G.R. No.

L-23351

March 13, 1968

CIRILO PAREDES, plaintiff-appellant, vs. JOSE L.

ESPINO, defendant-appellee.
Appellant Cirilo Parades had filed an action to compel
defendant-appellee Jose L. Espino to execute a deed of
sale and to pay damages. The complaint alleged that the
defendant "had entered into the sale" to plaintiff of Lot
No. 67 of the Puerto Princesa Cadastre at P4.00 a square
meter; that the deal had been "closed by letter and
telegram" but the actual execution of the deed of sale
and payment of the price were deferred to the arrival of
defendant at Puerto Princesa; that defendant upon arrival
had refused to execute the deed of sale altho plaintiff
was able and willing to pay the price, and continued to
refuse despite written demands of plaintiff; that as a
result, plaintiff had lost expected profits from a resale of
the property, and caused plaintiff mental anguish and
suffering, for which reason the complaint prayed for
specific performance and damages.
Defendant filed a motion to dismiss upon the ground that
the complaint stated no cause of action, and that the
plaintiff's claim upon which the action was founded was
unenforceable under the Statute of Frauds.
Plaintiff opposed in writing the motion to dismiss
and annexed to his opposition a copy of a letter
purportedly signed by defendant
Dear Mr. Paredes:
So far I received two letters from you, one dated
April 17 and the other April 29, both 1964. In reply
thereto, please be informed that after consulting with my
wife, we both decided to accept your last offer of Four
(P4.00) pesos per square meter of the lot which contains
1826 square meters and on cash basis.
In order that we can facilitate the transaction of
the sale in question, we (Mrs. Espino and I), are going
there (Puerto Princess, Pal.) to be there during the last
week of the month, May. I will send you a telegram, as
per your request, when I will reach Manila before taking
the boat for Pto. Princess. As it is now, there is no
schedule yet of the boats plying between Manila and Pto.
Princess for next week.
Plaintiff also appended as Annex "A-1", a telegram
apparently from defendant advising plaintiff of his
arrival by boat about the last week of May 1964 (Annex
"A-1" Record on Appeal, p. 21), as well as a previous
letter of defendant (Appendix B, Record on Appeal, p.
35) referring to the lot as the one covered by Certificate
of Title No. 62.

The sole issue here is whether enforcement of the

contract pleaded in the complaint is barred by the Statute
of Frauds; and the Court a quo plainly erred in holding
that it was unenforceable.
In the case at bar, the complaint in its paragraph 3 pleads
that the deal had been closed by letter and telegram"
(Record on Appeal, p. 2), and the letter referred to was
evidently the one copy of which was appended as
Exhibit A to plaintiff's opposition to the motion dismiss.
This letter, transcribed above in part, together with that
one marked as Appendix B, constitute an adequate
memorandum of the transaction. They are signed by the
defendant-appellee; refer to the property sold as a lot in
Puerto Princesa, Palawan, covered, by TCT No. 62; give
its area as 1826 square meters and the purchase price of
four (P4.00) pesos per square meter payable in cash. We
have in them therefore, all the essential terms of the
contract, and they satisfy the requirements of the Statute
of Frauds. We have ruled in Berg vs. Magdalena Estate,
Inc., 92 Phil. 110, 115, that a sufficient memorandum
may be contained in two or more documents.
Defendant-appellee argues that the authenticity of the
letters has not been established. That is not necessary for
the purpose of showing prima facie that the contract is
enforceable. For as ruled by us in Shaffer vs. Palma, L24115, March 1, 1968, whether the agreement is in
writing or not, is a question of evidence; and the
authenticity of the writing need not be established until
the trial is held. The plaintiff having alleged that the
contract is backed by letter and telegram, and the same
being a sufficient memorandum, his cause of action is
thereby established, especially since the defendant has
not denied the letters in question. At any rate, if the
Court below entertained any doubts about the existence
of the written memorandum, it should have called for a
preliminary hearing on that point, and not dismissed the
complaint.

Claudel v. CA
And the real issues are:
1.
Whether or not a contract of sale of land may be
proven orally:
2.
Whether or not the prescriptive period for filing
an action for cancellation of titles and reconveyance with
damages (the action filed by the SIBLINGS OF
CECILIO) should be counted from the alleged sale upon
which they claim their ownership (1930) or from the
date of the issuance of the titles sought to be cancelled in
favor of the HEIRS OF CECILIO (1976).
The rule of thumb is that a sale of land, once
consummated, is valid regardless of the form it may
have been entered into. 11 For nowhere does law or
jurisprudence prescribe that the contract of sale be put in
writing before such contract can validly cede or transmit
rights over a certain real property between the parties
themselves.
However, in the event that a third party, as in this case,
disputes the ownership of the property, the person
against whom that claim is brought can not present any
proof of such sale and hence has no means to enforce the
contract. Thus the Statute of Frauds was precisely
devised to protect the parties in a contract of sale of real
property so that no such contract is enforceable unless
certain requisites, for purposes of proof, are met.
Of the parties SIBLINGS OF CECILIO had allegedly
derived their right of action from the oral purchase made
by their parents in 1930, then the action filed in 1976
would have clearly prescribed. More than six years had
lapsed.
We do not agree with the parties SIBLINGS OF
CECILIO when they reason that an implied trust in favor
of the SIBLINGS OF CECILIO was established in 1972,
when the HEIRS OF CECILIO executed a contract of
partition over the said properties.
But as we had pointed out, the law recognizes the
superiority of the torrens title.
Above all, the torrens title in the possession of the
HEIRS OF CECILIO carries more weight as proof of
ownership than the survey or subdivision plan of a
parcel of land in the name of SIBLINGS OF CECILIO.
The Court has invariably upheld the indefeasibility of
the torrens title. No possession by any person of any
portion of the land could defeat the title of the registered
owners thereof.

For several years, when the SIBLINGS OF CECILIO,

namely, Macario, Esperidiona Raymunda, and Celestina
were living on the contested premises, they regularly
paid a sum of money, designated as "taxes" at first, to the
widow of Cecilio, and later, to his heirs. 21 Why their
payments were never directly made to the Municipal
Government of Muntinlupa when they were intended as
payments for "taxes" is difficult to square with their
claim of ownership. We are rather inclined to consider
this fact as an admission of non-ownership. And when
we consider also that the petitioners HEIRS OF
CECILIO had individually paid to the municipal
treasury the taxes corresponding to the particular
portions they were occupying, 22 we can readily see the
superiority of the petitioners' position.
In view of the foregoing, we find that the appellate court
committed a reversible error in denigrating the transfer
certificates of title of the petitioners to the survey or
subdivision plan proffered by the private respondents.
The Court generally recognizes the profundity of
conclusions and findings of facts reached by the trial
court and hence sustains them on appeal except for
strong and cogent reasons inasmuch as the trial court is
in a better position to examine real evidence and observe
the demeanor of witnesses in a case.

City lite vs CA
FACTS:
FP Holdings and Realty Corp (respondent) was the
registered owner of a 71754 sq m-parcel of land along E
Rodriguez Ave, QC known as the Violago Property or
the San Lorenzo Ruiz Commercial Center.
It was offered for sale to the general public through a
sales brochure:
A parcel of land including buildings and other
improvements thereon located along E.Rodriguez
Avenue, Quezon City, with a total lot area of 71,754
square meters - 9,192square meters in front, 23,332
square meters in the middle, and 39,230 square meters at
the back. But the total area for sale excludes 5,000
square meters covering the existingchapel and adjoining
areas which will be donated to the Archdiocese of
Manila thusreducing the total saleable area to 66,754
square meters. Asking price was P6,250.00/square meter
with terms of payment negotiable. Broker's commission
was 2.0% of selling price, net of withholding taxes and
other charges. As advertised, contact person was Meldin
Al G. Roy, Metro Drug Inc., with address at 5/F Metro
House, 345 Sen.Gil Puyat Avenue, Makati City
The 9192 sq m- front portion was the subject of
litigation.
Meldin Roy (respondent) sent a sales brochure, location
plane and copy of the TCT to AttyGelacio Mamaril, a
lawyer and licensed real estate broker. Mamaril passed
on the documents to City-Lites Executive VP Antonio
Teng and Legal Counsel Atty Victor Villanueva.

City-Lite and Mamaril met with Roy to consummate the

transaction; Roy agreed to sell the property provided
City- Lite submit its acceptance in writing to the terms
and conditions in Roys letter. Later that afternoon
Mamaril and Teng conveyed their formal acceptance of
the terms.
However, FP Holdings refused to execute the
corresponding deed of sale and registered anadverse
claim to the title of the property with the Register of
Deeds of QC, annotated in thememorandum of
encumbrance in the TCT.
FP Holdings filed a petition for the cancellation of the
adverse claim against City-Lite with theRTC QC;
City-Lite caused the annotation of the first notice of lis
pendens which was recorded inthe title of the property.
RTC dismissed FP Holdings petition; FP Holdings
caused a resurvey and segregation of the property, asking
and was granted separate titles from the RD QC.
City-Lite instituted a complaint against FP Holdings for
specific performance and damages and caused the
annotation of the second notice of lis pendens
The property was transferred to Viewmaster
Construction Co (respondent) for which aTCT was
issued; the lis pendens was carried over to the new title.
The RTC rendered a decision in favor of City-Lite
ordering FP Holdings to execute a deedof sale of the
property and ordering the RD QC to cancel
Viewmasters TCT.
The CA reversed an set aside the RTC judgment.

City-Lite conveyed its interest to purchase of the front

portion in a letter send toMetro Drug (Attn: Meldin
Roy). Roy also informed City- Lites representative that
it would take time to subdivide the lot and FP Holdings
wasnt receptive to a purchase.
Atty Mamaril sent a letter to Metro Drug expressing
City- Lites desire to buy the entire front lot so long as
the P6250/sq m asking price was reduced and that
payment be madein installments.
Roy made a counter offer in another letter:
1. The price shallbeP6,250.00/square meter or a total of
P57,450,000.00;
2. The above purchase priceshall be paid to the owner as
follows: (a) P15.0 Million downpayment; (b)
balancepayable within six (6) months from date of
downpayment without interest.

ISSUE:
Was there a contract of sale perfected between City-Lite
and FP Holdings through its agent Meldin Roy of Metro
Drug?
REASONING:
Art. 1874 of the Civil Code provided:
"When the sale of a piece of land or any interest therein
is through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void. "
Roy was FP Holdings authorized agent to sell the
property, but the NCC required that the authority be in
writing.

The absence of authority to sell could be determined

from the written memo issued by FP Holdings president
requesting Metro Drugs assistance in finding buyers.
The memo stated:
We will appreciate Metro Drug's assistance in referring
to us buyers for the property. Please proceed to hold
preliminary negotiations with interested buyers and
endorse formal offers to us for our final evaluation and
appraisal.
This meant that Roy and/or Metro Drug were only to
assist FP Holdings, and FPHoldings were the only ones
who could make the final evaluation, appraisal and
acceptance of any transaction.
Roy and/or Metro Drug were only a contact person with
no authority to conclude a saleof the property.
Consequently, the sale should be null and void, and not
produce any legal effect to transfer the property from FP
Holdings to any interested party

G.R. No. L-15113

January 28, 1961

ANTONIO MEDINA, petitioner, vs. COLLECTOR OF

INTERNAL REVENUE and THE COURT OF TAX
APPEALS respondents.
The records show that on or about May 20, 1944,
petitioning taxpayer Antonio Medina married Antonia
Rodriguez. Before 1946, the spouses had neither
property nor business of their own. Later, however,
petitioner acquired forest, concessions in the
municipalities of San Mariano and Palanan in the
Province of Isabela. From 1946 to 1948, the logs cut and
removed by the petitioner from his concessions were
sold to different persons in Manila through his agent,
Mariano Osorio.
Sometime in 1949, Antonia R. Medina, petitioner's wife,
started to engage in business as a lumber dealer, and up
to around 1952, petitioner sold to her almost all the logs
produced in his San Mariano, concession. Mrs. Medina,
In turn, sold in Manila the logs bought from her husband
through the same agent, Mariano Osorio. The proceeds
were, upon instructions from petitioner, either received
by Osorio for petitioner or deposited by said agent in
petitioner's current account with the Philippine National
Bank.
On the thesis that the sales made by petitioner to his wife
were null and void pursuant to the provisions of Article
1490 of the Civil Code of the Philippines (formerly, Art.
1458, Civil Code of 1889), the Collector considered the
sales made by Mrs. Medina as the petitioner's original
sales taxable under Section 186 of the National Internal
Revenue Code and, therefore, imposed a tax assessment
on petitioner, calling for the payment of P4,553.54 as
deficiency sales taxes and surcharges from 1949 to 1952.
This same assessment of September 26, 1953 sought
also the collection of another sum of P643.94 as
deficiency sales tax and surcharge based on petitioner's
quarterly returns from 1946 to 1952.
On November 30, 1953, petitioner protested the
assessment; however, respondent Collector insisted on
his demand. On July 9, 1954, petitioner filed a petition
for reconsideration revealing for the first time the
existence of an alleged premarital agreement of
complete separation of properties between him and his
wife, and contending that the assessment for the years
1946 to 1952 had already prescribed. After one hearing,
the Conference Staff of the Bureau of Internal Revenue
eliminated the 50% fraud penalty and held that the taxes
assessed against him before 1948 had already prescribed.

Petitioner again requested for reconsideration, but

respondent Collector, in his letter of April 4, 1955,
denied the same.
Petitioner appealed to the Court of Tax Appeals, which
rendered judgment as aforesaid. The Court's decision
was based on two main findings, namely,
(a) that there was no premarital agreement of absolute
separation of property between the Medina spouse; and
(b) assuming that there was such an agreement, the sales
in question made by petitioner to his wife were fictitious,
simulated, and not bona fide.
Relying mainly on testimonial evidence that before their
marriage, he and his wife executed and recorded a
prenuptial agreement for a regime of complete
separation of property, and that all trace of the document
was lost on account of the war, petitioner imputes lack of
basis for the tax court's factual finding that no agreement
of complete separation of property was ever executed by
and between the spouses before their marriage. We do
not think so. Aside from the material inconsistencies in
the testimony of petitioner's witnesses pointed out by the
trial court, the circumstantial evidence is against
petitioner's claim. Thus, it appears that at the time of the
marriage between petitioner and his wife, they neither
had any property nor business of their own, as to have
really urged them to enter into the supposed property
agreement. Secondly, the testimony that the separation of
property agreement was recorded in the Registry of
Property three months before the marriage, is patently
absurd, since such a prenuptial agreement could not be
effective before marriage is celebrated, and would
automatically be cancelled if the union was called off.
How then could it be accepted for recording prior to the
marriage? In the third place, despite their insistence on
the existence of the ante nuptial contract, the couple,
strangely enough, did not act in accordance with its
alleged covenants. Quite the contrary, it was proved that
even during their taxable years, the ownership, usufruct,
and administration of their properties and business were
in the husband. And even when the wife was engaged in
lumber dealing, and she and her husband contracted
sales with each other as aforestated, the proceeds she
derived from her alleged subsequent disposition of the
logs incidentally, by and through the same agent of
her husband, Mariano Osorio were either received by
Osorio for the petitioner or deposited by said agent in
petitioner's current account with the Philippine National
Bank. Fourth, although petitioner, a lawyer by
profession, already knew, after he was informed by the
Collector on or about September of 1953, that the
primary reason why the sales of logs to his wife could
not be considered as the original taxable sales was
because of the express prohibition found in Article 1490
of the Civil Code of sales between spouses married

under a community system; yet it was not until July of

1954 that he alleged, for the first time, the existence of
the supposed property separation agreement. Finally, the
Day Book of the Register of Deeds on which the
agreement would have been entered, had it really been
registered as petitioner insists, and which book was
among those saved from the ravages of the war, did not
show that the document in question was among those
recorded therein.
The foregoing findings notwithstanding, the petitioner
argues that the prohibition to sell expressed under Article
1490 of the Civil Code has no application to the sales
made by said petitioner to his wife, because said
transactions are contemplated and allowed by the
provisions of Articles 7 and 10 of the Code of
Commerce. But said provisions merely state, under
certain conditions, a presumption that the wife is
authorized to engage in business and for the incidents
that flow therefrom when she so engages therein. But the
transactions permitted are those entered into with
strangers, and do not constitute exceptions to the
prohibitory provisions of Article 1490 against sales
between spouses.
Petitioner's contention that the respondent Collector can
not assail the questioned sales, he being a stranger to
said transactions, is likewise untenable. The government,
as correctly pointed out by the Tax Court, is always an
interested party to all matters involving taxable
transactions and, needless to say, qualified to question
their validity or legitimacy whenever necessary to block
tax evasion.
Contracts violative of the provisions of Article 1490 of
the Civil Code are null and void (Uy Sui Pin vs.
Cantollas, 70 Phil. 55; Uy Coque vs. Sioca 45 Phil. 43).
Being void transactions, the sales made by the petitioner
to his wife were correctly disregarded by the Collector in
his tax assessments that considered as the taxable sales
those made by the wife through the spouses' common
agent, Mariano Osorio. In upholding that stand, the
Court below committed no error.

G.R. No. L-57499

June 22, 1984

MERCEDES CALIMLIM- CANULLAS, petitioner, vs.

HON. WILLELMO FORTUN, Judge, Court of First
instance of Pangasinan, Branch I, and CORAZON
DAGUINES, respondents.
The background facts may be summarized as follows:
Petitioner
MERCEDES
Calimlim-Canullas
and
FERNANDO Canullas were married on December 19,
1962. They begot five children. They lived in a small
house on the residential land in question with an area of
approximately 891 square meters, located at Bacabac,
Bugallon, Pangasinan. After FERNANDO's father died
in 1965, FERNANDO inherited the land.
In 1978, FERNANDO abandoned his family and was
living with private respondent Corazon DAGUINES.
During the pendency of this appeal, they were convicted
of concubinage in a judgment rendered on October 27,
1981 by the then Court of First Instance of Pangasinan,
Branch II, which judgment has become final.
On April 15, 1980, FERNANDO sold the subject
property with the house thereon to DAGUINES for the
sum of P2,000.00. In the document of sale, FERNANDO
described the house as "also inherited by me from my
deceased parents."
Unable to take possession of the lot and house,
DAGUINES initiated a complaint on June 19, 1980 for
quieting of title and damages against MERCEDES. The
latter resisted and claimed that the house in dispute
where she and her children were residing, including the
coconut trees on the land, were built and planted with
conjugal funds and through her industry; that the sale of
the land together with the house and improvements to
DAGUINES was null and void because they are
conjugal properties and she had not given her consent to
the sale,
In its original judgment, respondent Court principally
declared DAGUINES "as the lawful owner of the land in
question as well as the one-half () of the house erected
on said land." Upon reconsideration prayed for by
MERCEDES, however, respondent Court resolved:
WHEREFORE, the dispositive portion of the Decision
of this Court, promulgated on October 6, 1980, is hereby
amended to read as follows:
(1)

Declaring plaintiff as the true and lawful

owner of the land in question and the 10
coconut trees;

The issues posed for resolution are

(1) whether or not the construction of a conjugal house

on the exclusive property of the husband ipso facto gave
the land the character of conjugal property; and
(2) whether or not the sale of the lot together with the
house and improvements thereon was valid under the
circumstances surrounding the transaction.
We hold that pursuant to the foregoing provision both
the land and the building belong to the conjugal
partnership but the conjugal partnership is indebted to
the husband for the value of the land. The spouse owning
the lot becomes a creditor of the conjugal partnership for
the value of the lot, 1 which value would be reimbursed
at the liquidation of the conjugal partnership
The foregoing premises considered, it follows that
FERNANDO could not have alienated the house and lot
to DAGUINES since MERCEDES had not given her
consent to said sale. 4
Anent the second issue, we find that the contract of sale
was null and void for being contrary to morals and
public policy. The sale was made by a husband in favor
of a concubine after he had abandoned his family and
left the conjugal home where his wife and children lived
and from whence they derived their support. That sale
was subversive of the stability of the family, a basic
social institution which public policy cherishes and
protects.
Additionally, the law emphatically prohibits the spouses
from selling property to each other subject to certain
exceptions. 6 Similarly, donations between spouses
during marriage are prohibited. 7 And this is so because
if transfers or con conveyances between spouses were
allowed during marriage, that would destroy the system
of conjugal partnership, a basic policy in civil law. It was
also designed to prevent the exercise of undue influence
by one spouse over the other, 8 as well as to protect the
institution of marriage, which is the cornerstone of
family law. The prohibitions apply to a couple living as
husband and wife without benefit of marriage,
otherwise, "the condition of those who incurred guilt
would turn out to be better than those in legal union."
Those provisions are dictated by public interest and their
criterion must be imposed upon the wig of the parties.

Philippine Trust Co. v. Roldan

Mariano L Bernardo, a minor, inherited from his father,
Marcelo Bernardo 17 parcels of land located in
Guiguinto, Bulacan. In view of his minority,
guardianship proceedings were instituted on July 27,
1947, where Socorro Roland, surviving spouse of
Marcelo and step-mother of Mariano, was appointed as
guardian of the latter. Also, Socorro filed a motion
asking authority to sell as guardian the 17 parcels for the
sum of P14,700 to his brother-in-law, Dr. Fidel C.
Ramos, the purpose of the sale being allegedly to invest
money in a residential house, which theminor desired to
have on Tindalo St., Manila. The motion was granted.
On August 5, 1947 Socorro, as guardian, then executed
the proper deed of sale in favor of Fidel Ramos and on
August 12, 1947, she asked for and obtained judicial
confirmation of thesale. However, on August 13, 1947,
Fidel Ramos executed in favor of Socorro personally, a
deedof conveyance covering the same 17 parcels for the
sum of P15,000. And on October 21, 1947 Socorro sold
4 out of the 17 parcels to Emilio Cruz for P3,000,
reserving herself the right torepurchase.On August 10,
1948, petitioner Phil. Trust Co. replaced Socorro as
guardian. Petitioner filed a complaint to annul two
contracts regarding the 17 parcels of land:
a) the sale thereof by Socorro, as guardian, to Fidel
Ramos; and
b) sale thereof by Fidel Ramos to Socorro personally.
Petitioner contends that the step-mother in effect, sold to
herself, the properties of her ward thusshould be
annulled as it violates Art. 1459 of the Civil Code
prohibiting the guardian from purchasing either in
person or through the mediation of another the property
of her ward. As to the third conveyance, that Socorro had
acquired no valid title to convey to Cruz.The trial court
held that Art 1459 was not controlling as there was no
proof that Ramoswas a mere intermediary or that the
latter agreed with Socorro to but the parcels of land for
her benefit. The Court of Appeals affirmed the judgment,
adding that the minor new the particulars of,and
approved the transactions, and that only clear and
positive evidence of fraud and bad faith,and not mere
insinuations and interferences will overcome the
presumptions that a sale wasconcluded in all good faith
for value. Hence, this petition.
ISSUE:
Whether the two contracts of sale made by Socorro was
valid.
HELD:
To our minds the first two transactions herein described
couldnt be in a better juridical situation than if this
guardian had purchased the seventeen parcels on the day

following the sale to Dr. Ramos. Now, if she was willing

to pay P15,000 why did she sell the parcels for less? In
one day (or actually one week) the price could not have
risen so suddenly. Obviously when, seeking approval of
the sale she represented the price to be the best
obtainable in the market, she was not entirely truthful.
This is one phase to consider.
Even without proof that she had connived with Dr.
Ramos. Remembering the general doctrine that
guardianship is a trust of the highest order, and the
trustee cannot be allowed to have any inducement to
neglect his wards interest and in line with the courts
suspicion whenever the guardian acquires the wards
property 1 we have no hesitation to declare that in this
case, in the eyes of the law, Socorro Roldan took by
purchase her wards parcels thru Dr. Ramos
She acted it may be true without malice; chan
roblesvirtualawlibrarythere may have been no previous
agreement between her and Dr. Ramos to the effect that
the latter would buy the lands for her. But the stubborn
fact remains that she acquired her proteges properties,
through her brother-in-law
A ttempting to prove that the transaction was beneficial
to the minor, Appellees attorney alleges that the money
(P14,700) invested in the house on Tindalo Street
produced for him rentals of P2,400 yearly; chan
roblesvirtualawlibrarywhereas the parcels of land
yielded to his step-mother only an average of P1,522 per
year. 3 The argument would carry some weight if that
house had been built out of the purchase price of
P14,700 only. 4 One thing is certain: the calculation
does not include the price of the lot on which the house
was erected. Estimating such lot at P14,700 only,
(ordinarily the city lot is more valuable than the
building) the result is that the price paid for the
seventeen parcels gave the minor an income of only
P1,200 a year, whereas the harvest from the seventeen
parcels netted his step-mother a yearly profit of
P1,522.00. The minor was thus on the losing end
Hence, from both the legal and equitable standpoints
these
three
sales
should
not
be
sustained:chanroblesvirtuallawlibrary the first two for
violation of article 1459 of the Civil Code; chan
roblesvirtualawlibraryand the third because Socorro
Roldan could pass no title to Emilio Cruz. The
annulment carries with is (Article 1303 Civil Code) the
obligation of Socorro Roldan to return the 17 parcels
together with their fruits and the duty of the minor,
through his guardian to repay P14,700 with legal
interest.

Rubias vs Batiller (1973)

Facts:
Francisco Militante claimed that he owned aparcel of
land located in Iloilo. He filed with theCFI of Iloilo an
application for the registrationof title of the land. This
was opposed by theDirector of Lands, the Director of
Forestry, andother oppositors. The case was docked as
aland case, and after trial the court dismissedthe
application for registration. Militante appealed to the
Court of Appeals.
Pending that appeal, he sold to Rubias (hisson-in-law
and a lawyer) the land.
The CA rendered a decision, dismissing the application
for registration.
On August 31, 1964, plaintiff Domingo D. Rubias, a
lawyer, filed a suit to recover the ownership and
possession of certain portions of lot under Psu-99791
located in Barrio General Luna, Barotac Viejo, Iloilo
which he bought from his father-in-law, Francisco
Militante in 1956 against its present occupant defendant,
Isaias Batiller, who illegally entered said portions of the
lot on two occasion
Rubias filed a Forcible Entry and Detainer case against
Batiller.
In that case, the court held that Rubias has nocause of
action because the property in disputewhich Rubias
allegedly bought from Militantewas the subject matter of
a land case, in whichcase Rubias was the counsel on
record of Militante himself. It thus falls under
Article1491 of the Civil Code. (Hence, this appeal.)
Issue: Whether the sale of the land is prohibitedunder
Article 1491.
Held: YES
. Ar ticle 1491 says that The following persons cannot
acquire any purchase, even at a public or judicial
auction, either in person or through the mediation of
another.
(5) Justices, judges, prosecuting attorneys, clerks of
superior and inferior courts, and other officers and
employees connected with the administration of justice,
the property and rights in litigation or levied upon an
execution before the court within whose jurisdiction or
territory theyexercise their respective functions; this
prohibition includes the act of acquiring by assignment
and shall apply to lawyer, with respect to the property
andrights which may be the object of any litigation
inwhich they may take part by virtue of their
profession. The present case clearly falls under this,

especially since the case was still pending appeal when

the sale was made.
Issue: Legal effect of a sale falling under Article1491?
Held: NULL AND VOID.CANNOT BE RATIFIED.
Manresa considered such prohibited acquisitions (which
fell under the Spanish Civil Code) as merely voidable
because the Spanish Code did not recognize nullity. But
our Civil Code does recognize the absolute nullity of
contracts whose cause, object or purpose is contract to
law, morals, good customs, public order or public
policy or which are expressly prohibited or declared
void by law and declares such contracts inexistent and
void from the beginning.
The nullity of such prohibited contracts is definite and
permanent, and cannot be cured by ratification. The
public interest and public policy remain paramount and
do not permit of compromise or ratification. In this
aspect, the permanent is qualification of public and
judicial officers and lawyers grounded on public policy
differs from the first three cases of guardians agents and
administrators(under Art 1491). As to their transactions,
it has been opined that they may be ratified by means
of and in the form of a new contract, in which case its
validity shall be determined only by the circumstances at
the time of execution of s uch new contract. In those
cases, the object which was illegal at the time of the first
contract may have already become lawful at thetime of
the ratification or second contract, or theintent, or the
service which was impossible. The ratification or second
contract would then be valid fromits execution; however,
it does not retroact to the dateof the first contract.
Decision affirmed
The chain of Militante's alleged title and right to the land
as supposedly traced back to Liberato Demontao was
actually asserted by Militante (and his vendee, lawyer
and son-in-law, herein plaintiff) in the land registration
case and rejected by the Iloilo land registration court
which dismissed Militante's application for registration
of the land. Such dismissal, as already stated, was
affirmed by the final judgment in 1958 of the Court of
Appeals

Macariola Vs. Asuncion 114 SCRA 77

Facts:
On June 8, 1963, respondent Judge Elias Asuncion
rendered a decision in Civil Case 3010 final for lack of
an appeal.
On October 16, 1963, a project of partition was
submitted to Judge Asuncion. The project of partition of
lots was not signed by the parties themselves but only by
the respective counsel of plaintiffs and petitioner
Bernardita R. Macariola. The Judge approved it in his
order dated October 23, 1963.
One of the lots in the project of partition was Lot 1184,
which was subdivided into 5 lots denominated as Lot
1184 A E. Dr. Arcadio Galapon bought Lot 1184-E on
July 31, 1964, who was issued transfer of certificate of
Title No, 2338 of the Register of Deeds of Tacloban
City. On March 6, 1965, Galapon sold a portion of the
lot to Judge Asuncion and his wife.
On August 31, 1966, spouses Asuncion and Galapon
conveyed their respective shares and interest inn Lot
1184-E to the Traders Manufacturing & Fishing
Industries Inc. Judge Asuncion was the President and his
wife Victoria was the Secretary. The Asuncions and
Galapons were also the stockholder of the corporation.
Respondent Macariola charged Judge Asuncion with
"Acts unbecoming a Judge" for violating the following
provisions: Article 1491, par. 5 of the New Civil Code,
Article 14, par. 1 & 5 of the Code of Commerce, Sec. 3
par H of RA 3019 also known as the Anti-Graft &
Corrupt Practice Act., Sec. 12, Rule XVIII of the Civil
Service Rules and Canon 25 of the Canons of Judicial
Ethics.
On November 2, 1970 a certain Judge Jose D.
Nepomuceno dismissed the complaints filed against
Asuncion.
Issue:
Whether or Not the respondent Judge violated the
mentioned provisions.
Ruling:
No. Judge Asuncion did not violate the mentioned
provisions constituting of "Acts unbecoming a Judge"
but was reminded to be more discreet in his private and
business activities.
Respondent Judge did not buy the lot 1184-E directly on
the plaintiffs in Civil Case No. 3010 but from Dr.
Galapon who earlier purchased the lot from 3 of the
plaintiffs. When the Asuncion bought the lot on March 6,

1965 from Dr. Galapon after the finality of the decision

which he rendered on June 8, 1963 in Civil Case No
3010 and his two orders dated October and November,
1963. The said property was no longer the subject of
litigation.
In the case at bar, Article 14 of Code of Commerce has
no legal and binding effect and cannot apply to the
respondent. Upon the sovereignty from the Spain to the
US and to the Republic of the Philippines, Art. 14 of this
Code of Commerce, which sourced from the Spanish
Code of Commerce, appears to have been abrogated
because whenever there is a change in the sovereignty,
political laws of the former sovereign are automatically
abrogated, unless they are reenacted by Affirmative Act
of the New Sovereign.
Asuncion cannot also be held liable under the par. H,
Sec. 3 of RA 3019, citing that the public officers cannot
partake in any business in connection with this office, or
intervened or take part in his official capacity. The Judge
and his wife had withdrawn on January 31, 1967 from
the corporation and sold their respective shares to 3rd
parties, and it appears that the corporation did not benefit
in any case filed by or against it in court as there was no
case filed in the different branches of the Court of First
Instance from the time of the drafting of the Articles of
Incorporation of the corporation on March 12, 1966 up
to its incorporation on January 9, 1967. The Judge
realized early that their interest in the corporation
contravenes against Canon 25.
No. The prohibition only applies if the litigation is under
pendency. The judge bought the property in 1965 2
years after his decision became final. Further, Asuncion
did not buy the property directly from any of the parties
since the property was directly bought by Galapon, who
then sold the property to Asuncion. There was no
showing that Galapon acted as a dummy of Asuncion.
Also, Macariola did not show proof that there was a
gross inequality in the partition; or that what she got
were insignificant portions of the land.

MAHARLIKA PUBLISHING CORP V TAGLE

ISSUE

FACTS

Whether or not Tagle are entitled to the property ?

GSIS owned a parcel of land with a building and

printing equipment in Paco, Manila. It was sold to
Maharlika in a Conditional Contract of Sale with the
stipulation that if Maharlika failed to pay monthly
installments in 90 days, the GSIS would automatically
cancel the contract. Because Maharlika failed to pay
several monthly installments, GSIS demanded that
Maharlika vacate the premises.

HELD
NO. The sale to them was against public policy. First of
all, the GSIS head office was stopped from claiming that
they did not give the impression to Maharlika that they
were accepting the proposal for a compromise
agreement. The act of the general manager is binding on
GSIS. Second, Article 1491 (4) of the CC provides that
public officers and employees are prohibited from
purchasing the property of the state or any GOCC or
institution, the administration of which has been
entrusted to them cannot purchase, even at public or
judicial auction, either in person or through the
mediation of another. The SC held that as an employee
of the GSIS, Edilberto Tagle and his wife are
disqualified from bidding on the property belonging to
the GSIS because it gives the impression that there was
politics involved in the sale. It is not necessary that
actual fraud be shown, for a contract which tends to
injure the public service is void although the parties
entered into it honestly and proceeded under it in good
faith

Because of Maharlika's failure to settle the unpaid

accounts, the GSIS notified Maharlika in writing on June
26, 1967 that the conditional contract of sale was
annulled and cancelled and required Maharlika to sign a
lease contract. Maharlika refused to vacate the premises
and to sign the lease contract.
Even though Maharlika refused to do so, the GSIS
published an advertisement inviting the public to bid in a
public auction. A day before the scheduled bidding,
Adolfo Calica, the President of Maharlika, gave the
GSIS head office 2 checks worth 11,000 and a proposal
for a compromise agreement. The GSIS General
Manager Roman Cruz gave a not to Maharlika saying
Hold Bidding. Discuss with me.
On February 12, 1971, however, the public bidding of
this particular property was held as scheduled prompting
Adolfo Calica to submit his bid to the Bidding
Committee with a deposit of P11,000.00 represented by
the same two checks submitted to General Manager
Cruz, Jr., together with his letter-proposal. His bid
proposal reads: "I bid to match the highest bidder."
The bidding committee rejected Maharlika's bid as an
imperfect bid and recommended acceptance of private
respondent Luz Tagle's bid of P130,000.00 with a ten
percent (10%) deposit of P13,000.00.
Due to the refusal of petitioners to surrender the
possession of the property in question, respondent
spouses Luz R. Tagle and Edilberto Tagle filed a case for
Recovery of Possession with Damages with the Court of
First Instance of Manila
Maharlika demanded that the sale be considered null and
void, as Mrs. Tagle should have been disqualified from
bidding for the GSIS property. RTC and CA both ruled
that the Tagles were entitled to the property and
Maharlika should vacate the premises.

A Division Chief of the GSIS is not an ordinary

employee without influence or authority. The mere fact
that he exercises ample authority with respect to a
particular activity, i.e., retirement, shows that his
influence cannot be lightly regarded.
The point is that he is a public officer and his wife acts
for and in his name in any transaction with the GSIS. If
he is allowed to participate in the public bidding of
properties foreclosed or confiscated by the GSIS, there
will always be the suspicion among other bidders and
the general public that the insider official had access to
information and connections with his fellow GSIS
officials as to allow him to eventually acquire the
property.
There is no need, therefore, to pass upon the issue of
irregularity in the appearance of the private respondents'
bid and the alleged inference of fraud flowing therefrom.
We reiterate that assuming the transaction to be fair and
not tainted with irregularity, it is still looked upon with
disfavor because it places the officer in a position which
might become antagonistic to his public duty.

RESTITUTO DE LEON, Petitioner, v. COURT OF

APPEALS, JUANITA RAMOS and MAXIMO PEREZ,
Respondents
The petitioner is challenging the purported sale to the
private respondents of two parcels of land which he
claims is his own by right of inheritance.
The said properties were part of the Buenavista Estate,
which had been purchased by the Republic of the
Philippines for distribution among landless tenants and
farmers. On April 1, 1955, Lot No. S-117 thereof,
covering over 14,200 square meters, was sold to Manuel
de Leon by the Department of Agriculture on behalf of
the Republic. On August 5, 1969, Lot 43 thereof,
consisting of 11,847 square meters, was also sold by the
Republic, through the Land Authority, to the heirs of
annulled Leon, represented by the herein petitioner, his
grandson.
The first Deed of Sale carried the following limitation on
the disposition of the land:chanrob1es virtual 1aw
library
1.
That it shall not be sold, assigned, encumbered,
mortgaged or transferred, within the period of five (5)
years from the date hereof without first obtaining the
written consent of the Secretary of Agriculture and
Natural Resources.
2.
That except by hereditary succession, it shall not
be conveyed, transferred or assigned in favor of any
person who is not landless and disqualified to acquire or
own land in the Philippines.
The second sale was subject to a similar condition
On July 24, 1969, the herein private respondents filed a
complaint against the petitioner for partition of the lands
and accounting in the Court of First Instance of Bulacan.
They alleged that they had bought 1/2 of the lands from
Maria de los Santos, the widow of Manuel de Leon, by
virtue of a "Tuluyang Bilihan" dated March 18, 1959. 1
She had filed to deliver possession to them until her
death on February 5, 1960. The petitioner, who had
succeeded her in the lands, had resisted their demands
for accounting of the income from the said properties.
After trial, Judge Benigno M. Puno sustained the private
respondents This was affirmed on appeal by the
respondent court on February 16, 1989, and
reconsideration was denied on June 15, 1989. 3
The Court of Appeals agreed that the "Tuluyang Bilihan"

was genuine and valid and that the alleged lack of the
stipulated written consent could be invoked only by the
Republic of the Philippines and not by the petitioner. He
was not a party to the "Tuluyang Bilihan." Besides, the
said stipulations were not applicable to cases of
hereditary succession, and De los Santos, who sold the
lands, was the heir of her husband, Manuel de Leon.
We disagree with the respondent court that because
Maria de los Santos acquired the subject lands by
hereditary successions she was thereby released from the
conditions of the sales made on April 1, 1955, and
August 5, 1969. There is no reason why, as heir, she
should be treated less strictly than her predecessor-ininterest in the disposition of the lands during the
prohibited period.
In any event, as the "Tuluyang Bilihan" was null and
void ab initio, ownership of the disputed lands was not
transferred to the private respondents but remained with
Maria de los Santos. The Republic of the Philippines, if
not the petitioner, may still ask for the reversion of the
properties to the State for violation of the conditions in
the deeds of sale. Meanwhile the petitioner would have
preferential rights of possession thereover vis-a-vis the
private respondents, who rely only on the void
"Tuluyang Bilihan."
It is only fair, however, that the private respondents be
allowed to at least recover the purchase price of the land,
with legal interest from the time of the execution of the
Tuluyang Bilihan until the refund is actually made. This
ruling is based on the findings of the lower court that the
said instrument, although deficient for lack of the
required consent, was validly executed.
We shall support this factual finding because the
petitioner was rather ambivalent in assailing the
authenticity of the "Tuluyang Bilihan." At first he
doubted its genuineness because it was only
thumbprinted and not signed by Maria de los Santos. On
appeal, he alleged that the contents of the instruments
should have been explained to her because she was
illiterate.

G.R. No. L-31606

March 28, 1983

DONATO
REYES
YAP
and
MELITONA
MARAVILLAS, petitioners, vs.
HON. EZEKIEL S. GRAGEDA, as Judge of the Court
of First Instance of Albay and JOSE A. RICO,

Philippines" to be an absolute and unqualified

prohibition and, therefore, ruled that a conveyance
contrary to it would not be validated nor its void nature
altered by the subsequent naturalization of the vendee.
The dispositive portion of the amended decision reads:

On April 12, 1939, Maximino Rico, for and in his own

behalf and that of the minors Maria Rico, Filomeno
Rico, Prisco Rico, and Lourdes' Rico, executed a Deed
of Absolute Sale (Annex 'A' to the complaint) over Lot
339 and a portion of Lot 327 in favor of the petitioner
Donato Reyes Yap who was then a Chinese national.
Respondent Jose A. Rico is the eldest son of Maximino
Rico, one of the vendors in Annex 'A'.
Subsequently, the petitioner as vendee caused the
registration of the instrument of sale and the cancellation
of Original Certificates of Title Nos. 29332 and 29410
and the consequent issuance in his favor of Transfer
Certificate of Title No. T-2433 covering the two lots
subject matter of the Contract of Sale.
After the lapse of nearly fifteen years from and after the
execution of the deed of absolute sale, Donato Reyes
Yap was admitted as a Filipino citizen and allowed to
take his oath of allegiance to the Republic of the
Philippines. He was, thereafter, issued Certificate of
Naturalization No. 7, File No. 19 of the Court of First
Instance of Albay.
On December 1, 1967, the petitioner ceded the major
portion of Lot No. 327 consisting of 1,078 square meters
which he acquired by purchase under the deed of sale in
favor of his engineer son, Felix Yap, who was also a
Filipino citizen because of the Filipino citizenship of his
mother and the naturalization of his father Donato Reyes
Yap.
Subsequently, Lourdes Rico, aunt and co-heir of
respondent Jose A. Rico. sold the remaining portion of
Lot 327 to the petitioner who had his rights thereon duly
registered under Act 496. Petitioner, Donato Reyes Yap,
has been in possession of the lots in question since 1939,
openly, publicly, continuously, and adversely in the
concept of owner until the present time. The petitioner
has one surviving son by his first marriage to a Filipino
wife. He has five children by his second marriage also to
a Filipina and has a total of 23 grandchildren all of
whom are Filipino citizens.
The respondent court considered Section 5, Article XIII
of the 1935 Constitution that "no private agricultural
land shall be transferred or assigned except to
individuals, corporations, or associations qualified to
acquire or hold lands of the public domain in the

WHEREFORE, in view of all the foregoing, the

Contract of Sale embodied in the 'Escritura de Compra
Venta' which is attached to the Complaint as Annex 'A',
is hereby declared null and void ab initio and without
any legal force and effect.
The action to recover Lot 339 of the Cadastral Survey of
Guinobatan, Albay, covered by Transfer Certificate of
Title No. T2433. and Lot 327 covered by the same
Transfer Certificate of Title, is hereby granted to
plaintiff, upon payment of the consideration price of
P150.00 and declaring plaintiff as the lawful owner and
entitled to the possession thereof.
Defendant Donato Reyes Yap is hereby ordered to
produce his Transfer Certificate of Title No. T-2433 to
the Register of Deeds of Albay, so as to enable said
office to make the due and proper annotations on said
title as well as in the original of the declaration of nullity
as herein adjudged. Let Transfer Certificate of Title
issued to plaintiff, concerning said Lots 339 and 327 of
the Cadastral Survey of Guinobatan, Albay.
But the factual set-up has changed. The litigated
property is now in the hands of a naturalized Filipino. It
is no longer owned by a disqualified vendee.
Respondent, as a naturalized citizen, was constitutionally
qualified to own the subject property. There would be no
more public policy to be served in allowing petitioner
Epifania to recover the land as it is already in the hands
of a qualified person

G.R. No. L-5295

December 16, 1909

KUENZLE & STREIFF, plaintiff-appellant, vs.

MACKE & CHANDLER, ET AL., defendantsappellees.
This is an action brought by the plaintiff to recover of
the defendants the sum of 1,000 pesos, the value of
certain personal property, constituting a saloon bar,
furniture, furnishings, and fixtures. The plaintiff alleges
that on or about the month of January, 1907, it was the
owner of the Oregon Saloon in Cavite, Province of
Cavite, consisting of bar, furniture, furnishings, and
fixtures, of the value of 1,000 pesos; that during the said
month of January, 1907, the defendant Jose Desiderio, as
sheriff, levied upon such property by virtue of an
execution issued upon a judgment secured by the
defendant Macke & Chandler, against Stanley &
Krippendorf; that said plaintiff notified the sheriff, in the
manner provided by law, that it was the owner of said
goods and forbade the sale thereof under said execution;
that, notwithstanding such claim upon the part of the
plaintiff, the said sheriff sold said goods under said
execution; that said firm of Macke & Chandler was the
purchaser of said goods and the same were delivered to
it; that the defendants Bachrach, Elser, and Gale, were
the sureties upon the bond given to the sheriff by Macke
& Chandler before said goods were sold. The defendants
in this case allege that the property described by the
plaintiff and sold at the execution sale referred to was
not the property of the plaintiff at the time of said levy
and sale, but was the property of Stanley & Krippendorf,
who were in possession of the same at the time of such
levy. They further allege that during the month of
January, 1907, the said Stanley & Krippendorf, being
indebted in a considerable sum to the plaintiff in this
case, attempted to sell to the said plaintiff by an
instrument in writing the property in question; that said
instrument was never recorded; that said instrument was
a private document; that the said property was not
delivered to the plaintiff under said sale but that said
property remained from the time of said sale forward in
the exclusive possession and control of said Stanley &
Krippendorf, and that they conducted the business
subsequent to the execution of said instrument exactly as
they had prior thereto in their own name
purchasing goods and paying therefor without reference
to the plaintiff in this case.
The facts in relation to the manner and method in an by
which the plaintiff obtained its alleged title to the goods
in question and the fact of continued possession by
Stanley & Krippendorf, as set forth by the defendants,
are substantially admitted in this case.

The question to be determined is the effect which the

said instrument of sale had, if any, in transferring the
property in question from Stanley & Krippendorf to the
plaintiff.itc_alf
The case of the Fidelity and Deposit Company against
Wilson (8 Phil. Rep., 51) lays down a doctrine which we
think is decisive of this case. In that case it was held that
the ownership of personal property can not be
transferred to the prejudice of third persons except by
delivery of the property itself; and that a sale without
delivery gives the would-be purchaser no rights in said
property except those of a creditor. The bill of sale in the
case at bar, under the circumstances of this case, could
have no effect against a person dealing with the property
upon the faith of appearances. The case of Kuenzle &
Streiff against A. S. Watson & Co. (7 Off Gaz., 425), 1
cited by the appellant in its brief, does not sustain its
contention. That was a case of the sale of property upon
the condition that the title thereto should remain in the
vendor until the purchase price thereof should be fully
paid, and that, in case of nonpayment of the debt or of
any installment thereof when due, the vendor would
have a right to take possession of the property and deal
with it as provided for in the contract. In that case the
court held that such a contract for the conditional sale of
goods was valid in these Islands between the parties
thereto, and was valid also as to third persons, provided
possession of the property therein described was taken
by the vendor before the rights of third persons
intervened against the same. In the case at bar it is
evident that the bill of sale, so called, was in no sense a
conditional sale of property, such as is described in the
case of Kuenzle & Streiff against A. S. Watson, & Co.,
and the principles applicable thereto are entirely
inapplicable in the case at bar. Moreover, possession of
the property in suit was not taken at any time by the
plaintiff.
The defendant Macke & Chandlre, having purchased the
property at an execution sale, property conducted,
obtained a good title to the property in question as
against the plaintiff in this case.
The judgment of the court below is, therefore, affirmed,
with costs against the appellant. So ordered.

Ocejo, Perez & Co. v. International

Corporation[February 14, 1918]
Ponente: Fisher, J

Banking

Appeal from the decision of the lower court

RATIO DECIDENDI:
The fact that the price of the property has not yet been
paid in full is not an obstacle to the acquisition of the
ownership thereof by the plaintiff when such a condition
is not stipulated in the contract and delivery will result in
the conveyance of ownership.
QUICK FACTS:
Petitioners delivered to Chua Teng Chong a shipmentof
sugar. Chua Teng Chong did not pay petitioners and the
sugar was seized by his creditor to settle a debt. The
court held that delivery resulted in conveyance of the
ownership over the sugar despite the fact that there was
no full payment.
FACTS:
Buyer: Chua Teng Chong Seller: Ocejo, Perez and Co
On March, 1914, Chua Teng Chong gave a promissory
note toInternational Banking Corporation in exchange
for Php 20k. 5000piculs of sugar, located in a warehouse
in Calle Toneleros, was put upas security for the note.It
seems that at the end of March, Ocejo, Perez and Co.
entered intocontract with Chua Teng Chong for the sale
of some sugar.
The sugar was brought to Manila in the month of April,
and 5,000 piculs were delivered to Chua Teng Chong
whereupon it was stored in the a warehouse at No. 119,
Muelle de la Industria. The next day, petitioners
attempted to collect the purchase price of the sugar, but
the buyerrefused to make payment.
In the written contract between them,nothing was said
concerning the time and place for payment. When the
promissory note executed had fallen due and was
unpaid, the bank made the effort to exercise active
ownership over the sugar(Coincidentally, on the same
day it was delivered to Chua Teng Chongby March,
Ocejo, Perez and Co), it discovered that the amount of
sugarin his warehouse was less than the 5,000 piculs
mentioned in thecontract. Chua Teng Chong said that the
rest of the sugar was in awarehouse at No. 119, Muelle
de la Industria. The banks representatives then went to
this warehouse and upon arrival therefound some 3,200
piculs which they immediately seized, closing
thewarehouse with the bank's padlocks.Ocejo demand
the bank to return the sugar, which the latter
refused.Petitioners filed a complaint, with the bank as
defendant, alleging thatthe bank was unlawfully holding
the property of the plaintiff firm.

By agreement of the parties, the sugar was sold and the

proceeds of thesale deposited in the bank, subject to the
order of the court upon the final disposition. Chua Seco,
the assignee of now insolvent Chua Teng Chong, asserts
apreferential right proceeds of its sale, upon the ground
that thedelivery of the sugar by plaintiff, by virtue of
which it passed into thepossession and control of Chua
Teng Chong, indicates that the sugar isthe property of
the insolvent estate represented by him. The lower court
rendered judgment in favor of Ocejo, Perez & Co and
from this decision appeals have been taken by the bank
and by the intervener.
ISSUES/DECISION:
(a) Did title to the sugar pass to the buyer upon its
delivery to him? Yes
(b) Assuming to pay that the title passed to the buyer, did
his failure to pay the purchase price authorize the seller
to rescind the sale? Yes
(c) Was the commencement of a replevin suit by the
seller equivalent to the rescission of the sale? No
Seller argues:
Despite the fact that no term was stipulated within which
the payment should be made, he was entitled to demand
payment at any time after delivery, and further that until
such payment was in fact made, title to the sugar did not
pass to the buyer.
HELD
a) The obligation of the seller to make delivery of the
thing sold was not subject to the condition that the buyer
was to pay the price before delivery.
The sugar was delivered to the buyer on April 16, 1914.
The seller delivered it into the buyer'swarehouse, leaving
it entirely subject to his control. Article 1462 of theCivil
Code provides that the thing sold is deemed to be
delivered"when it passes into the possession and control
of the buyer.According to Manresa, tradition is a true
mode of acquiring ownership"which effects the passage
of title and the birth of the right in rem.
Therefore, the delivery of the thing . . . signifies that title
has passedfrom the seller to the buyer." The Transaction
is not a like a cash sale in which delivery and
paymentare to be made simultaneously. When no term
for payment isstipulated, the seller is not bound to
deliver the thing sold until thebuyer has paid the price;
But if delivery is consummated, he in factgrants a term
of credit to the buyer, however short and indeterminateit
may be, and waives his right to insist upon payment in
advance orsimultaneously with delivery. But he does
become entitled to paymentupon demand made upon the
buyer.In De la Rama vs. Sanchez: The fact that the
price of the property hasnot yet been paid in full is not,

nor can it be, an obstacle to theacquisition of the

ownership thereof by the plaintiff, because as such
acondition was not stipulated in the contract, the latter
immediatelyproduced its natural effects in law, the
principal and most important of which being the
conveyance of the ownership by means of the deliveryof
the thing old to the purchaser, without prejudice, of the
course, tothe right of the vendor to claim payment of any
sum still due.In Gonzalez vs. Rojas: . . . ownership of
things is not transferred bymere contract but by delivery.
Contracts only constitute titles or rightsto the transfer or
acquisition of ownership, while delivery or tradition
isthe method of accomplishing the same, the title and the
method of acquiring it being different in our law."
Therefore, the effect of the delivery was to transmit the
title of thesugar to the buyer.b-c) Article 1124 of the
Civil Code states that reciprocal obligations
arerescindable when one of the parties bound should fail
to perform thatwhich is incumbent upon him. In the
contract of the sale the obligationto pay the price is
correlative to the obligation to deliver the thing
sold.Nonperformance by one of the parties authorizes
the other to exercisethe right to demand the performance
of the obligation or its rescission.But the right to rescind
the sale for nonperformance on the part of thebuyer is
not absolute; the law subordinates it to the rights of
thirdpersons in good faith. The bank argues this
principle, alleging that thesugar was pledged to it, after
its delivery to the buyer.
However, the sugar pledged is not the same as that here
in dispute. The pledge was for the sugar in the Calle
Toneleros warehouse, not theone in
Muelle de la Industria.
The sugar in question could not be possiblyhave been
the subject matter of the contract of pledge which was
formed in March as it was not the property of the
defendant at thetime.Even if an attempt was made to
pledge the sugar when it wasdelivered, it would be void
as against third persons since it was notrecorded in a
public instrument. Therefore, the pledge asserted by
theInternational Bank is inefficacious. The mere will of
the plaintiff will not produce the rescission of the
sale.Although the right to rescind a sale, is established
by article 1506 and
1124
and such right so conferred is not an absolute one. The
samearticle provides that "the court shall decree the
rescission demanded,unless there are causes which
justify him in allowing a term."