SECOND DIVISION

G.R. No. 133895

October 2, 2001

WHEREFORE, viewed from all the foregoing considerations,

judgment is hereby made in favor of the plaintiffs and against
the defendants:

ZENAIDA M. SANTOS, petitioner,

vs.
CALIXTO SANTOS, ALBERTO SANTOS, ROSA SANTOSCARREON and ANTONIO SANTOS, respondents.

a) Declaring Exh. "B", the deed of sale executed by Rosalia

Santos and Jesus Santos on January 19, 1959, as entirely null
and void for being fictitious or stimulated and inexistent and
without any legal force and effect:

QUISUMBING, J.:

b) Declaring Exh. "D", the deed of sale executed by Rosa

Santos in favor of Salvador Santos on November 20, 1973,
also as entirely null and void for being likewise fictitious or
stimulated and inexistent and without any legal force and
effect;

review1

This petition for

seeks to annul and set aside the
decision date March 10, 1998 of the Court of Appeals that
affirmed the decision of the Regional Trial Court of Manila,
Branch 48, dated March 17, 1993. Petitioner also seeks to
annul the resolution that denied her motion for reconsideration.
Petitioner Zenaida M. Santos is the widow of Salvador Santos,
a brother of private respondents Calixto, Alberto, Antonio, all
surnamed Santos and Rosa Santos-Carreon.
The spouses Jesus and Rosalia Santos owned a parcel of land
registered under TCT No. 27571 with an area of 154 square
meters, located at Sta. Cruz Manila. On it was a four-door
apartment administered by Rosalia who rented them out. The
spouses had five children, Salvador, Calixto, Alberto, Antonio
and Rosa.
On January 19, 1959, Jesus and Rosalia executed a deed of
sale of the properties in favor of their children Salvador and
Rosa. TCT No. 27571 became TCT No. 60819. Rosa in turn
sold her share to Salvador on November 20, 1973 which
resulted in the issuance of a new TCT No. 113221. Despite the
transfer of the property to Salvador, Rosalia continued to lease
receive rentals form the apartment units.1wphi1.nt
On November 1, 1979, Jesus died. Six years after or on
January 9, 1985, Salvador died, followed by Rosalia who died
the following month. Shortly after, petitioner Zenaida, claiming
to be Salvador's heir, demanded the rent from Antonio
Hombrebueno,2 a tenant of Rosalia. When the latter refused to
pay, Zenaida filed and ejectment suit against him with the
Metropolitan Trial Court of Manila, Branch 24, which eventually
decided in Zenaida's favor.
On January 5, 1989, private respondents instituted an action
for reconveyance of property with preliminary injunction against
petitioner in the Regional Trial Court of Manila, where they
alleged that the two deeds of sale executed on January 19,
1959 and November 20, 1973 were simulated for lack of
consideration. They were executed to accommodate Salvador
in generation funds for his business and providing him with
greater business flexibility.
In her Answer, Zenaida denied the material allegations in the
complaint as special and affirmative defenses, argued that
Salvador was the registered owner of the property, which could
only be subjected to encumbrances or liens annotated on the
title; that the respondents' right to reconveyance was already
barred by prescription and laches; and that the complaint state
no cause of action.
On March 17, 1993, the trial court decided in private
respondents' favor, thus:

c) Directing the Register of Deeds of Manila to cancel Transfer

Certificate of Title No. T-113221 registered in the name of
Salvador Santos, as well as, Transfer Certificate of Title No.
60819 in the names of Salvador Santos, Rosa Santos, and
consequently thereafter, reinstating with the same legal force
and effect as if the same was not cancelled, and which shall in
all respects be entitled to like faith and credit; Transfer
Certificate of Title No. T-27571 registered in the name of
Rosalia A. Santos, married to Jesus Santos, the same to be
partitioned by the heirs of the said registered owners in
accordance with law; and
d) Making the injunction issued in this case permanent.
Without pronouncement as to costs.
SO OREDERED.3
The trial court reasoned that notwithstanding the deeds of sale
transferring the property to Salvador, the spouses Rosalia and
Jesus continued to possess the property and to exercise rights
of ownership not only by receiving the monthly rentals, but also
by paying the realty taxes. Also, Rosalia kept the owner's
duplicate copy of the title even after it was already in the name
of Salvador. Further, the spouses had no compelling reason in
1959 to sell the property and Salvador was not financially
capable to purchase it. The deeds of sale were therefore
fictitious. Hence, the action to assail the same does not
prescribe.4
Upon appeal, the Court of Appeals affirmed the trial court's
decision dated March 10, 1998. It held that in order for the
execution of a public instrument to effect tradition, as provided
in Article 1498 of the Civil Code,5 the vendor shall have had
control over the thing sold, at the moment of sale. It was not
enough to confer upon the purchaser the ownership and the
right of possession. The thing sold must be placed in his
control. The subject deeds of sale did not confer upon
Salvador the ownership over the subject property, because
even after the sale, the original vendors remained in dominion,
control, and possession thereof. The appellate court further
said that if the reason for Salvador's failure to control and
possess the property was due to his acquiescence to his
mother, in deference to Filipino custom, petitioner, at least,
should have shown evidence to prove that her husband
declared the property for tax purposes in his name or paid the
land taxes, acts which strongly indicate control and
possession. The appellate court disposed:
WHEREFORE, finding no reversible error in the decision
appealed from, the same is hereby AFFIRMED. No
pronouncement as to costs.

SO ORDERED.6
Hence, this petition where petitioner avers that the Court of
Appeals erred in:
I.
HOLDING THAT THE OWNERSHIP OVER THE
LITIGATED PROPERTY BY THE LATE HUSBAND OF
DEFENDANT-APPELLANT WAS AFFECTED BY HIS
FAILURE TO EXERCISE CERTAIN ATTRIBUTES OF
OWNERSHIP.
II.
HOLDING THAT DUE EXECUTION OF A PUBLIC
INSTRUMENT IS NOT EQUIVALENT TO DELIVERY OF THE
LAND IN DISPUTE.
III.
NOT FINDING THAT THE CAUSE OF ACTION OF
ROSALIA SANTOS HAD PRESCRIBED AND/OR BARRED
BY LACHES.
IV.
IGNORING PETITIONER'S ALLEGATION TO THE
EFFECT THAT PLAINTIFF DR. ROSA [S.] CARREON IS NOT
DISQUALIFIED TO TESTIFY AS TO THE QUESTIONED
DEEDS OF SALE CONSIDERING THAT SALVADOR
SANTOS HAS LONG BEEN DEAD.7
In this petition, we are asked to resolve the following:
1. Are payments of realty taxes and retention of possession
indications of continued ownership by the original owners?
2. Is a sale through a public instrument tantamount to delivery
of the thing sold?
3. Did the cause of action of Rosalia Santos and her heirs
prescribe?
4. Can petitioner invoke the "Dead Man's Statute?"8
On the first issue, petitioner contends that the Court of Appeals
erred in holding that despite the deeds of sale in Salvador's
favor, Jesus and Rosalia still owned the property because the
spouses continued to pay the realty taxes and possess the
property. She argues that tax declarations are not conclusive
evidence of ownership when not supported by evidence. She
avers that Salvador allowed his mother to possess the property
out of respect to her in accordance with Filipino values.
It is true that neither tax receipts nor declarations of ownership
for taxation purposes constitute sufficient proof of ownership.
They must be supported by other effective proofs. 9 These
requisite proofs we find present in this case. As admitted by
petitioner, despite the sale, Jesus and Rosalia continued to
possess and administer the property and enjoy its fruits by
leasing it to third persons.10 Both Rosa and Salvador did not
exercise any right of ownership over it.11 Before the second
deed of sale to transfer her share over the property was
executed by Rosa, Salvador still sought she permission of his
mother.12 Further, after Salvador registered the property in his
name, he surrendered the title to his mother.13 These are clear
indications that ownership still remained with the original
owners. In Serrano vs. CA, 139 SCRA 179, 189 (1985), we

held that the continued collection of rentals from the tenants by

the seller of realty after execution of alleged deed of sale is
contrary to the notion of ownership.
Petitioner argues that Salvador, in allowing her mother to use
the property even after the sale, did so out of respect for her
and out of generosity, a factual matter beyond the province of
this Court.14 Significantly, in Alcos vs. IAC 162 SCRA 823, 837
(1988), we noted that the buyer's immediate possession and
occupation of the property corroborated the truthfulness and
authenticity of the deed of sale. Conversely, the vendor's
continued possession of the property makes dubious the
contract of sale between the parties.
On the second issue, is a sale through a public instrument
tantamount to delivery of the thing sold? Petitioner in her
memorandum invokes Article 147715 of the Civil Code which
provides that ownership of the thing sold is transferred to the
vendee upon its actual or constructive delivery. Article 1498, in
turn, provides that when the sale is made through a public
instrument, its execution is equivalent to the delivery of the
thing subject of the contract. Petitioner avers that applying said
provisions to the case, Salvador became the owner of the
subject property by virtue of the two deeds of sale executed in
his favor.
Nowhere in the Civil Code, however, does it provide that
execution of a deed of sale is a conclusive presumption of
delivery of possession. The Code merely said that the
execution shall be equivalent to delivery. The presumption can
be rebutted by clear and convincing evidence.16 Presumptive
delivery can be negated by the failure of the vendee to take
actual possession of the land sold.17
In Danguilan vs. IAC, 168 SCRA 22, 32 (1988), we held that
for the execution of a public instrument to effect tradition, the
purchaser must be placed in control of the thing sold. When
there is no impediment to prevent the thing sold from
converting to tenancy of the purchaser by the sole will of the
vendor, symbolic delivery through the execution of a public
instrument is sufficient. But if, notwithstanding the execution of
the instrument, the purchaser cannot have the enjoyment and
material tenancy nor make use of it himself or through another
in his name, then delivery has not been effected.
As found by both the trial and appellate courts and amply
supported by the evidence on record, Salvador was never
placed in control of the property. The original sellers retained
their control and possession. Therefore, there was no real
transfer of ownership.
Moreover, in Norkis Distributors, Inc. vs. CA, 193 SCRA 694,
698-699 (1991), citing the land case of Abuan vs. Garcia, 14
SCRA 759 (1965), we held that the critical factor in the
different modes of effecting delivery, which gives legal effect to
the act is the actual intention of the vendor to deliver, and its
acceptance by the vendee. Without that intention, there is no
tradition. In the instant case, although the spouses Jesus and
Rosalia executed a deed of sale, they did not deliver the
possession and ownership of the property to Salvador and
Rosa. They agreed to execute a deed of sale merely to
accommodate Salvador to enable him to generate funds for his
business venture.
On the third issue, petitioner argues that from the date of the
sale from Rosa to Salvador on November 20, 1973, up to his

death on January 9, 1985, more or less twelve years had

lapsed, and from his death up to the filing of the case for
reconveyance in the court a quo on January 5, 1989, four
years had lapsed. In other words, it took respondents about
sixteen years to file the case below. Petitioner argues that an
action to annul a contract for lack of consideration prescribes in
ten years and even assuming that the cause of action has not
prescribed, respondents are guilty of laches for their inaction
for a long period of time.

to testify, she waived her right to invoke the dean man's

statute. Further, her counsel cross-examined Rosa on matters
that occurred during Salvadors' lifetime. In Goi vs. CA, 144
SCRA 222, 231 (1986) we held that protection under the dead
man's statute is effectively waived when a counsel for a
petitioner cross-examines a private respondent on matters
occurring during the deceased's lifetime. The Court of appeals
cannot be faulted in ignoring petitioner on Rosa's
disqualification.1wphi1.nt

Has respondents' cause of action prescribed? In Lacsamana

vs. CA, 288 SCRA 287, 292 (1998), we held that the right to
file an action for reconveyance on the ground that the
certificate of title was obtained by means of a fictitious deed of
sale is virtually an action for the declaration of its nullity, which
does not prescribe. This applies squarely to the present case.
The complaint filed by respondent in the court a quo was for
the reconveyance of the subject property to the estate of
Rosalia since the deeds of sale were simulated and fictitious.
The complaint amounts to a declaration of nullity of a void
contract, which is imprescriptible. Hence, respondents' cause
of action has not prescribed.

WHEREFORE, the instant petition is DENIED. The assailed

decision dated March 10, 1998 of the Court of Appeals, which
sustained the judgment of the Regional Trial Court dated
March 17, 1993, in favor of herein private respondents, is
AFFIRMED. Costs against petitioner.

Neither is their action barred by laches. The elements of laches

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

FRANCISCO N. DY, JR., Substituted by his Estate Rep. by

ROSARIO PEREZ-DY, Administratrix, petitioner,
vs.
COURT OF APPEALS and FERTILIZER MARKETING
COMPANY OF THE PHILIPPINES, respondents.

Lastly, petitioner in her memorandum seeks to expunge the

testimony of Rosa Santos-Carreon before the trial court in view
of Sec. 23, Rule 130 of the Revised Rules of Court, otherwise
known as the "Dead Man's Statute."19 It is too late for
petitioner, however, to invoke said rule. The trial court in its
order dated February 5, 1990, denied petitioner's motion to
disqualify respondent Rosa as a witness. Petitioner did not
appeal therefrom. Trial ensued and Rosa testified as a witness
for respondents and was cross-examined by petitioner's
counsel. By her failure to appeal from the order allowing Rosa

SO ORDERED.

FIRST DIVISION
G.R. No. 97130

June 19, 1991

Loreta F. Sablaya for petitioner.

Rayala & Associates for private respondent.
GRIO-AQUINO, J.:
This is a petition for review of the Court of Appeals' decision
dated December 11, 1990, which affirmed in toto the decision
of the Regional Trial Court of Makati dated July 18, 1988,
which ordered the petitioner to pay the private respondent the
sum of P337,120.00 plus interest of 12% per annum, attorney's
fees and costs.
Private respondent Fertilizer Marketing Company of the
Philippines filed an action to collect from Francisco Dy, Jr.
(now deceased) and the Francisco Dy, Jr. Trading Corporation
the sum of P337,120.00 as unpaid balance on their purchase
of fertilizers on credit from the private respondent.
The defendants were declared in default on August 15, 1983
for failure to answer the complaint within the reglementary
period. Private respondent was thereafter allowed to present
its evidence ex parte before the Branch Clerk of Court.
Subsequently, the defendants filed a motion to admit their
answer, but it was denied by the court. They filed a motion for
reconsideration; it was granted; the order of default was set
aside; their answer was admitted; and they were allowed to
present their evidence without retaking the plaintiff s evidence.
On the date set for the reception of their evidence, the
defendants failed to appear despite due notice, so, judgment
was rendered by the trial court against them on January 4,
1984.
On appeal to the Court of Appeals, the judgment by default
was set aside and the case was remanded to the lower court
for pre-trial and trial on the merits (AC-G.R. CV No. 03747, p.
46, Rollo).

At the pre-trial conference on November 12, 1987, the plaintiff

and defendant Francisco Dy, Jr. appeared, but there was no
appearance for the defendant trading corporation, so it was
declared in default again and the plaintiff was allowed to
present its evidence ex parte before the Branch Clerk of Court.
However, in that same pre-trial conference the parties agreed
that the evidence previously presented by the plaintiff shall
remain on record for purposes of the continuation of the trial,
subject to cross-examination in open court, and, that the
presentation of the affidavits in question and answer form will
constitute the direct testimony of the defendant's witnesses
likewise subject to cross-examination of the adverse counsel.
On motion for reconsideration, the order of default against the
corporation was lifted. A second motion for reconsideration
was filed by the defendants on January 22, 1988 to set aside
the agreement for trial by affidavits but it was denied by the
court.
On the date of the hearing set on April 25, 1988, the
defendants failed to appear to present their evidence despite
due notice, hence, they were deemed to have waived the
presentation of their evidence. The case was submitted for
decision upon the plaintiffs evidence.
On July 18, 1988, the trial court rendered a decision
(mentioned earlier) for the plaintiff and against the defendants.
The latter appealed to the Court of Appeals (CA-G.R. CV No.
23540) alleging that the court a quo erred (1) in reinstating the
nullified proceedings on August 19, 1983 before the Branch
Clerk of Court; (2) in denying her procedural due process; and
(3) in awarding damages against her.
During the pendency of the appeal, Francisco Dy, Jr. passed
away on June 20, 1989. His wife, Rosario Perez-Dy, as judicial
administratrix of his estate, prosecuted the appeal (Azarraga
vs. Cortes, 9 Phil. 698).
On December 11, 1990, the Court of Appeals dismissed the
appeal (CA-G.R. CV No. 23540) for lack of merit.
In this petition for review of that decision, the petitioner
reiterates the same issues that she raised in the Court of
Appeals.
With regard to the validity of the proceedings before the
Branch Clerk of Court, we agree with the observations of the
Court of Appeals that:
Appellant is now estopped from questioning the retention of the
proceedings held on August 19, 1983 before the Branch Clerk
of Court since her husband agreed to the same during the pretrial conference held on November 12, 1987. Agreements
reached at the pre-trial conference and embodied in the pretrial order shall control the subsequent course of the trial and
should not be disturbed unless there could be manifest
injustice.
The agreement is not unjust to appellant. Aside from appellant
having the right to adduce evidence on her behalf, the parties
agreed that the evidence presented by appellee before the
Branch Clerk of Court would be retained, with appellant having
the right to cross-examine appellee's witnesses.
xxx

xxx

xxx

The agreement of the parties as contained in the pre-trial order

is not invalid. The parties are authorized by the Rules of Court
to consider "[s]uch other matters as may aid in the prompt
disposition of the action." An authority believes this includes
"agreement on certain matters so that witnesses need not and
will not be called." Undoubtedly, the procedure agreed upon by
the parties in this case would have greatly accelerated the trial
and the decision therein, which, at the, time of the pre-trial
conference, had been pending for three years and had already
gone up on appeal to this Court. (pp. 27-28, Rollo.)
The presentation of the plaintiff's evidence before the Branch
Clerk of Court was not void. The Supreme Court, in the case of
Continental Bank vs. Tiangco, et al. (94 SCRA 715) departing
from its contrary statement in the Lim Tan Hu case (66 SCRA
425), declared that a decision based on evidence heard by a
deputy clerk of court as commissioner is valid and enforceable
because it was rendered by a court of competent jurisdiction,
was not impaired by extrinsic fraud, nor by lack of due process,
and there was no showing that the private respondents were
prejudiced by such a procedure, or that the commissioner
committed any mistake or abuse of discretion, or that the
proceedings were vitiated by collusion and collateral fraud.
That ruling applies four square to this case.
The practice of designating the clerk of court as a
commissioner to receive evidence in the event of the nonappearance of the defendant and its counsel, is not irregular
and is sanctioned by Rule 33 of the Rules of Court on trial by
commissioner (J.M. Tuazon, Inc. vs. Dela Rosa, 18 SCRA 591;
Wassmer vs. Velez, 12 SCRA 648).
The petitioner was not denied due process. As pointed out by
the appellate court:
. . . Appellant retained her right to present evidence on her
behalf and the opportunity to cross-examine the witnesses
already presented by appellee. At any rate, if appellant
believes that her right to procedural due process had been
curtailed, the same was due to a voluntary waiver by her
husband. (p. 28, Rollo)
WHEREFORE, the petition for review is denied for lack of
merit. Costs against the petitioners.
SO ORDERED.

EN BANC
G.R. No. L-12342

August 3, 1918

A. A. ADDISON, plaintiff-appellant,
vs.
MARCIANA FELIX and BALBINO TIOCO, defendantsappellees.
Thos. D. Aitken for appellant.
Modesto Reyes and Eliseo Ymzon for appellees.
FISHER, J.:
By a public instrument dated June 11, 1914, the plaintiff sold to
the defendant Marciana Felix, with the consent of her husband,
the defendant Balbino Tioco, four parcels of land, described in
the instrument. The defendant Felix paid, at the time of the
execution of the deed, the sum of P3,000 on account of the
purchase price, and bound herself to pay the remainder in
installments, the first of P2,000 on July 15, 1914, and the
second of P5,000 thirty days after the issuance to her of a
certificate of title under the Land Registration Act, and further,
within ten years from the date of such title P10, for each
coconut tree in bearing and P5 for each such tree not in
bearing, that might be growing on said four parcels of land on
the date of the issuance of title to her, with the condition that
the total price should not exceed P85,000. It was further
stipulated that the purchaser was to deliver to the vendor 25
per centum of the value of the products that she might obtain
from the four parcels "from the moment she takes possession
of them until the Torrens certificate of title be issued in her
favor."
It was also covenanted that "within one year from the date of
the certificate of title in favor of Marciana Felix, this latter may
rescind the present contract of purchase and sale, in which
case Marciana Felix shall be obliged to return to me, A. A.
Addison, the net value of all the products of the four parcels
sold, and I shall obliged to return to her, Marciana Felix, all the
sums that she may have paid me, together with interest at the
rate of 10 per cent per annum."
In January, 1915, the vendor, A. A. Addison, filed suit in Court
of First Instance of Manila to compel Marciana Felix to make
payment of the first installment of P2,000, demandable in
accordance with the terms of the contract of sale
aforementioned, on July 15, 1914, and of the interest in
arrears, at the stipulated rate of 8 per cent per annum. The
defendant, jointly with her husband, answered the complaint
and alleged by way of special defense that the plaintiff had
absolutely failed to deliver to the defendant the lands that were
the subject matter of the sale, notwithstanding the demands
made upon him for this purpose. She therefore asked that she
be absolved from the complaint, and that, after a declaration of
the rescission of the contract of the purchase and sale of said
lands, the plaintiff be ordered to refund the P3,000 that had
been paid to him on account, together with the interest agreed
upon, and to pay an indemnity for the losses and damages
which the defendant alleged she had suffered through the
plaintiff's non-fulfillment of the contract.
The evidence adduced shows that after the execution of the
deed of the sale the plaintiff, at the request of the purchaser,
went to Lucena, accompanied by a representative of the latter,
for the purpose of designating and delivering the lands sold.

He was able to designate only two of the four parcels, and

more than two-thirds of these two were found to be in the
possession of one Juan Villafuerte, who claimed to be the
owner of the parts so occupied by him. The plaintiff admitted
that the purchaser would have to bring suit to obtain
possession of the land (sten. notes, record, p. 5). In August,
1914, the surveyor Santamaria went to Lucena, at the request
of the plaintiff and accompanied by him, in order to survey the
land sold to the defendant; but he surveyed only two parcels,
which are those occupied mainly by the brothers Leon and
Julio Villafuerte. He did not survey the other parcels, as they
were not designated to him by the plaintiff. In order to make
this survey it was necessary to obtain from the Land Court a
writ of injunction against the occupants, and for the purpose of
the issuance of this writ the defendant, in June, 1914, filed an
application with the Land Court for the registration in her name
of four parcels of land described in the deed of sale executed
in her favor by the plaintiff. The proceedings in the matter of
this application were subsequently dismissed, for failure to
present the required plans within the period of the time allowed
for the purpose.
The trial court rendered judgment in behalf of the defendant,
holding the contract of sale to be rescinded and ordering the
return to the plaintiff the P3,000 paid on account of the price,
together with interest thereon at the rate of 10 per cent per
annum. From this judgment the plaintiff appealed.
In decreeing the rescission of the contract, the trial judge
rested his conclusion solely on the indisputable fact that up to
that time the lands sold had not been registered in accordance
with the Torrens system, and on the terms of the second
paragraph of clause (h) of the contract, whereby it is stipulated
that ". . . within one year from the date of the certificate of title
in favor of Marciana Felix, this latter may rescind the present
contract of purchase and sale . . . ."
The appellant objects, and rightly, that the cross-complaint is
not founded on the hypothesis of the conventional rescission
relied upon by the court, but on the failure to deliver the land
sold. He argues that the right to rescind the contract by virtue
of the special agreement not only did not exist from the
moment of the execution of the contract up to one year after
the registration of the land, but does not accrue until the land is
registered. The wording of the clause, in fact, substantiates the
contention. The one year's deliberation granted to the
purchaser was to be counted "from the date of the certificate of
title ... ." Therefore the right to elect to rescind the contract was
subject to a condition, namely, the issuance of the title. The
record show that up to the present time that condition has not
been fulfilled; consequently the defendant cannot be heard to
invoke a right which depends on the existence of that
condition. If in the cross-complaint it had been alleged that the
fulfillment of the condition was impossible for reasons
imputable to the plaintiff, and if this allegation had been
proven, perhaps the condition would have been considered as
fulfilled (arts. 1117, 1118, and 1119, Civ. Code); but this issue
was not presented in the defendant's answer.
However, although we are not in agreement with the reasoning
found in the decision appealed from, we consider it to be
correct in its result. The record shows that the plaintiff did not
deliver the thing sold. With respect to two of the parcels of
land, he was not even able to show them to the purchaser; and

as regards the other two, more than two-thirds of their area

was in the hostile and adverse possession of a third person.
The Code imposes upon the vendor the obligation to deliver
the thing sold. The thing is considered to be delivered when it
is placed "in the hands and possession of the vendee." (Civ.
Code, art. 1462.) It is true that the same article declares that
the execution of a public instruments is equivalent to the
delivery of the thing which is the object of the contract, but, in
order that this symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall have had such
control over the thing sold that, at the moment of the sale, its
material delivery could have been made. It is not enough to
confer upon the purchaser the ownership and the right of
possession. The thing sold must be placed in his control. When
there is no impediment whatever to prevent the thing sold
passing into the tenancy of the purchaser by the sole will of the
vendor, symbolic delivery through the execution of a public
instrument is sufficient. But if, notwithstanding the execution of
the instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it himself or
through another in his name, because such tenancy and
enjoyment are opposed by the interposition of another will,
then fiction yields to reality the delivery has not been
effected.
As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his
commentaries on article 1604 of the French Civil code, "the
word "delivery" expresses a complex idea . . . the
abandonment of the thing by the person who makes the
delivery and the taking control of it by the person to whom the
delivery is made."
The execution of a public instrument is sufficient for the
purposes of the abandonment made by the vendor; but it is not
always sufficient to permit of the apprehension of the thing by
the purchaser.
The supreme court of Spain, interpreting article 1462 of the
Civil Code, held in its decision of November 10, 1903, (Civ.
Rep., vol. 96, p. 560) that this article "merely declares that
when the sale is made through the means of a public
instrument, the execution of this latter is equivalent to the
delivery of the thing sold: which does not and cannot mean that
this fictitious tradition necessarily implies the real tradition of
the thing sold, for it is incontrovertible that, while its ownership
still pertains to the vendor (and with greater reason if it does
not), a third person may be in possession of the same thing;
wherefore, though, as a general rule, he who purchases by
means of a public instrument should be deemed . . . to be the
possessor in fact, yet this presumption gives way before proof
to the contrary."
It is evident, then, in the case at bar, that the mere execution of
the instrument was not a fulfillment of the vendors' obligation to
deliver the thing sold, and that from such non-fulfillment arises
the purchaser's right to demand, as she has demanded, the
rescission of the sale and the return of the price. (Civ. Code,
arts. 1506 and 1124.)
Of course if the sale had been made under the express
agreement of imposing upon the purchaser the obligation to
take the necessary steps to obtain the material possession of
the thing sold, and it were proven that she knew that the thing
was in the possession of a third person claiming to have
property rights therein, such agreement would be perfectly

valid. But there is nothing in the instrument which would

indicate, even implicitly, that such was the agreement. It is
true, as the appellant argues, that the obligation was
incumbent upon the defendant Marciana Felix to apply for and
obtain the registration of the land in the new registry of
property; but from this it cannot be concluded that she had to
await the final decision of the Court of Land Registration, in
order to be able to enjoy the property sold. On the contrary, it
was expressly stipulated in the contract that the purchaser
should deliver to the vendor one-fourth "of the products ... of
the aforesaid four parcels from the moment when she takes
possession of them until the Torrens certificate of title be
issued in her favor." This obviously shows that it was not
forseen that the purchaser might be deprived of her
possession during the course of the registration proceedings,
but that the transaction rested on the assumption that she was
to have, during said period, the material possession and
enjoyment of the four parcels of land.
Inasmuch as the rescission is made by virtue of the provisions
of law and not by contractual agreement, it is not the
conventional but the legal interest that is demandable.
It is therefore held that the contract of purchase and sale
entered into by and between the plaintiff and the defendant on
June 11, 1914, is rescinded, and the plaintiff is ordered to
make restitution of the sum of P3,000 received by him on
account of the price of the sale, together with interest thereon
at the legal rate of 6 per annum from the date of the filing of the
complaint until payment, with the costs of both instances
against the appellant. So ordered.

SECOND DIVISION
G.R. No. 120820

August 1, 2000

SPS. FORTUNATO SANTOS and ROSALINDA R SANTOS,

petitioners,
vs.
COURT OF APPEALS, SPS. MARIANO R. CASEDA and
CARMEN CASEDA, respondents.
QUISUMBING, J.:
For review on certiorari is the decision of the Court of Appeals,
dated March 28, 1995, in CA-G.R. CV No. 30955, which
reversed and set aside the judgment of the Regional Trial
Court of Makati, Branch 133, in Civil Case No. 89-4759.
Petitioners (the Santoses) were the owners of a house and lot
informally sold, with conditions, to herein private respondents
(the Casedas). In the trial court, the Casedas had complained
that the Santoses refused to deliver said house and lot despite
repeated demands. The trial court dismissed the complaint for
specific performance and damages, but in the Court of
Appeals, the dismissal was reversed, as follows:
"WHEREFORE, in view of the foregoing, the decision appealed
from is hereby REVERSED and SET ASIDE and a new one
entered:
"1. GRANTING plaintiffs-appellants a period of NINETY (90)
DAYS from the date of the finality of judgment within which to
pay the balance of the obligation in accordance with their
agreement;

"2. Ordering appellees to restore possession of the subject

house and lot to the appellants upon receipt of the full amount
of the balance due on the purchase price; and

on the property for 1981-1984. She also settled the electric

bills from December 12, 1988 to July 12, 1989. All these
payments were made in the name of Rosalinda Santos.

"3. No pronouncement as to costs.

In January 1989, the Santoses, seeing that the Casedas

lacked the means to pay the remaining installments and/or
amortization of the loan, repossessed the property. The
Santoses then collected the rentals from the tenants.

"SO ORDERED."1
The undisputed facts of this case are as follows:
The spouses Fortunato and Rosalinda Santos owned the
house and lot consisting of 350 square meters located at Lot 7,
Block 8, Better Living Subdivision, Paraaque, Metro Manila,
as evidenced by TCT (S-11029) 28005 of the Register of
Deeds of Paraaque. The land together with the house, was
mortgaged with the Rural Bank of Salinas, Inc., to secure a
loan of P150,000.00 maturing on June 16, 1987.
Sometime in 1984, Rosalinda Santos met Carmen Caseda, a
fellow market vendor of hers in Pasay City and soon became
very good friends with her. The duo even became kumadres
when Carmen stood as a wedding sponsor of Rosalinda's
nephew.
On June 16, 1984, the bank sent Rosalinda Santos a letter
demanding payment of P16,915.84 in unpaid interest and other
charges. Since the Santos couple had no funds, Rosalinda
offered to sell the house and lot to Carmen. After inspecting
the real property, Carmen and her husband agreed.
Sometime that month of June, Carmen and Rosalinda signed a
document, which reads:
"Received the amount of P54,100.00 as a partial payment of
Mrs. Carmen Caseda to the (total) amount of 350,000.00
(house and lot) that is own (sic) by Mrs. Rosalinda R. Santos.
(Sgd.) Carmen H. Caseda
direct buyer
Mrs. Carmen Caseda
"(Sgd.) Rosalinda Del R. Santos
Owner
Mrs. Rosalinda R. Santos
House and Lot
Better Living Subd. Paraaque, Metro Manila
Section V Don Bosco St."2
The other terms and conditions that the parties agreed upon
were for the Caseda spouses to pay: (1) the balance of the
mortgage loan with the Rural bank amounting to P135,385.18;
(2) the real estate taxes; (3) the electric and water bills; and (4)
the balance of the cash price to be paid not later than June 16,
1987, which was the maturity date of the loan.3
The Casedas gave an initial payment of P54,100.00 and
immediately took possession of the property, which they then
leased out. They also paid in installments, P81,696.84 of the
mortgage loan. The Casedas, however, failed to pay the
remaining balance of the loan because they suffered
bankruptcy in 1987. Notwithstanding the state of their finances,
Carmen nonetheless paid in March 1990, the real estate taxes

In February 1989, Carmen Caseda sold her fishpond in

Batangas. She then approached petitioners and offered to pay
the balance of the purchase price for the house and lot. The
parties, however, could not agree, and the deal could not push
through because the Santoses wanted a higher price. For
understandably, the real estate boom in Metro Manila at this
time, had considerably jacked up realty values. On August 11,
1989, the Casedas filed Civil Case No. 89-4759, with the RTC
of Makati, to have the Santoses execute the final deed of
conveyance over the property, or in default thereof, to
reimburse the amount of P180,000.00 paid in cash and
P249,900.00 paid to the rural bank, plus interest, as well as
rentals for eight months amounting to P32,000.00, plus
damages and costs of suit.1wphi1.nt
After trial on the merits, the lower court disposed of the case as
follows:
"WHEREFORE, judgment is hereby ordered:
(a) dismissing plaintiff's (Casedas') complaint; and
(b) declaring the agreement; marked as Annex "C" of the
complaint rescinded. Costs against plaintiffs.
"SO ORDERED."4
Said judgment of dismissal is mainly based on the trial court's
finding that:
"Admittedly, the purchase price of the house and lot was
P485,385.18, i.e. P350,000.00 as cash payment and
P135,385.18, assumption of mortgage. Of it plaintiffs
[Casedas] paid the following: (1) P54,100.00 down payment;
and (2) P81,694.64 installment payments to the bank on the
loan (Exhs. E to E-19) or a total of P135,794.64. Thus,
plaintiffs were short of the purchase price. They cannot,
therefore, demand specific performance."5
The trial court further held that the Casedas were not entitled
to reimbursement of payments already made, reasoning that:
"As earlier mentioned, plaintiffs made a total payment of
P135,794.64 out of the purchase price of P485,385.18. The
property was in plaintiffs' possession from June 1984 to
January 1989 or a period of fifty-five months. During that time,
plaintiffs leased the property. Carmen said the property was
rented for P25.00 a day or P750.00 a month at the start and in
1987 it was increased to P2,000.00 and P4,000 a month. But
the evidence is not precise when the different amounts of
rental took place. Be that as it may, fairness demands that
plaintiffs must pay defendants for the exercise of dominical
rights over the property by renting it to others. The amount of
P2,000.00 a month would be reasonable based on the average
of P750.00, P2,000.00, P4,000.00 lease-rentals charged.
Multiply P2,000 by 55 months, the plaintiffs must pay
defendants P110,000 for the use of the property. Deducting
this amount from the P135,794.64 payment of the plaintiffs on

the property the difference is P25,794.64. Should the plaintiffs

be entitled to a reimbursement of this amount? The answer is
in the negative. Because of failure of plaintiffs to liquidated the
mortgage loan on time, it had ballooned from its original figure
of P135,384.18 as of June 1984 to P337,280.78 as of
December 31, 1988. Defendants [Santoses] had to pay the last
amount to the bank to save the property from foreclosure.
Logically, plaintiffs must share in the burden arising from their
failure to liquidate the loan per their contractual commitment.
Hence, the amount of P25,794.64 as their share in the
defendants' damages in the form of increased loan-amount, is
reasonable."6
On appeal, the appellate court, as earlier noted, reversed the
lower court. The appellate court held that rescission was not
justified under the circumstances and allowed the Caseda
spouses a period of ninety days within which to pay the
balance of the agreed purchase price.
Hence, this instant petition for review on certiorari filed by the
Santoses.
Petitioners now submit the following issues for our
consideration:
WHETHER OR NOT THE COURT OF APPEALS, HAS
JURISDICTION TO DECIDE PRIVATE RESPONDENT'S
APPEAL INTERPOSING PURELY QUESTIONS OF LAW.
WHETHER THE SUBJECT TRANSACTION IS NOT A
CONTRACT OF ABSOLUTE SALE BUT A MERE ORAL
CONTRACT TO SELL IN WHICH CASE JUDICIAL DEMAND
FOR RESCISSION (ART. 1592,7 CIVIL CODE) IS NOT
APPLICABLE.
ASSUMING ARGUENDO THAT A JUDICIAL DEMAND FOR
RESCISSION IS REQUIRED, WHETHER PETITIONERS'
DEMAND AND PRAYER FOR RESCISSION CONTAINED IN
THEIR ANSWER FILED BEFORE THE TRIAL SATISFIED
THE SAID REQUIREMENT.
WHETHER OR NOT THE NON-PAYMENT OF MORE THAN
HALF OF THE ENTIRE PURCHASE PRICE INCLUDING THE
NON-COMPLIANCE WITH THE STIPULATION TO
LIQUIDATE THE MORTGAGE LOAN ON TIME WHICH
CAUSED GRAVE DAMAGE AND PREJUDICE TO
PETITIONERS, CONSTITUTE SUBSTANTIAL BREACH TO
JUSTIFY RESCISSION OF A CONTRACT TO SELL UNDER
ARTICLE 1191 8 (CIVIL CODE).
On the first issue, petitioners argue that, since both the parties
and the apellate court adopted the findings of trial court, 9 no
questions of fact were raised before the Court of Appeals.
According to petitioners, CA-G.R. CV No. 30955, involved only
pure questions of law. They aver that the court a quo had no
jurisdiction to hear, much less decide, CA-G.R. CV No. 30955,
without running afoul of Supreme Court Circular No. 290 (4)
[c].10
There is a question of law in a given case when the doubt or
difference arises as to how the law is on a certain set of facts,
and there is a question of fact when the doubt or difference
arises as to the truth or falsehood of the alleged facts. 11 But we
note that the first assignment of error submitted by
respondents for consideration by the appellate court dealt with
the trial court's finding that herein petitioners got back the
property in question because respondents did not have the

means to pay the installments and/or amortization of the

loan.12 The resolution of this question involved an evaluation of
proof, and not only a consideration of the applicable statutory
and case laws. Clearly, C.A.-G.R. CV No. 30955 did not
involve pure questions of law, hence the Court of Appeals had
jurisdiction and there was no violation of our Circular No. 2-90.
Moreover, we find that petitioners took an active part in the
proceedings before the Court of Appeals, yet they did not raise
there the issue of jurisdiction. They should have raised this
issue at the earliest opportunity before the Court of Appeals. A
party taking part in the proceedings before the appellate court
and submitting his case for its decision ought not to later on
attack the court's decision for want of jurisdiction because the
decision turns out to be adverse to him.13
The second and third issues deal with the question: Did the
Court of Appeals err in holding that a judicial rescission of the
agreement was necessary? In resolving both issues, we must
first make a preliminary determination of the nature of the
contract in question: Was it a contract of sale, as insisted by
the respondents or a mere contract to sell, as contended by
petitioners?
Petitioners argue that the transaction between them and
respondents was a mere contract to sell, and not a contract of
sale, since the sole documentary evidence (Exh. D, receipt)
referring to their agreement clearly showed that they did not
transfer ownership of the property in question simultaneous
with its delivery and hence remained its owners, pending
fulfillment of the other suspensive conditions, i.e. full payment
of the balance of the purchase price and the loan
amortizations. Petitioners point to Manuel v. Rodriguez, 109
Phil. 1 (1960) and Luzon Brokerage Co., Inc. v. Maritime
Building Co., Inc., 43 SCRA 93 (1972), where he held that
article 1592 of the Civil Code is inapplicable to a contract to
sell. They charge the court a quo with reversible error in
holding that petitioners should have judicially rescinded the
agreement with respondents when the latter failed to pay the
amortizations on the bank loan.
Respondents insist that there was a perfected contract of sale,
since upon their partial payment of the purchase price, they
immediately took possession of the property as vendees, and
subsequently leased it, thus exercising all the rights of
ownership over the property. This showed that transfer of
ownership was simultaneous with the delivery of the realty
sold, according to respondents.
It must be emphasized from the outset that a contract is what
the law defines it to be, taking into consideration its essential
elements, and not what the contracting parties call it. 14 Article
145815 of the Civil Code defines a contract of sale. Note that
the said article expressly obliges the vendor to transfer the
ownership of the thing sold as an essential element of a
contract of sale.16 We have carefully examined the contents of
the unofficial receipt, Exh. D, with the terms and conditions
informally agreed upon by the parties, as well as the proofs
submitted to support their respective contentions. We are far
from persuaded that there was a transfer of ownership
simultaneously with the delivery of the property purportedly
sold. The records clearly show that, notwithstanding the fact
that the Casedas first took then lost possession of the disputed
house and lot, the title to the property, TCT No. 28005 (S11029) issued by the Register of Deeds of Paraaque, has

remained always in the name of Rosalinda Santos.17 Note

further that although the parties agreed that the Casedas
would assume the mortgage, all amortization payments made
by Carmen Caseda to the bank were in the name of Rosalinda
Santos.18 We likewise find that the bank's cancellation and
discharge of mortgage dated January 20, 1990, was made in
favor of Rosalinda Santos.19 The foregoing circumstances
categorically and clearly show that no valid transfer of
ownership was made by the Santoses to the Casedas. Absent
this essential element, their agreement cannot be deemed a
contract of sale. We agree with petitioner's averment that the
agreement between Rosalinda Santos and Carmen Caseda is
a contract to sell. In contracts to sell, ownership is reserved the
by the vendor and is not to pass until full payment of the
purchase price. This we find fully applicable and
understandable in this case, given that the property involved is
a titled realty under mortgage to a bank and would require
notarial and other formalities of law before transfer thereof
could be validly effected.

DISMISSAL of the complaint in Civil Case No. 89-4759, is

hereby REINSTATED. No pronouncement as to
costs.1wphi1.nt

In view of our finding in the present case that the agreement

between the parties is a contract to sell, it follows that the
appellate court erred when it decreed that a judicial rescission
of said agreement was necessary. This is because there was
no rescission to speak of in the first place. As we earlier
pointed, in a contract to sell, title remains with the vendor and
does not pass on to the vendee until the purchase price is paid
in full, Thus, in contract to sell, the payment of the purchase
price is a positive suspensive condition. Failure to pay the price
agreed upon is not a mere breach, casual or serious, but a
situation that prevents the obligation of the vendor to convey
title from acquiring an obligatory force.20 This is entirely
different from the situation in a contract of sale, where nonpayment of the price is a negative resolutory condition. The
effects in law are not identical. In a contract of sale, the vendor
has lost ownership of the thing sold and cannot recover it,
unless the contract of sale is rescinded and set aside. 21 In a
contract to sell, however, the vendor remains the owner for as
long as the vendee has not complied fully with the condition of
paying the purchase. If the vendor should eject the vendee for
failure to meet the condition precedent, he is enforcing the
contract and not rescinding it. When the petitioners in the
instant case repossessed the disputed house and lot for failure
of private respondents to pay the purchase price in full, they
were merely enforcing the contract and not rescinding it. As
petitioners correctly point out the Court of Appeals erred when
it ruled that petitioners should have judicially rescinded the
contract pursuant to Articles 1592 and 1191 of the Civil Code.
Article 1592 speaks of non-payment of the purchase price as a
resolutory condition. It does not apply to a contract to sell. 22 As
to Article 1191, it is subordinated to the provisions of Article
1592 when applied to sales of immovable property.23 Neither
provision is applicable in the present case.

We resolve the petition for review on certiorari1 tiled by

spouses Eros to Santiago and Nelsie Santiago (petitioners) to
challenge the August 10, 2004 decision2 and the June 8, 2005
resolution3of the Court of Appeals (CA) in CA-G.R. CV No.
59112. The CA decision set aside the May 28, 1997 decision4
of the Regional Trial Court (RTC) of San Jacinto, Masbate,
Branch 50, in Civil Case No. 201. The CA resolution denied the
petitioners' subsequent motion for reconsideration.

As to the last issue, we need not tarry to make a determination

of whether the breach of contract by private respondents is so
substantial as to defeat the purpose of the parties in entering
into the agreement and thus entitle petitioners to rescission.
Having ruled that there is no rescission to speak of in this case,
the question is moot.
WHEREFORE, the instant petition is GRANTED and the
assailed decision of the Court of Appeals in CA-G.R. CV No.
30955 is REVERSED and SET ASIDE. The judgment of the
Regional Trial Court of Makati, Branch 133, with respect to the

SO ORDERED.

SECOND DIVISION
G.R. No. 168499

November 26, 2012

SPOUSES EROSTO SANTIAGO and NELSIE SANTIAGO,

Petitioners,
vs.
MANCER VILLAMOR, CARLOS VILLAMOR, JOHN
VILLAMOR and DOMINGO VILLAMOR, JR., Respondents.
DECISION
BRION, J.:

THE FACTUAL ANTECEDENTS

In January 1982,5 the spouses Domingo Villamor, Sr. and
Trinidad Gutierrez Villamor (spouses Villamor, Sr.), the parents
of Mancer Villamor, Carlos Villamor and Domingo Villamor, Jr.
(respondents) and the grandparents of respondent John
Villamor, mortgaged their 4.5-hectare coconut land in Sta.
Rosa, San Jacinto, Masbate, known as Lot No. 1814, to the
Rural Bank of San Jacinto (Masbate), Inc. (San Jacinto Bank)
as security for a P10,000.00 loan.
For non-payment of the loan, the San Jacinto Bank
extrajudicially foreclosed the mortgage, and, as the highest
bidder at the public auction, bought the land. When the
spouses Villamor, Sr. failed to redeem the property within the
prescribed period, the San Jacinto Bank obtained a final deed
of sale in its favor sometime in 1991. The San Jacinto Bank
then offered the land for sale to any interested buyer.6
a. The Specific Performance Case
Since the respondents had been in possession and cultivation
of the land, they decided, together with their sister Catalina
Villamor Ranchez, to acquire the land from the San Jacinto
Bank. The San Jacinto Bank agreed with the respondents and
Catalina to a P65,000.00 sale, payable in installments. The
respondents and Catalina made four (4) installment payments
of P28,000.00, P5,500.00, P7,000.00 and P24,500.00 on
November 4, 1991, November 23, 1992, April 26, 1993 and
June 8, 1994, respectively.7
When the San Jacinto Bank refused to issue a deed of
conveyance in their favor despite full payment, the
respondents and Catalina filed a complaint against the San
Jacinto Bank (docketed as Civil Case No. 200) with the RTC
on October 11, 1994. The complaint was for specific
performance with damages.

The San Jacinto Bank claimed that it already issued a deed of

repurchase in favor of the spouses Villamor, Sr.; the payments
made by the respondents and Catalina were credited to the
account of Domingo, Sr. since the real buyers of the land were
the spouses Villamor, Sr.8

dismissal of the complaint, without prejudice to the outcome of

the specific performance case.18

In a February 10, 2004 decision, the RTC dismissed the

specific performance case. It found that the San Jacinto Bank
acted in good faith when it executed a deed of "repurchase" in
the spouses Villamor, Sr.s names since Domingo, Sr., along
with the respondents and Catalina, was the one who
transacted with the San Jacinto Bank to redeem the land.9

THE PETITION

The CA, on appeal, set aside the RTCs decision.10 The CA

found that the respondents and Catalina made the installment
payments on their own behalf and not as representatives of the
spouses Villamor, Sr. The San Jacinto Bank mistakenly
referred to the transaction as a "repurchase" when the
redemption period had already lapsed and the title had been
transferred to its name; the transaction of the respondents and
Catalina was altogether alien to the spouses Villamor, Sr.s
loan with mortgage. Thus, it ordered the San Jacinto Bank to
execute the necessary deed of sale in favor of the respondents
and Catalina, and to pay P30,000.00 as attorneys fees. 11 No
appeal appears to have been taken from this decision.
b. The Present Quieting of Title Case
On July 19, 1994 (or prior to the filing of the respondents and
Catalinas complaint for specific performance, as narrated
above), the San Jacinto Bank issued a deed of sale in favor of
Domingo, Sr.12 On July 21, 1994, the spouses Villamor, Sr.
sold the land to the petitioners for P150,000.00.13
After the respondents and Catalina refused the petitioners
demand to vacate the land, the petitioners filed on October 20,
1994 a complaint for quieting of title and recovery of
possession against the respondents.14 This is the case that is
now before us.
The respondents and Catalina assailed the San Jacinto Banks
execution of the deed of sale in favor of Domingo, Sr., claiming
that the respondents and Catalina made the installment
payments on their own behalf.15
In its May 28, 1997 decision,16 the RTC declared the
petitioners as the legal and absolute owners of the land, finding
that the petitioners were purchasers in good faith; the spouses
Villamor, Sr.s execution of the July 21, 1994 notarized deed of
sale in favor of the petitioners resulted in the constructive
delivery of the land. Thus, it ordered the respondents to vacate
and to transfer possession of the land to the petitioners, and to
pay P10,000.00 as moral damages.17
On appeal, the CA, in its August 10, 2004 decision, found that
the petitioners action to quiet title could not prosper because
the petitioners failed to prove their legal or equitable title to the
land. It noted that there was no real transfer of ownership since
neither the spouses Villamor, Sr. nor the petitioners were
placed in actual possession and control of the land after the
execution of the deeds of sale. It also found that the petitioners
failed to show that the respondents and Catalinas title or claim
to the land was invalid or inoperative, noting the pendency of
the specific performance case, at that time on appeal with the
CA. Thus, it set aside the RTC decision and ordered the

When the CA denied19 the motion for reconsideration20 that

followed, the petitioners filed the present Rule 45 petition.

The petitioners argue that the spouses Villamor, Sr.s

execution of the July 21, 1994 deed of sale in the petitioners
favor was equivalent to delivery of the land under Article 1498
of the Civil Code; the petitioners are purchasers in good faith
since they had no knowledge of the supposed transaction
between the San Jacinto Bank and the respondents and
Catalina; and the respondents and Catalinas possession of
the land should not be construed against them (petitioners)
since, by tradition and practice in San Jacinto, Masbate, the
children use their parents property.
THE CASE FOR THE RESPONDENTS
The respondents and respondent John submit that they hold
legal title to the land since they perfected the sale with the San
Jacinto Bank as early as November 4, 1991, the first
installment payment, and are in actual possession of the land;
the petitioners are not purchasers in good faith since they
failed to ascertain why the respondents were in possession of
the land.
THE ISSUE
The case presents to us the issue of whether the CA
committed a reversible error when it set aside the RTC
decision and dismissed the petitioners complaint for quieting
of title and recovery of possession.
OUR RULING
The petition lacks merit.
Quieting of title is a common law remedy for the removal of any
cloud, doubt or uncertainty affecting title to real property. The
plaintiffs must show not only that there is a cloud or contrary
interest over the subject real property,21 but that they have a
valid title to it.22 Worth stressing, in civil cases, the plaintiff
must establish his cause of action by preponderance of
evidence; otherwise, his suit will not prosper.23
The petitioners anchor their claim over the disputed land on the
July 21, 1994 notarized deed of sale executed in their favor by
the spouses Villamor, Sr. who in turn obtained a July 19, 1994
notarized deed of sale from the San Jacinto Bank. On the other
hand, the respondents and respondent John claim title by
virtue of their installment payments to the San Jacinto Bank
from November 4, 1991 to June 8, 1994 and their actual
possession of the disputed land.
After considering the parties evidence and arguments, we
agree with the CA that the petitioners failed to prove that they
have any legal or equitable title over the disputed land.
Execution of the deed of sale only a
prima facie presumption of delivery.
Article 1477 of the Civil Code recognizes that the "ownership of
the thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof." Related to this article is

Article 1497 which provides that "the thing sold shall be

understood as delivered, when it is placed in the control and
possession of the vendee."

EN BANC

With respect to incorporeal property, Article 1498 of the Civil

Code lays down the general rule: the execution of a public
instrument "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." However, the
execution of a public instrument gives rise only to a prima facie
presumption of delivery, which is negated by the failure of the
vendee to take actual possession of the land sold.24 "A person
who does not have actual possession of the thing sold cannot
transfer constructive possession by the execution and delivery
of a public instrument."25

LA FUERZA, INC., petitioner,

vs.
THE HON. COURT OF APPEALS and ASSOCIATED
ENGINEERING CO., INC., respondents.

In this case, no constructive delivery of the land transpired

upon the execution of the deed of sale since it was not the
spouses Villamor, Sr. but the respondents who had actual
possession of the land. The presumption of constructive
delivery is inapplicable and must yield to the reality that the
petitioners were not placed in possession and control of the
land.
The petitioners are not purchasers in
good faith.
The petitioners can hardly claim to be purchasers in good faith.
"A purchaser in good faith is one who buys property without
notice that some other person has a right to or interest in such
property and pays its fair price before he has notice of the
adverse claims and interest of another person in the same
property."26 However, where the land sold is in the possession
of a person other than the vendor, the purchaser must be wary
and must investigate the rights of the actual possessor; without
such inquiry, the buyer cannot be said to be in good faith and
cannot have any right over the property.27
In this case, the spouses Villamor, Sr. were not in possession
of the land.1wphi1 The petitioners, as prospective vendees,
carried the burden of investigating the rights of the
respondents and respondent John who were then in actual
possession of the land. The petitioners cannot take refuge
behind the allegation that, by custom and tradition in San
Jacinto, Masbate, the children use their parents' property,
since they offered no proof supporting their bare allegation.
The burden of proving the status of a purchaser in good faith
lies upon the party asserting that status and cannot be
discharged by reliance on the legal presumption of good
faith.28 The petitioners failed to discharge this burden.
Lastly, since the specific performance case already settled the
respondents and respondent John's claim over the disputed
land, the dispositive portion of the CA decision (dismissing the
complaint without prejudice to the outcome of the specific
performance case29) is modified to reflect this fact; we thus
dismiss for lack of merit the complaint for quieting of title and
recovery of possession.
WHEREFORE, we hereby DENY the petition and ORDER the
DISMISSAL of Civil Case No. 201 before the Regional Trial
Court of San Jacinto, Masbate, Branch 50.
Costs against the petitioners.
SO ORDERED.

G.R. No. L-24069

June 28, 1968

Sycip, Salazar, Luna and Associates for respondent

Associated Engineering Co., Inc.
De Santos and Delfino for petitioner.
CONCEPCION, C.J.:
Ordinary action for the recovery of a sum of money. In due
course, the Court of First Instance of Manila rendered
judgment for defendant, La Fuerza, Inc. hereinafter referred
to as La Fuerza which was at first affirmed by the Court of
Appeals. On motion for reconsideration, the latter, however,
set aside its original decision and sentenced La Fuerza to pay
to the plaintiff, Associated Engineering Co., hereinafter
referred to as the Plaintiff the sum of P8,250.00, with
interest at the rate of 1% per month, from July, 1960 until fully
paid, plus P500 as attorney's fees and the costs. Hence, this
Petition for review on certiorari.
The facts, as found by the Court of First Instance and adopted
by the Court of Appeals, are:
The plaintiff (Associated Engineering, Co., Inc.) is a
corporation engaged in the manufacture and installation of flat
belt conveyors. The defendant (La Fuerza, Inc.) is also a
corporation engaged in the manufacture of wines. Sometime in
the month of January, 1960, Antonio Co, the manager of the
plaintiff corporation, who is an engineer, called the office of the
defendant located at 399 Muelle de Binondo, Manila and told
Mariano Lim, the President and general manager of the
defendant that he had just visited the defendant's plant at
Pasong Tamo, Makati, Rizal and was impressed by its size
and beauty but he believed it needed a conveyor system to
convey empty bottles from the storage room in the plant to the
bottle washers in the production room thereof. He therefore
offered his services to manufacture and install a conveyor
system which, according to him, would increase production
and efficiency of his business. The president of the defendant
corporation did not make up his mind then but suggested to
Antonio Co to put down his offer in writing. Effectively, on
February 4, 1960, marked as Exhibit A in this case. Mariano
Lim did not act on the said offer until February 11, 1960, when
Antonio Co returned to inquire about the action of the
defendant on his said offer. The defendants president and
general manager then expressed his conformity to the offer
made in Exhibit A by writing at the foot thereof under the word
"confirmation" his signature. He caused, however, to be added
to this offer at the foot a note which reads: "All specifications
shall be in strict accordance with the approved plan made part
of this agreement hereof." A few days later, Antonio Co made
the demand for the down payment of P5,000.00 which was
readily delivered by the defendant in the form of a check for the
said amount. After that agreement, the plaintiff started to
prepare the premises for the installations of the conveyor
system by digging holes in the cement floor of the plant and on
April 18, 1960, they delivered one unit of 110' 26" wide flat belt
conveyor, valued at P3,750.00, and another unit measuring
190' and 4" wide flat conveyor, valued at P4,500.00, or a total

of P13,250.00. Deducting the down payment of P5,000.00 from

this value, there is a balance, of P8,250.00 to be paid by the
defendant upon the completion of the installation, Exhibit B.
The work went under way during the months of March and
April, during which time the president and general manager of
the defendant corporation was duly apprised of the progress of
the same because his plant mechanic, one Mr. Santos, had
kept him informed of the installation for which he gave the go
signal. It seems that the work was completed during the month
of May, 1960. Trial runs were made in the presence of the
president and general manager of the defendant corporation,
Antonio Co, the technical manager of the plaintiff, and some
other people. Several trial runs were made then totalling about
five. These runs were continued during the month of June
where about three trial runs were made and, lastly, during the
month of July, 1960.
As a result of this trial or experimental runs, it was discovered,
according to the defendant's general manager, that the
conveyor system did not function to their satisfaction as
represented by the technical manager of the plaintiff Antonio
Co for the reason that, when operated several bottles collided
with each other, some jumping off the conveyor belt and were
broken, causing considerable damage. It was further observed
that the flow of the system was so sluggish that in the opinion
of the said general manager of the defendant their old system
of carrying the bottles from the storage room to the washers by
hand carrying them was even more efficient and faster.
After the last trial run made in the month of July and after the
plaintiff's technical manager had been advised several times to
make the necessary and proper adjustments or corrections in
order to improve the efficiency of the conveyor system, it
seems that the defects indicated by the said president and
general manager of the defendant had not been remedied so
that they came to the parting of the ways with the result that
when the plaintiff billed the defendant for the balance of the
contract price, the latter refused to pay for the reason that
according to the defendant the conveyor system installed by
the plaintiff did not serve the purpose for which the same was
manufactured and installed at such a heavy expense. The flat
belt conveyors installed in the factory of the defendant are still
there....
xxx

xxx

xxx

On March 22, 1961, the contractor commenced the present

action to recover the sums of P8,250, balance of the stipulated
price of the aforementioned conveyors, and P2,000, as
attorney's fees, in addition to the costs.
In its answer to the complaint, La Fuerza alleged that the
"conveyors furnished and installed by the plaintiff do not meet
the conditions and warrantings" (warranties?) of the latter, and
set up a counterclaim for the P5,000 advanced by La Fuerza,
which prayed that the complaint be dismissed; that its contract
with the plaintiff be rescinded; and that plaintiff be sentenced to
refund said sum of P5,000 to La Fuerza, as well as to pay
thereto P1,000 as attorney's fees, apart from the costs.
After appropriate proceedings, the Court of First Instance of
Manila rendered a decision the dispositive part of which reads:
WHEREFORE, judgment is hereby rendered rescinding the
contract entered into by the parties in this case, marked as

Exhibit A, and ordering the plaintiff to refund or return to the

defendant the amount of P5,000.00 which they had received
as down payment, and the costs of this action. On the other
hand, defendant is ordered to permit the plaintiff to remove the
flat belt conveyors installed in their premises.
As above indicated, this decision was affirmed by the Court of
Appeals, which, on motion for reconsideration of the plaintiff,
later set aside its original decision and rendered another in
plaintiff's favor, as stated in the opening paragraph hereof.
The appealed resolution of the Court of Appeals was, in effect,
based upon the theory of prescription of La Fuerza's right of
action for rescission of its contract with the plaintiff, for in the
language of said resolution "Article 1571 of the Civil Code
provides that an action to rescind 'shall be barred after six
months from delivery of the thing sold'", and, in the case at bar,
La Fuerza did not avail of the right to demand rescission until
the filing of its answer in the Court of First Instance, on April
17, 1961, or over ten (10) months after the installation of the
conveyors in question had been completed on May 30, 1960.
La Fuerza assails the view taken by the Court of Appeals,
upon the ground: 1) that there has been, in contemplation of
law, no delivery of the conveyors by the plaintiff; and 2) that,
assuming that there has been such delivery, the period of six
(6) months prescribed in said Art. 1571 refers to the "period
within which" La Fuerza may "bring an action to demand
compliance of the warranty against hidden defects", not the
action for rescission of the contract. Both grounds are
untenable.
With respect to the first point, La Fuerza maintains that plaintiff
is deemed not to have delivered the conveyors, within the
purview of Art. 1571, until it shall have complied with the
conditions or requirements of the contract between them
that is to say, until the conveyors shall meet La Fuerza's "need
of a conveyor system that would mechanically transport empty
bottles from the storage room to the bottle workers in the
production room thus increasing the production and efficiency"
of its business-and La Fuerza had accepted said conveyors.
On this point, the Court of Appeals had the following to say:
Article 1571 of the Civil Code provides that an action to rescind
'shall be barred after six months, from delivery of the thing
sold". This article is made applicable to the case at bar by
Article 1714 which provides that "the pertinent provisions on
warranty of title against hidden defect in a contract of sale"
shall be applicable to a contract for a piece of work.
Considering that Article 1571 is a provision on sales, the
delivery mentioned therein should be construed in the light of
the provisions on sales. Article 1497 provides that the thing
sold shall be understood as delivered when it is placed in the
control and possession of the vendee. Therefore, when the
thing subject of the sale is placed in the control and possession
of the vendee, delivery is complete. Delivery is an act of the
vendor. Thus, one of the obligations of the vendor is the
delivery of the thing sold (Art. 1495). The vendee has nothing
to do with the act of delivery by the vendor. On the other hand,
acceptance is an obligation on the part of the vendee (Art.
1582). Delivery and acceptance are two distinct and separate
acts of different parties. Consequently, acceptance cannot be
regarded as a condition to complete delivery.
xxx

xxx

xxx

We find no plausible reason to disagree with this view. Upon

the completion of the installation of the conveyors, in May,
1960, particularly after the last trial run, in July 1960, La Fuerza
was in a position to decide whether or not it was satisfied with
said conveyors, and, hence, to state whether the same were a
accepted or rejected. The failure of La Fuerza to express
categorically whether they accepted or rejected the conveyors
does not detract from the fact that the same were actually in its
possession and control; that, accordingly, the conveyors had
already been delivered by the plaintiff; and that, the period
prescribed in said Art. 1571 had begun to run.

THIRD DIVISION

With respect to the second point raised by La Fuerza, Art.

1571 of the Civil Code provides:
Actions arising from the provisions of the preceding ten articles
shall be barred after six months, from the delivery of the thing
sold.

Before this Court is a petition for review under Rule 45 of the

Rules of Court assailing the July 8, 2010 Decision1 of the Court
of Appeals (CA), in CA-G.R. CR No. 91839, which affirmed the
July 17, 2008 Decision2 of the Regional Trial Court, Branch
VIII, Manila (RTC) in Civil Case No. 94-69402, an action for
specific performance and damages.

xxx

The Facts:

xxx

xxx

Among the "ten articles" referred to in this provision, are

Articles 1566 and 1567, reading:
Art. 1566. The vendor is responsible to the vendee for any
hidden faults or defects in the thing sold, even though he was
not aware thereof. ."This provision shall not apply if the
contrary has been stipulated, and the vendor was not aware of
the hidden faults or defects in the thing sold.
Art. 1567. In the cases of articles 1561, 1562, 1564, 1565 and
1566, the vendee may elect between withdrawing from the
contract and demanding a proportionate reduction of the price,
with damages in either case.
xxx

xxx

xxx

Pursuant to these two (2) articles, if the thing sold has hidden
faults or defects as the conveyors are claimed to have
the vendor in the case at bar, the plaintiff shall be
responsible therefor and the vendee or La Fuerza, in the
present case "may elect between withdrawing from the
contract and demanding a proportional reduction of the price,
with damages in either case." In the exercise of this right of
election, La Fuerza had chosen to withdraw from the contract,
by praying for its rescission; but the action therefor in the
language of Art. 1571 "shall be barred after six months, from
the delivery of the thing sold." The period of four (4) years,
provided in Art. 1389 of said Code, for "the action to claim
rescission," applies to contracts, in general, and must yields, in
the instant case, to said Art. 1571, which refers to sales in
particular.
Indeed, in contracts of the latter type, especially when goods,
merchandise, machinery or parts or equipment thereof are
involved, it is obviously wise to require the parties to define
their position, in relation thereto, within the shortest possible
time. Public interest demands that the status of the relations
between the vendor and the vendee be not left in a condition of
uncertainty for an unreasonable length of time, which would be
the case, if the lifetime of the vendee's right of rescission were
four (4) years.
WHEREFORE, the appealed resolution of the Court of Appeals
is hereby affirmed, with costs against appellant, La Fuerza, Inc.
It is so ordered.

G.R. No. 194785

July 11, 2012

VIRGILIO S. DAVID, Petitioner,

vs.
MISAMIS OCCIDENTAL II ELECTRIC COOPERATIVE, INC.,
Respondent.
DECISION
MENDOZA, J.:

Petitioner Virgilio S. David (David) was the owner or proprietor

of VSD Electric Sales, a company engaged in the business of
supplying electrical hardware including transformers for rural
electric cooperatives like respondent Misamis Occidental II
Electric Cooperative, Inc. (MOELCI), with principal office
located in Ozamis City.
To solve its problem of power shortage affecting some areas
within its coverage, MOELCI expressed its intention to
purchase a 10 MVA power transformer from David. For this
reason, its General Manager, Engr. Reynaldo Rada (Engr.
Rada), went to meet David in the latters office in Quezon City.
David agreed to supply the power transformer provided that
MOELCI would secure a board resolution because the item
would still have to be imported.
On June 8, 1992, Engr. Rada and Director Jose Jimenez
(Jimenez), who was in-charge of procurement, returned to
Manila and presented to David the requested board resolution
which authorized the purchase of one 10 MVA power
transformer. In turn, David presented his proposal for the
acquisition of said transformer. This proposal was the same
proposal that he would usually give to his clients.
After the reading of the proposal and the discussion of terms,
David instructed his then secretary and bookkeeper, Ellen M.
Wong, to type the names of Engr. Rada and Jimenez at the
end of the proposal. Both signed the document under the word
"conforme." The board resolution was thereafter attached to
the proposal.
As stated in the proposal, the subject transformer, together
with the basic accessories, was valued at P5,200,000.00. It
was also stipulated therein that 50% of the purchase price
should be paid as downpayment and the remaining balance to
be paid upon delivery. Freight handling, insurance, customs
duties, and incidental expenses were for the account of the
buyer.
The Board Resolution, on the other hand, stated that the
purchase of the said transformer was to be financed through a
loan from the National Electrification Administration (NEA). As
there was no immediate action on the loan application, Engr.
Rada returned to Manila in early December 1992 and
requested David to deliver the transformer to them even

without the required downpayment. David granted the request

provided that MOELCI would pay interest at 24% per annum.
Engr. Rada acquiesced to the condition. On December 17,
1992, the goods were shipped to Ozamiz City via William
Lines. In the Bill of Lading, a sales invoice was included which
stated the agreed interest rate of 24% per annum.
When nothing was heard from MOELCI for sometime after the
shipment, Emanuel Medina (Medina), Davids Marketing
Manager, went to Ozamiz City to check on the shipment.
Medina was able to confer with Engr. Rada who told him that
the loan was not yet released and asked if it was possible to
withdraw the shipped items. Medina agreed.
When no payment was made after several months, Medina
was constrained to send a demand letter, dated September 15,
1993, which MOELCI duly received. Engr. Rada replied in
writing that the goods were still in the warehouse of William
Lines again reiterating that the loan had not been approved by
NEA. This prompted Medina to head back to Ozamiz City
where he found out that the goods had already been released
to MOELCI evidenced by the shipping companys copy of the
Bill of Lading which was stamped "Released," and with the
notation that the arrastre charges in the amount of P5,095.60
had been paid. This was supported by a receipt of payment
with the corresponding cargo delivery receipt issued by the
Integrated Port Services of Ozamiz, Inc.
Subsequently, demand letters were sent to MOELCI
demanding the payment of the whole amount plus the balance
of previous purchases of other electrical hardware. Aside from
the formal demand letters, David added that several
statements of accounts were regularly sent through the mails
by the company and these were never disputed by MOELCI.

In its July 17, 2008 Decision, the RTC dismissed the complaint.
It found that although a contract of sale was perfected, it was
not consummated because David failed to prove that there was
indeed a delivery of the subject item and that MOELCI
received it.3
Aggrieved, David appealed his case to the CA.
On July 8, 2010, the CA affirmed the ruling of the RTC. In the
assailed decision, the CA reasoned out that although David
was correct in saying that MOELCI was deemed to have
admitted the genuineness and due execution of the "quotation
letter" (Exhibit A), wherein the signatures of the Chairman and
the General Manager of MOELCI appeared, he failed to offer
any textual support to his stand that it was a contract of sale
instead of a mere price quotation agreed to by MOELCI
representatives. On this score, the RTC erred in stating that a
contract of sale was perfected between the parties despite the
irregularities that tainted their transaction. Further, the fact that
MOELCIs representatives agreed to the terms embodied in
the agreement would not preclude the finding that said contract
was at best a mere contract to sell.
A motion for reconsideration was filed by David but it was
denied.4
Hence, this petition.
Before this Court, David presents the following issues for
consideration:
I.
WHETHER OR NOT THERE WAS A PERFECTED
CONTRACT OF SALE.

On February 17, 1994, David filed a complaint for specific

performance with damages with the RTC. In response,
MOECLI moved for its dismissal on the ground that there was
lack of cause of action as there was no contract of sale, to
begin with, or in the alternative, the said contract was
unenforceable under the Statute of Frauds. MOELCI argued
that the quotation letter could not be considered a binding
contract because there was nothing in the said document from
which consent, on its part, to the terms and conditions
proposed by David could be inferred. David knew that
MOELCIs assent could only be obtained upon the issuance of
a purchase order in favor of the bidder chosen by the Canvass
and Awards Committee.

II.

Eventually, pursuant to Rule 16, Section 5 of the Rules of

Court, MOELCI filed its Motion for Preliminary Hearing of
Affirmative Defenses and Deferment of the Pre-Trial
Conference which was denied by the RTC to abbreviate
proceedings and for the parties to proceed to trial and avoid
piecemeal resolution of issues. The order denying its motion
was raised with the CA, and then with this Court. Both courts
sustained the RTC ruling.

This was reiterated in the case of Buenaventura v. Pascual, 5

where it was written:

Trial ensued. By reason of MOELCIs continued failure to

appear despite notice, David was allowed to present his
testimonial and documentary evidence ex parte, pursuant to
Rule 18, Section 5 of the Rules. A Very Urgent Motion to Allow
Defendant to Present Evidence was filed by MOELCI, but was
denied.

WHETHER OR NOT THERE WAS A DELIVERY THAT

CONSUMMATED THE CONTRACT.
The Court finds merit in the petition.
I.
On the issue as to whether or not there was a perfected
contract of sale, this Court is required to delve into the
evidence of the case. In a petition for review on certiorari under
Rule 45 of the Rules of Court, the issues to be threshed out
are generally questions of law only, and not of fact.

Time and again, this Court has stressed that its jurisdiction in a
petition for review on certiorari under Rule 45 of the Rules of
Court is limited to reviewing only errors of law, not of fact,
unless the findings of fact complained of are devoid of support
by the evidence on record, or the assailed judgment is based
on the misapprehension of facts. The trial court, having heard
the witnesses and observed their demeanor and manner of
testifying, is in a better position to decide the question of their
credibility. Hence, the findings of the trial court must be
accorded the highest respect, even finality, by this Court.
That being said, the Court is not unmindful, however, of the
recognized exceptions well-entrenched in jurisprudence. It has
always been stressed that when supported by substantial

evidence, the findings of fact of the CA are conclusive and

binding on the parties and are not reviewable by this Court,
unless the case falls under any of the following recognized
exceptions:
(1) When the conclusion is a finding grounded entirely on
speculation, surmises and conjectures;
(2) When the inference made is manifestly mistaken, absurd or
impossible;
(3) Where there is a grave abuse of discretion:
(4) When the judgment is based on a misapprehension of
facts;
(5) When the findings of fact are conflicting;
(6) When the Court of Appeals, in making its findings, went
beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee;
(7) When the findings are contrary to those of the trial court;
(8) When the findings of fact are without citation of specific
evidence on which the conclusions are based;
(9) When the facts set forth in the petition as well as in the
petitioners main and reply briefs are not disputed by the
respondents; and
(10) When the findings of fact of the Court of Appeals are
premised on the supposed absence of evidence and
contradicted by the evidence on record. 6 [Emphasis supplied]
In this case, the CA and the RTC reached different conclusions
on the question of whether or not there was a perfected
contract of sale. The RTC ruled that a contract of sale was
perfected although the same was not consummated because
David failed to show proof of delivery.7
The CA was of the opposite view. The CA wrote:
Be that as it may, it must be emphasized that the appellant
failed to offer any textual support to his insistence that Exhibit
"A" is a contract of sale instead of a mere price quotation
conformed to by MOELCI representatives. To that extent, the
trial court erred in laying down the premise that "indeed a
contract of sale is perfected between the parties despite the
irregularities attending the transaction." x x x
That representatives of MOELCI conformed to the terms
embodied in the agreement does not preclude the finding that
such contract is, at best, a mere contract to sell with stipulated
costs quoted should it ultimately ripen into one of sale. The
conditions upon which that development may occur may even
be obvious from statements in the agreement itself, that go
beyond just "captions." Thus, the appellant opens with, "WE
are pleased to submit our quotation xxx." The purported
contract also ends with. "Thank you for giving us the
opportunity to quote on your requirements and we hope to
receive your order soon" apparently referring to a purchase
order which MOELCI contends to be a formal requirement for
the entire transaction.8
In other words, the CA was of the position that Exhibit A was at
best a contract to sell.

A perusal of the records persuades the Court to hold

otherwise.
The elements of a contract of sale are, to wit: a) Consent or
meeting of the minds, that is, consent to transfer ownership in
exchange for the price; b) Determinate subject matter; and c)
Price certain in money or its equivalent.9 It is the absence of
the first element which distinguishes a contract of sale from
that of a contract to sell.
In a contract to sell, the prospective seller explicitly reserves
the transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to transfer
ownership of the property subject of the contract to sell until
the happening of an event, such as, in most cases, the full
payment of the purchase price. What the seller agrees or
obliges himself to do is to fulfill his promise to sell the subject
property when the entire amount of the purchase price is
delivered to him. In other words, the full payment of the
purchase price partakes of a suspensive condition, the nonfulfillment of which prevents the obligation to sell from arising
and, thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.10
In a contract of sale, on the other hand, the title to the property
passes to the vendee upon the delivery of the thing sold.
Unlike in a contract to sell, the first element of consent is
present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the
suspensive condition is not fulfilled, the perfection of the
contract of sale is completely abated. However, if the
suspensive condition is fulfilled, the contract of sale is thereby
perfected, such that if there had already been previous delivery
of the property subject of the sale to the buyer, ownership
thereto automatically transfers to the buyer by operation of law
without any further act having to be performed by the seller.
The vendor loses ownership over the property and cannot
recover it until and unless the contract is resolved or
rescinded.11
An examination of the alleged contract to sell, "Exhibit A,"
despite its unconventional form, would show that said
document, with all the stipulations therein and with the
attendant circumstances surrounding it, was actually a
Contract of Sale. The rule is that it is not the title of the
contract, but its express terms or stipulations that determine
the kind of contract entered into by the parties.12 First, there
was meeting of minds as to the transfer of ownership of the
subject matter. The letter (Exhibit A), though appearing to be a
mere price quotation/proposal, was not what it seemed. It
contained terms and conditions, so that, by the fact that
Jimenez, Chairman of the Committee on Management, and
Engr. Rada, General Manager of MOELCI, had signed their
names under the word "CONFORME," they, in effect, agreed
with the terms and conditions with respect to the purchase of
the subject 10 MVA Power Transformer. As correctly argued
by David, if their purpose was merely to acknowledge the
receipt of the proposal, they would not have signed their name
under the word "CONFORME."
Besides, the uncontroverted attending circumstances bolster
the fact that there was consent or meeting of minds in the
transfer of ownership. To begin with, a board resolution was
issued authorizing the purchase of the subject power
transformer. Next, armed with the said resolution, top officials

of MOELCI visited Davids office in Quezon City three times to

discuss the terms of the purchase. Then, when the loan that
MOELCI was relying upon to finance the purchase was not
forthcoming, MOELCI, through Engr. Rada, convinced David to
do away with the 50% downpayment and deliver the unit so
that it could already address its acute power shortage
predicament, to which David acceded when it made the
delivery, through the carrier William
Lines, as evidenced by a bill of lading.
Second, the document specified a determinate subject matter
which was one (1) Unit of 10 MVA Power Transformer with
corresponding KV Line Accessories. And third, the document
stated categorically the price certain in money which was
P5,200,000.00 for one (1) unit of 10 MVA Power Transformer
and P2,169,500.00 for the KV Line Accessories.
In sum, since there was a meeting of the minds, there was
consent on the part of David to transfer ownership of the power
transformer to MOELCI in exchange for the price, thereby
complying with the first element. Thus, the said document
cannot just be considered a contract to sell but rather a
perfected contract of sale.
II.
Now, the next question is, was there a delivery?
MOELCI, in denying that the power transformer was delivered
to it, argued that the Bill of Lading which David was relying
upon was not conclusive. It argued that although the bill of
lading was stamped "Released," there was nothing in it that
indicated that said power transformer was indeed released to it
or delivered to its possession. For this reason, it is its position
that it is not liable to pay the purchase price of the 10 MVA
power transformer.
This Court is unable to agree with the CA that there was no
delivery of the items. On the contrary, there was delivery and
release.
To begin with, among the terms and conditions of the proposal
to which MOELCI agreed stated:
2. Delivery Ninety (90) working days upon receipt of your
purchase order and downpayment.
C&F Manila, freight, handling, insurance, custom duties and
incidental expenses shall be for the account of MOELCI II. 13
(Emphasis supplied)
On this score, it is clear that MOELCI agreed that the power
transformer would be delivered and that the freight, handling,
insurance, custom duties, and incidental expenses shall be
shouldered by it.
On the basis of this express agreement, Article 1523 of the
Civil Code becomes applicable.1wphi1 It provides:
Where, in pursuance of a contract of sale, the seller is
authorized or required to send the goods to the buyer delivery
of the goods to a carrier, whether named by the buyer or not,
for the purpose of transmission to the buyer is deemed to be a
delivery of the goods to the buyer, except in the cases
provided for in Article 1503, first, second and third paragraphs,
or unless a contrary intent appears. (Emphasis supplied)

Thus, the delivery made by David to William Lines, Inc., as

evidenced by the Bill of Lading, was deemed to be a delivery to
MOELCI. David was authorized to send the power transformer
to the buyer pursuant to their agreement. When David sent the
item through the carrier, it amounted to a delivery to MOELCI.
Furthermore, in the case of Behn, Meyer & Co. (Ltd.) v.
Yangco,14 it was pointed out that a specification in a contract
relative to the payment of freight can be taken to indicate the
intention of the parties with regard to the place of delivery. So
that, if the buyer is to pay the freight, as in this case, it is
reasonable to suppose that the subject of the sale is
transferred to the buyer at the point of shipment. In other
words, the title to the goods transfers to the buyer upon
shipment or delivery to the carrier.
Of course, Article 1523 provides a mere presumption and in
order to overcome said presumption, MOELCI should have
presented evidence to the contrary. The burden of proof was
shifted to MOELCI, who had to show that the rule under Article
1523 was not applicable. In this regard, however, MOELCI
failed.
There being delivery and release, said fact constitutes partial
performance which takes the case out of the protection of the
Statute of Frauds. It is elementary that the partial execution of
a contract of sale takes the transaction out of the provisions of
the Statute of Frauds so long as the essential requisites of
consent of the contracting parties, object and cause of the
obligation concur and are clearly established to be present. 15
That being said, the Court now comes to Davids prayer that
MOELCI be made to pay the total sum of P 5,472,722.27 plus
the stipulated interest at 24% per annum from the filing of the
complaint. Although the Court agrees that MOELCI should pay
interest, the stipulated rate is, however, unconscionable and
should be equitably reduced. While there is no question that
parties to a loan agreement have wide latitude to stipulate on
any interest rate in view of the Central Bank Circular No. 905 s.
1982 which suspended the Usury Law ceiling on interest
effective January 1, 1983, it is also worth stressing that interest
rates whenever unconscionable may still be reduced to a
reasonable and fair level. There is nothing in the said circular
which grants lenders carte blanche authority to raise interest
rates to levels which will either enslave their borrowers or lead
to a hemorrhaging of their assets.16 Accordingly, the excessive
interest of 24% per annum stipulated in the sales invoice
should be reduced to 12% per annum.
Indeed, David was compelled to file an action against MOELCI
but this reason alone will not warrant an award of attorneys
fees. It is settled that the award of attorney's fees is the
exception rather than the rule. Counsel's fees are not awarded
every time a party prevails in a suit because of the policy that
no premium should be placed on the right to litigate. Attorney's
fees, as part of damages, are not necessarily equated to the
amount paid by a litigant to a lawyer. In the ordinary sense,
attorney's fees represent the reasonable compensation paid to
a lawyer by his client for the legal services he has rendered to
the latter; while in its extraordinary concept, they may be
awarded by the court as indemnity for damages to be paid by
the losing party to the prevailing party. Attorney's fees as part
of damages are awarded only in the instances specified in
Article 2208 of the Civil Code 17 which demands factual, legal,

and equitable justification. Its basis cannot be left to

speculation or conjecture. In this regard, none was proven.
Moreover, in the absence of stipulation, a winning party may
be awarded attorney's fees only in case plaintiffs action or
defendant's stand is so untenable as to amount to gross and
evident bad faith.18 is MOELCI's case cannot be similarly
classified.
Also, David's claim for the balance of P73,059.76 plus the
stipulated interest is denied for being unsubstantiated.
WHEREFORE, the petition Is GRANTED. The July 8, 2010
Decision of the Court of Appeals Is REVERSED and SET
ASIDE. Respondent Misamis Occidental II Electric
Cooperative, Inc. is ordered to pay petitioner Virgilio S. David
the total sum of P5,472,722.27 with interest at the rate of 12o/o
per annum reckoned from the filing of the complaint until fully
paid.
SO ORDERED.

EN BANC
G.R. No. L-22537

December 8, 1924

BEHN, MEYER & CO., plaintiff,

vs.
J.S. STANLEY, ET AL., defendants.
And
LAZARUS G. JOSEPH and A.N. JUREIDINI & BROS.,
appellants,
vs.
JOHN BORDMAN, J.M. MENZI, and THE BANK OF THE
PHILIPPINE ISLANDS, intervenors-appellees.
Schwarzkopf and Ohnick for appellants Joseph and Jureidini
and Bros.
Araneta and Zaragoza for intervenor Bank of the Philippine
Islands.
Crossfield and O'Brien for intervenor Bordman.

OSTRAND, J.:
There is particularly no dispute as to the facts in this case. On
January 23, 1917, Behn, Meyer & Co., Ltd., a foreign
corporation with a branch in the Philippine Islands, brought an
action against the Collector of Customs to recover the
possession of certain merchandise imported into the Islands
and then in the hands of the Collector. A.N. Jureidini & Bros.
intervened in the case and claimed title to the merchandise
under a sale of the same ordered by the British Admiralty Court
of Alexandria, Egypt, in prize court proceedings.
The Court of First Instance on February 28, 1918, rendered
judgment in favor of Behn, Meyer & Co., on the ground that the
title to the merchandise originally rested in Behn, Meyer & Co.,
Ltd., and that no record on the prize court proceedings
showing that Behn, Meyer & Co., Ltd., had been divested of
the title had been presented in evidence. On appeal to the
Supreme Court the judgment was reversed and the case
remanded to the court below with instructions to allow Jureidini

& Bros. a reasonable time within which to obtain a duly

certified copy of the decision of the Admiralty Court of
Alexandria, in which the court declared that the merchandise
constituted lawful prize. 1 A new trial was held on February 24,
1922, after which a judgment was entered in favor of A.N.
Jureidini & Bros. and against Behn, Meyer & Co., Ltd., for the
sum of P1,988 in damages for the further sum of P1,988 for
the value of the merchandise in default of delivery to Jureidini
& Bros.
In the meantime, on the 16th day of February, 1918, all the
business, property, and assets of every nature of the firm of
Behn, Meyer & Co., Ltd., were taken over by the Alien Property
Custodian of the United States under the provisions of the
Trading with the Enemy Act and by direction of the said Alien
Property Custodian, one W.D. Pemberton was appointed
receiver and placed in full charge of the business and assets of
the firm.
During the month of January, 1919, the business of the
Philippine branch of Behn, Meyer & Co., Ltd., was liquidated
and the property and assets of the corporation in the Philippine
Islands, including the goodwill, trade-marks, accounts
receivable, together with all vouchers, entries, and other proofs
of the indebtedness, such as the books of account, etc., were
sold to one of the intervenors herein, John Bordman, by the
direction and under the supervision of the said Alien Property
Custodian, in accordance with the provisions of the Alien
Enemy Act, for the sum of P660,000, as shown by the letters
and bills of sale, Exhibits B, C, D, and E.
The intervenor herein the Bank of the Philippine Islands,
advanced to Bordman the sum of P660,000 with which to
purchase the said business, property, and assets of the said
Behn, Meyer & Co., Ltd., which sum was turned over to W.D.
Pemberton, the receiver appointed by the Alien Property
Custodian.
On the 21st of February, 1919, Behn, Meyer & Co., Ltd., was
declared by the Alien Property Custodian to be an enemy not
holding a license granted by the President, and on the same
date demand was made on the receiver to convey, transfer,
assign, deliver, and pay over to the Alien Property Custodian
the bet proceeds of the sale and liquidation of the business,
property, and assets aforesaid, and by virtue of that demand,
the said net proceeds in the sum of P392,674.96 was on
February 28, 1919, delivered to the managing director of the
office of the Alien Property Custodian in the Philippine Islands,
as shown by Exhibits F and G, which sum as far as the record
shows, is still in possession of the Alien Property Custodian.
Execution of the judgment of February 24, 1922, in favor of
A.N. Jureidini & Bros, having been issued and returned
unsatisfied, Jureidini & Bros. on August 8, 1922, filed an exparte petition in the same case praying that a receiver be
appointed by the court to take charge of the estate and effects
of Behn, Meyer & Co., Ltd., and on August 10, 1922, the Court
of First Instance issued an order appointing Lazarus G. Joseph
receiver of the property, assets and estate of the said firm,
upon giving a bond in the sum of P1,000.
On the 4th of September, 1923, the said Lazarus G. Joseph,
as such receiver, commenced an action in the Court of First
Instance of Manila against the Bank of the Philippine Islands
and J.M. Menzi, being civil case No. 24892 of said court, to
annul the aforesaid sale of the business, property, and assets,

etc., of the said Behn, & Co., Ltd., to John Bordman and to
recover back the property sold as property of the said Behn,
Meyer & Co., Ltd., and for an accounting and other relief.
On the 5th of September, 1923, the said Lazarus G. Joseph, in
his capacity of receiver, appeared in the present case in the
Court of First Instance and obtained an order directed to the
said J.M. Menzi citing him to appear before the court on a
certain date to show cause why he should not turn over to the
said receiver the books of account of the said Behn, Meyer &
Co., Ltd.
On September 14, 1923, John Bordman, J.M. Menzi, and the
Bank of the Philippine Islands filed in the same case a motion
for permission to intervene in the receivership proceedings
solely for the purpose of vacating the order of August 10, 1922,
appointing a receiver for the property, assets, and estate of the
said Behn, Meyer & Co., Ltd., and alleging in support thereof
that they had a legal interest in the subject-matter of said
receivership and an interest against that of the parties to said
proceedings.lawphi1.net
At the same time the intervenors filed a verified motion setting
forth the facts hereinabove stated asking that the said order of
August 10, 1922, appointing the said Lazarus G. Joseph,
receiver of the said Behn, Meyer & Co. Ltd., be vacated and
set aside on the ground that Jureidini & Bros., under the facts
and circumstances stated, had no legal right to such
receivership and that the court had no jurisdiction to make
such appointment, and that consequently its order to that effect
was null and void.
Upon hearing, the Court of First Instance, under date of
September 26, 1923, entered an order, the dispositive part of
which reads as follows:
For the foregoing and the interests of J.M. Menzi, John
Bordman and the Bank of the Philippine Islands in this
proceeding having, in the opinion of the court, been shown,
that of Bordman consisting in his having in his acquired
through purchase for the sum of P660,000 all the interests,
rights, choses in action, books, vouchers of the herein plaintiff;
that of J.M. Menzi in his having been designated by said
Bordman to take charge of said properties and books in his
name; and that of the Bank of the Philippine Islands in its
having furnished the sum of money with which said Bordman
made the purchase, it is hereby adjudged to permit said
parties, as they are hereby permitted and authorized, to
intervene in this case; and the court having reached the
conclusion that it has not, and did not have, any jurisdiction to
appoint a receiver in view of the fact that all of the properties of
the said plaintiff had been sold by the Alien Property Custodian
in accordance with the Act of Congress hereinbefore
mentioned; it is hereby adjudged that the order of this court of
August 10, 1922, appointing Lazarus G. Joseph, receiver,
should be, as it hereby is, set aside. Let the bond given by said
receiver to secure the faithful performance of his duties be
cancelled, and J.M. Menzi is held to be under no obligation to
deliver to the aforesaid Lazarus G. Joseph, the books under
said Menzi's charge which formerly belonged to the plaintiff
Behn, Meyer & Co., Ltd.
No exception was taken to this order neither by the receiver
nor by Jureidini Bros., but on October 1, 1923, their counsel
filed the following motion for reconsideration:

Come now the Receiver and A.N. Jureidini & Bros. in the
above entitled case and move this court that the court
reconsider the resolution of this court dated September 26,
1923, and, thereafter order the delivery of the books to the said
receiver.
On December 3, 1923, the motion for reconsideration was
denied, exception duly taken and the case is now before us
upon appeal from the two orders last mentioned.
The appellants contend that the court below erred in permitting
the appellees to intervene inasmuch as (a) a final judgment
had been entered in the case and (b) the appellees had no
legal interest in the matter in litigation. Neither of these points
is, in our opinion, well taken. The appellees intervene only in
the receivership proceedings which still were an open issue
and did not attempt to interfere in the part of the case which
was covered by the final judgment. They claimed no interest in
the controversy between Jureidini & Bros., and Behn, Meyer &
Co., Ltd., but that Bordman and the Bank of the Philippine
Islands had a vital interest in the subsequent receivership is
clearly shown by the fact that one of the first actions of the
receiver appears to have been the institution of an action
against them to annul the sale made by the Alien Property
Custodian to Bordman, thus disturbing the latter in his '
property rights and threatening the lien held by the bank upon
the property sold. As to the appellee Menzi, it is sufficient to
say that he was brought into the present case by the receiver
himself on the order to show cause why he did not turn over
and deliver to said receiver the books of account of Behn,
Meyer & Co., Ltd. We fail to find any error or abuse of
discretion on the part of the court below in permitting the
intervention.
Appellants further maintain that the court erred in holding that
the appointment of the receiver was in excess of its jurisdiction.
This contention is also untenable. As soon as Behn, Meyer &
Co., Ltd., was an "enemy not holding a license granted by the
President of the United States," it became the duty of the Alien
Property Custodian to take possession of its business and all
its assets within United States territory, and we must presume
that this duty was duly performed and that all such assets are
now either actually or constructively in the possession of the
Alien Property Custodian and under his control. If so, they are
beyond the jurisdiction and control of the Philippine Courts.
Section 7 of the Trading with Enemy Act as amended provides
as follows:
"The sole relief and remedy of any person having any claim to
any money or other property heretofore or hereafter conveyed,
transferred, assigned, delivered, or paid over to the Alien
Property Custodian, or required so to be, or seized by him shall
be that provided by the terms of this Act, and in the event of
sale or other disposition of such property by the Alien Property
Custodian, shall be limited to and enforced against the net
proceeds received therefrom and held by the Alien Property
Custodian or by the Treasurer of the United
States."lawphi1.net
Section 9 of the Act provides that anyone "not an enemy or ally
of enemy claiming any interest, right, or title in any money of
other property so requested and held, may give notice of his
claim and institute a suit in equity against the Custodian or the
Treasurer, as the case may be, to establish and enforce his
claim, and where suit is brought, the money or property is to be

retained by the Custodian or in the Treasury, to abide the final

decree. The same section further provides:
Except as herein provided, the money or other property
conveyed, transferred, assigned, delivered, or paid to the Alien
Property Custodian shall not be liable to lien, attachment,
garnishment, trustee, process, or execution, or subject to any
order to decree of any court.
Section 17 of the same Act provides:
That the district courts of the United States are hereby given
jurisdiction to make and enter all such rules as to notice and
otherwise, and all such orders and decrees, and to issue such
process as may be necessary and proper in the premises to
enforce the provisions of this Act, with a right of appeal from
the final order or decree of such court as provided in sections
one hundred and twenty-eight and two hundred and thirty-eight
of the Act of March third, nineteen hundred and eleven, entitled
"An Act to codify, revise, and amend the laws relating to the
judiciary."
The only jurisdiction given to the Courts of First Instance of the
Philippine Islands is in regard to criminal offenses under said
Act, as shown by section 18 thereof. Had it been the intention
of Congress to give the Philippine courts jurisdiction over civil
litigation in regard to property under the control of the Alien
Property Custodian, the Act would, of course, have so stated.
The orders appealed from are affirmed, with the costs against
the appellants. So ordered.

THIRD DIVISION
G.R. No. 103577 October 7, 1996
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE
A. CORONEL, ANNABELLE C. GONZALES (for herself and
on behalf of Florida C. Tupper, as attorney-in-fact),
CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and
CATALINA BALAIS MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ,
and RAMONA PATRICIA ALCARAZ, assisted by GLORIA
F. NOEL as attorney-in-fact, respondents.

P1,240,000.00 Total amount

50,000 Down payment

P1,190,000.00 Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog,
Quezon City, the sum of Fifty Thousand Pesos purchase price
of our inherited house and lot, covered by TCT No. 119627 of
the Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00.
We bind ourselves to effect the transfer in our names from our
deceased father, Constancio P. Coronel, the transfer certificate
of title immediately upon receipt of the down payment abovestated.
On our presentation of the TCT already in or name, We will
immediately execute the deed of absolute sale of said property
and Miss Ramona Patricia Alcaraz shall immediately pay the
balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the
following:
1. Ramona will make a down payment of Fifty Thousand
(P50,000.00) Pesos upon execution of the document
aforestated;
2. The Coronels will cause the transfer in their names of the
title of the property registered in the name of their deceased
father upon receipt of the Fifty Thousand (P50,000.00) Pesos
down payment;
3. Upon the transfer in their names of the subject property, the
Coronels will execute the deed of absolute sale in favor of
Ramona and the latter will pay the former the whole balance of
One Million One Hundred Ninety Thousand (P1,190,000.00)
Pesos.
On the same date (January 15, 1985), plaintiff-appellee
Concepcion D. Alcaraz (hereinafter referred to as Concepcion),
mother of Ramona, paid the down payment of Fifty Thousand
(P50,000.00) Pesos (Exh. "B", Exh. "2").

MELO, J.:p

On February 6, 1985, the property originally registered in the

name of the Coronels' father was transferred in their names
under TCT
No. 327043 (Exh. "D"; Exh. "4")

The petition before us has its roots in a complaint for specific

performance to compel herein petitioners (except the last
named, Catalina Balais Mabanag) to consummate the sale of a
parcel of land with its improvements located along Roosevelt
Avenue in Quezon City entered into by the parties sometime in
January 1985 for the price of P1,240,000.00.

On February 18, 1985, the Coronels sold the property covered

by TCT No. 327043 to intervenor-appellant Catalina B.
Mabanag (hereinafter referred to as Catalina) for One Million
Five Hundred Eighty Thousand (P1,580,000.00) Pesos after
the latter has paid Three Hundred Thousand (P300,000.00)
Pesos (Exhs. "F-3"; Exh. "6-C")

The undisputed facts of the case were summarized by

respondent court in this wise:

For this reason, Coronels canceled and rescinded the contract

(Exh. "A") with Ramona by depositing the down payment paid
by Concepcion in the bank in trust for Ramona Patricia
Alcaraz.

On January 19, 1985, defendants-appellants Romulo Coronel,

et al. (hereinafter referred to as Coronels) executed a
document entitled "Receipt of Down Payment" (Exh. "A") in
favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred
to as Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT

On February 22, 1985, Concepcion, et al., filed a complaint for

specific performance against the Coronels and caused the
annotation of a notice of lis pendens at the back of TCT No.
327403 (Exh. "E"; Exh. "5").

On April 2, 1985, Catalina caused the annotation of a notice of

adverse claim covering the same property with the Registry of
Deeds of Quezon City (Exh. "F"; Exh. "6").

A motion for reconsideration was filed by petitioner before the

new presiding judge of the Quezon City RTC but the same was
denied by Judge Estrella T. Estrada, thusly:

On April 25, 1985, the Coronels executed a Deed of Absolute

Sale over the subject property in favor of Catalina (Exh. "G";
Exh. "7").

The prayer contained in the instant motion, i.e., to annul the

decision and to render anew decision by the undersigned
Presiding Judge should be denied for the following reasons: (1)
The instant case became submitted for decision as of April 14,
1988 when the parties terminated the presentation of their
respective documentary evidence and when the Presiding
Judge at that time was Judge Reynaldo Roura. The fact that
they were allowed to file memoranda at some future date did
not change the fact that the hearing of the case was terminated
before Judge Roura and therefore the same should be
submitted to him for decision; (2) When the defendants and
intervenor did not object to the authority of Judge Reynaldo
Roura to decide the case prior to the rendition of the decision,
when they met for the first time before the undersigned
Presiding Judge at the hearing of a pending incident in Civil
Case No. Q-46145 on November 11, 1988, they were deemed
to have acquiesced thereto and they are now estopped from
questioning said authority of Judge Roura after they received
the decision in question which happens to be adverse to them;
(3) While it is true that Judge Reynaldo Roura was merely a
Judge-on-detail at this Branch of the Court, he was in all
respects the Presiding Judge with full authority to act on any
pending incident submitted before this Court during his
incumbency. When he returned to his Official Station at
Macabebe, Pampanga, he did not lose his authority to decide
or resolve such cases submitted to him for decision or
resolution because he continued as Judge of the Regional Trial
Court and is of co-equal rank with the undersigned Presiding
Judge. The standing rule and supported by jurisprudence is
that a Judge to whom a case is submitted for decision has the
authority to decide the case notwithstanding his transfer to
another branch or region of the same court (Sec. 9, Rule 135,
Rule of Court).

On June 5, 1985, a new title over the subject property was

issued in the name of Catalina under TCT No. 351582 (Exh.
"H"; Exh. "8").
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch
83, RTC, Quezon City) the parties agreed to submit the case
for decision solely on the basis of documentary exhibits. Thus,
plaintiffs therein (now private respondents) proffered their
documentary evidence accordingly marked as Exhibits "A"
through "J", inclusive of their corresponding submarkings.
Adopting these same exhibits as their own, then defendants
(now petitioners) accordingly offered and marked them as
Exhibits "1" through "10", likewise inclusive of their
corresponding submarkings. Upon motion of the parties, the
trial court gave them thirty (30) days within which to
simultaneously submit their respective memoranda, and an
additional 15 days within which to submit their corresponding
comment or reply thereof, after which, the case would be
deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before
Judge Reynaldo Roura, who was then temporarily detailed to
preside over Branch 82 of the RTC of Quezon City. On March
1, 1989, judgment was handed down by Judge Roura from his
regular bench at Macabebe, Pampanga for the Quezon City
branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby
rendered ordering defendant to execute in favor of plaintiffs a
deed of absolute sale covering that parcel of land embraced in
and covered by Transfer Certificate of Title No. 327403 (now
TCT No. 331582) of the Registry of Deeds for Quezon City,
together with all the improvements existing thereon free from
all liens and encumbrances, and once accomplished, to
immediately deliver the said document of sale to plaintiffs and
upon receipt thereof, the said document of sale to plaintiffs and
upon receipt thereof, the plaintiffs are ordered to pay
defendants the whole balance of the purchase price amounting
to P1,190,000.00 in cash. Transfer Certificate of Title No.
331582 of the Registry of Deeds for Quezon City in the name
of intervenor is hereby canceled and declared to be without
force and effect. Defendants and intervenor and all other
persons claiming under them are hereby ordered to vacate the
subject property and deliver possession thereof to plaintiffs.
Plaintiffs' claim for damages and attorney's fees, as well as the
counterclaims of defendants and intervenors are hereby
dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)

Coming now to the twin prayer for reconsideration of the

Decision dated March 1, 1989 rendered in the instant case,
resolution of which now pertains to the undersigned Presiding
Judge, after a meticulous examination of the documentary
evidence presented by the parties, she is convinced that the
Decision of March 1, 1989 is supported by evidence and,
therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the "Motion for
Reconsideration and/or to Annul Decision and Render Anew
Decision by the Incumbent Presiding Judge" dated March 20,
1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December
16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad
Santos (P), JJ.) rendered its decision fully agreeing with the
trial court.
Hence, the instant petition which was filed on March 5, 1992.
The last pleading, private respondents' Reply Memorandum,
was filed on September 15, 1993. The case was, however, reraffled to undersigned ponente only on August 28, 1996, due to

the voluntary inhibition of the Justice to whom the case was

last assigned.
While we deem it necessary to introduce certain refinements in
the disquisition of respondent court in the affirmance of the trial
court's decision, we definitely find the instant petition bereft of
merit.
The heart of the controversy which is the ultimate key in the
resolution of the other issues in the case at bar is the precise
determination of the legal significance of the document entitled
"Receipt of Down Payment" which was offered in evidence by
both parties. There is no dispute as to the fact that said
document embodied the binding contract between Ramona
Patricia Alcaraz on the one hand, and the heirs of Constancio
P. Coronel on the other, pertaining to a particular house and lot
covered by TCT No. 119627, as defined in Article 1305 of the
Civil Code of the Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two
persons whereby one binds himself, with respect to the other,
to give something or to render some service.
While, it is the position of private respondents that the "Receipt
of Down Payment" embodied a perfected contract of sale,
which perforce, they seek to enforce by means of an action for
specific performance, petitioners on their part insist that what
the document signified was a mere executory contract to sell,
subject to certain suspensive conditions, and because of the
absence of Ramona P. Alcaraz, who left for the United States
of America, said contract could not possibly ripen into a
contract absolute sale.

seller agrees or obliges himself to do is to fulfill is promise to

sell the subject property when the entire amount of the
purchase price is delivered to him. In other words the full
payment of the purchase price partakes of a suspensive
condition, the non-fulfillment of which prevents the obligation to
sell from arising and thus, ownership is retained by the
prospective seller without further remedies by the prospective
buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court
had occasion to rule:
Hence, We hold that the contract between the petitioner and
the respondent was a contract to sell where the ownership or
title is retained by the seller and is not to pass until the full
payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach,
casual or serious, but simply an event that prevented the
obligation of the vendor to convey title from acquiring binding
force.
Stated positively, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price, the
prospective seller's obligation to sell the subject property by
entering into a contract of sale with the prospective buyer
becomes demandable as provided in Article 1479 of the Civil
Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.

Plainly, such variance in the contending parties' contentions is

brought about by the way each interprets the terms and/or
conditions set forth in said private instrument. Withal, based on
whatever relevant and admissible evidence may be available
on record, this, Court, as were the courts below, is now called
upon to adjudge what the real intent of the parties was at the
time the said document was executed.

A contract to sell may thus be defined as a bilateral contract

whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to
the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase
price.

The Civil Code defines a contract of sale, thus:

A contract to sell as defined hereinabove, may not even be

considered as a conditional contract of sale where the seller
may likewise reserve title to the property subject of the sale
until the fulfillment of a suspensive condition, because in a
conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the
suspensive condition is not fulfilled, the perfection of the
contract of sale is completely abated (cf. Homesite and
housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]).
However, if the suspensive condition is fulfilled, the contract of
sale is thereby perfected, such that if there had already been
previous delivery of the property subject of the sale to the
buyer, ownership thereto automatically transfers to the buyer
by operation of law without any further act having to be
performed by the seller.

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.
Sale, by its very nature, is a consensual contract because it is
perfected by mere consent. The essential elements of a
contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered
as a Contract of Sale because the first essential element is
lacking. In a contract to sell, the prospective seller explicity
reserves the transfer of title to the prospective buyer, meaning,
the prospective seller does not as yet agree or consent to
transfer ownership of the property subject of the contract to sell
until the happening of an event, which for present purposes we
shall take as the full payment of the purchase price. What the

In a contract to sell, upon the fulfillment of the suspensive

condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although
the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective
buyer by entering into a contract of absolute sale.

It is essential to distinguish between a contract to sell and a

conditional contract of sale specially in cases where the
subject property is sold by the owner not to the party the seller
contracted with, but to a third person, as in the case at bench.
In a contract to sell, there being no previous sale of the
property, a third person buying such property despite the
fulfillment of the suspensive condition such as the full payment
of the purchase price, for instance, cannot be deemed a buyer
in bad faith and the prospective buyer cannot seek the relief of
reconveyance of the property. There is no double sale in such
case. Title to the property will transfer to the buyer after
registration because there is no defect in the owner-seller's title
per se, but the latter, of course, may be used for damages by
the intending buyer.
In a conditional contract of sale, however, upon the fulfillment
of the suspensive condition, the sale becomes absolute and
this will definitely affect the seller's title thereto. In fact, if there
had been previous delivery of the subject property, the seller's
ownership or title to the property is automatically transferred to
the buyer such that, the seller will no longer have any title to
transfer to any third person. Applying Article 1544 of the Civil
Code, such second buyer of the property who may have had
actual or constructive knowledge of such defect in the seller's
title, or at least was charged with the obligation to discover
such defect, cannot be a registrant in good faith. Such second
buyer cannot defeat the first buyer's title. In case a title is
issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to
the task of deciphering the real nature of the contract entered
into by petitioners and private respondents.
It is a canon in the interpretation of contracts that the words
used therein should be given their natural and ordinary
meaning unless a technical meaning was intended (Tan vs.
Court of Appeals, 212 SCRA 586 [1992]). Thus, when
petitioners declared in the said "Receipt of Down Payment"
that they
Received from Miss Ramona Patricia Alcaraz of 146 Timog,
Quezon City, the sum of Fifty Thousand Pesos purchase price
of our inherited house and lot, covered by TCT No. 1199627 of
the Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00.
without any reservation of title until full payment of the entire
purchase price, the natural and ordinary idea conveyed is that
they sold their property.
When the "Receipt of Down Payment" is considered in its
entirety, it becomes more manifest that there was a clear intent
on the part of petitioners to transfer title to the buyer, but since
the transfer certificate of title was still in the name of
petitioner's father, they could not fully effect such transfer
although the buyer was then willing and able to immediately
pay the purchase price. Therefore, petitioners-sellers
undertook upon receipt of the down payment from private
respondent Ramona P. Alcaraz, to cause the issuance of a
new certificate of title in their names from that of their father,
after which, they promised to present said title, now in their
names, to the latter and to execute the deed of absolute sale
whereupon, the latter shall, in turn, pay the entire balance of
the purchase price.

The agreement could not have been a contract to sell because

the sellers herein made no express reservation of ownership or
title to the subject parcel of land. Furthermore, the
circumstance which prevented the parties from entering into an
absolute contract of sale pertained to the sellers themselves
(the certificate of title was not in their names) and not the full
payment of the purchase price. Under the established facts
and circumstances of the case, the Court may safely presume
that, had the certificate of title been in the names of petitionerssellers at that time, there would have been no reason why an
absolute contract of sale could not have been executed and
consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at
bar did not merely promise to sell the properly to private
respondent upon the fulfillment of the suspensive condition. On
the contrary, having already agreed to sell the subject property,
they undertook to have the certificate of title changed to their
names and immediately thereafter, to execute the written deed
of absolute sale.
Thus, the parties did not merely enter into a contract to sell
where the sellers, after compliance by the buyer with certain
terms and conditions, promised to sell the property to the latter.
What may be perceived from the respective undertakings of
the parties to the contract is that petitioners had already
agreed to sell the house and lot they inherited from their father,
completely willing to transfer full ownership of the subject
house and lot to the buyer if the documents were then in order.
It just happened, however, that the transfer certificate of title
was then still in the name of their father. It was more expedient
to first effect the change in the certificate of title so as to bear
their names. That is why they undertook to cause the issuance
of a new transfer of the certificate of title in their names upon
receipt of the down payment in the amount of P50,000.00. As
soon as the new certificate of title is issued in their names,
petitioners were committed to immediately execute the deed of
absolute sale. Only then will the obligation of the buyer to pay
the remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most
commonly entered into so as to protect the seller against a
buyer who intends to buy the property in installment by
withholding ownership over the property until the buyer effects
full payment therefor, in the contract entered into in the case at
bar, the sellers were the one who were unable to enter into a
contract of absolute sale by reason of the fact that the
certificate of title to the property was still in the name of their
father. It was the sellers in this case who, as it were, had the
impediment which prevented, so to speak, the execution of an
contract of absolute sale.
What is clearly established by the plain language of the subject
document is that when the said "Receipt of Down Payment"
was prepared and signed by petitioners Romeo A. Coronel, et
al., the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful
transfer of the certificate of title from the name of petitioners'
father, Constancio P. Coronel, to their names.
The Court significantly notes this suspensive condition was, in
fact, fulfilled on February 6, 1985 (Exh. "D"; Exh. "4"). Thus, on
said date, the conditional contract of sale between petitioners
and private respondent Ramona P. Alcaraz became obligatory,
the only act required for the consummation thereof being the

delivery of the property by means of the execution of the deed

of absolute sale in a public instrument, which petitioners
unequivocally committed themselves to do as evidenced by the
"Receipt of Down Payment."
Article 1475, in correlation with Article 1181, both of the Civil
Code, plainly applies to the case at bench. Thus,
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 the moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the
form of contracts.
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.
Since the condition contemplated by the parties which is the
issuance of a certificate of title in petitioners' names was
fulfilled on February 6, 1985, the respective obligations of the
parties under the contract of sale became mutually
demandable, that is, petitioners, as sellers, were obliged to
present the transfer certificate of title already in their names to
private respondent Ramona P. Alcaraz, the buyer, and to
immediately execute the deed of absolute sale, while the buyer
on her part, was obliged to forthwith pay the balance of the
purchase price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9
of their petition, petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves "to effect
the transfer in our names from our deceased father Constancio
P. Coronel, the transfer certificate of title immediately upon
receipt of the downpayment above-stated". The sale was still
subject to this suspensive condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a
contract of sale subject to a suspensive condition. Only, they
contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of
first transferring the title to the property under their names,
there could be no perfected contract of sale. (Emphasis
supplied.)
(Ibid.)
not aware that they set their own trap for themselves, for
Article 1186 of the Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is
more controlling than these mere hypothetical arguments is the
fact that the condition herein referred to was actually and
indisputably fulfilled on February 6, 1985, when a new title was
issued in the names of petitioners as evidenced by TCT No.
327403 (Exh. "D"; Exh. "4").

The inevitable conclusion is that on January 19, 1985, as

evidenced by the document denominated as "Receipt of Down
Payment" (Exh. "A"; Exh. "1"), the parties entered into a
contract of sale subject only to the suspensive condition that
the sellers shall effect the issuance of new certificate title from
that of their father's name to their names and that, on February
6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4").
We, therefore, hold that, in accordance with Article 1187 which
pertinently provides
Art. 1187. The effects of conditional obligation to give, once the
condition has been fulfilled, shall retroact to the day of the
constitution of the obligation . . .
In obligation to do or not to do, the courts shall determine, in
each case, the retroactive effect of the condition that has been
complied with.
the rights and obligations of the parties with respect to the
perfected contract of sale became mutually due and
demandable as of the time of fulfillment or occurrence of the
suspensive condition on February 6, 1985. As of that point in
time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract
on January 19, 1985 because they were then not yet the
absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of
transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which
the property, rights and obligations to be extent and value of
the inheritance of a person are transmitted through his death to
another or others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and
daughters of the decedent Constancio P. Coronel are
compulsory heirs who were called to succession by operation
of law. Thus, at the point their father drew his last breath,
petitioners stepped into his shoes insofar as the subject
property is concerned, such that any rights or obligations
pertaining thereto became binding and enforceable upon them.
It is expressly provided that rights to the succession are
transmitted from the moment of death of the decedent (Article
777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners' claim that succession may not
be declared unless the creditors have been paid is rendered
moot by the fact that they were able to effect the transfer of the
title to the property from the decedent's name to their names
on February 6, 1985.
Aside from this, petitioners are precluded from raising their
supposed lack of capacity to enter into an agreement at that
time and they cannot be allowed to now take a posture
contrary to that which they took when they entered into the
agreement with private respondent Ramona P. Alcaraz. The
Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is
rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon.

Having represented themselves as the true owners of the

subject property at the time of sale, petitioners cannot claim
now that they were not yet the absolute owners thereof at that
time.
Petitioners also contend that although there was in fact a
perfected contract of sale between them and Ramona P.
Alcaraz, the latter breached her reciprocal obligation when she
rendered impossible the consummation thereof by going to the
United States of America, without leaving her address,
telephone number, and Special Power of Attorney (Paragraphs
14 and 15, Answer with Compulsory Counterclaim to the
Amended Complaint, p. 2; Rollo, p. 43), for which reason, so
petitioners conclude, they were correct in unilaterally
rescinding rescinding the contract of sale.
We do not agree with petitioners that there was a valid
rescission of the contract of sale in the instant case. We note
that these supposed grounds for petitioners' rescission, are
mere allegations found only in their responsive pleadings,
which by express provision of the rules, are deemed
controverted even if no reply is filed by the plaintiffs (Sec. 11,
Rule 6, Revised Rules of Court). The records are absolutely
bereft of any supporting evidence to substantiate petitioners'
allegations. We have stressed time and again that allegations
must be proven by sufficient evidence (Ng Cho Cio vs. Ng
Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598
[1961]. Mere allegation is not an evidence (Lagasca vs. De
Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the
United States of America on February 6, 1985, we cannot
justify petitioner-sellers' act of unilaterally and extradicially
rescinding the contract of sale, there being no express
stipulation authorizing the sellers to extarjudicially rescind the
contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988];
Taguba vs. Vda. de Leon, 132 SCRA 722 [1984])

(as buyer) never became due and demandable and, therefore,

she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a
contract involving reciprocal obligations may be considered in
default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in
delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.
xxx xxx xxx
In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment
one of the parties fulfill his obligation, delay by the other
begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the
contract of sale between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner,
Catalina B. Mabanag, gave rise to a case of double sale where
Article 1544 of the Civil Code will apply, to wit:
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 if be immovable property, the ownership shall belong to
the person acquiring it who in good faith first recorded it in
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.

Moreover, petitioners are estopped from raising the alleged

absence of Ramona P. Alcaraz because although the evidence
on record shows that the sale was in the name of Ramona P.
Alcaraz as the buyer, the sellers had been dealing with
Concepcion D. Alcaraz, Ramona's mother, who had acted for
and in behalf of her daughter, if not also in her own behalf.
Indeed, the down payment was made by Concepcion D.
Alcaraz with her own personal check (Exh. "B"; Exh. "2") for
and in behalf of Ramona P. Alcaraz. There is no evidence
showing that petitioners ever questioned Concepcion's
authority to represent Ramona P. Alcaraz when they accepted
her personal check. Neither did they raise any objection as
regards payment being effected by a third person. Accordingly,
as far as petitioners are concerned, the physical absence of
Ramona P. Alcaraz is not a ground to rescind the contract of
sale.

The record of the case shows that the Deed of Absolute Sale
dated April 25, 1985 as proof of the second contract of sale
was registered with the Registry of Deeds of Quezon City
giving rise to the issuance of a new certificate of title in the
name of Catalina B. Mabanag on June 5, 1985. Thus, the
second paragraph of Article 1544 shall apply.

Corollarily, Ramona P. Alcaraz cannot even be deemed to be

in default, insofar as her obligation to pay the full purchase
price is concerned. Petitioners who are precluded from setting
up the defense of the physical absence of Ramona P. Alcaraz
as above-explained offered no proof whatsoever to show that
they actually presented the new transfer certificate of title in
their names and signified their willingness and readiness to
execute the deed of absolute sale in accordance with their
agreement. Ramona's corresponding obligation to pay the
balance of the purchase price in the amount of P1,190,000.00

In his commentaries on the Civil Code, an accepted authority

on the subject, now a distinguished member of the Court,
Justice Jose C. Vitug, explains:

The above-cited provision on double sale presumes title or

ownership to pass to the first buyer, the exceptions being: (a)
when the second buyer, in good faith, registers the sale ahead
of the first buyer, and (b) should there be no inscription by
either of the two buyers, when the second buyer, in good faith,
acquires possession of the property ahead of the first buyer.
Unless, the second buyer satisfies these requirements, title or
ownership will not transfer to him to the prejudice of the first
buyer.

The governing principle is prius tempore, potior jure (first in

time, stronger in right). Knowledge by the first buyer of the
second sale cannot defeat the first buyer's rights except when
the second buyer first registers in good faith the second sale
(Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge
gained by the second buyer of the first sale defeats his rights
even if he is first to register, since knowledge taints his

registration with bad faith (see also Astorga vs. Court of

Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs.
Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it
has 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. No.
95843, 02 September 1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993
Edition, p. 604).

mother and daughter. Thus, We will not touch this issue and no
longer disturb the lower courts' ruling on this point.

Petitioner point out that the notice of lis pendens in the case at
bar was annoted on the title of the subject property only on
February 22, 1985, whereas, the second sale between
petitioners Coronels and petitioner Mabanag was supposedly
perfected prior thereto or on February 18, 1985. The idea
conveyed is that at the time petitioner Mabanag, the second
buyer, bought the property under a clean title, she was
unaware of any adverse claim or previous sale, for which
reason she is buyer in good faith.

G.R. No. 124242

We are not persuaded by such argument.

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. T39023 both measuring 15,808 square meters or a total of
3.1616 hectares.

In a case of double sale, 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.
As clearly borne out by the evidence in this case, petitioner
Mabanag could not have in good faith, registered the sale
entered into on February 18, 1985 because as early as
February 22, 1985, a notice of lis pendens had been annotated
on the transfer certificate of title in the names of petitioners,
whereas petitioner Mabanag registered the said sale sometime
in April, 1985. At the time of registration, therefore, petitioner
Mabanag knew that the same property had already been
previously sold to private respondents, or, at least, she was
charged with knowledge that a previous buyer is claiming title
to the same property. Petitioner Mabanag cannot close her
eyes to the defect in petitioners' title to the property at the time
of the registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers that 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 pervious sale, the registration will constitute a
registration in bad faith and will not confer upon him any right.
(Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs.
Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil.
554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners
and Ramona P. Alcaraz, perfected on February 6, 1985, prior
to that between petitioners and Catalina B. Mabanag on
February 18, 1985, was correctly upheld by both the courts
below.
Although there may be ample indications that there was in fact
an agency between Ramona as principal and Concepcion, her
mother, as agent insofar as the subject contract of sale is
concerned, the issue of whether or not Concepcion was also
acting in her own behalf as a co-buyer is not squarely raised in
the instant petition, nor in such assumption disputed between

WHEREFORE, premises considered, the instant petition is

hereby DISMISSED and the appealed judgment AFFIRMED.
SO ORDERED.

SECOND DIVISION
January 21, 2005

SAN LORENZO DEVELOPMENT CORPORATION, petitioner,

vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS.
MIGUEL LU and PACITA ZAVALLA LU, respondents.
DECISION
TINGA, J.:

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
Damages1 against his co-respondents herein, the Spouses Lu.
Babasanta alleged that the lands covered by TCT No. T39022 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.

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
19903 wherein he prayed for the issuance of a writ of
preliminary injunction with temporary restraining order and the
inclusion of the Register of Deeds of Calamba, Laguna as
party defendant. He contended that the issuance of a
preliminary injunction was necessary to restrain the transfer or
conveyance by the Spouses Lu of the subject property to other
persons.
The Spouses Lu filed their Opposition4 to the amended
complaint contending that it raised new matters which seriously
affect their substantive rights under the original complaint.
However, the trial court in its Order dated 17 January 19905
admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo
Development Corporation (SLDC) filed a Motion for
Intervention6 before the trial court. SLDC alleged that it had
legal interest in the subject matter under litigation because on
3 May 1989, the two parcels of land involved, namely Lot
1764-A and 1764-B, had been sold to it in a Deed of Absolute
Sale with Mortgage.7 It alleged that it was a buyer in good faith
and for value and therefore it had a better right over the
property in litigation.
In his Opposition to 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-inIntervention 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 199110

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 verbal
contract of sale and declared that the original loan transaction
just be carried out. The Spouses Lu argued that since the
properties involved were conjugal, the trial court should have
declared the verbal contract to sell between Pacita Lu and
Pablo Babasanta null and void ab initio for lack of knowledge
and consent of Miguel Lu. They further averred that the trial
court erred in not dismissing the complaint filed by Babasanta;
in awarding damages in his favor and in refusing to grant the
reliefs prayed for in their answer.

On 4 October 1995, the Court of Appeals rendered its

Decision11 which set aside the judgment of the trial court. It
declared that the sale between Babasanta and the Spouses Lu
was valid and subsisting and ordered the spouses to execute
the necessary deed of conveyance in favor of Babasanta, and
the latter to pay the balance of the purchase price in the
amount of two hundred sixty thousand pesos (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 OF P200,000.00, 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 1989.1awphi1.nt
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27
August 1999, the Spouses Lu informed the Court that due to
financial constraints they have no more interest to pursue their
rights in the instant case and submit themselves to the
decision of the Court of Appeals.16
On the other hand, respondent Babasanta argued that SLDC
could not have acquired ownership of the property because it
failed to comply with the requirement of registration of the sale
in good faith. He emphasized that at the time SLDC registered
the sale in its favor on 30 June 1990, there was already a
notice of lis pendens annotated on the titles of the property
made as early as 2 June 1989. Hence, 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 198918 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.

sale, to wit: (1) consent or meeting of the minds, that is, to

transfer ownership in exchange for the price; (2) object certain
which is the subject matter of the contract; (3) cause of the
obligation which is established.27
The perfection of a contract of sale should not, however, be
confused with its consummation. In relation to the acquisition
and transfer of ownership, it should be noted that sale is not a
mode, but merely a title. A mode is the legal means by which
dominion or ownership is created, transferred or destroyed, but
title is only the legal basis by which to affect dominion or
ownership.28 Under Article 712 of the Civil Code, "ownership
and other real rights over property are acquired and
transmitted by law, by donation, by testate and intestate
succession, and in consequence of certain contracts, by
tradition." Contracts only constitute titles or rights to the
transfer or acquisition of ownership, while delivery or tradition
is the mode of accomplishing the same.29 Therefore, sale by
itself does not transfer or affect ownership; the most that sale
does is to create the obligation to transfer ownership. It is
tradition or delivery, as a consequence of sale, that actually
transfers ownership.
Explicitly, the law provides that the ownership of the thing sold
is acquired by the vendee from the moment it is delivered to
him in any of the ways specified in Article 1497 to 1501.30 The
word "delivered" should not be taken restrictively to mean
transfer of actual physical possession of the property. The law
recognizes two principal modes of delivery, to wit: (1) actual
delivery; and (2) legal or constructive delivery.

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

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

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.

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

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
consent25 and from that moment, the parties may reciprocally
demand performance.26 The essential elements of a contract of

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 property and
were in fact in possession of the lands.l^vvphi1.net Time and
again, this Court has ruled that a person dealing with the
owner of registered land is not bound to go beyond the
certificate of title as he is charged with notice of burdens on the
property which are noted on the face of the register or on the
certificate of title.41 In assailing knowledge of the transaction
between him and the Spouses Lu, Babasanta apparently relies
on the principle of constructive notice incorporated in Section
52 of the Property Registration Decree (P.D. No. 1529) which
reads, thus:
Sec. 52. Constructive notice upon registration. Every
conveyance, mortgage, lease, lien, attachment, order,
judgment, instrument or entry affecting registered land shall, if
registered, filed, or entered in the office of the Register of
Deeds for the province or city where the land to which it relates
lies, be constructive notice to all persons from the time of such
registering, filing, or entering.
However, the constructive notice operates as suchby the
express wording of Section 52from the time of the
registration of the notice of lis pendens which in this case was
effected only on 2 June 1989, at which time the sale in favor of
SLDC had long been consummated insofar as the obligation of
the Spouses Lu to transfer ownership over the property to
SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC
to the claim of Babasanta the annotation of the notice of lis
pendens cannot help 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 capital43 of SLDCs averment
in its Complaint-in-Intervention44 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 crossexamination.45 However, there is nothing in the said pleading
and the testimony which explicitly relates the amount to the
transaction between the Spouses Lu and Babasanta for what
they attest to is that the amount was supposed to pay off the
advances made by Babasanta to Pacita Lu. In any event, the
incident took place after the Spouses Lu had already executed
the Deed of Absolute Sale with Mortgage in favor of SLDC and
therefore, as previously explained, it has no effect on the legal
position of SLDC.
Assuming ex gratia argumenti that 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 in Abarquez, we
would not hesitate to rule in favor of SLDC on the basis of its
prior possession of the property in good faith. Be it noted that
delivery of the property to SLDC was immediately effected
after the execution of the deed in its favor, at which time SLDC
had no knowledge at all of the prior transaction by the Spouses
Lu in favor of Babasanta.1a\^/phi1.net
The law speaks not only of one criterion. The first criterion is
priority of entry in the registry of property; there being no
priority of such entry, the second is priority of possession; and,
in the absence of the two priorities, the third priority is of the
date of title, with good faith as the common critical element.
Since SLDC acquired possession of the property in good faith
in contrast to Babasanta, who neither registered nor
possessed the property at any time, 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.

SECOND DIVISION
G.R. No. 176308

May 8, 2009

ANGEL M. PAGADUAN, AMELIA P. TUCCI, TERESITA P.

DEL MONTE, ORLITA P. GADIN, PERLA P. ESPIRITU,
ELISA P. DUNN, LORNA P. KIMBLE, EDITO N.
PAGADUAN, and LEO N. PAGADUAN, Petitioners,
vs.
SPOUSES ESTANISLAO & FE POSADAS OCUMA,
Respondents.
DECISION
TINGA, J.:
In this Petition for Review,1 petitioners assail the Decision2 of
the Court of Appeals dated September 18, 2006 which ruled
that petitioners action for reconveyance is barred by
prescription and consequently reversed the decision 3 dated
June 25, 2002 of the Regional Trial Court (RTC) of Olongapo
City.
Petitioners Angel N. Pagaduan, Amelia P. Tucci, Teresita P.
del Monte, Orlita P. Gadin, Perla P. Espiritu, Elisa P. Dunn,
Lorna P. Kimble, Edito N. Pagaduan and Leo N. Pagaduan are
all heirs of the late Agaton Pagaduan. Respondents are the
spouses Estanislao Ocuma and Fe Posadas Ocuma.
The facts are as follows:
The subject lot used to be part of a big parcel of land that
originally belonged to Nicolas Cleto as evidenced by Certificate
of Title (C.T.) No. 14. The big parcel of land was the subject of
two separate lines of dispositions. The first line of dispositions
began with the sale by Cleto to Antonio Cereso on May 11,
1925. Cereso in turn sold the land to the siblings with the
surname Antipolo on September 23, 1943. The Antipolos sold
the property to Agaton Pagaduan, father of petitioners, on
March 24, 1961. All the dispositions in this line were not
registered and did not result in the issuance of new certificates
of title in the name of the purchasers.
The second line of dispositions started on January 30, 1954,
after Cletos death, when his widow Ruperta Asuncion as his
sole heir and new owner of the entire tract, sold the same to
Eugenia Reyes. This resulted in the issuance of Transfer
Certificate of Title (TCT) No. T-1221 in the name of Eugenia
Reyes in lieu of TCT No. T-1220 in the name of Ruperta
Asuncion.
On November 26, 1961, Eugenia Reyes executed a unilateral
deed of sale where she sold the northern portion with an area
of 32,325 square meters to respondents for P1,500.00 and the
southern portion consisting of 8,754 square meters to Agaton
Pagaduan for P500.00. Later, on June 5, 1962, Eugenia
executed another deed of sale, this time conveying the entire
parcel of land, including the southern portion, in respondents
favor. Thus, TCT No. T-1221 was cancelled and in lieu thereof
TCT No. T-5425 was issued in the name of respondents. On
June 27, 1989, respondents subdivided the land into two lots.
The subdivision resulted in the cancellation of TCT No. T-5425
and the issuance of TCT Nos. T-37165 covering a portion with
31,418 square meters and T-37166 covering the remaining
portion with 9,661 square meters.

On July 26, 1989, petitioners instituted a complaint for

reconveyance of the southern portion with an area of 8,754
square meters, with damages, against respondents before the
RTC of Olongapo City.
On June 25, 2002, the trial court rendered a decision in
petitioners favor. Ruling that a constructive trust over the
property was created in petitioners favor, the court below
ordered respondents to reconvey the disputed southern portion
and to pay attorneys fees as well as litigation expenses to
petitioners. The dispositive portion of the decision reads:
WHEREFORE, foregoing premises considered, judgment is
hereby rendered:
1. Ordering the defendants to reconvey to the plaintiffs, a
portion of their property originally covered by Certificate of Title
No. T-542164 now TCT Nos. 37165 and 37166 an area
equivalent to 8,754 square meters.
2. Ordering the defendant to pay plaintiffs P15,000.00 as
attorneys fees and P5,000.00 for litigation expenses.
3. Defendants counterclaims are dismissed.
SO ORDERED.5
Dissatisfied with the decision, respondents appealed it to the
Court of Appeals. The Court of Appeals reversed and set aside
the decision of the trial court; with the dispositive portion of the
decision reading, thus:
WHEREFORE, premises considered, the appeal is granted.
Accordingly, prescription having set in, the assailed June 25,
2002 Decision of the RTC is reversed and set aside, and the
Complaint for reconveyance is hereby DISMISSED.
SO ORDERED.6
The Court of Appeals ruled that while the registration of the
southern portion in the name of respondents had created an
implied trust in favor of Agaton Pagaduan, petitioners,
however, failed to show that they had taken possession of the
said portion. Hence, the appellate court concluded that
prescription had set in, thereby precluding petitioners recovery
of the disputed portion.
Unperturbed by the reversal of the trial courts decision, the
petitioners come to this Court via a petition for review on
certiorari.7 They assert that the Civil Code provision on double
sale is controlling. They submit further that since the
incontrovertible evidence on record is that they are in
possession of the southern portion, the ten (10)-year
prescriptive period for actions for reconveyance should not
apply to them.8 Respondents, on the other hand, aver that the
action for reconveyance has prescribed since the ten (10)-year
period, which according to them has to be reckoned from the
issuance of the title in their name in 1962, has elapsed long
ago.9
The Court of Appeals decision must be reversed and set aside,
hence the petition succeeds.
An action for reconveyance respects the decree of registration
as incontrovertible but seeks the transfer of property, which
has been wrongfully or erroneously registered in other persons'
names, to its rightful and legal owners, or to those who claim to
have a better right. However, contrary to the positions of both

the appellate and trial courts, no trust was created under

Article 1456 of the new Civil Code which provides:
Art. 1456. If property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of
an implied trust for the benefit of the person from whom the
property comes. (Emphasis supplied)
The property in question did not come from the petitioners. In
fact that property came from Eugenia Reyes. The title of the
Ocumas can be traced back from Eugenia Reyes to Ruperta
Asuncion to the original owner Nicolas Cleto. Thus, if the
respondents are holding the property in trust for anyone, it
would be Eugenia Reyes and not the petitioners.1a v v p h i 1
Moreover, as stated in Berico v. Court of Appeals,10 Article
1456 refers to actual or constructive fraud. Actual fraud
consists in deception, intentionally practiced to induce another
to part with property or to surrender some legal right, and
which accomplishes the end designed. Constructive fraud, on
the other hand, is a breach of legal or equitable duty which the
law declares fraudulent irrespective of the moral guilt of the
actor due to the tendency to deceive others, to violate public or
private confidence, or to injure public interests. The latter
proceeds from a breach of duty arising out of a fiduciary or
confidential relationship. In the instant case, none of the
elements of actual or constructive fraud exists. The
respondents did not deceive Agaton Pagaduan to induce the
latter to part with the ownership or deliver the possession of
the property to them. Moreover, no fiduciary relations existed
between the two parties.
This lack of a trust relationship does not inure to the benefit of
the respondents. Despite a host of jurisprudence that states a
certificate of title is indefeasible, unassailable and binding
against the whole world, it merely confirms or records title
already existing and vested, and it cannot be used to protect a
usurper from the true owner, nor can it be used for the
perpetration of fraud; neither does it permit one to enrich
himself at the expense of others.11
Rather, after a thorough scrutiny of the records of the instant
case, the Court finds that this is a case of double sale under
article 1544 of the Civil Code which reads:
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. The requirement of the law then is two-fold: acquisition in
good faith and registration in good faith.12

In this case there was a first sale by Eugenia Reyes to Agaton

Pagaduan and a second sale by Eugenia Reyes to the
respondents.13 For a second buyer like the respondents to
successfully invoke the second paragraph, Article 1544 of the
Civil Code, it must possess good faith from the time of the sale
in its favor until the registration of the same. Respondents
sorely failed to meet this requirement of good faith since they
had actual knowledge of Eugenias prior sale of the southern
portion property to the petitioners, a fact antithetical to good
faith. This cannot be denied by respondents since in the same
deed of sale that Eugenia sold them the northern portion to the
respondents for P1,500.00, Eugenia also sold the southern
portion of the land to Agaton Pagaduan for P500.00.14
It is to be emphasized that the Agaton Pagaduan never parted
with the ownership and possession of that portion of Lot No.
785 which he had purchased from Eugenia Santos. Hence, the
registration of the deed of sale by respondents was ineffectual
and vested upon them no preferential rights to the property in
derogation of the rights of the petitioners.
Respondents had prior knowledge of the sale of the
questioned portion to Agaton Pagaduan as the same deed of
sale that conveyed the northern portion to them, conveyed the
southern portion to Agaton Pagaduan.15 Thus the subsequent
issuance of TCT No. T-5425, to the extent that it affects the
Pagaduans portion, conferred no better right than the
registration which was the source of the authority to issue the
said title. Knowledge gained by respondents of the first sale
defeats their rights even if they were first to register the second
sale. Knowledge of the first sale blackens this prior registration
with bad faith.16 Good faith must concur with the registration.17
Therefore, because the registration by the respondents was in
bad faith, it amounted to no registration at all.
As the respondents gained no rights over the land, it is
petitioners who are the rightful owners, having established that
their successor-in-interest Agaton Pagaduan had purchased
the property from Eugenia Reyes on November 26, 1961 and
in fact took possession of the said property. The action to
recover the immovable is not barred by prescription, as it was
filed a little over 27 years after the title was registered in bad
faith by the Ocumas as per Article 1141 of the Civil Code.18
WHEREFORE, the petition is GRANTED. The Decision of the
Court of Appeals dated January 25, 2006 and its Resolution
dated May 5, 2006 are hereby REVERSED and SET ASIDE.
The Decision of the Regional Trial Court is hereby
REINSTATED.
SO ORDERED.

FIRST DIVISION
G.R. No. L-29972 January 26, 1976
ROSARIO CARBONELL, petitioner,
vs.
HONORABLE COURT OF APPEALS, JOSE PONCIO,
EMMA INFANTE and RAMON INFANTE, respondents.
MAKASIAR, J.
Petitioner seeks a review of the resolution of the Court of
Appeals (Special Division of Five) dated October 30, 1968,
reversing its decision of November 2, 1967 (Fifth Division), and
its resolution of December 6, 1968 denying petitioner's motion
for reconsideration.
The dispositive part of the challenged resolution reads:
Wherefore, the motion for reconsideration filed on behalf of
appellee Emma Infante, is hereby granted and the decision of
November 2, 1967, is hereby annulled and set aside. Another
judgement shall be entered affirming in toto that of the court a
quo, dated January 20, 1965, which dismisses the plaintiff's
complaint and defendant's counterclaim.
Without costs.
The facts of the case as follows:
Prior to January 27, 1955, respondent Jose Poncio, a native of
the Batanes Islands, was the owner of the parcel of land herein
involve with improvements situated at 179 V. Agan St., San
Juan, Rizal, having an area of some one hundred ninety-five
(195) square meters, more or less, covered by TCT No. 5040
and subject to mortgage in favor of the Republic Savings Bank
for the sum of P1,500.00. Petitioner Rosario Carbonell, a
cousin and adjacent neighbor of respondent Poncio, and also
from the Batanes Islands, lived in the adjoining lot at 177 V.
Agan Street.
Both petitioners Rosario Carbonell and respondent Emma
Infante offered to buy the said lot from Poncio (Poncio's
Answer, p. 38, rec. on appeal).
Respondent Poncio, unable to keep up with the installments
due on the mortgage, approached petitioner one day and
offered to sell to the latter the said lot, excluding the house
wherein respondent lived. Petitioner accepted the offer and
proposed the price of P9.50 per square meter. Respondent
Poncio, after having secured the consent of his wife and
parents, accepted the price proposed by petitioner, on the
condition that from the purchase price would come the money
to be paid to the bank.
Petitioner and respondent Jose Poncio then went to the
Republic Savings Bank and secured the consent of the
President thereof for her to pay the arrears on the mortgage
and to continue the payment of the installments as they fall
due. The amount in arrears reached a total sum of P247.26.
But because respondent Poncio had previously told her that
the money, needed was only P200.00, only the latter amount
was brought by petitioner constraining respondent Jose Poncio
to withdraw the sum of P47.00 from his bank deposit with
Republic Savings Bank. But the next day, petitioner refunded
to Poncio the sum of P47.00.

On January 27, 1955, petitioner and respondent Poncio, in the

presence of a witness, made and executed a document in the
Batanes dialect, which, translated into English, reads:
CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM
JOSE PONCIO
Beginning today January 27, 1955, Jose Poncio can start living
on the lot sold by him to me, Rosario Carbonell, until after one
year during which time he will not pa anything. Then if after
said one can he could not find an place where to move his
house, he could still continue occupying the site but he should
pay a rent that man, be agreed.
(Sgd) JOSE PONCIO
(Sgd.) ROSARIO CARBONELL
(Sgd) CONSTANCIO MEONADA
Witness
(Pp. 6-7 rec. on appeal).
Thereafter, petitioner asked Atty. Salvador Reyes, also from
the Batanes Islands, to prepare the formal deed of sale, which
she brought to respondent Poncio together with the amount of
some P400.00, the balance she still had to pay in addition to
her assuming the mortgaged obligation to Republic Savings
Bank.
Upon arriving at respondent Jose Poncio's house, however,
the latter told petitioner that he could not proceed any more
with the sale, because he had already given the lot to
respondent Emma Infants; and that he could not withdraw from
his deal with respondent Mrs. Infante, even if he were to go to
jail. Petitioner then sought to contact respondent Mrs. Infante
but the latter refused to see her.
On February 5, 1955, petitioner saw Emma Infante erecting a
all around the lot with a gate.
Petitioner then consulted Atty. Jose Garcia, who advised her to
present an adverse claim over the land in question with the
Office of the Register of Deeds of Rizal. Atty. Garcia actually
sent a letter of inquiry to the Register of Deeds and demand
letters to private respondents Jose Poncio and Emma Infante.
In his answer to the complaint Poncio admitted "that on
January 30, 1955, Mrs. Infante improved her offer and he
agreed to sell the land and its improvements to her for
P3,535.00" (pp. 38-40, ROA).
In a private memorandum agreement dated January 31, 1955,
respondent Poncio indeed bound himself to sell to his
corespondent Emma Infante, the property for the sum of
P2,357.52, with respondent Emma Infante still assuming the
existing mortgage debt in favor of Republic Savings Bank in
the amount of P1,177.48. Emma Infante lives just behind the
houses of Poncio and Rosario Carbonell.
On February 2, 1955, respondent Jose Poncio executed the
formal deed of sale in favor of respondent Mrs. Infante in the
total sum of P3,554.00 and on the same date, the latter paid
Republic Savings Bank the mortgage indebtedness of
P1,500.00. The mortgage on the lot was eventually
discharged.
Informed that the sale in favor of respondent Emma Infante
had not yet been registered, Atty. Garcia prepared an adverse

claim for petitioner, who signed and swore to an registered the

same on February 8, 1955.
The deed of sale in favor of respondent Mrs. Infante was
registered only on February 12, 1955. As a consequence
thereof, a Transfer Certificate of Title was issued to her but
with the annotation of the adverse claim of petitioner Rosario
Carbonell.
Respondent Emma Infante took immediate possession of the
lot involved, covered the same with 500 cubic meters of garden
soil and built therein a wall and gate, spending the sum of
P1,500.00. She further contracted the services of an architect
to build a house; but the construction of the same started only
in 1959 years after the litigation actually began and during
its pendency. Respondent Mrs. Infante spent for the house the
total amount of P11,929.00.
On June 1, 1955, petitioner Rosario Carbonell, thru counsel,
filed a second amended complaint against private
respondents, praying that she be declared the lawful owner of
the questioned parcel of land; that the subsequent sale to
respondents Ramon R. Infante and Emma L. Infante be
declared null and void, and that respondent Jose Poncio be
ordered to execute the corresponding deed of conveyance of
said land in her favor and for damages and attorney's fees (pp.
1-7, rec. on appeal in the C.A.).
Respondents first moved to dismiss the complaint on the
ground, among others, that petitioner's claim is unenforceable
under the Statute of Frauds, the alleged sale in her favor not
being evidenced by a written document (pp. 7-13, rec. on
appeal in the C.A.); and when said motion was denied without
prejudice to passing on the question raised therein when the
case would be tried on the merits (p. 17, ROA in the C.A.),
respondents filed separate answers, reiterating the grounds of
their motion to dismiss (pp. 18-23, ROA in the C.A.).
During the trial, when petitioner started presenting evidence of
the sale of the land in question to her by respondent Poncio,
part of which evidence was the agreement written in the
Batanes dialect aforementioned, respondent Infantes objected
to the presentation by petitioner of parole evidence to prove
the alleged sale between her and respondent Poncio. In its
order of April 26, 1966, the trial court sustained the objection
and dismissed the complaint on the ground that the
memorandum presented by petitioner to prove said sale does
not satisfy the requirements of the law (pp. 31-35, ROA in the
C.A.).
From the above order of dismissal, petitioner appealed to the
Supreme Court (G.R. No. L-11231) which ruled in a decision
dated May 12, 1958, that the Statute of Frauds, being
applicable only to executory contracts, does not apply to the
alleged sale between petitioner and respondent Poncio, which
petitioner claimed to have been partially performed, so that
petitioner is entitled to establish by parole evidence "the truth
of this allegation, as well as the contract itself." The order
appealed from was thus reversed, and the case remanded to
the court a quo for further proceedings (pp. 26-49, ROA in the
C.A.).
After trial in the court a quo; a decision was, rendered on
December 5, 1962, declaring the second sale by respondent
Jose Poncio to his co-respondents Ramon Infante and Emma
Infante of the land in question null and void and ordering

respondent Poncio to execute the proper deed of conveyance

of said land in favor of petitioner after compliance by the latter
of her covenants under her agreement with respondent Poncio
(pp. 5056, ROA in the C.A.).
On January 23, 1963, respondent Infantes, through another
counsel, filed a motion for re-trial to adduce evidence for the
proper implementation of the court's decision in case it would
be affirmed on appeal (pp. 56-60, ROA in the C.A.), which
motion was opposed by petitioner for being premature (pp. 6164, ROA in the C.A.). Before their motion for re-trial could be
resolved, respondent Infantes, this time through their former
counsel, filed another motion for new trial, claiming that the
decision of the trial court is contrary to the evidence and the
law (pp. 64-78, ROA in the C.A.), which motion was also
opposed by petitioner (pp. 78-89, ROA in the C.A.).
The trial court granted a new trial (pp. 89-90, ROA in the C.A.),
at which re-hearing only the respondents introduced additional
evidence consisting principally of the cost of improvements
they introduced on the land in question (p. 9, ROA in the C.A.).
After the re-hearing, the trial court rendered a decision,
reversing its decision of December 5, 1962 on the ground that
the claim of the respondents was superior to the claim of
petitioner, and dismissing the complaint (pp. 91-95, ROA in the
C.A.), From this decision, petitioner Rosario Carbonell
appealed to the respondent Court of Appeals (p. 96, ROA in
the C.A.).
On November 2, 1967, the Court of Appeals (Fifth Division
composed of Justices Magno Gatmaitan, Salvador V. Esguerra
and Angle H. Mojica, speaking through Justice Magno
Gatmaitan), rendered judgment reversing the decision of the
trial court, declaring petitioner therein, to have a superior right
to the land in question, and condemning the defendant Infantes
to reconvey to petitioner after her reimbursement to them of
the sum of P3,000.00 plus legal interest, the land in question
and all its improvements (Appendix "A" of Petition).
Respondent Infantes sought reconsideration of said decision
and acting on the motion for reconsideration, the Appellate
Court, three Justices (Villamor, Esguerra and Nolasco) of
Special Division of Five, granted said motion, annulled and set
aside its decision of November 2, 1967, and entered another
judgment affirming in toto the decision of the court a quo, with
Justices Gatmaitan and Rodriguez dissenting (Appendix "B" of
Petition).
Petitioner Rosario Carbonell moved to reconsider the
Resolution of the Special Division of Five, which motion was
denied by Minute Resolution of December 6, 1968 (but with
Justices Rodriguez and Gatmaitan voting for reconsideration)
[Appendix "C" of Petition].
Hence, this appeal by certiorari.
Article 1544, New Civil Code, which is decisive of this case,
recites:
If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have
first taken possession thereof in good faith, if it should movable
property.

Should it be immovable property, the ownership shall belong to

the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription, the ownership shall pertain to
the person who in good faith was first in the possession; and,
in the absence thereof, to the person who presents the oldest
title, provided there is good faith (emphasis supplied).
It is essential that the buyer of realty must act in good faith in
registering his deed of sale to merit the protection of the
second paragraph of said Article 1544.
Unlike the first and third paragraphs of said Article 1544, which
accord preference to the one who first takes possession in
good faith of personal or real property, the second paragraph
directs that ownership of immovable property should be
recognized in favor of one "who in good faith first recorded" his
right. Under the first and third paragraph, good faith must
characterize the act of anterior registration (DBP vs.
Mangawang, et al., 11 SCRA 405; Soriano, et al. vs. Magale,
et al., 8 SCRA 489).
If there is no inscription, what is decisive is prior possession in
good faith. If there is inscription, as in the case at bar, prior
registration in good faith is a pre-condition to superior title.
When Carbonell bought the lot from Poncio on January 27,
1955, she was the only buyer thereof and the title of Poncio
was still in his name solely encumbered by bank mortgage duly
annotated thereon. Carbonell was not aware and she could
not have been aware of any sale of Infante as there was no
such sale to Infante then. Hence, Carbonell's prior purchase of
the land was made in good faith. Her good faith subsisted and
continued to exist when she recorded her adverse claim four
(4) days prior to the registration of Infantes's deed of sale.
Carbonell's good faith did not cease after Poncio told her on
January 31, 1955 of his second sale of the same lot to Infante.
Because of that information, Carbonell wanted an audience
with Infante, which desire underscores Carbonell's good faith.
With an aristocratic disdain unworthy of the good breeding of a
good Christian and good neighbor, Infante snubbed Carbonell
like a leper and refused to see her. So Carbonell did the next
best thing to protect her right she registered her adversed
claim on February 8, 1955. Under the circumstances, this
recording of her adverse claim should be deemed to have
been done in good faith and should emphasize Infante's bad
faith when she registered her deed of sale four (4) days later
on February 12, 1955.
Bad faith arising from previous knowledge by Infante of the
prior sale to Carbonell is shown by the following facts, the vital
significance and evidenciary effect of which the respondent
Court of Appeals either overlooked of failed to appreciate:
(1) Mrs. Infante refused to see Carbonell, who wanted to see
Infante after she was informed by Poncio that he sold the lot to
Infante but several days before Infante registered her deed of
sale. This indicates that Infante knew from Poncio and from
the bank of the prior sale of the lot by Poncio to Carbonell.
Ordinarily, one will not refuse to see a neighbor. Infante lives
just behind the house of Carbonell. Her refusal to talk to
Carbonell could only mean that she did not want to listen to
Carbonell's story that she (Carbonell) had previously bought
the lot from Poncio.

(2) Carbonell was already in possession of the mortgage

passbook [not Poncio's saving deposit passbook Exhibit "1"
Infantes] and Poncio's copy of the mortgage contract, when
Poncio sold the lot Carbonell who, after paying the arrearages
of Poncio, assumed the balance of his mortgaged
indebtedness to the bank, which in the normal course of
business must have necessarily informed Infante about the
said assumption by Carbonell of the mortgage indebtedness of
Poncio. Before or upon paying in full the mortgage
indebtedness of Poncio to the Bank. Infante naturally must
have demanded from Poncio the delivery to her of his
mortgage passbook as well as Poncio's mortgage contract so
that the fact of full payment of his bank mortgage will be
entered therein; and Poncio, as well as the bank, must have
inevitably informed her that said mortgage passbook could not
be given to her because it was already delivered to Carbonell.
If Poncio was still in possession of the mortgage passbook and
his copy of the mortgage contract at the time he executed a
deed of sale in favor of the Infantes and when the Infantes
redeemed his mortgage indebtedness from the bank, Poncio
would have surrendered his mortgage passbook and his copy
of the mortgage contract to the Infantes, who could have
presented the same as exhibits during the trial, in much the
same way that the Infantes were able to present as evidence
Exhibit "1" Infantes, Poncio's savings deposit passbook, of
which Poncio necessarily remained in possession as the said
deposit passbook was never involved in the contract of sale
with assumption of mortgage. Said savings deposit passbook
merely proves that Poncio had to withdraw P47.26, which
amount was tided to the sum of P200.00 paid by Carbonell for
Poncio's amortization arrearages in favor of the bank on
January 27, 1955; because Carbonell on that day brought with
her only P200.00, as Poncio told her that was the amount of
his arrearages to the bank. But the next day Carbonell
refunded to Poncio the sum of P47.26.
(3) The fact that Poncio was no longer in possession of his
mortgage passbook and that the said mortgage passbook was
already in possession of Carbonell, should have compelled
Infante to inquire from Poncio why he was no longer in
possession of the mortgage passbook and from Carbonell why
she was in possession of the same (Paglago, et. al vs. Jara et
al 22 SCRA 1247, 1252-1253). The only plausible and logical
reason why Infante did not bother anymore to make such injury
, w because in the ordinary course of business the bank must
have told her that Poncio already sold the lot to Carbonell who
thereby assumed the mortgage indebtedness of Poncio and to
whom Poncio delivered his mortgage passbook. Hoping to give
a semblance of truth to her pretended good faith, Infante
snubbed Carbonell's request to talk to her about the prior sale
to her b Poncio of the lot. As aforestated, this is not the attitude
expected of a good neighbor imbued with Christian charity and
good will as well as a clear conscience.
(4) Carbonell registered on February 8, 1955 her adverse
claim, which was accordingly annotated on Poncio's title, four
[4] days before Infante registered on February 12, 1955 her
deed of sale executed on February 2, 1955. Here she was
again on notice of the prior sale to Carbonell. Such registration
of adverse claim is valid and effective (Jovellanos vs.
Dimalanta, L-11736-37, Jan. 30, 1959, 105 Phil. 1250-51).
(5) In his answer to the complaint filed by Poncio, as defendant
in the Court of First Instance, he alleged that both Mrs. Infante

and Mrs. Carbonell offered to buy the lot at P15.00 per square
meter, which offers he rejected as he believed that his lot is
worth at least P20.00 per square meter. It is therefore logical to
presume that Infante was told by Poncio and consequently
knew of the offer of Carbonell which fact likewise should have
put her on her guard and should have compelled her to inquire
from Poncio whether or not he had already sold the property to
Carbonell.
As recounted by Chief Justice Roberto Concepcion, then
Associate Justice, in the preceding case of Rosario Carbonell
vs. Jose Poncio, Ramon Infante and Emma Infante (1-11231,
May 12, 1958), Poncio alleged in his answer:
... that he had consistently turned down several offers, made
by plaintiff, to buy the land in question, at P15 a square meter,
for he believes that it is worth not less than P20 a square
meter; that Mrs. Infante, likewise, tried to buy the land at P15 a
square meter; that, on or about January 27, 1955, Poncio was
advised by plaintiff that should she decide to buy the property
at P20 a square meter, she would allow him to remain in the
property for one year; that plaintiff then induced Poncio to sign
a document, copy of which if probably the one appended to the
second amended complaint; that Poncio signed it 'relying upon
the statement of the plaintiff that the document was a permit for
him to remain in the premises in the event defendant decided
to sell the property to the plaintiff at P20.00 a square meter';
that on January 30, 1955, Mrs. Infante improved her offer and
agreed to sell the land and its improvement to her for
P3,535.00; that Poncio has not lost 'his mind,' to sell his
property, worth at least P4,000, for the paltry sum P1,177.48,
the amount of his obligation to the Republic Saving s Bank;
and that plaintiff's action is barred by the Statute of Frauds. ...
(pp. 38-40, ROA, emphasis supplied).
II
EXISTENCE OF THE PRIOR SALE TO CARBONELL
DULY ESTABLISHED
(1) In his order dated April 26, 1956 dismissing the complaint
on the ground that the private document Exhibit "A" executed
by Poncio and Carbonell and witnessed by Constancio
Meonada captioned "Contract for One-half Lot which I Bought
from Jose Poncio," was not such a memorandum in writing
within the purview of the Statute of Frauds, the trial judge
himself recognized the fact of the prior sale to Carbonell when
he stated that "the memorandum in question merely states that
Poncio is allowed to stay in the property which he had sold to
the plaintiff. There is no mention of the reconsideration, a
description of the property and such other essential elements
of the contract of sale. There is nothing in the memorandum
which would tend to show even in the slightest manner that it
was intended to be an evidence of contract sale. On the
contrary, from the terms of the memorandum, it tends to show
that the sale of the property in favor of the plaintiff is already an
accomplished act. By the very contents of the memorandum
itself, it cannot therefore, be considered to be the
memorandum which would show that a sale has been made by
Poncio in favor of the plaintiff" (p. 33, ROA, emphasis
supplied). As found by the trial court, to repeat the said
memorandum states "that Poncio is allowed to stay in the
property which he had sold to the plaintiff ..., it tends to show
that the sale of the property in favor of the plaintiff is already an
accomplished act..."

(2) When the said order was appealed to the Supreme Court
by Carbonell in the previous case of Rosario Carbonell vs.
Jose Poncio, Ramon Infante and Emma Infante
(L-11231, supra), Chief Justice Roberto Concepcion, then
Associate Justice, speaking for a unanimous Court, reversed
the aforesaid order of the trial court dismissing the complaint,
holding that because the complaint alleges and the plaintiff
claims that the contract of sale was partly performed, the same
is removed from the application of the Statute of Frauds and
Carbonell should be allowed to establish by parol evidence the
truth of her allegation of partial performance of the contract of
sale, and further stated:
Apart from the foregoing, there are in the case at bar several
circumstances indicating that plaintiff's claim might not be
entirely devoid of factual basis. Thus, for instance, Poncio
admitted in his answer that plaintiff had offered several times to
purchase his land.
Again, there is Exhibit A, a document signed by the defendant.
It is in the Batanes dialect, which, according to plaintiff's
uncontradicted evidence, is the one spoken by Poncio, he
being a native of said region. Exhibit A states that Poncio
would stay in the land sold by him to plaintiff for one year, from
January 27, 1955, free of charge, and that, if he cannot find a
place where to transfer his house thereon, he may remain
upon. Incidentally, the allegation in Poncio's answer to the
effect that he signed Exhibit A under the belief that it "was a
permit for him to remain in the premises in the" that "he
decided to sell the property" to the plaintiff at P20 a sq. m." is,
on its face, somewhat difficult to believe. Indeed, if he had not
decided as yet to sell the land to plaintiff, who had never
increased her offer of P15 a square meter, there was no
reason for Poncio to get said permit from her. Upon the other
hand, if plaintiff intended to mislead Poncio, she would have
caused Exhibit A to be drafted, probably, in English , instead of
taking the trouble of seeing to it that it was written precisely in
his native dialect, the Batanes. Moreover, Poncio's signature
on Exhibit A suggests that he is neither illiterate nor so ignorant
as to sign document without reading its contents, apart from
the fact that Meonada had read Exhibit A to him and given him
a copy thereof, before he signed thereon, according to
Meonada's uncontradicted testimony.
Then, also, defendants say in their brief:
The only allegation in plaintiff's complaint that bears any
relation to her claim that there has been partial performance of
the supposed contract of sale, is the notation of the sum of
P247.26 in the bank book of defendant Jose Poncio. The
noting or jotting down of the sum of P247.26 in the bank book
of Jose Poncio does not prove the fact that the said amount
was the purchase price of the property in question. For all we
knew, the sum of P247.26 which plaintiff claims to have paid to
the Republic Savings Bank for the account of the defendant,
assuming that the money paid to the Republic Savings Bank
came from the plaintiff, was the result of some usurious loan or
accomodation, rather than earnest money or part payment of
the land. Neither is it competent or satisfactory evidence to
prove the conveyance of the land in question the fact that the
bank book account of Jose Poncio happens to be in the
possession of the plaintiff. (Defendants-Appellees' brief, pp.
25-26).

How shall We know why Poncio's bank deposit book is in

plaintiffs possession, or whether there is any relation between
the P247.26 entry therein and the partial payment of P247.26
allegedly made by plaintiff to Poncio on account of the price of
his land, if we do not allow the plaintiff to explain it on the
witness stand? Without expressing any opinion on the merits of
plaintiff's claim, it is clear, therefore, that she is entitled , legally
as well as from the viewpoint of equity, to an opportunity to
introduce parol evidence in support of the allegations of her
second amended complaint. (pp. 46-49, ROA, emphasis
supplied).
(3) In his first decision of December 5, 1962 declaring null and
void the sale in favor of the Infantes and ordering Poncio to
execute a deed of conveyance in favor of Carbonell, the trial
judge found:
... A careful consideration of the contents of Exh. 'A' show to
the satisfaction of the court that the sale of the parcel of land in
question by the defendant Poncio in favor of the plaintiff was
covered therein and that the said Exh. "a' was also executed to
allow the defendant to continue staying in the premises for the
stated period. It will be noted that Exh. 'A' refers to a lot 'sold
by him to me' and having been written originally in a dialect
well understood by the defendant Poncio, he signed the said
Exh. 'A' with a full knowledge and consciousness of the terms
and consequences thereof. This therefore, corroborates the
testimony of the plaintiff Carbonell that the sale of the land was
made by Poncio. It is further pointed out that there was a
partial performance of the verbal sale executed by Poncio in
favor of the plaintiff, when the latter paid P247.26 to the
Republic Savings Bank on account of Poncio's mortgage
indebtedness. Finally, the possession by the plaintiff of the
defendant Poncio's passbook of the Republic Savings Bank
also adds credibility to her testimony. The defendant contends
on the other hand that the testimony of the plaintiff, as well as
her witnesses, regarding the sale of the land made by Poncio
in favor of the plaintiff is inadmissible under the provision of the
Statute of Fraud based on the argument that the note Exh. "A"
is not the note or memorandum referred to in the to in the
Statute of Fraud. The defendants argue that Exh. "A" fails to
comply with the requirements of the Statute of Fraud to qualify
it as the note or memorandum referred to therein and open the
way for the presentation of parole evidence to prove the fact
contained in the note or memorandum. The defendant argues
that there is even no description of the lot referred to in the
note, especially when the note refers to only one half lot. With
respect to the latter argument of the Exhibit 'A', the court has
arrived at the conclusion that there is a sufficient description of
the lot referred to in Exh. 'A' as none other than the parcel of
land occupied by the defendant Poncio and where he has his
improvements erected. The Identity of the parcel of land
involved herein is sufficiently established by the contents of the
note Exh. "A". For a while, this court had that similar
impression but after a more and thorough consideration of the
context in Exh. 'A' and for the reasons stated above, the Court
has arrived at the conclusion stated earlier (pp. 52-54, ROA,
emphasis supplied).
(4) After re-trial on motion of the Infantes, the trial Judge
rendered on January 20, 1965 another decision dismissing the
complaint, although he found
1. That on January 27, 1955, the plaintiff purchased from the
defendant Poncio a parcel of land with an area of 195 square

meters, more or less, covered by TCT No. 5040 of the

Province of Rizal, located at San Juan del Monte, Rizal, for the
price of P6.50 per square meter;
2. That the purchase made by the plaintiff was not reduced to
writing except for a short note or memorandum Exh. A, which
also recited that the defendant Poncio would be allowed to
continue his stay in the premises, among other things, ... (pp.
91-92, ROA, emphasis supplied).
From such factual findings, the trial Judge confirms the due
execution of Exhibit "A", only that his legal conclusion is that it
is not sufficient to transfer ownership (pp. 93-94, ROA).
(5) In the first decision of November 2, 1967 of the Fifth
Division of the Court of Appeals composed of Justices
Esguerra (now Associate Justice of the Supreme Court),
Gatmaitan and Mojica, penned by Justice Gatmaitan, the Court
of Appeals found that:
... the testimony of Rosario Carbonell not having at all been
attempted to be disproved by defendants, particularly Jose
Poncio, and corroborated as it is by the private document in
Batanes dialect, Exhibit A, the testimony being to the effect
that between herself and Jose there had been celebrated a
sale of the property excluding the house for the price of P9.50
per square meter, so much so that on faith of that, Rosario had
advanced the sum of P247.26 and binding herself to pay unto
Jose the balance of the purchase price after deducting the
indebtedness to the Bank and since the wording of Exhibit A,
the private document goes so far as to describe their
transaction as one of sale, already consummated between
them, note the part tense used in the phrase, "the lot sold by
him to me" and going so far even as to state that from that day
onwards, vendor would continue to live therein, for one year,
'during which time he will not pay anything' this can only mean
that between Rosario and Jose, there had been a true contract
of sale, consummated by delivery constitutum possession, Art.
1500, New Civil Code; vendor's possession having become
converted from then on, as a mere tenant of vendee, with the
special privilege of not paying rental for one year, it is true
that the sale by Jose Poncio to Rosario Carbonell corroborated
documentarily only by Exhibit A could not have been registered
at all, but it was a valid contract nonetheless, since under our
law, a contract sale is consensual, perfected by mere consent,
Couto v. Cortes, 8 Phil 459, so much so that under the New
Civil Code, while a sale of an immovable is ordered to be
reduced to a public document, Art. 1358, that mandate does
not render an oral sale of realty invalid, but merely incapable of
proof, where still executory and action is brought and resisted
for its performance, 1403, par. 2, 3; but where already wholly
or partly executed or where even if not yet, it is evidenced by a
memorandum, in any case where evidence to further
demonstrate is presented and admitted as the case was here,
then the oral sale becomes perfectly good, and becomes a
good cause of action not only to reduce it to the form of a
public document, but even to enforce the contract in its
entirety, Art. 1357; and thus it is that what we now have is a
case wherein on the one hand Rosario Carbonell has proved
that she had an anterior sale, celebrated in her favor on 27
January, 1955, Exhibit A, annotated as an adverse claim on 8
February, 1955, and on other, a sale is due form in favor of
Emma L. Infante on 2 February, 1955, Exhibit 3-Infante, and
registered in due form with title unto her issued on 12
February, 1955; the vital question must now come on which of

these two sales should prevail; ... (pp. 74-76, rec., emphasis
supplied).
(6) In the resolution dated October 30, 1968 penned by then
Court of Appeals Justice Esguerra (now a member of this
Court), concurred in by Justices Villamor and Nolasco,
constituting the majority of a Special Division of Five, the Court
of Appeals, upon motion of the Infantes, while reversing the
decision of November 2, 1967 and affirming the decision of the
trial court of January 20, 1965 dismissing plaintiff's complaint,
admitted the existence and genuineness of Exhibit "A", the
private memorandum dated January 27, 1955, although it did
not consider the same as satisfying "the essential elements of
a contract of sale," because it "neither specifically describes
the property and its boundaries, nor mention its certificate of
title number, nor states the price certain to be paid, or contrary
to the express mandate of Articles 1458 and 1475 of the Civil
Code.
(7) In his dissent concurred in by Justice Rodriguez, Justice
Gatmaitan maintains his decision of November 2, 1967 as well
as his findings of facts therein, and reiterated that the private
memorandum Exhibit "A", is a perfected sale, as a sale is
consensual and consummated by mere consent, and is binding
on and effective between the parties. This statement of the
principle is correct [pp. 89-92, rec.].
III
ADEQUATE CONSIDERATION OR PRICE FOR THE SALE
IN FAVOR OF CARBONELL
It should be emphasized that the mortgage on the lot was
about to be foreclosed by the bank for failure on the part of
Poncio to pay the amortizations thereon. To forestall the
foreclosure and at the same time to realize some money from
his mortgaged lot, Poncio agreed to sell the same to Carbonell
at P9.50 per square meter, on condition that Carbonell [1]
should pay (a) the amount of P400.00 to Poncio and 9b) the
arrears in the amount of P247.26 to the bank; and [2] should
assume his mortgage indebtedness. The bank president
agreed to the said sale with assumption of mortgage in favor of
Carbonell an Carbonell accordingly paid the arrears of
P247.26. On January 27, 1955, she paid the amount of
P200.00 to the bank because that was the amount that Poncio
told her as his arrearages and Poncio advanced the sum of
P47.26, which amount was refunded to him by Carbonell the
following day. This conveyance was confirmed that same day,
January 27, 1955, by the private document, Exhibit "A", which
was prepared in the Batanes dialect by the witness Constancio
Meonada, who is also from Batanes like Poncio and Carbonell.
The sale did not include Poncio's house on the lot. And Poncio
was given the right to continue staying on the land without
paying any rental for one year, after which he should pay rent if
he could not still find a place to transfer his house. All these
terms are part of the consideration of the sale to Carbonell.
It is evident therefore that there was ample consideration, and
not merely the sum of P200.00, for the sale of Poncio to
Carbonell of the lot in question.
But Poncio, induced by the higher price offered to him by
Infante, reneged on his commitment to Carbonell and told
Carbonell, who confronted him about it, that he would not
withdraw from his deal with Infante even if he is sent to jail The

victim, therefore, "of injustice and outrage is the widow

Carbonell and not the Infantes, who without moral compunction
exploited the greed and treacherous nature of Poncio, who, for
love of money and without remorse of conscience, dishonored
his own plighted word to Carbonell, his own cousin.
Inevitably evident therefore from the foregoing discussion, is
the bad faith of Emma Infante from the time she enticed Poncio
to dishonor his contract with Carbonell, and instead to sell the
lot to her (Infante) by offering Poncio a much higher price than
the price for which he sold the same to Carbonell. Being guilty
of bad faith, both in taking physical possession of the lot and in
recording their deed of sale, the Infantes cannot recover the
value of the improvements they introduced in the lot. And after
the filing by Carbonell of the complaint in June, 1955, the
Infantes had less justification to erect a building thereon since
their title to said lot is seriously disputed by Carbonell on the
basis of a prior sale to her.
With respect to the claim of Poncio that he signed the
document Exhibit "A" under the belief that it was a permit for
him to remain in the premises in ease he decides to sell the
property to Carbonell at P20.00 per square meter, the
observation of the Supreme Court through Mr. Chief Justice
Concepcion in G.R. No. L-11231, supra, bears repeating:
... Incidentally, the allegation in Poncio's answer to the effect
that he signed Exhibit A under the belief that it 'was a permit for
him to remain in the premises in the event that 'he decided to
sell the property' to the plaintiff at P20.00 a sq. m is, on its
face, somewhat difficult to believe. Indeed, if he had not
decided as yet to sell that land to plaintiff, who had never
increased her offer of P15 a square meter, there as no reason
for Poncio to get said permit from her. Upon the they if plaintiff
intended to mislead Poncio, she would have Exhibit A to be
drafted, probably, in English, instead of taking the trouble of
seeing to it that it was written precisely in his native dialect, the
Batanes. Moreover, Poncio's signature on Exhibit A suggests
that he is neither illiterate nor so ignorant as to sign a
document without reading its contents, apart from the fact that
Meonada had read Exhibit A to him-and given him a copy
thereof, before he signed thereon, according to Meonada's
uncontradicted testimony. (pp. 46-47, ROA).
As stressed by Justice Gatmaitan in his first decision of
November 2, 1965, which he reiterated in his dissent from the
resolution of the majority of the Special Division. of Five on
October 30, 1968, Exhibit A, the private document in the
Batanes dialect, is a valid contract of sale between the parties,
since sale is a consensual contract and is perfected by mere
consent (Couto vs. Cortes, 8 Phil. 459). Even an oral contract
of realty is all between the parties and accords to the vendee
the right to compel the vendor to execute the proper public
document As a matter of fact, Exhibit A, while merely a private
document, can be fully or partially performed, to it from the
operation of the statute of frauds. Being a all consensual
contract, Exhibit A effectively transferred the possession of the
lot to the vendee Carbonell by constitutum possessorium
(Article 1500, New Civil Code); because thereunder the vendor
Poncio continued to retain physical possession of the lot as
tenant of the vendee and no longer as knew thereof. More than
just the signing of Exhibit A by Poncio and Carbonell with
Constancio Meonada as witness to fact the contract of sale,
the transition was further confirmed when Poncio agreed to the
actual payment by at Carbonell of his mortgage arrearages to

the bank on January 27, 1955 and by his consequent delivery

of his own mortgage passbook to Carbonell. If he remained
owner and mortgagor, Poncio would not have surrendered his
mortgage passbook to' Carbonell.
IV
IDENTIFICATION AND DESCRIPTION OF THE DISPUTED
LOT IN THE MEMORANDUM EXHIBIT "A"
The claim that the memorandum Exhibit "A" does not
sufficiently describe the disputed lot as the subject matter of
the sale, was correctly disposed of in the first decision of the
trial court of December 5, 1962, thus: "The defendant argues
that there is even no description of the lot referred to in the
note (or memorandum), especially when the note refers to only
one-half lot. With respect to the latter argument of the
defendant, plaintiff points out that one- half lot was mentioned
in Exhibit 'A' because the original description carried in the title
states that it was formerly part of a bigger lot and only
segregated later. The explanation is tenable, in (sic)
considering the time value of the contents of Exh. 'A', the court
has arrived at the conclusion that there is sufficient description
of the lot referred to in Exh. As none other than the parcel of lot
occupied by the defendant Poncio and where he has his
improvements erected. The Identity of the parcel of land
involved herein is sufficiently established by the contents of the
note Exh. 'A'. For a while, this court had that similar impression
but after a more and through consideration of the context in
Exh. 'A' and for the reasons stated above, the court has arrived
to (sic) the conclusion stated earlier" (pp. 53-54, ROA).
Moreover, it is not shown that Poncio owns another parcel with
the same area, adjacent to the lot of his cousin Carbonell and
likewise mortgaged by him to the Republic Savings Bank. The
transaction therefore between Poncio and Carbonell can only
refer and does refer to the lot involved herein. If Poncio had
another lot to remove his house, Exhibit A would not have
stipulated to allow him to stay in the sold lot without paying any
rent for one year and thereafter to pay rental in case he cannot
find another place to transfer his house.
While petitioner Carbonell has the superior title to the lot, she
must however refund to respondents Infantes the amount of
P1,500.00, which the Infantes paid to the Republic Savings
Bank to redeem the mortgage.
It appearing that the Infantes are possessors in bad faith, their
rights to the improvements they introduced op the disputed lot
are governed by Articles 546 and 547 of the New Civil Code.
Their expenses consisting of P1,500.00 for draining the
property, filling it with 500 cubic meters of garden soil, building
a wall around it and installing a gate and P11,929.00 for
erecting a b ' bungalow thereon, are useful expenditures, for
they add to the value of the property (Aringo vs. Arenas, 14
Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia vs. Ayala
de Roxas, 13 Phil. 45).
Under the second paragraph of Article 546, the possessor in
good faith can retain the useful improvements unless the
person who defeated him in his possession refunds him the
amount of such useful expenses or pay him the increased
value the land may have acquired by reason thereof. Under
Article 547, the possessor in good faith has also the right to
remove the useful improvements if such removal can be done
without damage to the land, unless the person with the

superior right elects to pay for the useful improvements or

reimburse the expenses therefor under paragraph 2 of Article
546. These provisions seem to imply that the possessor in bad
faith has neither the right of retention of useful improvements
nor the right to a refund for useful expenses.
But, if the lawful possessor can retain the improvements
introduced by the possessor in bad faith for pure luxury or
mere pleasure only by paying the value thereof at the time he
enters into possession (Article 549 NCC), as a matter of equity,
the Infantes, although possessors in bad faith, should be
allowed to remove the aforesaid improvements, unless
petitioner Carbonell chooses to pay for their value at the time
the Infantes introduced said useful improvements in 1955 and
1959. The Infantes cannot claim reimbursement for the current
value of the said useful improvements; because they have
been enjoying such improvements for about two decades
without paying any rent on the land and during which period
herein petitioner Carbonell was deprived of its possession and
use.
WHEREFORE, THE DECISION OF THE SPECIAL DIVISION
OF FIVE OF THE COURT OF APPEALS OF OCTOBER 30,
1968 IS HEREBY REVERSED; PETITIONER ROSARIO
CARBONELL IS HEREBY DECLARED TO HAVE THE
SUPERIOR RIGHT TO THE LAND IN QUESTION AND IS
HEREBY DIRECTED TO REIMBURSE TO PRIVATE
RESPONDENTS INFANTES THE SUM OF ONE THOUSAND
FIVE HUNDRED PESOS (P1,500.00) WITHIN THREE (3)
MONTHS FROM THE FINALITY OF THIS DECISION; AND
THE REGISTER OF DEEDS OF RIZAL IS HEREBY
DIRECTED TO CANCEL TRANSFER CERTIFICATE OF
TITLE NO. 37842 ISSUED IN FAVOR OF PRIVATE
RESPONDENTS INFANTES COVERING THE DISPUTED
LOT, WHICH CANCELLED TRANSFER CERTIFICATE OF
TITLE NO. 5040 IN THE NAME OF JOSE PONCIO, AND TO
ISSUE A NEW TRANSFER CERTIFICATE OF TITLE IN
FAVOR OF PETITIONER ROSARIO CARBONELL UPON
PRESENTATION OF PROOF OF PAYMENT BY HER TO
THE INFANTES OF THE AFORESAID AMOUNT OF ONE
THOUSAND FIVE HUNDRED PESOS (P1,500.00).
PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR
AFOREMENTIONED USEFUL IMPROVEMENTS FROM THE
LOT WITHIN THREE (3) MONTHS FROM THE FINALITY OF
THIS DECISION, UNLESS THE PETITIONER ROSARIO
CARBONELL ELECTS TO ACQUIRE THE SAME AND PAYS
THE INFANTES THE AMOUNT OF THIRTEEN THOUSAND
FOUR HUNDRED TWENTY-NINE PESOS (P13,429.00)
WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS
DECISION. SHOULD PETITIONER CARBONELL FAIL TO
PAY THE SAID AMOUNT WITHIN THE AFORESTATED
PERIOD OF THREE (3) MONTHS FROM THE FINALITY OF
THIS DECISION, THE PERIOD OF THREE (3) MONTHS
WITHIN WHICH THE RESPONDENTS INFANTES MAY
REMOVE THEIR AFOREMENTIONED USEFUL
IMPROVEMENTS SHALL COMMENCE FROM THE
EXPIRATION OF THE THREE (3) MONTHS GIVEN
PETITIONER CARBONELL TO PAY FOR THE SAID USEFUL
IMPROVEMENTS.
WITH COSTS AGAINST PRIVATE RESPONDENTS.

SECOND DIVISION
G.R. No. 193787

April 7, 2014

SPOUSES JOSE C. ROQUE AND BEATRIZ DELA CRUZ

ROQUE, with deceased Jose C. Roque represented by his
substitute heir JOVETTE ROQUE-LIBREA, Petitioners,
vs.
MA. PAMELA P. AGUADO, FRUCTUOSO C. SABUG, JR.,
NATIONAL COUNCIL OF CHURCHES IN THE PHILIPPINES
(NCCP), represented by its Secretary General SHARON
ROSE JOY RUIZ-DUREMDES, LAND BANK OF THE
PHILIPPINES (LBP), represented by Branch Manager
EVELYN M. MONTERO, ATTY. MARIO S.P. DIAZ, in his
Official Capacity as Register of Deeds for Rizal, Morong
Branch, and CECILIO U. PULAN, in his Official Capacity as
Sheriff, Office of the Clerk of Court, Regional Trial Court,
Binangonan, Rizal, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the
Decision2 dated May 12, 2010 and the Resolution3 dated
September 15, 2010 of the Court of Appeals (CA) in CA G.R.
CV No. 92113 which affirmed the Decision4 dated July 8, 2008
of the Regional Trial Court of Binangonan, Rizal, Branch 69
(RTC) that dismissed Civil Case Nos. 03-022 and 05-003 for
reconveyance, annulment of sale, deed of real estate
mortgage, foreclosure and certificate of sale, and damages.
The Facts
The property subject of this case is a parcel of land with an
area of 20,862 square meters (sq. m.), located in Sitio Tagpos,
Barangay Tayuman, Binangonan, Rizal, known as Lot 18089.5
On July 21, 1977, petitioners-spouses Jose C. Roque and
Beatriz dela Cruz Roque (Sps. Roque) and the original owners
of the then unregistered Lot 18089 namely, Velia R. Rivero
(Rivero), Magdalena Aguilar, Angela Gonzales, Herminia R.
Bernardo, Antonio Rivero, Araceli R. Victa, Leonor R. Topacio,
and Augusto Rivero (Rivero, et al.) executed a Deed of
Conditional Sale of Real Property6 (1977 Deed of Conditional
Sale) over a 1,231-sq. m. portion of Lot 18089 (subject portion)
for a consideration of P30,775.00. The parties agreed that Sps.
Roque shall make an initial payment of P15,387.50 upon
signing, while the remaining balance of the purchase price
shall be payable upon the registration of Lot 18089, as well as
the segregation and the concomitant issuance of a separate
title over the subject portion in their names. After the deeds
execution, Sps. Roque took possession and introduced
improvements on the subject portion which they utilized as a
balut factory.7
On August 12, 1991, Fructuoso Sabug, Jr. (Sabug, Jr.), former
Treasurer of the National Council of Churches in the
Philippines (NCCP), applied for a free patent over the entire
Lot 18089 and was eventually issued Original Certificate of
Title (OCT) No. M-59558 in his name on October 21, 1991. On
June 24, 1993, Sabug, Jr. and Rivero, in her personal capacity
and in representation of Rivero, et al., executed a Joint
Affidavit9 (1993 Joint Affidavit), acknowledging that the subject
portion belongs to Sps. Roque and expressed their willingness
to segregate the same from the entire area of Lot 18089.

On December 8, 1999, however, Sabug, Jr., through a Deed of

Absolute Sale10 (1999 Deed of Absolute Sale), sold Lot 18089
to one Ma. Pamela P. Aguado (Aguado) for P2,500,000.00,
who, in turn, caused the cancellation of OCT No. M-5955 and
the issuance of Transfer Certificate of Title (TCT) No. M-96692
dated December 17, 199911 in her name.
Thereafter, Aguado obtained an P8,000,000.00 loan from the
Land Bank of the Philippines (Land Bank) secured by a
mortgage over Lot 18089.12 When she failed to pay her loan
obligation, Land Bank commenced extra-judicial foreclosure
proceedings and eventually tendered the highest bid in the
auction sale. Upon Aguados failure to redeem the subject
property, Land Bank consolidated its ownership, and TCT No.
M-11589513 was issued in its name on July 21, 2003.14
On June 16, 2003, Sps. Roque filed a complaint15 for
reconveyance, annulment of sale, deed of real estate
mortgage, foreclosure, and certificate of sale, and damages
before the RTC, docketed as Civil Case No. 03-022, against
Aguado, Sabug, Jr., NCCP, Land Bank, the Register of Deeds
of Morong, Rizal, and Sheriff Cecilio U. Pulan, seeking to be
declared as the true owners of the subject portion which had
been erroneously included in the sale between Aguado and
Sabug, Jr., and, subsequently, the mortgage to Land Bank,
both covering Lot 18089 in its entirety.
In defense, NCCP and Sabug, Jr. denied any knowledge of the
1977 Deed of Conditional Sale through which the subject
portion had been purportedly conveyed to Sps. Roque.16
For her part, Aguado raised the defense of an innocent
purchaser for value as she allegedly derived her title (through
the 1999 Deed of Absolute Sale) from Sabug, Jr., the
registered owner in OCT No. M-5955, covering Lot 18089,
which certificate of title at the time of sale was free from any
lien and/or encumbrances. She also claimed that Sps. Roques
cause of action had already prescribed because their adverse
claim was made only on April 21, 2003, or four (4) years from
the date OCT No. M-5955 was issued in Sabug, Jr.s name on
December 17, 1999.17
On the other hand, Land Bank averred that it had no
knowledge of Sps. Roques claim relative to the subject
portion, considering that at the time the loan was taken out, Lot
18089 in its entirety was registered in Aguados name and no
lien and/or encumbrance was annotated on her certificate of
title.18
Meanwhile, on January 18, 2005, NCCP filed a separate
complaint19 also for declaration of nullity of documents and
certificates of title and damages, docketed as Civil Case No.
05-003. It claimed to be the real owner of Lot 18089 which it
supposedly acquired from Sabug, Jr. through an oral contract
of sale20 in the early part of 1998, followed by the execution of
a Deed of Absolute Sale on December 2, 1998 (1998 Deed of
Absolute Sale).21 NCCP also alleged that in October of the
same year, it entered into a Joint Venture Agreement (JVA)
with Pilipinas Norin Construction Development Corporation
(PNCDC), a company owned by Aguados parents, for the
development of its real properties, including Lot 18089, into a
subdivision project, and as such, turned over its copy of OCT
No. M-5955 to PNCDC.22 Upon knowledge of the purported
sale of Lot 18089 to Aguado, Sabug, Jr. denied the transaction
and alleged forgery. Claiming that the Aguados23 and PNCDC
conspired to defraud NCCP, it prayed that PNCDCs corporate

veil be pierced and that the Aguados be ordered to pay the

amount of 38,092,002.00 representing the unrealized profit
from the JVA.24 Moreover, NCCP averred that Land Bank
failed to exercise the diligence required to ascertain the true
owners of Lot 18089. Hence, it further prayed that: (a) all acts
of ownership and dominion over Lot 18089 that the bank might
have done or caused to be done be declared null and void; (b)
it be declared the true and real owners of Lot 18089; and (c)
the Register of Deeds of Morong, Rizal be ordered to cancel
any and all certificates of title covering the lot, and a new one
be issued in its name.25 In its answer, Land Bank reiterated its
stance that Lot 18089 was used as collateral for the
P8,000,000.00 loan obtained by the Countryside Rural Bank,
Aguado, and one Bella Palasaga. There being no lien and/ or
encumbrance annotated on its certificate of title, i.e., TCT No.
M-115895, it cannot be held liable for NCCPs claims. Thus, it
prayed for the dismissal of NCCPs complaint.26
On September 7, 2005, Civil Case Nos. 02-022 and 05-003
were ordered consolidated.27
The RTC Ruling
After due proceedings, the RTC rendered a Decision28 dated
July 8, 2008, dismissing the complaints of Sps. Roque and
NCCP.
With respect to Sps. Roques complaint, the RTC found that
the latter failed to establish their ownership over the subject
portion, considering the following: (a) the supposed ownersvendors, i.e., Rivero, et al., who executed the 1977 Deed of
Conditional Sale, had no proof of their title over Lot 18089; (b)
the 1977 Deed of Conditional Sale was not registered with the
Office of the Register of Deeds;29 (c) the 1977 Deed of
Conditional Sale is neither a deed of conveyance nor a transfer
document, as it only gives the holder the right to compel the
supposed vendors to execute a deed of absolute sale upon full
payment of the consideration; (d) neither Sps. Roque nor the
alleged owners-vendors, i.e., Rivero, et al., have paid real
property taxes in relation to Lot 18089; and (e) Sps. Roques
occupation of the subject portion did not ripen into ownership
that can be considered superior to the ownership of Land
Bank.30 Moreover, the RTC ruled that Sps. Roques action for
reconveyance had already prescribed, having been filed ten
(10) years after the issuance of OCT No. M-5955.31
On the other hand, regarding NCCPs complaint, the RTC
observed that while it anchored its claim of ownership over Lot
18089 on the 1998 Deed of Absolute Sale, the said deed was
not annotated on OCT No. M-5955. Neither was any certificate
of title issued in its name nor did it take possession of Lot
18089 or paid the real property taxes therefor. Hence, NCCPs
claim cannot prevail against Land Banks title, which was
adjudged by the RTC as an innocent purchaser for value. Also,
the RTC disregarded NCCPs allegation that the signature of
Sabug, Jr. on the 1999 Deed of Absolute Sale in favor of
Aguado was forged because his signatures on both
instruments bear semblances of similarity and appear genuine.
Besides, the examiner from the National Bureau of
Investigation, who purportedly found that Sabug, Jr.s signature
thereon was spurious leading to the dismissal of a criminal
case against him, was not presented as a witness in the civil
action.32
Finally, the RTC denied the parties respective claims for
damages.33

The CA Ruling
On appeal, the Court of Appeals (CA) affirmed the foregoing
RTC findings in a Decision34 dated May 12, 2010. While Land
Bank was not regarded as a mortgagee/purchaser in good faith
with respect to the subject portion considering Sps. Roques
possession thereof,35 the CA did not order its reconveyance or
segregation in the latters favor because of Sps. Roques
failure to pay the remaining balance of the purchase price.
Hence, it only directed Land Bank to respect Sps. Roques
possession with the option to appropriate the improvements
introduced thereon upon payment of compensation.36
As regards NCCP, the CA found that it failed to establish its
right over Lot 18089 for the following reasons: (a) the sale to it
of the lot by Sabug, Jr. was never registered; and (b) there is
no showing that it was in possession of Lot 18089 or any
portion thereof from 1998. Thus, as far as NCCP is concerned,
Land Bank is a mortgagee/purchaser in good faith.37
Aggrieved, both Sps. Roque38 and NCCP39 moved for
reconsideration but were denied by the CA in a Resolution40
dated September 15, 2010, prompting them to seek further
recourse before the Court.
The Issue Before the Court
The central issue in this case is whether or not the CA erred in
not ordering the reconveyance of the subject portion in Sps.
Roques favor.
Sps. Roque maintain that the CA erred in not declaring them
as the lawful owners of the subject portion despite having
possessed the same since the execution of the 1977 Deed of
Conditional Sale, sufficient for acquisitive prescription to set in
in their favor.41 To bolster their claim, they also point to the
1993 Joint Affidavit whereby Sabug, Jr. and Rivero
acknowledged their ownership thereof.42 Being the first
purchasers and in actual possession of the disputed portion,
they assert that they have a better right over the 1,231- sq. m.
portion of Lot 18089 and, hence, cannot be ousted therefrom
by Land Bank, which was adjudged as a ortgagee/purchaser in
bad faith, pursuant to Article 1544 of the Civil Code.43
In opposition, Land Bank espouses that the instant petition
should be dismissed for raising questions of fact, in violation of
the proscription under Rule 45 of the Rules of Court which
allows only pure questions of law to be raised.44 Moreover, it
denied that ownership over the subject portion had been
acquired by Sps. Roque who admittedly failed to pay the
remaining balance of the purchase price.45 Besides, Land
Bank points out that Sps. Roques action for reconveyance had
already prescribed.46
Instead of traversing the arguments of Sps. Roque, NCCP, in
its Comment47 dated December 19, 2011, advanced its own
case, arguing that the CA erred in holding that it failed to
establish its claimed ownership over Lot 18089 in its entirety.
Incidentally, NCCPs appeal from the CA Decision dated May
12, 2010 was already denied by the Court,48 and hence, will
no longer be dealt with in this case.
The Courts Ruling
The petition lacks merit.

The essence of an action for reconveyance is to seek the

transfer of the property which was wrongfully or erroneously
registered in another persons name to its rightful owner or to
one with a better right.49 Thus, it is incumbent upon the
aggrieved party to show that he has a legal claim on the
property superior to that of the registered owner and that the
property has not yet passed to the hands of an innocent
purchaser for value.50
Sps. Roque claim that the subject portion covered by the 1977
Deed of Conditional Sale between them and Rivero, et al. was
wrongfully included in the certificates of title covering Lot
18089, and, hence, must be segregated therefrom and their
ownership thereof be confirmed. The salient portions of the
said deed state:
DEED OF CONDITIONAL SALE OF REAL PROPERTY
KNOW ALL MEN BY THESE PRESENTS:
xxxx
That for and in consideration of the sum of THIRTY
THOUSAND SEVEN HUNDRED SEVENTY FIVE PESOS
(P30,775.00), Philippine Currency, payable in the manner
hereinbelow specified, the VENDORS do hereby sell, transfer
and convey unto the VENDEE, or their heirs, executors,
administrators, or assignors, that unsegregated portion of the
above lot, x x x.
That the aforesaid amount shall be paid in two installments, the
first installment which is in the amount of __________
(P15,387.50) and the balance in the amount of __________
(P15,387.50), shall be paid as soon as the described portion of
the property shall have been registered under the Land
Registration Act and a Certificate of Title issued accordingly;
That as soon as the total amount of the property has been paid
and the Certificate of Title has been issued, an absolute deed
of sale shall be executed accordingly;
x x x x51
Examining its provisions, the Court finds that the stipulation
above-highlighted shows that the 1977 Deed of Conditional
Sale is actually in the nature of a contract to sell and not one of
sale contrary to Sps. Roques belief.52 In this relation, it has
been consistently ruled that where the seller promises to
execute a deed of absolute sale upon the completion by the
buyer of the payment of the purchase price, the contract is only
a contract to sell even if their agreement is denominated as a
Deed of Conditional Sale,53 as in this case. This treatment
stems from the legal characterization of a contract to sell, that
is, a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property
despite delivery thereof to the prospective buyer, binds himself
to sell the subject property exclusively to the prospective buyer
upon fulfillment of the condition agreed upon, such as, the full
payment of the purchase price.54 Elsewise stated, in a
contract to sell, ownership is retained by the vendor and is not
to pass to the vendee until full payment of the purchase
price.55 Explaining the subject matter further, the Court, in
Ursal v. CA,56 held that:
[I]n contracts to sell the obligation of the seller to sell becomes
demandable only upon the happening of the suspensive
condition, that is, the full payment of the purchase price by the

buyer. 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. Prior to the existence of the contract of
sale, the seller is not obligated to transfer the ownership to the
buyer, even if there is a contract to sell between them.
Here, it is undisputed that Sps. Roque have not paid the final
installment of the purchase price.57 As such, the condition
which would have triggered the parties obligation to enter into
and thereby perfect a contract of sale in order to effectively
transfer the ownership of the subject portion from the sellers
(i.e., Rivero et al.) to the buyers (Sps. Roque) cannot be
deemed to have been fulfilled. Consequently, the latter cannot
validly claim ownership over the subject portion even if they
had made an initial payment and even took possession of the
same.58
The Court further notes that Sps. Roque did not even take any
active steps to protect their claim over the disputed portion.
This remains evident from the following circumstances
appearing on record: (a) the 1977 Deed of Conditional Sale
was never registered; (b) they did not seek the actual/physical
segregation of the disputed portion despite their knowledge of
the fact that, as early as 1993, the entire Lot 18089 was
registered in Sabug, Jr.s name under OCT No. M-5955; and
(c) while they signified their willingness to pay the balance of
the purchase price,59 Sps. Roque neither compelled Rivero et
al., and/or Sabug, Jr. to accept the same nor did they consign
any amount to the court, the proper application of which would
have effectively fulfilled their obligation to pay the purchase
price.60 Instead, Sps. Roque waited 26 years, reckoned from
the execution of the 1977 Deed of Conditional Sale, to institute
an action for reconveyance (in 2003), and only after Lot 18089
was sold to Land Bank in the foreclosure sale and title thereto
was consolidated in its name. Thus, in view of the foregoing,
Sabug, Jr. as the registered owner of Lot 18089 borne by the
grant of his free patent application could validly convey said
property in its entirety to Aguado who, in turn, mortgaged the
same to Land Bank. Besides, as aptly observed by the RTC,
Sps. Roque failed to establish that the parties who sold the
property to them, i.e., Rivero, et al., were indeed its true and
lawful owners.61 In fine, Sps. Roque failed to establish any
superior right over the subject portion as against the registered
owner of Lot 18089, i.e., Land Bank, thereby warranting the
dismissal of their reconveyance action, without prejudice to
their right to seek damages against the vendors, i.e., Rivero et
al.62 As applied in the case of Coronel v. CA:63
It is essential to distinguish between a contract to sell and a
conditional contract of sale specially in cases where the
subject property is sold by the owner not to the party the seller
contracted with, but to a third person, as in the case at bench.
In a contract to sell, there being no previous sale of the
property, a third person buying such property despite the
fulfilment of the suspensive condition such as the full payment
of the purchase price, for instance, cannot be deemed a buyer
in bad faith and the prospective buyer cannot seek the relief of
reconveyance of the property.
There is no double sale in such case.1wphi1 Title to the
property will transfer to the buyer after registration because
there is no defect in the owner-sellers title per se, but the
latter, of course, may be sued for damages by the intending
buyer. (Emphasis supplied)

On the matter of double sales, suffice it to state that Sps.

Roques reliance64 on Article 154465 of the Civil Code has
been misplaced since the contract they base their claim of
ownership on is, as earlier stated, a contract to sell, and not
one of sale. In Cheng v. Genato,66 the Court stated the
circumstances which must concur in order to determine the
applicability of Article 1544, none of which are obtaining in this
case, viz.:
(a) The two (or more) sales transactions in issue must pertain
to exactly the same subject matter, and must be valid sales
transactions;
(b) The two (or more) buyers at odds over the rightful
ownership of the subject matter must each represent
conflicting interests; and
(c) The two (or more) buyers at odds over the rightful
ownership of the subject matter must each have bought from
the same seller.
Finally, regarding Sps. Roques claims of acquisitive
prescription and reimbursement for the value of the
improvements they have introduced on the subject property,67
it is keenly observed that none of the arguments therefor were
raised before the trial court or the CA.68 Accordingly, the Court
applies the well-settled rule that litigants cannot raise an issue
for the first time on appeal as this would contravene the basic
rules of fair play and justice. In any event, such claims appear
to involve questions of fact which are generally prohibited
under a Rule 45 petition.69
With the conclusions herein reached, the Court need not
belabor on the other points raised by the parties, and ultimately
finds it proper to proceed with the denial of the petition.
WHEREFORE, the petition is DENIED. The Decision dated
May 12, 2010 and the Resolution dated September 15, 2010 of
the Court of Appeals in CAG.R. CV No. 92113 are hereby
AFFIRMED.
SO ORDERED.