santos took care to ascertain first that the books belonged to Cruz
before she agreed to purchase them. The EDCA invoice Cruz showed her assured her that the books had been paid for on
delivery. By contrast, EDCA was less than cautious in fact, too trusting in dealing with the impostor. Although it had
never transacted with him before, it readily delivered the books he had ordered (by telephone) and as readily accepted his
personal check in payment. It did not verify his identity although it was easy enough to do this. It did not wait to clear the
check of this unknown drawer. Worse, it indicated in the sales invoice issued to him, by the printed terms thereon, that the
books had been paid for on delivery, thereby vesting ownership in the buyer.
Surely, the private respondent did not have to go beyond that invoice to satisfy herself that the books being offered for sale
by Cruz belonged to him; yet she did. Although the title of Cruz was presumed under Article 559 by his mere possession of
the books, these being movable property, Leonor Santos nevertheless demanded more proof before deciding to buy them.
It would certainly be unfair now to make the private respondents bear the prejudice sustained by EDCA as a result of its
own negligence. We cannot see the justice in transferring EDCA's loss to the Santoses who had acted in good faith, and with
proper care, when they bought the books from Cruz.
While we sympathize with the petitioner for its plight, it is clear that its remedy is not against the private respondents but
against Tomas de la Pea, who has apparently caused all this trouble. The private respondents have themselves been
unduly inconvenienced, and for merely transacting a customary deal not really unusual in their kind of business. It is they
and not EDCA who have a right to complain.
WHEREFORE, the challenged decision is AFFIRMED and the petition is DENIED, with costs against the petitioner.
45

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

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

FACTS:

Petitioner Carbonell lives in an adjoining lot owned by Respondent Poncio, latters lot is mortgaged in favor of Republic
Savings Bank for P1,500.

Petitioner and another Respondent (Infante) offered to buy the land owned by Poncio. Which Poncio, in his failure to pay the
mortgaged agreed for the petitioner to buy the land including his house for P9.50 per square meter on the condition that
from the purchase price would come the money to be paid to the bank.

Both parties settled the arrears of the mortgaged amounting P247.26. However, Petitioner only have P200.00 as per
respondents information that he only owes the same to the bank. Respondent then withdrew the deficit amount and was
reimbursed by Carbonell the following day.

The parties executed a document stipulating that, Poncio may still occupy the land sold by him to the petitioner and if after
a year, he still cant find a place to move, that he shall pay rent in favor of the petitioner.

Subsequently, Poncio had told Carbonell that the former can no longer pursue with the sale for he had given the land to
Infante, to which he cannot withdraw even if he goes to jail. The said lot was fenced by Infante.

Atty. Jose Garcia advised her to present an adverse claim over the land in question with the Office of the Register of Deeds
of Rizal.

Poncio, admittedly sold the land to Infante when she improved her offer.

With the information that the land was not yet registered, Atty. Garcia in favor of the petitioner prepared an adverse claim
over the property. Whereby upon registration of the same by Infante, the said adverse claim was noted in the Transfer
Certificate of Title.

Petitioner filed a second complaint, alleging that the sale between Poncio and Infante be declared null and void.
Respondents allegation was that, Petitioners claim was unenforceable for lack of written document.

Trial Court ruled that the second sale was null and void. However, after re-trial, Trial Court reversed its decision ruling that
the claim of the respondents were greater than that of the petitioner.

CA ruled in favor of petitioner, alleging that it has a superior right over the respondent. After a motion for reconsideration
CA reversed its decision.

ISSUE:
Whether or not Petitioner have the superior right over the property.

HELD:

YES.

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.
in the absence thereof, to the person who presents the oldest title, provided there is good faith (emphasis supplied).

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
46

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.
***
ROSARIO CARBONELL, petitioner,
vs.
HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA INFANTE and RAMON INFANTE, respondents.

MAKASIAR, J.
Petitioner seeks a review of the resolution of the Court of Appeals (Special Division of Five) dated October 30, 1968,
reversing its decision of November 2, 1967 (Fifth Division), and its resolution of December 6, 1968 denying petitioner's
motion for reconsideration.
The dispositive part of the challenged resolution reads:
Wherefore, the motion for reconsideration filed on behalf of appellee Emma Infante, is hereby granted and
the decision of November 2, 1967, is hereby annulled and set aside. Another judgement shall be entered
affirming in toto that of the court a quo, dated January 20, 1965, which dismisses the plaintiff's complaint
and defendant's counterclaim.
Without costs.
The facts of the case as follows:
Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes Islands, was the owner of the parcel of land
herein involve with improvements situated at 179 V. Agan St., San Juan, Rizal, having an area of some one hundred ninety-
five (195) square meters, more or less, covered by TCT No. 5040 and subject to mortgage in favor of the Republic Savings
Bank for the sum of P1,500.00. Petitioner Rosario Carbonell, a cousin and adjacent neighbor of respondent Poncio, and also
from the Batanes Islands, lived in the adjoining lot at 177 V. Agan Street.
Both petitioners Rosario Carbonell and respondent Emma Infante offered to buy the said lot from Poncio (Poncio's Answer,
p. 38, rec. on appeal).
Respondent Poncio, unable to keep up with the installments due on the mortgage, approached petitioner one day and
offered to sell to the latter the said lot, excluding the house wherein respondent lived. Petitioner accepted the offer and
proposed the price of P9.50 per square meter. Respondent Poncio, after having secured the consent of his wife and parents,
accepted the price proposed by petitioner, on the condition that from the purchase price would come the money to be paid
to the bank.
Petitioner and respondent Jose Poncio then went to the Republic Savings Bank and secured the consent of the President
thereof for her to pay the arrears on the mortgage and to continue the payment of the installments as they fall due. The
amount in arrears reached a total sum of P247.26. But because respondent Poncio had previously told her that the money,
needed was only P200.00, only the latter amount was brought by petitioner constraining respondent Jose Poncio to
withdraw the sum of P47.00 from his bank deposit with Republic Savings Bank. But the next day, petitioner refunded to
Poncio the sum of P47.00.
On January 27, 1955, petitioner and respondent Poncio, in the presence of a witness, made and executed a document in the
Batanes dialect, which, translated into English, reads:
CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM
JOSE PONCIO
Beginning today January 27, 1955, Jose Poncio can start living on the lot sold by him to me, Rosario
Carbonell, until after one year during which time he will not pa anything. Then if after said one can he
47

could not find an place where to move his house, he could still continue occupying the site but he should
pay a rent that man, be agreed.
(Sgd) JOSE
PONCIO
(Sgd.) ROSARIO
CARBONELL
(Sgd)
CONSTANCIO
MEONADA
Witness
(Pp. 6-7 rec. on appeal).
Thereafter, petitioner asked Atty. Salvador Reyes, also from the Batanes Islands, to prepare the formal deed of sale, which
she brought to respondent Poncio together with the amount of some P400.00, the balance she still had to pay in addition to
her assuming the mortgaged obligation to Republic Savings Bank.
Upon arriving at respondent Jose Poncio's house, however, the latter told petitioner that he could not proceed any more
with the sale, because he had already given the lot to respondent Emma Infants; and that he could not withdraw from his
deal with respondent Mrs. Infante, even if he were to go to jail. Petitioner then sought to contact respondent Mrs. Infante
but the latter refused to see her.
On February 5, 1955, petitioner saw Emma Infante erecting a all around the lot with a gate.
Petitioner then consulted Atty. Jose Garcia, who advised her to present an adverse claim over the land in question with the
Office of the Register of Deeds of Rizal. Atty. Garcia actually sent a letter of inquiry to the Register of Deeds and demand
letters to private respondents Jose Poncio and Emma Infante.
In his answer to the complaint Poncio admitted "that on January 30, 1955, Mrs. Infante improved her offer and he agreed to
sell the land and its improvements to her for P3,535.00" (pp. 38-40, ROA).
In a private memorandum agreement dated January 31, 1955, respondent Poncio indeed bound himself to sell to his
corespondent Emma Infante, the property for the sum of P2,357.52, with respondent Emma Infante still assuming the
existing mortgage debt in favor of Republic Savings Bank in the amount of P1,177.48. Emma Infante lives just behind the
houses of Poncio and Rosario Carbonell.
On February 2, 1955, respondent Jose Poncio executed the formal deed of sale in favor of respondent Mrs. Infante in the
total sum of P3,554.00 and on the same date, the latter paid Republic Savings Bank the mortgage indebtedness of
P1,500.00. The mortgage on the lot was eventually discharged.
Informed that the sale in favor of respondent Emma Infante had not yet been registered, Atty. Garcia prepared an adverse
claim for petitioner, who signed and swore to an registered the same on February 8, 1955.
The deed of sale in favor of respondent Mrs. Infante was registered only on February 12, 1955. As a consequence thereof, a
Transfer Certificate of Title was issued to her but with the annotation of the adverse claim of petitioner Rosario Carbonell.
Respondent Emma Infante took immediate possession of the lot involved, covered the same with 500 cubic meters of
garden soil and built therein a wall and gate, spending the sum of P1,500.00. She further contracted the services of an
architect to build a house; but the construction of the same started only in 1959 years after the litigation actually began
and during its pendency. Respondent Mrs. Infante spent for the house the total amount of P11,929.00.
On June 1, 1955, petitioner Rosario Carbonell, thru counsel, filed a second amended complaint against private respondents,
praying that she be declared the lawful owner of the questioned parcel of land; that the subsequent sale to respondents
Ramon R. Infante and Emma L. Infante be declared null and void, and that respondent Jose Poncio be ordered to execute
the corresponding deed of conveyance of said land in her favor and for damages and attorney's fees (pp. 1-7, rec. on
appeal in the C.A.).
Respondents first moved to dismiss the complaint on the ground, among others, that petitioner's claim is unenforceable
under the Statute of Frauds, the alleged sale in her favor not being evidenced by a written document (pp. 7-13, rec. on
48

appeal in the C.A.); and when said motion was denied without prejudice to passing on the question raised therein when the
case would be tried on the merits (p. 17, ROA in the C.A.), respondents filed separate answers, reiterating the grounds of
their motion to dismiss (pp. 18-23, ROA in the C.A.).
During the trial, when petitioner started presenting evidence of the sale of the land in question to her by respondent Poncio,
part of which evidence was the agreement written in the Batanes dialect aforementioned, respondent Infantes objected to
the presentation by petitioner of parole evidence to prove the alleged sale between her and respondent Poncio. In its order
of April 26, 1966, the trial court sustained the objection and dismissed the complaint on the ground that the memorandum
presented by petitioner to prove said sale does not satisfy the requirements of the law (pp. 31-35, ROA in the C.A.).
From the above order of dismissal, petitioner appealed to the Supreme Court (G.R. No. L-11231) which ruled in a decision
dated May 12, 1958, that the Statute of Frauds, being applicable only to executory contracts, does not apply to the alleged
sale between petitioner and respondent Poncio, which petitioner claimed to have been partially performed, so that petitioner
is entitled to establish by parole evidence "the truth of this allegation, as well as the contract itself." The order appealed
from was thus reversed, and the case remanded to the court a quo for further proceedings (pp. 26-49, ROA in the C.A.).
After trial in the court a quo; a decision was, rendered on December 5, 1962, declaring the second sale by respondent Jose
Poncio to his co-respondents Ramon Infante and Emma Infante of the land in question null and void and ordering
respondent Poncio to execute the proper deed of conveyance of said land in favor of petitioner after compliance by the latter
of her covenants under her agreement with respondent Poncio (pp. 5056, ROA in the C.A.).
On January 23, 1963, respondent Infantes, through another counsel, filed a motion for re-trial to adduce evidence for the
proper implementation of the court's decision in case it would be affirmed on appeal (pp. 56-60, ROA in the C.A.), which
motion was opposed by petitioner for being premature (pp. 61-64, ROA in the C.A.). Before their motion for re-trial could be
resolved, respondent Infantes, this time through their former counsel, filed another motion for new trial, claiming that the
decision of the trial court is contrary to the evidence and the law (pp. 64-78, ROA in the C.A.), which motion was also
opposed by petitioner (pp. 78-89, ROA in the C.A.).
The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at which re-hearing only the respondents introduced
additional evidence consisting principally of the cost of improvements they introduced on the land in question (p. 9, ROA in
the C.A.).
After the re-hearing, the trial court rendered a decision, reversing its decision of December 5, 1962 on the ground that the
claim of the respondents was superior to the claim of petitioner, and dismissing the complaint (pp. 91-95, ROA in the C.A.),
From this decision, petitioner Rosario Carbonell appealed to the respondent Court of Appeals (p. 96, ROA in the C.A.).
On November 2, 1967, the Court of Appeals (Fifth Division composed of Justices Magno Gatmaitan, Salvador V. Esguerra
and Angle H. Mojica, speaking through Justice Magno Gatmaitan), rendered judgment reversing the decision of the trial
court, declaring petitioner therein, to have a superior right to the land in question, and condemning the defendant Infantes
to reconvey to petitioner after her reimbursement to them of the sum of P3,000.00 plus legal interest, the land in question
and all its improvements (Appendix "A" of Petition).
Respondent Infantes sought reconsideration of said decision and acting on the motion for reconsideration, the Appellate
Court, three Justices (Villamor, Esguerra and Nolasco) of Special Division of Five, granted said motion, annulled and set
aside its decision of November 2, 1967, and entered another judgment affirming in totothe 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.
49

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is
good faith (emphasis supplied).
It is essential that the buyer of realty must act in good faith in registering his deed of sale to merit the protection of the
second paragraph of said Article 1544.
Unlike the first and third paragraphs of said Article 1544, which accord preference to the one who first takes possession in
good faith of personal or real property, the second paragraph directs that ownership of immovable property should be
recognized in favor of one "who in good faith first recorded" his right. Under the first and third paragraph, good faith must
characterize the act of anterior registration (DBP vs. Mangawang, et al., 11 SCRA 405; Soriano, et al. vs. Magale, et al., 8
SCRA 489).
If there is no inscription, what is decisive is prior possession in good faith. If there is inscription, as in the case at bar, prior
registration in good faith is a pre-condition to superior title.
When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer thereof and the title of Poncio was
still in his name solely encumbered by bank mortgage duly annotated thereon. Carbonell was not aware and she could
not have been aware of any sale of Infante as there was no such sale to Infante then. Hence, Carbonell's prior purchase
of the land was made in good faith. Her good faith subsisted and continued to exist when she recorded her adverse claim
four (4) days prior to the registration of Infantes's deed of sale. Carbonell's good faith did not cease after Poncio told her on
January 31, 1955 of his second sale of the same lot to Infante. Because of that information, Carbonell wanted an audience
with Infante, which desire underscores Carbonell's good faith. With an aristocratic disdain unworthy of the good breeding of
a good Christian and good neighbor, Infante snubbed Carbonell like a leper and refused to see her. So Carbonell did the
next best thing to protect her right she registered her adversed claim on February 8, 1955. Under the circumstances, this
recording of her adverse claim should be deemed to have been done in good faith and should emphasize Infante's bad faith
when she registered her deed of sale four (4) days later on February 12, 1955.
Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is shown by the following facts, the vital
significance and evidenciary effect of which the respondent Court of Appeals either overlooked of failed to appreciate:
(1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she was informed by Poncio that he sold the lot
to Infante but several days before Infante registered her deed of sale. This indicates that Infante knew from Poncio and
from the bank of the prior sale of the lot by Poncio to Carbonell. Ordinarily, one will not refuse to see a neighbor. Infante
lives just behind the house of Carbonell. Her refusal to talk to Carbonell could only mean that she did not want to listen to
Carbonell's story that she (Carbonell) had previously bought the lot from Poncio.
(2) Carbonell was already in possession of the mortgage passbook [not Poncio's saving deposit passbook Exhibit "1"
Infantes] and Poncio's copy of the mortgage contract, when Poncio sold the lot Carbonell who, after paying the arrearages
of Poncio, assumed the balance of his mortgaged indebtedness to the bank, which in the normal course of business must
have necessarily informed Infante about the said assumption by Carbonell of the mortgage indebtedness of Poncio. Before
or upon paying in full the mortgage indebtedness of Poncio to the Bank. Infante naturally must have demanded from Poncio
the delivery to her of his mortgage passbook as well as Poncio's mortgage contract so that the fact of full payment of his
bank mortgage will be entered therein; and Poncio, as well as the bank, must have inevitably informed her that said
mortgage passbook could not be given to her because it was already delivered to Carbonell.
If Poncio was still in possession of the mortgage passbook and his copy of the mortgage contract at the time he executed a
deed of sale in favor of the Infantes and when the Infantes redeemed his mortgage indebtedness from the bank, Poncio
would have surrendered his mortgage passbook and his copy of the mortgage contract to the Infantes, who could have
presented the same as exhibits during the trial, in much the same way that the Infantes were able to present as evidence
Exhibit "1" Infantes, Poncio's savings deposit passbook, of which Poncio necessarily remained in possession as the said
deposit passbook was never involved in the contract of sale with assumption of mortgage. Said savings deposit passbook
merely proves that Poncio had to withdraw P47.26, which amount was tided to the sum of P200.00 paid by Carbonell for
Poncio's amortization arrearages in favor of the bank on January 27, 1955; because Carbonell on that day brought with her
only P200.00, as Poncio told her that was the amount of his arrearages to the bank. But the next day Carbonell refunded to
Poncio the sum of P47.26.
(3) The fact that Poncio was no longer in possession of his mortgage passbook and that the said mortgage passbook was
already in possession of Carbonell, should have compelled Infante to inquire from Poncio why he was no longer in
possession of the mortgage passbook and from Carbonell why she was in possession of the same (Paglago, et. al vs. Jara et
al 22 SCRA 1247, 1252-1253). The only plausible and logical reason why Infante did not bother anymore to make such
injury , w because in the ordinary course of business the bank must have told her that Poncio already sold the lot to
50

Carbonell who thereby assumed the mortgage indebtedness of Poncio and to whom Poncio delivered his mortgage
passbook. Hoping to give a semblance of truth to her pretended good faith, Infante snubbed Carbonell's request to talk to
her about the prior sale to her b Poncio of the lot. As aforestated, this is not the attitude expected of a good neighbor
imbued with Christian charity and good will as well as a clear conscience.
(4) Carbonell registered on February 8, 1955 her adverse claim, which was accordingly annotated on Poncio's title, four [4]
days before Infante registered on February 12, 1955 her deed of sale executed on February 2, 1955. Here she was again on
notice of the prior sale to Carbonell. Such registration of adverse claim is valid and effective (Jovellanos vs. Dimalanta, L-
11736-37, Jan. 30, 1959, 105 Phil. 1250-51).
(5) In his answer to the complaint filed by Poncio, as defendant in the Court of First Instance, he alleged that both Mrs.
Infante and Mrs. Carbonell offered to buy the lot at P15.00 per square meter, which offers he rejected as he believed that
his lot is worth at least P20.00 per square meter. It is therefore logical to presume that Infante was told by Poncio and
consequently knew of the offer of Carbonell which fact likewise should have put her on her guard and should have
compelled her to inquire from Poncio whether or not he had already sold the property to Carbonell.
As recounted by Chief Justice Roberto Concepcion, then Associate Justice, in the preceding case of Rosario Carbonell vs.
Jose Poncio, Ramon Infante and Emma Infante (1-11231, May 12, 1958), Poncio alleged in his answer:
... that he had consistently turned down several offers, made by plaintiff, to buy the land in question, at
P15 a square meter, for he believes that it is worth not less than P20 a square meter; that Mrs. Infante,
likewise, tried to buy the land at P15 a square meter; that, on or about January 27, 1955, Poncio was
advised by plaintiff that should she decide to buy the property at P20 a square meter, she would allow him
to remain in the property for one year; that plaintiff then induced Poncio to sign a document, copy of
which if probably the one appended to the second amended complaint; that Poncio signed it 'relying upon
the statement of the plaintiff that the document was a permit for him to remain in the premises in the
event defendant decided to sell the property to the plaintiff at P20.00 a square meter'; that on January
30, 1955, Mrs. Infante improved her offer and agreed to sell the land and its improvement to her for
P3,535.00; that Poncio has not lost 'his mind,' to sell his property, worth at least P4,000, for the paltry
sum P1,177.48, the amount of his obligation to the Republic Saving s Bank; and that plaintiff's action is
barred by the Statute of Frauds. ... (pp. 38-40, ROA, emphasis supplied).
II
EXISTENCE OF THE PRIOR SALE TO CARBONELL
DULY ESTABLISHED
(1) In his order dated April 26, 1956 dismissing the complaint on the ground that the private document Exhibit "A" executed
by Poncio and Carbonell and witnessed by Constancio Meonada captioned "Contract for One-half Lot which I Bought from
Jose Poncio," was not such a memorandum in writing within the purview of the Statute of Frauds, the trial judge himself
recognized the fact of the prior sale to Carbonell when he stated that "the memorandum in question merely states that
Poncio is allowed to stay in the property which he had sold to the plaintiff. There is no mention of the reconsideration, a
description of the property and such other essential elements of the contract of sale. There is nothing in the memorandum
which would tend to show even in the slightest manner that it was intended to be an evidence of contract sale. On the
contrary, from the terms of the memorandum, it tends to show that the sale of the property in favor of the plaintiff is
already an accomplished act. By the very contents of the memorandum itself, it cannot therefore, be considered to be the
memorandum which would show that a sale has been made by Poncio in favor of the plaintiff" (p. 33, ROA, emphasis
supplied). As found by the trial court, to repeat the said memorandum states "that Poncio is allowed to stay in the property
which he had sold to the plaintiff ..., it tends to show that the sale of the property in favor of the plaintiff is already an
accomplished act..."
(2) When the said order was appealed to the Supreme Court by Carbonell in the previous case of Rosario Carbonell vs. Jose
Poncio, Ramon Infante and Emma Infante
(L-11231, supra), Chief Justice Roberto Concepcion, then Associate Justice, speaking for a unanimous Court, reversed the
aforesaid order of the trial court dismissing the complaint, holding that because the complaint alleges and the plaintiff
claims that the contract of sale was partly performed, the same is removed from the application of the Statute of Frauds
and Carbonell should be allowed to establish by parol evidence the truth of her allegation of partial performance of the
contract of sale, and further stated:
Apart from the foregoing, there are in the case at bar several circumstances indicating that plaintiff's claim
might not be entirely devoid of factual basis. Thus, for instance, Poncio admitted in his answer that
plaintiff had offered several times to purchase his land.
51

Again, there is Exhibit A, a document signed by the defendant. It is in the Batanes dialect, which,
according to plaintiff's uncontradicted evidence, is the one spoken by Poncio, he being a native of said
region. Exhibit A states that Poncio would stay in the land sold by him to plaintiff for one year, from
January 27, 1955, free of charge, and that, if he cannot find a place where to transfer his house thereon,
he may remain upon. Incidentally, the allegation in Poncio's answer to the effect that he signed Exhibit A
under the belief that it "was a permit for him to remain in the premises in the" that "he decided to sell the
property" to the plaintiff at P20 a sq. m." is, on its face, somewhat difficult to believe. Indeed, if he had
not decided as yet to sell the land to plaintiff, who had never increased her offer of P15 a square meter,
there was no reason for Poncio to get said permit from her. Upon the other hand, if plaintiff intended to
mislead Poncio, she would have caused Exhibit A to be drafted, probably, in English , instead of taking the
trouble of seeing to it that it was written precisely in his native dialect, the Batanes. Moreover, Poncio's
signature on Exhibit A suggests that he is neither illiterate nor so ignorant as to sign document without
reading its contents, apart from the fact that Meonada had read Exhibit A to him and given him a copy
thereof, before he signed thereon, according to Meonada's uncontradicted testimony.
Then, also, defendants say in their brief:
The only allegation in plaintiff's complaint that bears any relation to her claim that there
has been partial performance of the supposed contract of sale, is the notation of the
sum of P247.26 in the bank book of defendant Jose Poncio. The noting or jotting down
of the sum of P247.26 in the bank book of Jose Poncio does not prove the fact that the
said amount was the purchase price of the property in question. For all we knew, the
sum of P247.26 which plaintiff claims to have paid to the Republic Savings Bank for the
account of the defendant, assuming that the money paid to the Republic Savings Bank
came from the plaintiff, was the result of some usurious loan or accomodation, rather
than earnest money or part payment of the land. Neither is it competent or satisfactory
evidence to prove the conveyance of the land in question the fact that the bank book
account of Jose Poncio happens to be in the possession of the plaintiff. (Defendants-
Appellees' brief, pp. 25-26).
How shall We know why Poncio's bank deposit book is in plaintiffs possession, or whether there is any
relation between the P247.26 entry therein and the partial payment of P247.26 allegedly made by plaintiff
to Poncio on account of the price of his land, if we do not allow the plaintiff to explain it on the witness
stand? Without expressing any opinion on the merits of plaintiff's claim, it is clear, therefore, that she is
entitled , legally as well as from the viewpoint of equity, to an opportunity to introduce parol evidence in
support of the allegations of her second amended complaint. (pp. 46-49, ROA, emphasis supplied).
(3) In his first decision of December 5, 1962 declaring null and void the sale in favor of the Infantes and ordering Poncio to
execute a deed of conveyance in favor of Carbonell, the trial judge found:
... A careful consideration of the contents of Exh. 'A' show to the satisfaction of the court that the sale of
the parcel of land in question by the defendant Poncio in favor of the plaintiff was covered therein and that
the said Exh. "a' was also executed to allow the defendant to continue staying in the premises for the
stated period. It will be noted that Exh. 'A' refers to a lot 'sold by him to me' and having been written
originally in a dialect well understood by the defendant Poncio, he signed the said Exh. 'A' with a full
knowledge and consciousness of the terms and consequences thereof. This therefore, corroborates the
testimony of the plaintiff Carbonell that the sale of the land was made by Poncio. It is further pointed out
that there was a partial performance of the verbal sale executed by Poncio in favor of the plaintiff, when
the latter paid P247.26 to the Republic Savings Bank on account of Poncio's mortgage indebtedness.
Finally, the possession by the plaintiff of the defendant Poncio's passbook of the Republic Savings Bank
also adds credibility to her testimony.The defendant contends on the other hand that the testimony of the
plaintiff, as well as her witnesses, regarding the sale of the land made by Poncio in favor of the plaintiff is
inadmissible under the provision of the Statute of Fraud based on the argument that the note Exh. "A" is
not the note or memorandum referred to in the to in the Statute of Fraud. The defendants argue that Exh.
"A" fails to comply with the requirements of the Statute of Fraud to qualify it as the note or memorandum
referred to therein and open the way for the presentation of parole evidence to prove the fact contained in
the note or memorandum. The defendant argues that there is even no description of the lot referred to in
the note, especially when the note refers to only one half lot. With respect to the latter argument of the
Exhibit 'A', the court has arrived at the conclusion that there is a sufficient description of the lot referred
to in Exh. 'A' as none other than the parcel of land occupied by the defendant Poncio and where he has his
improvements erected. The Identity of the parcel of land involved herein is sufficiently established by the
contents of the note Exh. "A". For a while, this court had that similar impression but after a more and
thorough consideration of the context in Exh. 'A' and for the reasons stated above, the Court has arrived
at the conclusion stated earlier (pp. 52-54, ROA, emphasis supplied).
52

(4) After re-trial on motion of the Infantes, the trial Judge rendered on January 20, 1965 another decision dismissing the
complaint, although he found
1. That on January 27, 1955, the plaintiff purchased from the defendant Poncio a parcel of land with an
area of 195 square meters, more or less, covered by TCT No. 5040 of the Province of Rizal, located at San
Juan del Monte, Rizal, for the price of P6.50 per square meter;
2. That the purchase made by the plaintiff was not reduced to writing except for a short note or
memorandum Exh. A, which also recited that the defendant Poncio would be allowed to continue his stay
in the premises, among other things, ... (pp. 91-92, ROA, emphasis supplied).
From such factual findings, the trial Judge confirms the due execution of Exhibit "A", only that his legal conclusion is that it
is not sufficient to transfer ownership (pp. 93-94, ROA).
(5) In the first decision of November 2, 1967 of the Fifth Division of the Court of Appeals composed of Justices Esguerra
(now Associate Justice of the Supreme Court), Gatmaitan and Mojica, penned by Justice Gatmaitan, the Court of Appeals
found that:
... the testimony of Rosario Carbonell not having at all been attempted to be disproved by defendants,
particularly Jose Poncio, and corroborated as it is by the private document in Batanes dialect, Exhibit A,
the testimony being to the effect that between herself and Jose there had been celebrated a sale of the
property excluding the house for the price of P9.50 per square meter, so much so that on faith of that,
Rosario had advanced the sum of P247.26 and binding herself to pay unto Jose the balance of the
purchase price after deducting the indebtedness to the Bank and since the wording of Exhibit A, the
private document goes so far as to describe their transaction as one of sale, already consummated
between them, note the part tense used in the phrase, "the lot sold by him to me" and going so far even
as to state that from that day onwards, vendor would continue to live therein, for one year, 'during which
time he will not pay anything' this can only mean that between Rosario and Jose, there had been a true
contract of sale, consummated by delivery constitutum possession, Art. 1500, New Civil Code; vendor's
possession having become converted from then on, as a mere tenant of vendee, with the special privilege
of not paying rental for one year, it is true that the sale by Jose Poncio to Rosario Carbonell
corroborated documentarily only by Exhibit A could not have been registered at all, but it was a valid
contract nonetheless, since under our law, a contract sale is consensual, perfected by mere
consent, Couto v. Cortes, 8 Phil 459, so much so that under the New Civil Code, while a sale of an
immovable is ordered to be reduced to a public document, Art. 1358, that mandate does not render an
oral sale of realty invalid, but merely incapable of proof, where still executory and action is brought and
resisted for its performance, 1403, par. 2, 3; but where already wholly or partly executed or where even if
not yet, it is evidenced by a memorandum, in any case where evidence to further demonstrate is
presented and admitted as the case was here, then the oral sale becomes perfectly good, and becomes a
good cause of action not only to reduce it to the form of a public document, but even to enforce the
contract in its entirety, Art. 1357; and thus it is that what we now have is a case wherein on the one hand
Rosario Carbonell has proved that she had an anterior sale, celebrated in her favor on 27 January,
1955, Exhibit A, annotated as an adverse claim on 8 February, 1955, and on other, a sale is due form in
favor of Emma L. Infante on 2 February, 1955, Exhibit 3-Infante, and registered in due form with title
unto her issued on 12 February, 1955; the vital question must now come on which of these two sales
should prevail; ... (pp. 74-76, rec., emphasis supplied).
(6) In the resolution dated October 30, 1968 penned by then Court of Appeals Justice Esguerra (now a member of this
Court), concurred in by Justices Villamor and Nolasco, constituting the majority of a Special Division of Five, the Court of
Appeals, upon motion of the Infantes, while reversing the decision of November 2, 1967 and affirming the decision of the
trial court of January 20, 1965 dismissing plaintiff's complaint, admitted the existence and genuineness of Exhibit "A", the
private memorandum dated January 27, 1955, although it did not consider the same as satisfying "the essential elements of
a contract of sale," because it "neither specifically describes the property and its boundaries, nor mention its certificate of
title number, nor states the price certain to be paid, or contrary to the express mandate of Articles 1458 and 1475 of the
Civil Code.
(7) In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his decision of November 2, 1967 as well
as his findings of facts therein, and reiterated that the private memorandum Exhibit "A", is a perfected sale, as a sale is
consensual and consummated by mere consent, and is binding on and effective between the parties. This statement of the
principle is correct [pp. 89-92, rec.].
III
53

ADEQUATE CONSIDERATION OR PRICE FOR THE SALE
IN FAVOR OF CARBONELL
It should be emphasized that the mortgage on the lot was about to be foreclosed by the bank for failure on the part of
Poncio to pay the amortizations thereon. To forestall the foreclosure and at the same time to realize some money from his
mortgaged lot, Poncio agreed to sell the same to Carbonell at P9.50 per square meter, on condition that Carbonell [1]
should pay (a) the amount of P400.00 to Poncio and 9b) the arrears in the amount of P247.26 to the bank; and [2] should
assume his mortgage indebtedness. The bank president agreed to the said sale with assumption of mortgage in favor of
Carbonell an Carbonell accordingly paid the arrears of P247.26. On January 27, 1955, she paid the amount of P200.00 to
the bank because that was the amount that Poncio told her as his arrearages and Poncio advanced the sum of P47.26,
which amount was refunded to him by Carbonell the following day. This conveyance was confirmed that same day, January
27, 1955, by the private document, Exhibit "A", which was prepared in the Batanes dialect by the witness Constancio
Meonada, who is also from Batanes like Poncio and Carbonell.
The sale did not include Poncio's house on the lot. And Poncio was given the right to continue staying on the land without
paying any rental for one year, after which he should pay rent if he could not still find a place to transfer his house. All
these terms are part of the consideration of the sale to Carbonell.
It is evident therefore that there was ample consideration, and not merely the sum of P200.00, for the sale of Poncio to
Carbonell of the lot in question.
But Poncio, induced by the higher price offered to him by Infante, reneged on his commitment to Carbonell and told
Carbonell, who confronted him about it, that he would not withdraw from his deal with Infante even if he is sent to jail The
victim, therefore, "of injustice and outrage is the widow Carbonell and not the Infantes, who without moral compunction
exploited the greed and treacherous nature of Poncio, who, for love of money and without remorse of conscience,
dishonored his own plighted word to Carbonell, his own cousin.
Inevitably evident therefore from the foregoing discussion, is the bad faith of Emma Infante from the time she enticed
Poncio to dishonor his contract with Carbonell, and instead to sell the lot to her (Infante) by offering Poncio a much higher
price than the price for which he sold the same to Carbonell. Being guilty of bad faith, both in taking physical possession of
the lot and in recording their deed of sale, the Infantes cannot recover the value of the improvements they introduced in the
lot. And after the filing by Carbonell of the complaint in June, 1955, the Infantes had less justification to erect a building
thereon since their title to said lot is seriously disputed by Carbonell on the basis of a prior sale to her.
With respect to the claim of Poncio that he signed the document Exhibit "A" under the belief that it was a permit for him to
remain in the premises in ease he decides to sell the property to Carbonell at P20.00 per square meter, the observation of
the Supreme Court through Mr. Chief Justice Concepcion in G.R. No. L-11231, supra, bears repeating:
... Incidentally, the allegation in Poncio's answer to the effect that he signed Exhibit A under the belief that
it 'was a permit for him to remain in the premises in the event that 'he decided to sell the property' to the
plaintiff at P20.00 a sq. m is, on its face, somewhat difficult to believe. Indeed, if he had not decided as
yet to sell that land to plaintiff, who had never increased her offer of P15 a square meter, there as no
reason for Poncio to get said permit from her. Upon the they if plaintiff intended to mislead Poncio, she
would have Exhibit A to be drafted, probably, in English, instead of taking the trouble of seeing to it that it
was written precisely in his native dialect, the Batanes. Moreover, Poncio's signature on Exhibit A suggests
that he is neither illiterate nor so ignorant as to sign a document without reading its contents, apart from
the fact that Meonada had read Exhibit A to him-and given him a copy thereof, before he signed thereon,
according to Meonada's uncontradicted testimony. (pp. 46-47, ROA).
As stressed by Justice Gatmaitan in his first decision of November 2, 1965, which he reiterated in his dissent from the
resolution of the majority of the Special Division. of Five on October 30, 1968, Exhibit A, the private document in the
Batanes dialect, is a valid contract of sale between the parties, since sale is a consensual contract and is perfected by mere
consent (Couto vs. Cortes, 8 Phil. 459). Even an oral contract of realty is all between the parties and accords to the vendee
the right to compel the vendor to execute the proper public document As a matter of fact, Exhibit A, while merely a private
document, can be fully or partially performed, to it from the operation of the statute of frauds. Being a all consensual
contract, Exhibit A effectively transferred the possession of the lot to the vendee Carbonell by constitutum
possessorium (Article 1500, New Civil Code); because thereunder the vendor Poncio continued to retain physical possession
of the lot as tenant of the vendee and no longer as knew thereof. More than just the signing of Exhibit A by Poncio and
Carbonell with Constancio Meonada as witness to fact the contract of sale, the transition was further confirmed when Poncio
agreed to the actual payment by at Carbonell of his mortgage arrearages to the bank on January 27, 1955 and by his
consequent delivery of his own mortgage passbook to Carbonell. If he remained owner and mortgagor, Poncio would not
have surrendered his mortgage passbook to' Carbonell.
54

IV
IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN THE MEMORANDUM EXHIBIT "A"
The claim that the memorandum Exhibit "A" does not sufficiently describe the disputed lot as the subject matter of the sale,
was correctly disposed of in the first decision of the trial court of December 5, 1962, thus: "The defendant argues that there
is even no description of the lot referred to in the note (or memorandum), especially when the note refers to only one-half
lot. With respect to the latter argument of the defendant, plaintiff points out that one- half lot was mentioned in Exhibit 'A'
because the original description carried in the title states that it was formerly part of a bigger lot and only segregated later.
The explanation is tenable, in (sic) considering the time value of the contents of Exh. 'A', the court has arrived at the
conclusion that there is sufficient description of the lot referred to in Exh. As none other than the parcel of lot occupied by
the defendant Poncio and where he has his improvements erected. The Identity of the parcel of land involved herein is
sufficiently established by the contents of the note Exh. 'A'. For a while, this court had that similar impression but after a
more and through consideration of the context in Exh. 'A' and for the reasons stated above, the court has arrived to (sic)
the conclusion stated earlier" (pp. 53-54, ROA).
Moreover, it is not shown that Poncio owns another parcel with the same area, adjacent to the lot of his cousin Carbonell
and likewise mortgaged by him to the Republic Savings Bank. The transaction therefore between Poncio and Carbonell can
only refer and does refer to the lot involved herein. If Poncio had another lot to remove his house, Exhibit A would not have
stipulated to allow him to stay in the sold lot without paying any rent for one year and thereafter to pay rental in case he
cannot find another place to transfer his house.
While petitioner Carbonell has the superior title to the lot, she must however refund to respondents Infantes the amount of
P1,500.00, which the Infantes paid to the Republic Savings Bank to redeem the mortgage.
It appearing that the Infantes are possessors in bad faith, their rights to the improvements they introduced op the disputed
lot are governed by Articles 546 and 547 of the New Civil Code. Their expenses consisting of P1,500.00 for draining the
property, filling it with 500 cubic meters of garden soil, building a wall around it and installing a gate and P11,929.00 for
erecting a b ' bungalow thereon, are useful expenditures, for they add to the value of the property (Aringo vs. Arenas, 14
Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia vs. Ayala de Roxas, 13 Phil. 45).
Under the second paragraph of Article 546, the possessor in good faith can retain the useful improvements unless the
person who defeated him in his possession refunds him the amount of such useful expenses or pay him the increased value
the land may have acquired by reason thereof. Under Article 547, the possessor in good faith has also the right to remove
the useful improvements if such removal can be done without damage to the land, unless the person with the superior right
elects to pay for the useful improvements or reimburse the expenses therefor under paragraph 2 of Article 546. These
provisions seem to imply that the possessor in bad faith has neither the right of retention of useful improvements nor the
right to a refund for useful expenses.
But, if the lawful possessor can retain the improvements introduced by the possessor in bad faith for pure luxury or mere
pleasure only by paying the value thereof at the time he enters into possession (Article 549 NCC), as a matter of equity, the
Infantes, although possessors in bad faith, should be allowed to remove the aforesaid improvements, unless petitioner
Carbonell chooses to pay for their value at the time the Infantes introduced said useful improvements in 1955 and 1959.
The Infantes cannot claim reimbursement for the current value of the said useful improvements; because they have been
enjoying such improvements for about two decades without paying any rent on the land and during which period herein
petitioner Carbonell was deprived of its possession and use.
WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE OF THE COURT OF APPEALS OF OCTOBER 30, 1968 IS
HEREBY REVERSED; PETITIONER ROSARIO CARBONELL IS HEREBY DECLARED TO HAVE THE SUPERIOR RIGHT TO THE
LAND IN QUESTION AND IS HEREBY DIRECTED TO REIMBURSE TO PRIVATE RESPONDENTS INFANTES THE SUM OF ONE
THOUSAND FIVE HUNDRED PESOS (P1,500.00) WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION; AND
THE REGISTER OF DEEDS OF RIZAL IS HEREBY DIRECTED TO CANCEL TRANSFER CERTIFICATE OF TITLE NO. 37842
ISSUED IN FAVOR OF PRIVATE RESPONDENTS INFANTES COVERING THE DISPUTED LOT, WHICH CANCELLED TRANSFER
CERTIFICATE OF TITLE NO. 5040 IN THE NAME OF JOSE PONCIO, AND TO ISSUE A NEW TRANSFER CERTIFICATE OF TITLE
IN FAVOR OF PETITIONER ROSARIO CARBONELL UPON PRESENTATION OF PROOF OF PAYMENT BY HER TO THE INFANTES
OF THE AFORESAID AMOUNT OF ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00).
PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL IMPROVEMENTS FROM THE LOT
WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION, UNLESS THE PETITIONER ROSARIO CARBONELL
ELECTS TO ACQUIRE THE SAME AND PAYS THE INFANTES THE AMOUNT OF THIRTEEN THOUSAND FOUR HUNDRED
TWENTY-NINE PESOS (P13,429.00) WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION. SHOULD
PETITIONER CARBONELL FAIL TO PAY THE SAID AMOUNT WITHIN THE AFORESTATED PERIOD OF THREE (3) MONTHS
55

FROM THE FINALITY OF THIS DECISION, THE PERIOD OF THREE (3) MONTHS WITHIN WHICH THE RESPONDENTS
INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL IMPROVEMENTS SHALL COMMENCE FROM THE EXPIRATION OF
THE THREE (3) MONTHS GIVEN PETITIONER CARBONELL TO PAY FOR THE SAID USEFUL IMPROVEMENTS.
WITH COSTS AGAINST PRIVATE RESPONDENTS.
G.R. No. L-18497 May 31, 1965
DAGUPAN TRADING COMPANY, petitioner,
vs.
RUSTICO MACAM, respondent.
Angel Sanchez for petitioner.
Manuel L. Fernandez for respondent.
DIZON, J.:
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 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
56

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)
The present case, however, does not fall within either, situation. Here the sale in favor of appellee was executedbefore 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 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.1wph1.t
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.
[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.
D E C I S I O N
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
57

claims of the defendant. Further, the sheriffs certificate of sale, Exhibit 4; 4-A; Sheriffs 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 Assessors 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 vendors title. They
found out that the property was mortgaged for P8,000 to a certain Mrs. Galupo and that the owners 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 Galupos 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 Assessors Office that the property was also declared for tax
purposes in the name of petitioner Naawan Community Rural Bank Inc. Records in the City Assessors Office revealed that,
for the lot covered by TCT No. T-50134, Alfredo Lumos T/D # 83324 bore the note: 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 sheriffs 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 thesheriffs 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.
58

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 courts decision.
Hence, this petition.
Petitioner raises the following issues:
I. WHETHER OR NOT THE SHERIFFS 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 SHERIFFS 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:
x x x. 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 sheriffs deed of final conveyance in the day book under Act
3344 should prevail over the later registration of private 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 sheriffs 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 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 already covered by the
Torrens System.
Petitioner also relies on the case of Bautista vs. Fule
[6]
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 sheriffs 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 sheriffs 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.
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]

59

Petitioner contends that the due and proper registration of the sheriffs 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.
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 vendors 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 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.
G.R. No. 85082 February 25, 1991
SPOUSES PASTOR VALDEZ and VIRGINIA VALDEZ, petitioners,
vs.
HONORABLE COURT OF APPEALS AND FELICIDAD VIERNES, FRANCISCO ANTE, AND ANTONIO ANTE,respondents.
Sumulong Law Offices for petitioners.
Antonio A. Ante for respondents Ante.
Jose A. Rico for respondent Viernes.

GANCAYCO, J.:p
This is a case of double sale of real property where both vendees registered the sales with the Register of Deeds and each
produced their respective owner's duplicate copy of the certificate of title to the property.
Spouses Francisco Ante and Manuela Ante were the registered owners of a parcel of land located at 20th Avenue, Murphy,
Quezon City, with an area of approximately 625.70 square meters as evidenced by Transfer Certificate of Title (TCT) No.
141582 issued by the Register of Deeds of Quezon City. Said spouses executed a special power of attorney in favor of their
son, Antonio Ante, a lawyer, authorizing him to execute any document conveying by way of mortgage or sale a portion or
60

the whole of said property, to receive payment and dispose of the same as he may deem fit and proper under the
premises.
1

Antonio Ante offered to sell the lot to Eliseo Viernes, who was occupying the same with the permission of Ante. Viernes,
however, turned down the offer as he did not have money. Antonio Ante then told Viernes that he will instead sell the
property to Pastor Valdez and Virginia Valdez.
2

Antonio Ante had the said lot subdivided into Lot A with an area of 280 square meters and Lot B with an area or 345.70
square meters, each lot having its corresponding technical description.
On June 15, 1980, Antonio Ante, as attorney in fact, executed a deed of sale of Lot A in favor of spouses Pastor Valdez and
Virginia Valdez, for and in consideration of the amount of P112,000.00
3

On February 12, 1987, in the same capacity, Antonio Ante sold to said Valdez spouses, Lot B for the amount of
P138,000.00.
4

The Valdez spouses demanded from Antonio Ante the delivery of the owner's duplicate copy of TCT No. 141582 covering
said two (2) lots. Ante promised them that he will deliver the title to them in a few days.
In the meanwhile petitioners started fencing the whole lot with cement hollow blocks in the presence of spouses Eliseo and
Felicidad Viernes. Except for the gate, it took them two weeks to finish fencing the whole lot. On said occasion the Viernes
spouses were informed by the Valdez spouses that they were fencing the same as they purchased the land from Antonio
Ante.
As Ante failed to deliver the owner's duplicate certificate of title demanded by the Valdez spouses, the latter filed their
affidavit of adverse claim over the subject lot with the Register of Deeds of Quezon City on September 6, 1982 as the
vendees of the property.
5

Upon inquiries made, the Valdez spouses learned that Antonio Ante had delivered the owner's duplicate certificate of title as
a collateral to one Dr. Camilo Garma of Purdue Street., Cubao Quezon City to secure his rentals in arrears in the amount of
P9,000.00. On September 13, 1983, upon the prodding of the Valdez spouses, Antonio Ante wrote to Dr. & Mrs. Garma to
request them to entrust the owner's duplicate copy of the title of the questioned lot to the Valdez spouses with the
assurance that Ante will pay his indebtedness to them.
6
The Garma spouses turned over to the Valdez spouses the said
owner's duplicate certificate of title after said Valdez spouses paid for the obligation of Antonio Ante to the Garma spouses.
The Valdez spouses then proceeded to register the two deeds of sale dated June 15, 1980 and February 12, 1981
7
with the
Register of Deeds of Quezon City by presenting the owner's duplicate copy of the title. They were, however, informed that
the said owner's duplicate certificate of title had been declared null and void per order of Judge Tutaan dated November 10,
1982. They also found out that spouses Francisco and Manuela Ante earlier filed a petition for the issuance of a new owner's
duplicate certificate of title and to declare null and void the lost owner's duplicate certificate of title.
The Valdez spouses also discovered that the Register of Deeds cancelled TCT No. 141582 and in lieu thereof issued TCT No.
293889 in the name of Felicidad Viernes on the basis of a deed of assignment of the same property dated February 17,
1982 executed by Antonio Ante in her favor.
When Virginia Valdez inquired from Antonio Ante why he executed the said deed of assignment when he had previously sold
the same lot to them, Ante replied that they could sue him in court.
Thus, the Valdezes filed their adverse claim over the lot covered by TCT No. 293889 in the name of Felicidad Viernes. They
filed the complaint in Barangay office of San Roque, Quezon City against Felicidad Viernes but as no amicable settlement
was reached, the Valdezes filed a complaint in the Regional Trial Court of Quezon City seeking among others, that the order
dated November 10, 1982 of the Court of First Instance of Quezon City authorizing the issuance of a new owner's duplicate
certificate of title in the name of Francisca Ante be declared null any void; that the deed of assignment dated February 17,
1982 executed by Antonio Ante in favor of Felicidad Viernes be cancelled and revoked; that TCT No. 293889 in the name of
Felicidad Viernes in the Register of Deeds of Quezon City be cancelled and declared null and void; that the Register of Deeds
of Quezon City be ordered to reinstate, revalidate and give full force and effect to the owner's duplicate copy of TCT No.
141582 in the name of spouses Francisco and Manuela Ante and declare petitioners as the true and lawful owners of the
property; ordering respondents Viernes and all persons claiming right under them to vacate the property, and to pay
damages and costs to petitioners.
61

After trial on the merits before which the Antes were declared in default, a decision was rendered by the trial court on April
9, 1986, the dispositive part of which reads as follows:
WHEREFORE, the complaint is dismissed as against defendants Vierneses, and defendants Antes are
hereby ordered to pay to plaintiff, as prayed for in their complaint, as follows:
Defendant Antes are hereby ordered to pay actual damages in the amount of P250,000.00 to plaintiffs.
Defendants Antes are hereby ordered to pay moral and exemplary damages in the amount of P15,000.00
and exemplary damages in the amount of P5,000.00.
Defendants Antes, are hereby ordered to pay P5,000.00 for attorney's fees.
SO ORDERED.
8

Not satisfied therewith the Valdezes interposed an appeal therefrom to the Court of Appeals wherein in due course a
decision was rendered on September 12, 1988, affirming in toto the appealed decision, with costs against the appellants.
Hence this petition for review on certiorari filed by the Valdezes wherein the following issues are raised:
1. Whether the Order dated November 10, 1983 declaring as null and void the Owner's copy of Transfer
Certificate of Title No. 141582 and ordering the issuance of a new Owner's copy of said title should be set
aside having been secured fraudulently and in bad faith by Francisco Ante and Antonio Ante who had
already sold the property to the spouses Pastor and Virginia Valdez and who knew fully well that the said
Owner's copy of said title has never been lost.
2. As between plaintiff-spouses Pastor and Virginia Valdez, petitioners in this case and defendant Felicidad
Viernes, one of the private respondents, who is entitled to the subject lot?
3. Who is entitled to damages?
9

The petition is impressed with merit.
Article 1544 of the Civil Code provides as follows:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is
good faith.
From the aforesaid provision of the law, it is clear that if movable property is sold to different vendees, the ownership shall
be transferred to the person who may have first taken possession thereof in good faith. However, should the subject of the
sale be immovable property, the ownership shall vest in the person acquiring it who in good faith first recorded it in the
registry of property. Should none of the vendees inscribe the sale in the Registry of Property, then the ownership of the
subject real property 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.
In this case, Lot A of the subject property was sold to the petitioners by Antonio Ante, as attorney-in-fact, on June 15,
1980, while Lot B was sold by the same attorney-in-fact to petitioners on February 12, 1981.
10
Since the owner's copy of
TCT No. 141582 was not delivered in due time to the petitioners by Antonio Ante despite his promise to deliver the same in
a few days, petitioners registered their notice of adverse claim over the said property on September 6, 1982 with the
Register of Deeds of Quezon City wherein it was duly annotated as follows:
62

PE-3004/T-141582 Affidavit of Adverse Claim
Filed under sworn statement of Pastor Valdez & Virginia C. Valdez claiming that they are the vendees of
the property described herein, but the title was not delivered (Doc. 253, Page 51, Bk. I of the Not. Pub. of
Q. City, Prudencio W. Valido)
Date of Instrument August 19, 1982
Date of Inscription Sept. 6, 1982
11

However, earlier, that is on February 17, 1982, a Deed of Assignment of the same property was executed by Antonio Ante
in favor of respondent Felicidad Viernes.
12
Ante filed a petition for the issuance of another owner's duplicate copy of TCT
No. 141582 with the then Court of First Instance of Quezon City on the ground that the owner's duplicate copy had been
lost. The petition was granted in an order dated November 10, 1983 declaring null and void the lost owner's duplicate copy
of the title and ordering the issuance of a new owner's duplicate copy of the title in favor of the Antes. Said owner's
duplicate copy was delivered by Ante to respondent Viernes who thereafter together with the Deed of Assignment presented
the same to the Register of Deeds of Quezon City for registration on November 11, 1982. Thus, on the basis thereof, TCT
No. 141582 was cancelled and TCT No. 293889 was issued in the name of respondent Felicidad Viernes.
Petitioners again filed an adverse claim this time on the property covered by TCT No. 293889 in the name of respondent
Viernes.
From the foregoing set of facts there can be no question that the sale of the subject lot to petitioners was made long before
the execution of the Deed of Assignment of said lot to respondent Viernes and that petitioners annotated their adverse claim
as vendees of the property as early as September 6, 1982 with the Register of Deeds of Quezon City. On the other hand the
deed of Assignment in favor of Viernes of the said lot was registered with the Register of Deeds of Quezon City only on
November 11, 1982 whereby a new title was issued in the name of Viernes as above stated.
The rule is clear that a prior right is accorded to the vendee who first recorded his right in good faith over an immovable
property.
13
In this case, the petitioners acquired subject lot in good faith and for valuable consideration from the Antes and
as such owners petitioners fenced the property taking possession thereof. Thus, when petitioners annotated their adverse
claim in the Register of Deeds of Quezon City they thereby established a superior right to the property in question as
against respondent Viernes.
14

On the other hand, respondent Viernes cannot claim good faith in the purchase of the subject lot and the subsequent
registration of the Deed of Assignment in her favor. Even before the petitioners purchased the lot from the Antes
respondent Viernes' husband was first given the option to purchase the same by Antonio Ante but he declined because he
had no money and so he was informed that it would be sold to petitioners. After petitioners purchased the lot they
immediately fenced the same with the knowledge and without objection of respondent Viernes and her husband and they
were informed by the petitioners about their purchase of the same. Moreover, when petitioners annotated their adverse
claim as vendees of the property with the Register of Deeds of Quezon City, it was effectively a notice to the whole world
including respondent Viernes.
Respondent Ante obviously in collusion with respondent Viernes sold the same property to Viernes which was earlier sold to
petitioners, by virtue of a subsequent Deed of Assignment. It was fraudulently made to appear that the owner's duplicate
copy of TCT No. 141582 was lost through a petition filed with the trial court to nullify the said owner's duplicate copy and
for the issuance of another owner's duplicate copy.
Unfortunately, such fraud was unmasked as early as July 14, 1981 when respondent Francisco Ante, in Civil Case No.
29617, filed an urgent motion for the issuance of a subpoena and subpoena duces tecum to require Paz Garma of 8 Purdue
Street, Cubao, Quezon City to produce before the court on July 16, 1981 at 2:00 o'clock p.m. at the scheduled pre-trial of
the case, the owner's duplicate copy of TCT No. 141582 issued by the Register of Deeds in the name of the Antes as the
same was entrusted to Paz Garma as a realtor for the proposed sale of the property which did not
materialize.
15
Respondent Viernes admitted in her answer dated January 7, 1984 that she knew of the filing in court of said
urgent motion and that the branch clerk of court issued the correspondingsubpoena.
16
Thus, respondent Ante, as well as
respondent Viernes, knew that the owner's duplicate copy of certificate of title No. 141582 was never lost, consequently the
filing of the petition in court for the issuance of a new one was attended with fraud and gross misrepresentation.
As a matter of fact, as hereinabove discussed, upon the urging of petitioners, respondent Antonio Ante wrote to the Garma
spouses to entrust the TCT to petitioners on September 30, 1983
17
and when petitioners paid the standing account of Ante
63

to the Garmas said owner's duplicate copy was delivered by the Garmas to the petitioners. The bad faith of respondents
Viernes and Ante is obvious.
Further, even while the notice of adverse claim of September 6, 1982 filed by the petitioners on TCT No. 141582 in the
Register of Deeds was still existing and had not been cancelled, on November 11, 1982 the Register of Deeds nevertheless
cancelled said TCT and issued a new title in favor of respondent Viernes. The annotation was not even carried over nor was
it ordered cancelled under the new title issued to respondent Viernes. The Register of Deeds and/or his subordinates
apparently yielded to the fraudulent design of respondents Viernes and Ante.
An examination of the decision of the trial court dated April 9, 1986 shows that there are no findings of facts to serve as
basis for its conclusions.
18
Section 14, Article VIII of the Constitution mandates as follows:
No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and
the law on which it is based.
No petition for review or motion for reconsideration of a decision shall be refused due course or denied
without stating the legal basis therefor. (Emphasis supplied.)
Section 1, Rule 36 of the Rules of Court also provides clearly as follows:
Sec. 1. Rendition of judgments. All judgments determining the merits of cases shall be in writing
personally and directly prepared by the judge, stating clearly and distinctly the facts and the law on which
it is based, signed by him, and filed with the clerk of the court. (Emphasis supplied.)
That is the reason why this Court, through Administrative Circular No. 1 dated January 28, 1988, reminded all judges "to
make complete findings of facts in their decisions, and scrutinize closely the legal aspects of the case in the light of the
evidence presented. They should avoid the tendency to generalize and form conclusions without detailing the facts from
which such conclusions are deduced."
Of course, when a petition for review or motion for reconsideration of a decision of the court is denied due course, or is
otherwise denied, it is not necessary that such findings of facts be made. However, the denial must state the legal basis
thereof.
In the present case, the three-paged decision of the trial court contained in the first two pages a statement of the
allegations of the pleadings of the parties and enumerates the witnesses presented and the exhibits marked during the trial.
Thereafter, the trial court arrived at the following conclusion:
After considering the evidence on record, this Court finds that plaintiff have failed to prove their case as
against defendant Felicidad Viernes, but proved their case against defaulted defendants Antes. The Court
finds that there is no sufficient proof of knowledge or bad faith on the part of defendant Vierneses, and on
the basis of existing jurisprudence, a third person who in good faith purchases and registers a property
cannot be deprived of his title as against plaintiff who had previously purchased same property but failed
to register the same.
19

This is not what is contemplated under the Constitution and the Rules as a clear and distinct statement of the facts on the
basis of which the decision is rendered. The foregoing one paragraph statement constitute a mere conclusion of facts and of
law arrived at by the trial court without stating the facts which serve as the basis thereof. Indeed the conclusion of fact
therein that petitioners had not registered the sale to them is traversed by the records which show on the contrary,
petitioners earlier registered the sale to them. The court statement in the decision that a party has proven his case while
the other has not, is not the findings of facts contemplated by the Constitution and the rules to be clearly and distinctly
stated.
Unfortunately, the appellate court overlooked this fatal defect in the appealed decision. It merely adopted the alleged
findings of facts of the trial court. Although it made some findings on how the deed of assignment in favor of respondent
Viernes came about, it is far from complete and is hardly a substantial compliance with the mandate aforestated.
As it is now, this Court has before it a challenged decision that failed to state clearly and distinctly the facts on which it is
predicated. This Court has said again and again that it is not a trier of facts and that it relies, on the factual findings of the
lower court and the appellate court which are conclusive. But as it is, in this case, the Court has to wade through the
64

records and make its own findings of facts, rather than further delay the disposition of the case by remanding the records
for further proceedings.
Hence, the appealed decision should be struck down.
WHEREFORE, the petition is GRANTED. The appealed decision of the appellate court dated September 12, 1988 is hereby
SET ASIDE and another judgment is hereby rendered declaring the order of the trial court dated November 10, 1982 null
and void and reinstating the owner's duplicate copy of TCT No. 141582 in the possession of the petitioners; declaring the
petitioners to have the superior right to the property in question and to be the true and lawful owners of the same; directing
the Register of Deeds of Quezon City to cancel TCT No. 293889 in the name of respondent Felicidad Viernes and to issue a
new title in favor of petitioners spouses Pastor and Virginia Valdez upon the presentation of the owner's duplicate copy of
TCT No. 141582; directing respondent Felicidad Viernes and other persons claiming rights under her residing in the
premises of the land in question to vacate the same immediately and to remove whatever improvement she has placed in
the premises; and ordering private respondents to jointly and severally pay the petitioners the amounts of P15,000.00 as
moral damages, P5,000.00 exemplary damages, and P20,000.00 as attorney's fees. The docket fees for the amount of
damages and attorney's fees awarded to the petitioners, if not yet duly paid, shall constitute a prior lien in favor of the
government, before the satisfaction of the judgment in favor of the petitioners. Costs against private respondents.
SO ORDERED.
Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.
G.R. No. 83432 May 20, 1991
RADIOWEALTH FINANCE COMPANY, petitioner,
vs.
MANUELITO S. PALILEO, respondent.
Rolando A. Calang for petitioner.
Sisenando Villaluz, Sr. for respondent.

GANCAYCO, J.:p
If the same piece of land was sold to two different purchasers, to whom shall ownership belong? Article 1544 of the Civil
Code provides that in case of double sale of an immovable property, ownership shall be transferred: (1) to the person
acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good
faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good
faith. There is no ambiguity regarding the application of the law with respect to lands registered under the Torrens System.
Section 51 of Presidential Decree No. 1529 (amending Section 50 of Act No. 496 clearly provides that the act of registration
is the operative act to convey or affect registered lands insofar as third persons are concerned. Thus, 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 certificate of title.
1
Following this
principle, this Court has time and again held that a purchaser in good faith of registered land (covered by a Torrens Title)
acquires a good title as against all the transferees thereof whose right is not recorded in the registry of deeds at the time of
the sale.
2

The question that has to be resolved in the instant petition is whether or not the rule provided in Article 1544 of the Civil
Code as discussed above, is applicable to a parcel of unregistered land purchased at a judicial sale. To be more specific, this
Court is asked to determine who, as between two buyers of unregistered land, is the rightful ownerthe first buyer in a
prior sale that was unrecorded, or the second buyer who purchased the land in an execution sale whose transfer was
registered in the Register of Deeds.
The facts as found by the Court of Appeals are as follows:
On April 13, 1970, defendant spouses Enrique Castro and Herminia R. Castro sold to plaintiff-appellee
Manuelito Palileo (private respondent herein), a parcel of unregistered coconut land situated in Candiis,
Mansayaw, Mainit, Surigao del Norte. The sale is evidenced by a notarized Deed of Absolute Sale (Exh.
65

"E"). The deed was not registered in the Registry of Property for unregistered lands in the province of
Surigao del Norte. Since the execution of the deed of sale, appellee Manuelito Palileo who was then
employed at Lianga Surigao del Sur, exercised acts of ownership over the land through his mother Rafaela
Palileo, as administratrix or overseer. Appellee has continuously paid the real estate taxes on said land
from 1971 until the present (Exhs. "C" to "C-7", inclusive).
On November 29, 1976, a judgment was rendered against defendant Enrique T. Castro, in Civil Case No.
0103145 by the then Court of First Instance of Manila, Branch XIX, to pay herein defendant-appellant
Radiowealth Finance Company (petitioner herein), the sum of P22,350.35 with interest thereon at the rate
of 16% per annum from November 2, 1975 until fully paid, and the further sum of P2,235.03 as attorney's
fees, and to pay the costs. Upon the finality of the judgment, a writ of execution was issued. Pursuant to
said writ, defendant provincial Sheriff Marietta E. Eviota, through defendant Deputy Provincial Sheriff
Leopoldo Risma, levied upon and finally sold at public auction the subject land that defendant Enrique
Castro had sold to appellee Manuelito Palileo on April 13,1970. A certificate of sale was executed by the
Provincial Sheriff in favor of defendant- appellant Radiowealth Finance Company, being the only bidder.
After the period of redemption has (sic) expired, a deed of final sale was also executed by the same
Provincial Sheriff. Both the certificate of sale and the deed of final sale were registered with the Registry of
Deeds.
3

Learning of what happened to the land, private respondent Manuelito Palileo filed an action for quieting of title over the
same. After a trial on the merits, the court a quo rendered a decision in his favor. On appeal, the decision of the trial court
was affirmed. Hence, this petition for review on certiorari.
In its petition, Radiowealth Finance Company presents the following errors:
1. THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE DEED OF ABSOLUTE SALE (EXHIBIT B)
ALLEGEDLY EXECUTED BY ENRIQUE CASTRO IN FAVOR OF APPELLEE MANUELITO PALILEO, WAS
SIMULATED OR FICTITIOUS.
2. THE COURT OF APPEALS ERRED IN NOT FINDING APPELLEE MANUELITO PALILEO AS ADMINISTRATOR
ONLY OF THE DISPUTED PROPERTY; AND
3. THE COURT OF APPEALS ERRED IN NOT FINDING DEFENDANT-APPELLANT RADIOWEALTH FINANCE
COMPANY OWNER OF THE DISPUTED PROPERTY BY REASON OF THE CERTIFICATE OF SALE AND THE
DEED OF FINAL SALE WHICH WERE ALL REGISTERED IN THE REGISTER OF DEEDS, HENCE, SUPERIOR TO
THAT OF THE DEED OF SALE IN POSSESSION OF MANUELITO PALILEO, FOR BEING NOT REGISTERED.
4

As regards the first and second assigned errors, suffice it to state that findings of fact of the Court of Appeals are conclusive
on this Court and will not be disturbed unless there is grave abuse of discretion. The finding of the Court of Appeals that the
property in question was already sold to private respondent by its previous owner before the execution sale is evidenced by
a deed of sale. Said deed of sale is notarized and is presumed authentic. There is no substantive proof to support
petitioner's allegation that the document is fictitious or simulated. With this in mind, We see no reason to reject the
conclusion of the Court of Appeals that private respondent was not a mere administrator of the property. That he exercised
acts of ownership through his mother also remains undisputed.
Going now to the third assigned error which deals with the main issue presented in the instant petition, We observe that the
Court of Appeals resolved the same in favor of private respondent due to the following reason; what the Provincial Sheriff
levied upon and sold to petitioner is a parcel of land that does not belong to Enrique Castro, the judgment debtor, hence the
execution is contrary to the directive contained in the writ of execution which commanded that the lands and
buildings belonging to Enrique Castro be sold to satisfy the execution.
5

There is no doubt that had the property in question been a registered land, this case would have been decided in favor of
petitioner since it was petitioner that had its claim first recorded in the Registry of Deeds. For, as already mentioned earlier,
it is the act of registration that operates to convey and affect registered land. Therefore, abona fide purchaser of a
registered land at an execution sale acquires a good title as against a prior transferee, if such transfer was unrecorded.
However, it must be stressed that this case deals with a parcel of unregistered land and a different set of rules applies. We
affirm the decision of the Court of Appeals.
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
66

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
6
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 35, Rule 39
of the Revised Rules of Court,
7
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 sheriffs 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, the Court of Appeals correctly held that the execution sale of the 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.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. CV No. 10788 is hereby AFFIRMED.
No costs.
SO ORDERED.
Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.
[G.R. No. 138201. September 12, 2000]
FRANCISCO BAYOCA, NONITO DICHOSO and SPOUSES PIO DICHOSO and DOLORES DICHOSO and ERWIN
BAYOCA, petitioners, vs. GAUDIOSO NOGALES represented by HENRY NOGALES, respondent.
D E C I S I O N
GONZAGA-REYES, J.:
Before us is a petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the December 24, 1998
Decision of the Court of Appeals,
[1]
which disposed as follows:
IN THE LIGHT OF ALL THE FOREGOING, Appellants appeal is DISMISSED. The Decision appealed from is AFFIRMED. With
costs against the Appellants.
SO ORDERED.
[2]

The decretal portion of the decision of the trial court affirmed by the Court of Appeals, reads:
ACCORDINGLY, judgment is hereby rendered:
(1) Declaring the plaintiff the absolute owner and entitled to the peaceful possession of the land in question
described in Paragraph 2 of the Amended Complaint, and for the defendants to refrain from disturbing the
plaintiff in his peaceful possession thereof;
(2) Ordering defendants Francisco Bayoca and Nonito Dichoso to remove their respective houses from the
premises in question within ten (10) days after the Decision becomes final and executory;
(3) Ordering defendant Erwin Bayoca to reconvey to the plaintiff TCT No. T-27220, and defendant Nonito
Dichoso, who substituted defendants Spouses Pio Dichoso and Lourdes Domasig as party-defendants, to
reconvey OCT No. P-11918 to the plaintiff within fifteen (15) days after the Decision becomes final and
67

executory, failing in which, the Clerk of Court is ordered to execute the Deed of Reconveyance in favor of the
plaintiff;
(4) Ordering the defendants to proportionally reimburse plaintiff the produce of the property in question, at 400
kilos of copra every 45 days, or its equivalent in money, from 1992, until they have surrendered or turned
over the possession of the land in question to the plaintiff;
(5) Ordering the defendants jointly and severally to pay plaintiff the amount of P8,000.00 as attorneys fees, and
the further sums of P3,000.00 as incidental litigation expenses, and
(6) To pay the costs.
SO ORDERED.
[3]

Also assailed by petitioners is the April 8, 1999 Resolution of the Court of Appeals, which denied their Motion for
Reconsideration.
[4]

In essence, the petition poses a challenge against the appellate courts conclusion that the first sale of a parcel of land
to respondent Gaudioso Nogales prevails over the second sale of the said property to petitioners Francisco Bayoca, Nonito
Dichoso and spouses Pio and Dolores Dichoso. As such, there is no dispute as to the following facts found by the Court of
Appeals:
When the Spouses Juan Canino and Brigida Domasig died intestate, before 1947, they were survived by their legitimate
children, namely, Preciosa Canino, married to Emilio Deocareza, Consolacion Canino, Dolores Canino, Isidra Canino and
Tomas Canino who inherited, from their father, a parcel of land, located in Prieto-Diaz, Sorsogon covered by Tax Declaration
No. 9659, in an assessed value of P500.00, with the following boundary owners abutting the same:
North - Vicente Dino;
West - Genaro Menor and Roman Bayle
East - Pedro Vargas and Fely Detablan
South - Bartolome Domalaon
Each of the heirs, therefore, had a pro indiviso share of the property, Tomas Canino, being then still a minor at 17 years of
age, was under the care and custody of his sister, Preciosa Canino Deocareza. She and her husband, Emilio Deocareza, and
Tomas Canino stayed in the said property.
On December 15, 1947, Preciosa Canino executed an unnotarized Deed of Sale of Real Property with Right of
Repurchase over a portion of the above property, with an area of 5,000 square meters, in favor of her sister-in-law, Julia
Deocareza, the sister of her husband, Emilio Deocareza, for the price of P200.00 (Exhibit K). Preciosa Canino reserved
her right to repurchase the said property, within five (5) years from the execution of the said deed.Dolores and Maria
Canino affixed the imprints of their thumbmarks on the deed (Exhibits K-1 and K-2). On February 2, 1948, Tomas
Canino, who was then 17 years of age and Preciosa Canino, who was then taking care of her brother, executed
an unnotarized Deed of Sale of Real Property with Right of Repurchase covering a portion of said property, with
an area of 5,330 square meters, in favor of Julia Deocareza, for the price of P60.00, with a right to repurchase the said
lot for the said amount, within one (1) year from the execution of said deed (Exhibit I). On August 29, 1948, Preciosa
Canino executed another unnotarized Deed of Sale of Real Property with Right to Repurchase over the entirety of
the property, in favor of Julia Deocareza, for the price of P270.00, with a right to repurchase the said lot for the same price,
within two (2) years from the execution thereof. Consolacion Canino affixed her thumbmark on said deed (Exhibit J-
1). Subsequently, Tax Declaration No. 9659 was cancelled by Tax Declaration No. 189, under the name of Juan Canino.
On January 31, 1951, Preciosa Canino executed a notarized Deed of Sale of Real Property with Right to
Repurchase over the entirety of the aforementioned property, in favor of Julia Deocareza, for the price of P800.00, with a
right to repurchase the same, for the same amount, within one (1) year from the execution of said deed, (Exhibit
H). The parties covenanted, under said deed, that the property described therein was unencumbered and to register the
deed under Act 3344. On the basis of said deed, Tax Declaration No. 3489 was issued over the property, under the name of
Julia Deocareza. The latter allowed her brothers, Ambrosio Deocareza, married to Olympia Dichoso, and Emilio Deocareza,
the husband of Preciosa Canino, to occupy the said property. However, Preciosa Canino failed to repurchase the property. In
the meantime, Gaudioso Nogales, the Appellee in the present recourse, acquired the property abutting the property of
Preciosa Canino and her siblings, on the east, and installed a tenant thereon.
68

On April 29, 1968, Julia Deocareza executed an unnotarized Compromise Agreement, in the local dialect, in favor of the
Appellee, whereby she sold to the Appellee, for the price of P3,500.00, the aforesaid property she earlier purchased from
Preciosa Canino, with an area of 21,080 square meters (Exhibit L) with the following boundary owners abutting the
property:
North - Vicente Dino
East - Felix Detablan and Pedro Vargas
(now Gaudioso Nogales)
West - Genaro Donor and Roman Balle
(now Gaudioso Nogales)
South - Bartolome Dumalaon
(Exhibit L)
She promised, in said deed, to have her brothers, Ambrosio and Emilio Deocareza, and their families, vacate the said
property. On the same day, Julia Deocareza executed a Deed of Absolute Sale of Realty Property in favor of the
Appellee over the aforesaid parcel of land for the price of P3,000.00 (Exhibit G). The aforesaid deed was registered with
the Register of Deeds on May 3, 1968, (Exhibit G-1). For a time, the Appellee was abroad. However, when the Appellee
demanded that Ambrosio and Emilio Deocareza and their families vacate the property, Emilio Deocareza and Preciosa
Deocareza refused. The Appellee forthwith filed a complaint, sometime in 1975, with the Regional Trial Court of Sorgoson,
against Emilio Deocareza, and Julia Deocareza for Recovery of Possession of property entitled Gaudioso
Nogales versus Emilio Deocareza, et al. Civil Case No. 975. In his Amended Complaint, the Appellee impleaded
Preciosa Canino, as party defendant, Julia Deocareza later filed a cross-claim against Preciosa Canino over the property.
On February 7, 1983, the Regional Trial Court promulgated a Decision, in Civil Case No. 975 in favor of the Appellee and
against Emilio Deocareza, et al., the decretal portion of which reads as follows:
ACCORDINGLY, judgment is hereby rendered (1) ordering the defendants Julia Deocareza and the spouses Emilio
Deocareza and Preciosa Canino to deliver possession of the land to plaintiff Gaudioso Nogales; (2) ordering the defendants
spouses Emilio Deocareza and Preciosa Canino to pay the plaintiff the sum of P1,500.00 every 45 days as actual damages
from the filing of the second amended complaint on November 12, 1976 until possession of the land is delivered to the
plaintiff and to pay attorneys fees to the plaintiff in the sum of P500.00.
Costs against the defendants spouses Emilio Deocareza and Preciosa Canino.
SO ORDERED. (Exhibit B)
Emilio Deocareza, et al., interposed an appeal, from the said Decision, to this Court, which appeal, was docketed as CA-G.R.
NO. 15135-CV. However, the Appellants therein belatedly paid the docketing fee for their appeal. On March 23, 1988, this
Court promulgated a Resolution dismissing the appeal. The Resolution of this Court became final and executory on June 2,
1988 (Exhibit C).
After the remand of the records of said case to the Court a quo, a Writ of Execution was issued by the Court a quo,
dated, February 20, 1992 (Exhibit D). Emilio Deocareza and Preciosa Deocareza vacated the property. The Appellee,
through Henry Nogales, executed an Acknowledgment acknowledging actual possession of the aforesaid parcel of land
from the Sheriff (Exhibit F). However, the Appellee discovered that Francisco Bayoca, Nonito Dichoso and the Spouses
Pio Dichoso and Dolores Dichoso, the Appellants in the present recourse, claimed ownership of portion of the said
property. The Appellant Nonito Dichoso had constructed a nipa hut on a portion of the property. The Appellant Francisco
Bayoca likewise constructed his house thereon.
In 1958, Tomas Canino, who was then about twenty-eight years old, died intestate, without any issue. His pro-indiviso
share in the property was inherited, in equal shares, by his four (4) surviving sisters, namely, Preciosa Canino, Isabel
Canino, Consolacion Canino and Dolores Canino who, on June 2, 1971 executed a Deed of Partition of Real Property,
declaring that, although, under Tax Declaration No. 9659, the property covering an area of 21,000 square meters that, as
early as 1950, they had verbally partitioned the said property, with an area of 29,645 square meters, into five (5) parcels,
69

namely Parcels A to E and adjudicated unto each of them, in equal shares of 5,090 square meters, the said
parcels as follows:
Parcel A - Consolacion Canino;
Parcel B - Isidra Canino;
Parcel C - Tomas Canino;
Parcel D - Preciosa Canino;
Parcel E - Dolores Canino;
(Exhibit G)
However, neither Julia Deocareza nor the Appellee conformed to the Deed of Partition.
Preciosa Canino and her siblings expressly declared, in said deed, that the property was declared for taxation purposes
under the name of Julia Deocareza under Tax Declaration No. 3894 (Exhibit 16).
On the basis of said deed, Isidra Canino declared Parcel B, for taxation purposes, under her name, with Tax Declaration
No. 6094 effective 1972 (Exhibit 2), which cancelled, in part, Tax Declaration No. 3489, under the name of Julia
Deocareza. On June 21, 1971, Isidra Canino executed a Deed of Absolute Sale over Parcel D, with an area of 5,929
square meters, in favor of Pio Dichoso and Lourdes Donor, two (2) of the Appellants in the present recourse, for the price of
P750.00 (Exhibit 1). Isidra Canino showed to the vendees a copy of the Deed of Partition of Real Property (Exhibit
6). The vendees declared the said property, under their names, for taxation purposes, under Tax Declaration No. 05079
(Exhibit 3) and paid the realty taxes due thereon.
In the interim, a cadastral survey was conducted in Prieto Diaz. Parcel A, adjudicated to Consolacion Canino, under the
Deed of Partition was identified, as Lot 676, with an area of more or less 5,929 square meters; Parcel B,adjudicated to
Isidra Canino, was identified as Lot 670; Parcel C, adjudicated to Tomas Canino, was identified as Lot 668; Parcel
D adjudicated to Preciosa Canino, was identified as Lot 669 but with an area of 6,550 square meters, covered by Tax
Declaration No. 396; and Parcel E, adjudicated to Dolores Canino, was identified as Lot 667.
On July 6, 1971, Isidra Canino, Dolores Canino and Consolacion Canino, executed a Deed of Absolute Sale of Real
Property over a portion of Lot 668 earlier adjudicated to Tomas Canino, under the Deed of Partition of Real Property,
with an area of 3,374 square meters, in favor of Preciosa Canino for the price of P500.00 (Exhibit 13).
In the meantime, Pio Diochoso and Lourdes Donor applied for the issuance of a Free Patent over Lot 670, the property
they purchased from Isidra Canino. On July 13, 1975, they were issued Free Patent No. V-3-0770, over the property, on the
basis of which Original Certificate of Title No. P-11918 was issued, under their names, by the Register of Deeds (Exhibit
4).
On April 17, 1975, Preciosa Canino applied for and was issued Free Patent No. V-30829, over a portion of Lot 668, with
an area of 2,800 square meters. On the basis of said Patent, Original Certificate of Title No. P-25402 was issued under the
name of Preciosa Canino, on April 17, 1975, by the Register of Deeds.
On June 20, 1979, Preciosa Canino executed a Deed of Absolute Sale, over Lot 669, with an area of 6,550 square
meters, in favor of the Appellant Erwin Bayoca, for the price of P4,000.00 (Exhibit 8). On the basis of said deed, Tax
Declaration No. 05135 was issued, under the name of Erwin Bayoca, over said property (Exhibit 9).
On January 18, 1983, Consolacion Canino executed a Deed of Absolute Sale, over Lot 671, with an area of 5,929
square meters, in favor of Nonito Dichoso, one of the Appellants in the present recourse, and a son of the Spouses Pio
Dichoso and Lourdes Dichoso, for the price of P1,300.00 (Exhibit 5).
On August 3, 1987, Dolores Canino executed a Deed of Absolute Sale of Real Property, over Lot 667, with an area of
7,090 square meters, in favor of Appellant Francisco Bayoca, for the price of P5,000 (Exhibit 14). On thebasis of said
deed, Francisco Bayoca declared the said property, for taxation purposes, under his name (Exhibit 15).
70

On October 13, 1989, Preciosa Canino executed a Deed of Absolute Sale of Real Property, over the parcel of lot
covered by Original Certificate of Title No. P-25402, in favor of Appellant Erwin Bayoca, the son of the Appellant Francisco
Bayoca, for the price of P5,000.00 (Exhibit 10). On the basis of said deed, Original Certificate of Title No. P-25402 was
cancelled and Transfer Certificate of Title No. 27220 was issued under the name of Appellant Erwin Bayoca (Exhibit
11). The latter forthwith declared the said property, under his name, for taxation purposes (Exhibit 12).
On September 8, 1992, the Appellee filed a complaint against the Appellants Francisco Bayoca, Nonito Dichoso and the
Spouses Pio Dichoso and Dolores Dichoso for Accion Reinvindicatoria with Damages, with the Regional Trial Court of
Sorsogon. On February 15, 1994, Pio Dichoso died and was substituted by his son, the Appellant Nonito Dichoso. With prior
leave of Court, the Appellees filed an Amended Complaint, impleading Lourdes Dichoso and Erwin Bayoca, as parties
defendants, praying that:
WHEREFORE, it is most respectfully prayed of the Honorable Court that pending hearing on the merits issue a writ of
preliminary injunction, or in the alternative, to appoint a receiver in the premises in question so that the produce be
deposited in court to be disposed of after the termination of this case, and that after due hearing, judgment issue:
(a) Making the injunction permanent;
(b) Declaring plaintiff the absolute owner of the land in question and entitled to the peaceful possession thereof;
(c) Ordering the defendants to vacate the premises within 10 days after the decision has become final, and to perpetually
refrain from disturbing plaintiff in his peaceful possession thereof;
(d) Ordering the defendants to pay plaintiff whatever produce they may have gathered from the land in question until they
have vacated or turned over the possession to the plaintiff;
(e) Ordering defendants Erwin Bayoca, Pio Dichoso and Lourdes Dichoso to reconvey Transfer Certificate of Title No. T-
27220 and Original Certificate of Title No. P-11918 to the plaintiff, and should the said defendants refuse to reconvey the
said certificates of title, the Clerk of Court be ordered to execute the deed of reconveyance in favor of the plaintiff within 15
days the decision becomes final and executory;
(f) Ordering defendants jointly and severally to pay plaintiff the amount of P12,000.00 as attorneys fees, plus P500.00 for
every appearance of his lawyer in court, P3,000.00 as incidental litigation expenses, and to pay the costs.
Plaintiff further prays for such other relief just and equitable in the premises. (at pages 104-105, Records)
The Appellee alleged, in his complaint, that he purchased the said property, with an area of 21,000 square meters, from
Julia Deocareza, under the deed, Exhibit G, and thus acquired ownership thereof and that the Appellants respectively
purchased portions of said property, in bad faith and through fraud, the Appellants knowing of the pendency of Civil Case
No. 975, before the Regional Trial Court, involving the said property. The Appellee further alleged that the Deed of
Partition of Real Property as well as the deeds of sale executed by Preciosa Canino, Consolacion Canino, Isidra Canino
and Dolores Canino in favor of the Appellants respectively, and Free Patent Nos. V-3-0770 and V-30829 in favor of the
Spouses Pio Dichoso and Lourdes Dichoso and Preciosa Canino, respectively, were fraudulent and that the said Free Patent
and Original Certificates of Title P-25402 and P-11918 issued on the basis thereof and derivative titles therefrom were null
and void. The Appellants, in their Answer to the complaint, alleged, inter alia that Preciosa Canino and her siblings
acquired just title over the property when they executed their Deed of Partitition of Real Property and conveyed titles
to the vendees, the Appellants in the present recourse, as buyers in good faith.
[5]

As mentioned at the outset, after hearing, the trial court ruled against herein petitioners Francisco Bayoca, Nonito
Dichoso, Erwin Bayoca, and spouses Pio and Dolores Dichoso. The trial court found and declared, under its Decision dated
March 12, 1996, that Gaudioso Nogales had acquired ownership over the property on the basis of the Compromise
Agreement (Exhibit I) and the Deed of Absolute Sale, (Exhibit G) executed by Julia Deocareza, who had
previously acquired ownership over the said property on the basis of the deeds, (Exhibits H, I, J and K) as
confirmed by the trial court under its Decision, Exhibit G. Hence, the sales of portions of said property by Preciosa
Canino, who was no longer the owner thereof, to herein petitioners were null and void. The trial court declared further that
petitioners were purchasers in bad faith.
On appeal, the Court of Appeals affirmed in toto the RTC ruling. Hence, this recourse to this Court.
In their Memorandum, petitioners raise the following issues:
[6]

71

WHETHER OR NOT THE PETITIONERS CLAIM OF OWNERSHIP BY VIRTUE OF THEIR RESPECTIVE TITLE ISSUED AND/OR
REGISTRATION WILL PREVAIL OVER THAT OF RESPONDENT?
WHETHER OR NOT THE REGIONAL TRIAL COURT HAS JURISDICTION TO TRY THE SAME CASE WHEN THE SAME LAND
SUBJECT OF THE CASE IS A PUBLIC LAND?
The petition lacks merit.
In fine, the main issue is who has the superior right to the parcel of land sold to different buyers at different times by
its former owners.
There is no question from the records that respondent Nogales was the first to buy the subject property from Julia
Deocareza, who in turn bought the same from the Canino brothers and sisters. Petitioners, however, rely on the fact that
they were the first to register the sales of the different portions of the property, resulting in the issuance of new titles in
their names. Petitioners insist that they have a better right over respondent Nogales considering the following
circumstances: (1) Pio and Lourdes Dichoso were issued Free Patent No. V-3-0770 over Lot 670, the property they
purchased from Isidra Canino on the basis of which Original Certificate of Title No. P-11918 was issued under their names
by the Register of Deeds; (2) Erwin Bayoca acquired the property covered by OCT No. P-25402 covering a portion of Lot
668 from Preciosa Canino, on the basis of which TCT No. 27220 was issued in his name. As far as Nonito Dichoso and
Francisco Bayoca are concerned they declared the properties they acquired, respectively, from Consolacion Canino and
Dolores Canino, for taxation purposes. Petitioners also assail the conclusion of the Court of Appeals that they were
purchasers in bad faith of the subject lots.
Article 1544 of the Civil Code governs the preferential rights of vendees in cases of multiple sales, as follows:
[7]

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.
in the absence thereof, to the person who presents the oldest title, provided there is good faith.
Following the above-quoted law, in the double sales of immovables, ownership is transferred in the order hereunder
stated to -
(a) the first registrant in good faith;
(b) the first in possession in good faith; and
(c) the buyer who presents the oldest title in good faith.
[8]

Based on the foregoing, to merit protection under Article 1544, second paragraph, of the Civil Code, the second buyer
must act in good faith in registering the deed.
[9]
Thus, it has been held that in cases of double sale of immovables, what
finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but whether or not said
second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of the property
sold.
[10]

Good faith on petitioners part, as the second buyers of the subject property, was not found by the appellate court,
thus its decision adverse to them. The Court of appeals ratiocinated thus:
Appellants insistence that they were purchasers in good faith is an exercise in futility. What, to our mind, is decisive of the
issue of who, between the Appellee, on the one hand, and the Appellants, on the other, is the owner of the property is
Article 1544 of the New Civil Code x x x:
x x x x x x x x x.
After all, the Regional Trial Court of Sorsogon had already decreed, under its Decision (Exhibit B) which the appellants did
not assail, that the Appellee was the owner of the property under the Deed of Absolute Sale (Exhibit G) executed, by
Julia Deocareza, in his favor.
The evidence on record shows that, on January 31, 1951, Preciosa Canino and her siblings sold the property in favor of Julia
Deocareza under the Deed of Sale with Right to Repurchase (Exhibit H), the culmination of the deeds of sale with
72

right to repurchase (Exhibits I, J and K). the latter, in turn, sold the said property to the Appellee under the Deed
of Absolute Sale, on April 29, 1968, (Exhibit G), Julia Deocareza obliging herself to cause the eviction of her brothers,
Ambrosio and Emilio Deocareza and their families from the property, who were at the time in possession of the property by
her and Appellees tolerance (Exhibit L). The appellee had the saidDeed of Absolute Sale (Exhibit G) registered
with the Registry of Deeds and entered in the Registry Records as Entry No. 47052, page 51, Volume 14 of the Registry
Record under Act 3344 (Exhibit G-1). The registration of the deed, under Act 3344, constitutes constructive notice of
said sale to the whole world:
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)." (Spouses Honorio Santiago versus Court of Appeals, et al., 247 SCRA 336, at
page 346)
On the other hand, the sales of portions of the property to the Appellants, by Preciosa Canino and her siblings, occurred
during the period from June 21, 1971 to October 13, 1989 or long after the Appellee had purchased the property (Exhibits
1, 13, 8, 5, 14, and 10). Inscrutably, too the sale to the Appellee was registered with the Registry of
properties much earlier than the registration, if any, of the sales to the Appellants and that the Appellee took possession of
the said property much earlier than the Appellants considering that the Deed of Sale (Exhibit G) is a public deed. It
bears stressing that possession, under Article 1544 of the New Civil Code, includes symbolic possession:
We are of the opinion that the possession mentioned in article 1473 (for determining who has better right when the same
piece of land has been sold several times by the same vendor) includes not only the material but also thesymbolic
possession, which is acquired by the execution of public instrument. (Narcisa Sanchez versus Roque Ramos, 40 Phil.
614, at page 617, underscoring supplied).
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,
[11]
On account of the undisputed fact of registration under Act No.
3344 by respondent Nogales as the first buyer, necessarily, there is absent good faith in the registration of the sale by the
petitioners Erwin Bayoca and the spouses Pio and Lourdes Dichoso for which they had been issued certificates of title in
their names. It follows that their title to the land cannot be upheld. As for petitioners Francisco Bayoca and Nonito Dichoso,
they failed to register the portions of the property sold to them, and merely rely on the fact that they declared the same in
their name for taxation purposes. Suffice it to state that such fact, does not, by itself, constitute evidence of
ownership,
[12]
and cannot likewise prevail over the title of respondent Nogales.
Enlightening in this regard is the following commentary:
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 buyers 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 alsoAstorga vs. Court of
Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabaa (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).
x x x x x x x x x.
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). x x x.
[13]

It is worth mentioning that while the certificates of title in the names of Erwin Bayoca and the spouses Pio and Lourdes
Dichoso are indefeasible, unassailable and binding against the whole world, including the government itself, they do not
create or vest title. 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 as a shield for the commission of fraud; neither do they permit one to
enrich himself at the expense of others.
[14]
The Torrens System is intended to guarantee the integrity and conclusiveness of
the certificate of registration but it cannot be used for the perpetration of fraud against the real owner of the registered
land.
[15]

73

Lastly, petitioners argument that the subject property is a public agricultural land over which the Regional Trial Court
has no jurisdiction over is clearly untenable. The prior grant of a free patent in favor of petitioners Erwin Bayoca and the
spouses Pio and Dolores Dichoso removed or segregated the property subject thereof from the mass of the public
domain.
[16]
So too, respondent Nogales had already registered the entire property under Act. No. 3344. Indeed, registration
with the Register of Deeds of a parcel of land divests the government of title to the land.
[17]
We also find that petitioners,
who raised this issue only before this Court, are now estopped from claiming that the subject property is a public
agricultural land, considering that petitioners have actively participated in the proceedings before the lower and appellate
courts with their principal defense consisting of the certificates of titles in their names. While it is a rule that jurisdictional
questions may be raised at any time, an exception arises where estoppel has supervened,
[18]
as in the instant case.
WHEREFORE, the petition is hereby DENIED and the assailed DECISION of the Court of Appeals is AFFIRMED. Costs
against petitioners.
SO ORDERED.
Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur.

G.R. No. L-27345 February 28, 1969
LEONARDO CATAIN, plaintiff-appellant,
vs.
HERMINIO RIOS and MARIANO TAMAYO defendants-appellees.
Abordo, Bocasa and Socrates for plaintiff-appellant.
David M. Lindayag and Emiliano B. Tanay for defendants-appellees.
CONCEPCION, C.J.:
This appeal from a decision of the Court of First Instance of Palawan, dismissing Civil Case No. 313 thereof, is before Us
upon certification by the Court of Appeals, only questions of law being raised therein.
Before the institution of said case, plaintiff Leonardo Catain had filed Civil Case No. 268 of the same court, which was
dismissed, upon the ground that, although its object was to recover the possession of a land, the right thereto hinged on
the ownership thereof, in view of which the court reserved to the parties the right to settle this question in another action
therefor. Hence, the aforementioned Case No. 313.
1

It appears that, on March 8, 1954, defendant Herminio Rios sold the land in question which is situated in the sitio of
Ituan municipality of Busuanga, province of Palawan to plaintiff Leonardo Catain. Over a year later, or on August 20,
1955, Rios sold the same land to his co-defendant herein, Mariano Tamayo. When, sometime after the second sale, plaintiff
sought to take physical possession of said land, Tamayo refused to turn it over to him. Accordingly, plaintiff commenced the
former action for the recovery of possession, and, upon its dismissal, as above stated, the present case, against Herminio
Rios and Mariano Tamayo, to establish title to said property, as well as to secure its possession and recover damages.
Defendant Herminio Rios did not care to file his answer to the complaint or otherwise contest the same.
Relying upon Article 1544 of the Civil Code of the Philippines,
2
the lower court rendered judgment for Tamayo and against
the plaintiff, upon the theory that, since neither the deed of sale to Tamayo nor that executed in favor of the plaintiff had
been registered, the former has a better right, he having been first in the physical possession of the disputed land.
Upon a review of the record, we find that the decision appealed from cannot be sustained. Indeed, it is well settled that the
possession referred to in the last paragraph of said Art. 1544, includes actual, as well as constructive possession.
3
In the
case at bar, both sales had been made through public instruments, so that, upon execution of the deed of conveyance in
favor of plaintiff herein, the property sold was deemed symbolically delivered to him, inasmuch as the contrary does not
appear and cannot be clearly inferred from said instruments.
4
What is more, as hereafter pointed out, the intent of the
parties at the time of the execution thereof, was to thereby consummate a full transfer of the corresponding right in rem, in
and to the property in litigation, to plaintiff herein.
It is true that Tamayo was then in actual possession thereof. Such possession was, however, a precarious one, for,
admittedly, he then held the land, not adversely to, but with the consent and, therefore, on behalf of defendant Herminio
Rios. This was due to the fact that prior thereto, Tamayo had bought from Honesto Rios, father of Herminio
Rios another land located in the sitio of Malabnao which, however, could not be delivered to Tamayo because it was
74

the object of a litigation. Pending final determination thereof, it was agreed, therefore, between Herminio Rios his father
having died in the meantime and Tamayo, that the latter wouldmeanwhile hold the property now in question located in
the sitio of Ituan although not in a proprietary character. Hence, it has been stipulated, between the parties herein, that
Tamayo's possession was not that of an owner, until August 20, 1955, when owing to subsequent developments, making
it impossible to turn over to Tamayo the land situated in Malabnao Herminio Rios executed the aforementioned deed of
sale in his (Tamayo's) favor.
At the time of the sale to plaintiff herein, on March 8, 1954, and for over a year thereafter, Rios was, therefore, in civil
possession of the land in question, in much the same way as he would have been in such possession had the land been
physically held by his tenant, administrator or agent. And his intent to make a symbolic and effective delivery of that civil
possession to the plaintiff could be and was carried out through the execution of the public instrument evidencing the sale
to the latter.
There is, besides, a decisive factor in favor of plaintiff herein, and that is that the property in question isregistered, not in
the name of Herminio Rios but in that of plaintiff's father, Vicente Catain. In this connection, it is alleged in plaintiff's
complaint, and not denied in defendants' answer, that said property is covered by Patent No. 2127 and Original Certificate
of Title No. 344 of Palawan, both in the name of said Vicente Catain. It appears that, sometime before 1951, the latter had
sold the property to Honesto Rios father of defendant Herminio Rios subject to redemption, which was exercised by plaintiff
Leonardo Catain on March 8, 1954, his own father having died prior thereto. For one reason or another, said conditional sale
by Vicente Catain to Honesto Rios was not registered, although the owner's duplicate of said Original Certificate of Title No.
344 had been delivered to him. Hence, when, on March 8, 1954, plaintiff redeemed the property from Herminio Rios whose
father had, also, died in the meantime, Herminio turned over to plaintiff said owner's duplicate of Original Certificate of Title
No. 344 and the corresponding tax declaration, as well as executed, before the Municipal Treasurer of Busuanga Palawan,
an affidavit of transfer of said property to him (plaintiff). As heretofore adverted to, the public instrument evidencing the
sale in his favor, coupled with the surrender of the owner's duplicate of said original certificate of title and the tax
declaration, and the execution of said affidavit of transfer of real estate, for purposes of taxation, manifestly reveal the
intent of Herminio Rios to do everything necessary to fully convey and transfer effectively to plaintiff herein the real right of
ownership over the land in question.
At any rate, inasmuch as said land was registered in the name of Vicente Catain when Herminio Rios sold it to Tamayo as
well as at present and this appeared and still appears in public records, in the Office of the Register of Deeds of Palawan,
Tamayo must be deemed to have notice of such fact 5 and cannot legally claim that he bought the land in the belief, in
good faith, that it belonged to Rios who could not even produce at the time of the sale to Tamayo the owner's
duplicate of the original certificate of title in the name of Vicente Catain, the same having been previously delivered to
plaintiff herein.
In fact, Tamayo did not allege in his answer that he bought the property in question in good faith or that he acted in good
faith when, on August 20, 1955, he converted his, up to then, precarious possession, into one as owner. Although the lower
court found that there was good faith on his part, when his possession began in 1951, this did not suffice to place him
within the purview of the third paragraph of the aforementioned Article 1544, because as already pointed out such
possession was one held with the consent of Honesto Rios and, hence,in his representation and behalf , not adversely to
him. In other words, Tamayo is not entitled to the benefits of said legal provision.
6

Moreover, a deed conveying a land covered by a certificate of title, under the Torrens system, does not transmit a right in
rem until the registration of said instrument,
7
and that executed in favor of Tamayo has not been registered. In fact,
it could not have been registered, it having been executed by Herminio Rios whereas the land is registered in the name of
Vicente Catain and Tamayo could not have presented the owner's duplicate of the certificate of title.
It is urged in plaintiff's brief that, in view of Tamayo's unjustified and illegal refusal to surrender the physical possession of
the property in question, the former has suffered damages equivalent to 50 cavanes of palay yearly, at the rate of P8.00 a
cavan. Without contesting the sufficiency of the evidence on this point, Tamayo argues that plaintiff is not entitled to
recover said damages, because said refusal was justified by law. Inasmuch, however, as Tamayo's stand is not legally
tenable, it follows necessarily that he should indemnify said damages.lawphi1.nt
WHEREFORE, the decision appealed from is hereby reversed and another one shall be entered ordering the defendants
herein to vacate the property in question and to deliver the possession thereof to plaintiff herein, as well as sentencing said
defendants to pay him by way of damages the price of 50 cavanes of palay a year, from August 20, 1955, up to the date on
which said delivery shall have taken place, computed at the rate of P8.00 a cavan, with interest thereon at the legal rate,
from September 22, 1958, when this action was begun, in addition to attorneys fees in the sum of P1,000.00, and the
costs. It is so ordered.
75

Reyes, J.B.L., Dizon, Zaldivar, Castro, Fernando, Capistrano, Teehankee and Barredo, JJ., concur.
Makalintal, J., concurs in the result.
Sanchez, J., took no part.

ALEJANDRO GABRIEL and ALFREDO GABRIEL, petitioners, vs. SPOUSES PABLO MABANTA AND ESCOLASTICA
COLOBONG, DEVELOPMENT BANK OF THE PHILIPPINES (Isabela Branch) and ZENAIDA TAN-
REYES, respondents.
D E C I S I O N
SANDOVAL-GUTIERREZ, J.:
Born of the need to protect our land registration system from being converted into an instrument of fraud, this Court
has consistently adhered to the principle that a mere registration of title in case of double sale is not enough, good faith
must concur with the registration.
In this petition for review on certiorari, Alejandro Gabriel and Alfredo Gabriel assailed the Decision
[1]
dated March 30,
1999 of the Court of Appeals in CA-G.R. CV No. 33941 modifying the Decision
[2]
dated April 12, 1991 of the Regional Trial
Court, Branch 21, Santiago, Isabela in Civil Case No. 0399 for specific performance, reconveyance and damages with
application for preliminary injunction.
The facts are as follows:
Spouses Pablo and Escolastica Mabanta were the registered owners of two lots located in Patul and Capaltitan,
Santiago, Isabela, with an area of 512 and 15,000 square meters, covered by Transfer Certificates of Title (TCT) Nos. 72705
and 72707, respectively. On October 25, 1975, they mortgaged both lots with the Development Bank of the Philippines
(DBP) as collateral for a loan of P14,000.00.
[3]

Five years thereafter or on September 1, 1980, spouses Mabanta sold the lots to Susana Soriano by way of a Deed of
Sale of Parcels of Land With Assumption of Mortgage.
[4]
Included in the Deed is an agreement that they could repurchase
the lots within a period of two (2) years.
Spouses Mabanta failed to repurchase the lots. But sometime in 1984, they were able to convince Alejandro Gabriel to
purchase the lots from Susana Soriano. As consideration, Alejandro delivered to Susana a 500-square meter residential lot
with an actual value of P40,000.00 and paid spouses Mabanta the sum of P5,000.00. On May 15, 1984, spouses Mabanta
executed a Deed of Sale with Assumption of Mortgage
[5]
in favor of Alejandro. For her part, Susana executed a document
entitled Cancellation of Contract
[6]
whereby she transferred to Alejandro all her rights over the two lots.
Alejandro and his son Alfredo cultivated the lots. They also caused the restructuring of spouses Mabantas loan with
the DBP.
[7]
However, when they were ready to pay the entire loan, they found that spouses Benito and Pura Tan had paid it
and that the mortgage was already cancelled.
[8]

On August 18, 1985, Benito Tan and Alejandro Tridanio, a barangay official, approached Alejandro to refund to him
the P5,000.00 he paid to spouses Mabanta. Alejandro refused because Tan was unwilling to return the formers 500-square
meter lot delivered to Susana as purchase price for the lots. Thereafter, spouses Tan tried to eject Alejandro from the lot
covered by TCT No. 72707.
On September 17, 1985, Alejandro and Alfredo filed with the Regional Trial Court, Branch 21, Santiago, Isabela a
complaint (involving the lot covered by TCT No. 72707) for specific performance, reconveyance and damages with an
application for a preliminary injunction against spouses Mabanta, spouses Tan, the DBP and barangay officials Dominador
Maylem and Alejandro Tridanio. In due time, these defendants filed their respective answers.
During the proceedings, it turned out that it was spouses Tans daughter, Zenaida Tan-Reyes who bought
one of the lots (covered by TCT No. 72707) from spouses Mabanta on August 21, 1985. Not having been
impleaded as a party-defendant, she filed an answer-in-intervention alleging that she is the registered owner of the lot
covered by TCT No. 72707; that she purchased it from spouses Mabanta in good faith and for value; that she paid their
loan with the DBP in the amounts of P17,580.88 and P16,845.17 per Official Receipts Nos. 1749539 and 1749540,
respectively; that the mortgage with the DBP was cancelled and spouses Mabanta executed a Deed of Absolute Sale
[9]
in
her favor; and that TCT No. T-72707 was cancelled and in lieu thereof, TCT No. T-160391 was issued in her name.
On April 12, 1991, the trial court rendered its Decision sustaining the right of Alejandro and Alfredo Gabriel over the lot
covered by TCT No. 72707 (now TCT No. T-160391), thus:
WHEREFORE, in the light of the foregoing considerations judgment is hereby rendered:
76

1. DECLARING Exhibit A, the deed of sale with assumption of mortgage executed by the spouses Pablo
Mabanta and Escolastica Colobong (in favor of Alejandro and Alfredo Gabriel) valid and subsisting.
2. ORDERING the plaintiff Alejandro Gabriel to pay to the spouses Pablo Mabanta and Escolastica Colobong the
sums of P5,000.00 plus P34,426.05 (representing the loan with the DBP which plaintiff assumed) within 30
days from receipt hereof.
3. DECLARING the deed of sale executed by the spouses Pablo Mabanta and Escolastica Colobong in
favor of Zenaida Tan Reyes as null and void.
4. ORDERING the intervenor Zenaida Tan-Reyes to reconvey the land covered by T.C.T. No. T-160391 in favor of
Alejandro Gabriel.
SO ORDERED.
In declaring null and void the Deed of Absolute Sale (or second sale) of the lot covered by TCT No. 72707 between
spouses Mabanta and Zenaida Tan-Reyes, the trial court ratiocinated as follows:
But Zenaida (Tan) Reyes professes that she is a buyer in good faith and for value. In her testimony she said that the
spouses Mabanta offered to sell the land to her on August 19, 1985. She was informed that the land was mortgaged in the
DBP. She readily agreed to buy the land on that same day. She did not inquire further into the status of the land. She did
not go and see the land first. What she did was to immediately go to the DBP the following day and paid the mortgage
obligation in the amount of P16,845.17 and P17,580.88 (Exhibits 1 and 2). The following day August 21, a deed of sale
in her favor was prepared and on October 17, 1985 she secured a certificate of title (Exhibit 5). Under the above
circumstances, it cannot be said that she is a purchaser in good faith. She should have first made a thorough investigation
of the status of the land. Had she inquired, she should have been informed that the land was previously sold to at least two
persons Susana Soriano and Alejandro Gabriel. She should also have first visited the land she was buying. Had she done
so she should have discovered that the land was being cultivated by the Gabriels who would have informed her that they
already bought the land from the Mabantas. The reason why she did not do this is because she already was
appraised of the status of the land by her father Benito Tan. For reasons known only to her, she decided to buy
the land just the same.
x x x x x x
Zenaida Tan therefore is not a purchaser in good faith and she cannot seek refuge behind her certificate of
title. True, Article 1544 of the Civil Code provides that should immovable property be sold to different vendees,
the ownership shall belong to the person who in good faith first recorded it in the registry of
property. Unfortunately, the registration made by Zenaida (Tan) Reyes of her deed of sale was not in good
faith. For this reason in accordance with the same Article 1544, the land shall pertain to the person who in
good faith was first in possession. There is no question that it is the Gabriels who are in possession of the
land.
Unsatisfied, spouses Mabanta and Zenaida Tan-Reyes interposed an appeal to the Court of Appeals.
On March 30, 1999, the Court of Appeals rendered a Decision modifying the trial courts Decision, declaring as valid
the second sale of the lot covered by TCT No. 72707 between spouses Mabanta and Zenaida Tan-Reyes on the ground that
a person dealing with registered land may simply rely on the correctness of the certificate of title and, in the absence of
anything to engender suspicion, he is under no obligation to look beyond it. The dispositive portion of the Appellate Courts
Decision reads:
Wherefore the appealed judgment is AFFIRMED with the following modification:
1. DECLARING Exhibit A, the deed of sale with assumption of mortgage executed by the defendants-appellants spouses
Pablo Mabanta and Escolastica Colobong over lots covered by TCT Nos. T-72705 and T-72707 valid and subsisting;
2. ORDERING spouses Pablo Mabanta and Escolastica Colobong to surrender TCT No. 72705 to plaintiff-appellee Alejandro
Gabriel;
3. DECLARING the deed of sale executed over lot with TCT No. 72707 (now T-160391) by spouses Pablo
Mabanta and Escolastica Colobong in favor of intervenor-appellant Zenaida Tan Reyes as valid;
77

4. ORDERING plaintiffs-appellees and any all persons claiming rights under them to vacate Lot 3651-A now covered by TCT
No. T-160391 and to deliver to intervenor-appellant Zenaida Tan-Reyes the possession thereof;
5. Dismissing the case against defendants-appellants Benito Tan and Purita Masa;
6. No pronouncement as to costs.
SO ORDERED.
In the instant petition for review on certiorari, petitioners Alejandro and Alfredo Gabriel raise this lone issue:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN DECLARING THE SECOND SALE OF THE DISPUTED LOT
EXECUTED BY SPOUSES MABANTA IN FAVOR OF ZENAIDA TAN-REYES VALID UNDER ARTICLE 1544 OF THE
CIVIL CODE.
Petitioners contend that respondent Reyes is not a purchaser in good faith since she bought the disputed lot with the
knowledge that petitioner Alejandro is claiming it in a previous sale.
In her comment on the petition, respondent Reyes maintains that the Court of Appeals factual finding that she is a
purchaser in good faith and for value is final and conclusive. Meeting the issue head on, she claims that there is no
evidence that prior to August 21, 1985, when she purchased the lot from respondent spouses Mabanta, she had knowledge
of any previous lien or encumbrance on the property.
For its part, respondent DBP avers that it acted in utmost good faith in releasing the mortgaged lots to respondent
spouses Mabanta who had the loan restructured and paid the same. Also, it did not transact business with spouses Tan.
With respect to respondent spouses Mabanta, this Courts Resolution dated June 14, 2000 requiring them to file
comment on the present petition was returned unserved. Thus, in its Resolution dated January 22, 2001, this Court
resolved to consider the Resolution of June 14, 2000 deemed served upon them.
[10]

The petition is impressed with merit.
The issue for our resolution is whether or not respondent Zenaida Tan-Reyes acted in good faith when she purchased
the subject lot and had the sale registered.
Settled is the principle that this Court is not a trier of facts. In the exercise of its power of review, the findings of fact
of the Court of Appeals are conclusive and binding and consequently, it is not our function to analyze or weigh evidence all
over again.
[11]
This rule, however, is not an iron-clad rule.
[12]
In Floro vs. Llenado,
[13]
we enumerated the various exceptions
and one which finds application to the present case iswhen the findings of the Court of Appeals are contrary to those
of the trial court.
We start first with the applicable law.
Article 1544 of the Civil Code provides:
ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person
who may have first possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and, in
the absence thereof; to the person who presents the oldest title, provided there is good faith.
Otherwise stated, where it is an immovable property that is the subject of a double sale, ownership shall be
transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in
default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who
presents the oldest title, provided there is good faith.
[14]
The requirement of the law then is two-fold: acquisition in
good faith and registration in good faith.
[15]
The rationale behind this is well-expounded in Uraca vs. Court of
Appeals,
[16]
where this Court held:
Under the foregoing, the prior registration of the disputed property by the second buyer does not by itself confer ownership
or a better right over the property. Article 1544 requires that such registration must be coupled with good
78

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 buyers right except where the second
buyer registers in good faith the second sale ahead of the first, as provided by the Civil Code. Such knowledge of the first
buyer does not bar her from availing of her rights under the law, among them, to register firsther purchase as against the
second buyer. But in converso, knowledge gained by the second buyer of the first sale defeats his right even if he is first to
register the second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted by
Article 1544 of the Civil Code for the second buyer being able to displace the first buyer, that before the second
buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e. in ignorance
of the first sale and of the first buyers right) from the time of acquisition until the title is transferred to him
by registration or failing registration, by delivery of possession. (Emphasis supplied)
In the case at bar, certain pieces of evidence, put together, would prove that respondent Reyes is not a buyer in good
faith. The records show that on August 18, 1985, spouses Mabanta offered to her for sale the disputed lot. They told her it
was mortgaged with respondent DBP and that she had to pay the loan if she wanted to buy it.
[17]
She readily agreed to such
a condition. The following day, her father Benito Tan, accompanied by barangay official Tridanio, went to petitioner
Alejandros house offering to return to him the P5,000.00 he had paid to spouses Mabanta. Tan did not suggest to return
the 500-square meter lot petitioner delivered to Susana Soriano.
[18]
For this reason, petitioner refused Tans offer and even
prohibited him from going to respondent DBP. We quote the following testimony of petitioner who, despite his blindness as
shown by the records, testified to assert his right, thus:
ATTY. CHANGALE:
Q What can you say to that statement?
A That is their mistake, sir.
Q Why do you say that is their mistake?
A Because her husband and Tridanio went at home offering to return the money but I did not accept, sir.
Q Who is this Benito Tan you are referring to?
A The husband of Pura Masa, sir.
Q What is the relationship with the intervenor Zenaida Tan?
A The daughter, sir.
Q When did Benito Tan together with Councilman Tridanio came?
A Before they went to the Development Bank of the Philippines they came at home and I prohibit
them, sir.
Q How did you prohibit them?
A No, I said please I am just waiting for the Bank to inspect then I will pay my obligation.
x x x x x x
Q You stated earlier that you will just pay the payments. What are those payments you are referring to?
A The payment I have given to Colobong and to the Bank, sir. They do not want to return the payment I have
given to Susana Soriano and that is the beginning of our quarrel.
[19]

We are thus convinced that respondent Reyes had knowledge that petitioner previously bought the disputed lot from
respondent spouses Mabanta. Why should her father approach petitioner and offer to return to him the money he paid
spouses Mabanta? Obviously, aware of the previous sale to petitioner, respondent Reyes informed her father about it. At
this juncture, it is reasonable to conclude that what prompted him to go to petitioners house was his desire to facilitate his
daughters acquisition of the lot, i.e., to prevent petitioner Alejandro from contesting it. He did not foresee then that
petitioner would insist he has a prior right over the lot.
Now respondent Reyes claims that she is a purchaser in good faith. This is preposterous. Good faith is something
internal. Actually, it is a question of intention. In ascertaining ones intention, this Court must rely on the evidence of
ones conduct and outward acts. From her actuations as specified above, respondent Reyes cannot be considered to be
in good faith when she bought the lot.
Moreover, it bears noting that on September 16, 1985, both petitioners filed with the trial court their complaint
involving the lot in question against respondents. After a month, or on October 17, 1985, respondent Reyes had the
Deed of Absolute Sale registered with the Registry of Property. Evidently, she wanted to be the first one to effect its
registration to the prejudice of petitioners who, although in possession, have not registered the same. This is another
indicum of bad faith.
79

We have consistently held that in cases of double sale of immovables, what finds relevance and materiality is
not whether or not the second buyer was a buyer in good faith but whether or not said second buyer registers
such second sale in good faith, that is, without knowledge of any defect in the title of the property
sold.
[20]
In Salvoro vs. Tanega,
[21]
we had the occasion to rule that:
If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale of the same
property to a third party or that another person claims said property in a previous sale, the registration will constitute a
registration in bad faith and will not confer upon him any right.
Mere registration of title is not enough, good faith must concur with the registration. To be entitled to priority, the
second purchaser must not only establish prior recording of his deed, but must have acted in good faith, without knowledge
of the existence of another alienation by the vendor to the other.
[22]
In the old case of Leung Yee vs. F. L. Strong Machinery,
Co. and Williamson, this Court ruled:
One who purchases a real estate with knowledge of a defect of title in his vendor cannot claim that he has
acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same
rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as
might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to
facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the
belief that there was no defect in the title of the vendor. His mere refusal to believe that such a defect exists,
or his willful closing of his eyes to the possibility of the existence of a defect in his vendors 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. x x x
[23]

In fine, we hold that respondent Zenaida Tan-Reyes did not act in good faith when she bought the lot and had the sale
registered.
WHEREFORE, the assailed Decision of the Court of Appeals is REVERSED and SET ASIDE. The Decision of the trial
court is hereby REINSTATED.
SO ORDERED.
Puno, (Chairman), Panganiban, Corona, and Carpio-Morales, JJ., concur.

Sales Cases from August 14

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SALES CASES FOR AUGUST 14

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