AUGUST 2009 JURISPRUDENCE

G.R. No. 130223

August 19, 2009

RURAL BANK OF STA. BARBARA [PANGASINAN], INC., Petitioner,

vs.
THE MANILA MISSION OF THE CHURCH OF JESUS CHRIST OF LATTER
DAY SAINTS, INC., Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to
set aside the Decision1dated 29 July 1997 of the Court of Appeals in CA-G.R. SP No.
41042 affirming the Orders dated 9 October 1995 and 27 February 1996 of the Regional
Trial Court (RTC), Branch 43, of Dagupan City, in Civil Case No. D-10583.
Spouses Tomas and Maria Soliven (spouses Soliven) were the registered owners, under
Transfer Certificate of Title (TCT) No. T-125213, of a parcel of land located in Barangay
Maninding, Sta. Barbara, Pangasinan (subject property). On 18 May 1992, the spouses
Soliven sold the subject property to respondent Manila Mission of the Church of Jesus
Christ of Latter Day Saints, Inc. (Manila Mission). However, it was only on 28 April
1994 when TCT No. T-125213 in the name of the spouses Soliven was cancelled, and TCT
No. 195616 was issued in the name of respondent.
In the meantime, on 15 April 1993, petitioner Rural Bank of Sta. Barbara (Pangasinan),
Inc. filed with the RTC a Complaint against the spouses Soliven for a sum of money,
docketed as Civil Case No. D-10583. The Complaint of petitioner included a prayer for
the issuance of a Writ of Preliminary Attachment.
In an Order dated 7 May 1993, the RTC ordered the issuance of the Writ of Attachment
petitioner prayed for, to wit:
WHEREFORE, let a Writ of Attachment be issued against all the properties of [Spouses
Soliven] not exempt from execution or so much thereof as may be sufficient to satisfy
the [herein petitioners] principal claim of P338,000.00 upon filing of [petitioners]
bond in the amount of P100,000.00.2
Upon the filing by petitioner of the required bond, the RTC issued the Writ of
Attachment on 21 May 1993. Acting on the authority of said Writ, Sheriff Reynaldo C.
Daray attached the subject property, which was then still covered by TCT No. T-125213
in the name of the spouses Soliven. The Writ of Attachment was annotated on TCT No.
T-125213 on 24 May 1993. Thus, when TCT No. T-125213 of the spouses Soliven was
cancelled and TCT No. 195616 of petitioner was issued on 28 April 1994, the annotation
on the Writ of Attachment was carried from the former to the latter.

AUGUST 2009 JURISPRUDENCE

While Civil Case No. D-10583 was still pending before the RTC, respondent executed an
Affidavit claiming title and ownership over the subject property, and requested the ExOfficio Provincial and City Sheriff to release the said property from attachment. The
Sheriff, however, advised respondent to file a motion directly with the RTC.
On 16 March 1995, respondent filed with the RTC, in Civil Case No. D-10583, a Motion
to Release Property from Attachment, to which petitioner, in turn, filed an Opposition.
After hearing, the RTC issued an Order on 9 October 1995 discharging the subject
property from attachment. The RTC decreed in said Order:
WHEREFORE, the Court hereby directs the Ex-Officio Provincial Sheriff of Pangasinan
and City Sheriff of Dagupan to discharge and release the subject land from attachment
and orders the notice of attachment on T.C.T. No. 195616 of the Register of Deeds of
Pangasinan be cancelled.3
Petitioner filed a Motion for Reconsideration of the 9 October 1995 Order of the RTC,
arguing that it had a better right over the subject property and that the filing by
respondent with the RTC, in Civil Case No. D-10583, of a Motion to Release Property
from Attachment, was the improper remedy. In an Order dated 27 February 1996, the
RTC denied the Motion for Reconsideration of petitioner for lack of merit.
On 12 April 1997, petitioner filed a Petition for Certiorari with this Court, alleging that
the RTC committed grave abuse of discretion, amounting to lack or excess of
jurisdiction, in canceling the Writ of Attachment and ordering the release of the subject
property. The Petition was docketed as G.R. No. 124343. In a Resolution dated 27 May
1997, this Court referred the case to the Court of Appeals for appropriate action.
The Court of Appeals docketed the Petition for Certiorari as CA-G.R. SP No. 41042. On
29 July 1997, the Court of Appeals issued the assailed Decision dismissing the Petition.
Hence, petitioner again comes before this Court via the present Petition for Review,
contending that the Court of Appeals erred in not finding grave abuse of discretion on
the part of the RTC when the latter directed the release of the subject property from
attachment. Petitioner insists that it has a better right to the subject property
considering that: (1) the attachment of the subject property in favor of petitioner was
made prior to the registration of the sale of the same property to respondent; and (2)
respondent availed itself of the wrong remedy in filing with the RTC, in Civil Case No.
D-10583, a Motion to Release Property from Attachment. We shall discuss ahead the
second ground for the instant Petition, a matter of procedure, since its outcome will
determine whether we still need to address the first ground, on the substantive rights of
the parties to the subject property.
Propriety of the Motion to Release Property from Attachment

AUGUST 2009 JURISPRUDENCE

According to petitioner, the Motion to Release Property from Attachment filed by

respondent before the RTC, in Civil Case No. D-10583, is not the proper remedy under
Section 14, Rule 57 of the Rules of Court,4 which provides:
SEC. 14. Proceedings where property claimed by third person.If the property
attached is claimed by any person other than the party against whom attachment had
been issued or his agent, and such person makes an affidavit of his title thereto, or right
to the possession thereof, stating the grounds of such right or title, and serves such
affidavit upon the sheriff while the latter has possession of the attached property, and a
copy thereof upon the attaching party, the sheriff shall not be bound to keep the
property under attachment, unless the attaching party or his agent, on demand of the
sheriff, shall file a bond approved by the court to indemnify the third-party claimant in a
sum not less than the value of the property levied upon. In case of disagreement as to
such value, the same shall be decided by the court issuing the writ of attachment. No
claim for damages for the taking or keeping of the property may be enforced against the
bond unless the action therefor is filed within one hundred twenty (120) days from the
date of the filing of the bond.
The sheriff shall not be liable for damages for the taking or keeping of such property, to
any such third-party claimant, if such bond shall be filed. Nothing herein contained
shall prevent such claimant or any third person from vindicating his claim to the
property, or prevent the attaching party from claiming damages against a third-party
claimant who filed a frivolous or plainly spurious claim, in the same or a separate action.
When the writ of attachment is issued in favor of the Republic of the Philippines, or any
officer duly representing it, the filing of such bond shall not be required, and in case the
sheriff is sued for damages as a result of the attachment, he shall be represented by the
Solicitor General, and if held liable therefor, the actual damages adjudged by the court
shall be paid by the National Treasurer out of the funds to be appropriated for the
purpose.
Petitioner argues that, pursuant to the aforequoted section, the remedy of a third person
claiming to be the owner of an attached property are limited to the following: (1) filing
with the Sheriff a third-party claim, in the form of an affidavit, per the first paragraph of
Section 14; (2) intervening in the main action, with prior leave of court, per the second
paragraph of Section 14, which allows a third person to vindicate his/her claim to the
attached property in the "same x x x action"; and (3) filing a separate and independent
action, per the second paragraph of Section 14, which allows a third person to vindicate
his/her claim to the attached property in a "separate action."
Respondent explains that it tried to pursue the first remedy, i.e., filing a third-party
claim with the Sheriff. Respondent did file an Affidavit of Title and Ownership with the
Sheriff, but said officer advised respondent to file a motion directly with the RTC in the
main case. Respondent heeded the Sheriffs advice by filing with the RTC, in Civil Case

AUGUST 2009 JURISPRUDENCE

No. D-10583, a Motion to Release Property from Attachment. The Court of Appeals
recognized and allowed said Motion, construing the same as an invocation by
respondent of the power of control and supervision of the RTC over its officers, which
includes the Sheriff.
We agree with the Court of Appeals on this score. The filing by respondent of the Motion
to Release Property from Attachment was made on the advice of the Sheriff upon whom
respondent served its Affidavit of Title and Ownership. Respondent should not be
faulted for merely heeding the Sheriffs advice. Apparently, the Sheriff, instead of acting
upon the third-party claim of respondent on his own, would rather have some direction
from the RTC. Indeed, the Sheriff is an officer of the RTC and may be directed by the
said court to allow the third-party claim of respondent. Therefore, the filing of the
Motion in question can be deemed as a mere continuation of the third-party claim of
respondent, in the form of its Affidavit of Title and Ownership, served upon the Sheriff,
in accord with the first paragraph of Section 14, Rule 57 of the Rules of Court.
Alternatively, we may also consider the Motion to Release Property from Attachment,
filed by respondent before the RTC, as a Motion for Intervention in Civil Case No. D10583, pursuant to the second paragraph of Section 14, Rule 56, in relation to Rule 19 of
the Rules of Court. Respondent, to vindicate its claim to the subject property, may
intervene in the same case, i.e., Civil Case No. D-10583, instituted by petitioner against
the spouses Soliven, in which the said property was attached. Respondent has the
personality to intervene, as it "is so situated as to be adversely affected by a distribution
or other disposition of property in the custody of the court or of an officer thereof." 5 The
RTC, in acting upon and granting the Motion to Release Property from Attachment in its
Order dated 9 October 1995, is deemed to have allowed respondent to intervene in Civil
Case No. D-10583.
Moreover, it may do petitioner well to remember that rules of procedure are merely
tools designed to facilitate the attainment of justice. They were conceived and
promulgated to effectively aid the court in the dispensation of justice. Courts are not
slaves to or robots of technical rules, shorn of judicial discretion. In rendering justice,
courts have always been, as they ought to be, conscientiously guided by the norm that on
the balance, technicalities take a backseat to substantive rights, and not the other way
around. Thus, if the application of the Rules would tend to frustrate rather than promote
justice, it is always within the power of the Court to suspend the rules, or except a
particular case from its operation.6 Hence, even if the Motion to Release Property from
Attachment does not strictly comply with Section 14, Rule 56 of the Rules of Court, the
RTC may still allow and act upon said Motion to render substantive justice.
This leads us to the substantive issue in this case, on which between the two
transactions should be given priority: the previous yet unregistered sale of the subject
property by the spouses Soliven to respondent, or the subsequent but duly annotated
attachment of the same property by petitioner.

AUGUST 2009 JURISPRUDENCE

Previous yet unregistered sale versus subsequent but duly annotated attachment
Petitioner does not dispute the allegation of respondent that the subject property was
sold by the spouses Soliven to respondent on 18 May 1992, before petitioner instituted
Civil Case No. D-10583 against the spouses Soliven on 15 April 1993; the RTC ordered
the issuance of the Writ of Attachment on 7 May 1993; and the attachment of the subject
property pursuant to the Writ on 27 May 1993.
Neither did petitioner offer evidence to counter the following documents presented by
respondent establishing the fact of the sale of the subject property to the latter by the
spouses Soliven: (1) the notarized Deed of Sale dated 18 May 1992; (2) BPI Managers
Check No. 010685 dated 8 May 1992 in the sum of P42,500.00 to represent the tender
of payment of capital gains tax; (3) BIR Official Receipt No. 0431320 dated 18 May 1992
of BPI Check No. 010625 for the payment of the sum of P8,5000.00; and (4) a letter
dated 11 August 1992 of Manila Missions former counsel, Lim Duran & Associates, to
the Revenue District Officer, District 7, Bureau of Internal Revenue, relative to its
request for the "reconsideration/condonation" of the assessment of the capital gains tax
on its purchase of the subject property.
Petitioner, however, invokes jurisprudence wherein this Court in a number of instances
allegedly upheld a subsequent but duly annotated attachment, as opposed to a previous
yet unregistered sale of the same property. Petitioner particularly calls our attention to
the following paragraph in Ruiz, Sr. v. Court of Appeals7:
[I]n case of a conflict between a vendee and an attaching creditor, an attaching creditor
who registers the order of attachment and the sale of the property to him as the highest
bidder acquires a valid title to the property, as against a vendee who had previously
bought the same property from the registered owner but who failed to register his deed
of sale. This is because registration is the operative act that binds or affects the land
insofar as third persons are concerned. It is upon registration that there is notice to the
whole world.
In the more recent case Valdevieso v. Damalerio,8 we have expounded on our foregoing
pronouncement in Ruiz.
On 5 December 1995, therein petitioner Bernardo Valdevieso (Valdevieso) bought a
parcel of land from spouses Lorenzo and Elenita Uy (spouses Uy), the registered owners
thereof. On 19 April 1996, therein respondents, spouses Candelario and Aurea
Damalerio (spouses Damalario), filed a Complaint against the spouses Uy for a sum of
money before the RTC of General Santos City. On 23 April 1996, the RTC issued a Writ
of Preliminary Attachment by virtue of which the subject parcel of land was levied. The
levy was duly recorded in the Register of Deeds, and annotated on the TCT of the
spouses Uy over the subject parcel of land. It was only on 6 June 1996 that the TCT in
the name of the spouses Uy was cancelled, and a new one issued in the name of

AUGUST 2009 JURISPRUDENCE

Valdevieso. As in the case at bar, the annotation on the attachment was carried over to
Valdeviesos TCT. Valdevieso filed a third-party claim before the RTC seeking to annul
the attachment. In a resolution, the RTC ruled in Valdeviesos favor, but the Court of
Appeals reversed said RTC resolution. On appeal, we adjudged:
The sole issue in this case is whether or not a registered writ of attachment on the land is
a superior lien over that of an earlier unregistered deed of sale.
xxxx
The settled rule is that levy on attachment, duly registered, takes preference over a prior
unregistered sale. This result is a necessary consequence of the fact that the property
involved was duly covered by the Torrens system which works under the fundamental
principle that registration is the operative act which gives validity to the transfer or
creates a lien upon the land.
The preference created by the levy on attachment is not diminished even by the
subsequent registration of the prior sale. This is so because an attachment is a
proceeding in rem. It is against the particular property, enforceable against the whole
world. The attaching creditor acquires a specific lien on the attached property which
nothing can subsequently destroy except the very dissolution of the attachment or levy
itself. Such a proceeding, in effect, means that the property attached is an indebted thing
and a virtual condemnation of it to pay the owners debt. The lien continues until the
debt is paid, or sale is had under execution issued on the judgment, or until the
judgment is satisfied, or the attachment discharged or vacated in some manner provided
by law.
Thus, in the registry, the attachment in favor of respondents appeared in the nature of a
real lien when petitioner had his purchase recorded. The effect of the notation of said
lien was to subject and subordinate the right of petitioner, as purchaser, to the lien.
Petitioner acquired ownership of the land only from the date of the recording of his title
in the register, and the right of ownership which he inscribed was not absolute but a
limited right, subject to a prior registered lien of respondents, a right which is preferred
and superior to that of petitioner.9
It is settled, therefore, that a duly registered levy on attachment takes preference over a
prior unregistered sale.
Nonetheless, respondent argues that there is a special circumstance in the case at bar,
which should be deemed a constructive registration of the sale of the subject property in
its favor, preceding the attachment of the same property by petitioner.
Knowledge of previous yet unregistered sale

AUGUST 2009 JURISPRUDENCE

In Ruiz, the very case cited by petitioner, we made a qualification of the general rule that
a duly annotated attachment is superior to an unregistered prior sale. In fact, we
resolved Ruiz in favor of the vendee in the unregistered prior sale, because knowledge of
the unregistered sale by the attaching creditor is deemed equivalent to registration. We
explained in Ruiz:
But where a party has knowledge of a prior existing interest which is unregistered at that
time he acquired a right to the same land, his knowledge of that prior unregistered
interest has the effect of registration as to him. Knowledge of an unregistered sale is
equivalent to registration. As held in Fernandez v. Court of Appeals [189 SCRA 780
(1990)],
Section 50 of Act No. 496 (now Sec. 51 of P.D. 1529), provides that the registration of the
deed is the operative act to bind or affect the land insofar as third persons are
concerned. But where the party has knowledge of a prior existing interest which is
unregistered at the time he acquired a right to the same land, his knowledge of that prior
unregistered interest has the effect of registration as to him. The torrens system cannot
be used as a shield for the commission of fraud (Gustillo v. Maravilla, 48 Phil. 442). As
far as private respondent Zenaida Angeles and her husband Justiniano are concerned,
the non-registration of the affidavit admitting their sale of a portion of 110 square
meters of the subject land to petitioners cannot be invoked as a defense because
(K)nowledge of an unregistered sale is equivalent to registration (Winkleman v. Veluz,
43 Phil. 604).
This knowledge of the conveyance to Honorato Hong can not be denied. The records
disclose that after the sale, private respondent was able to introduce improvements on
the land such as a concrete two-door commercial building, a concrete fence around the
property, concrete floor of the whole area and G.I. roofing. Acts of ownership and
possession were exercised by the private respondent over the land. By these overt acts, it
can not therefore be gainsaid that petitioner was not aware that private respondent had
a prior existing interest over the land.10
In the case at bar, respondent averred in its Motion to Release Property from
Attachment that the construction of a church edifice on the subject property was about
to be finished at the time the Writ of Preliminary Attachment was implemented on 24
May 1993, and that the construction of the church was actually completed by mid-1993.
Respondent asserts that since petitioner did not deny these allegations, much less
adduce evidence to the contrary, then the latter tacitly recognized the construction of
the church.
Petitioner contends, on the other hand, that respondent failed to present evidence to
prove the fact that a church had already been constructed on the subject property by the
time the said property was attached, thus, constituting notice to petitioner of the claim
or right of respondent to the same.lawph!1

AUGUST 2009 JURISPRUDENCE

Was there, at the time of the attachment, knowledge on the part of petitioner Rural
Bank of the interest of respondent Manila Mission on the subject property?
If the allegation of respondent Manila Mission anent the building of the chapel even
before the issuance of the writ of attachment is true, this case would be similar to Ruiz
where the vendee of the subject property was able to introduce improvements. However,
respondent Manila Mission presented no evidence of the building of the chapel other
than its bare allegation thereof. More importantly, even assuming for the sake of
argument that the chapel was indeed being built at the time of the attachment of the
property, we cannot simply apply Ruiz and conclude that this confirms knowledge of a
previous conveyance of the property at that time. In Ruiz, the attaching party was the
wife of the vendor of the subject property, whom she sued for support. It was thus very
probable that she knew of the sale of the property to the vendee therein, considering
that the vendee had already introduced improvements thereon. In the case at bar, there
is no special relationship between petitioner Rural Bank and the spouses Soliven
sufficient to charge the former with an implied knowledge of the state of the latters
properties. Unlike in the sale of real property, an attaching creditor is not expected to
inspect the property being attached, as it is the sheriff who does the actual act of
attaching the property.
Neither did respondent Manila Mission present any evidence of knowledge on the part
of petitioner Rural Bank of the prior existing interest of the former at the time of the
attachment. Respondent Manila Mission merely argues that there was a tacit
recognition on the part of petitioner Rural Bank of the construction of the chapel when
the latter did not deny this allegation in its Opposition to the Motion to Discharge
Property from Attachment.
The Motion, however, merely mentions the construction of the chapel and does not
charge petitioner Rural Bank with knowledge of the construction. There was, therefore,
nothing to deny on the part of petitioner Rural Bank, as the mere existence of such
construction at that time would not affect the right of petitioner Rural Bank to its lien
over the subject property. Also, the mention in the Motion of the construction of the
chapel would have the effect of being a notice of an adverse third-party claim only at the
time of such Motion. Since such notice, which was deemed in Ruiz as constructive
registration of the sale, was effected only after the attachment of the subject property, it
could not affect the validity of the attachment lien.
In sum, our decisions in Ruiz v. Court of Appeals and Valdevieso v. Damalerio oblige us
to rule that the duly registered levy on attachment by petitioner Rural Bank takes
preference over the prior but then unregistered sale of respondent Manila Mission.
There was likewise no evidence of knowledge on the part of petitioner Rural Bank of any
third-party interest in the subject property at the time of the attachment. We are,
therefore, constrained to grant the instant Petition for Review and nullify the Orders of
the RTC discharging the subject property from attachment.

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Nevertheless, respondent Manila Mission would not be left without remedy. It could file
a counter-bond pursuant to Section 12, Rule 57 11 of the Rules of Court in order to
discharge the attachment. If respondent Manila Mission fails to do the same and the
property ends up being subjected to execution, respondent can redeem the property and
seek reimbursement from the spouses Soliven.
WHEREFORE, the instant Petition for Review on Certiorari is hereby GRANTED. The
Decision dated 29 July 1997 of the Court of Appeals in CA-G.R. SP No. 41042 affirming
the Orders of the Regional Trial Court of Dagupan City dated 9 October 1995 and 27
February 1996 issued in Civil Case No. D-10583 is hereby REVERSED and SET ASIDE.
No pronouncement as to costs.
SO ORDERED.

AUGUST 2009 JURISPRUDENCE

G.R. No. 160346

August 25, 2009

PURITA PAHUD, SOLEDAD PAHUD, and IAN LEE CASTILLA (represented

by Mother and Attorney-in-Fact VIRGINIA CASTILLA), Petitioners,
vs.
COURT OF APPEALS, SPOUSES ISAGANI BELARMINO and LETICIA
OCAMPO, EUFEMIA SAN AGUSTIN-MAGSINO, ZENAIDA SAN AGUSTINMcCRAE, MILAGROS SAN AGUSTIN-FORTMAN, MINERVA SAN AGUSTINATKINSON, FERDINAND SAN AGUSTIN, RAUL SAN AGUSTIN, ISABELITA
SAN AGUSTIN-LUSTENBERGER and VIRGILIO SAN AGUSTIN, Respondents.
DECISION
NACHURA, J.:
For our resolution is a petition for review on certiorari assailing the April 23, 2003
Decision1 and October 8, 2003 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV
No. 59426. The appellate court, in the said decision and resolution, reversed and set
aside the January 14, 1998 Decision 3 of the Regional Trial Court (RTC), which ruled in
favor of petitioners.
The dispute stemmed from the following facts.
During their lifetime, spouses Pedro San Agustin and Agatona Genil were able to
acquire a 246-square meter parcel of land situated in Barangay Anos, Los Baos,
Laguna and covered by Original Certificate of Title (OCT) No. O-(1655) 0-15. 4 Agatona
Genil died on September 13, 1990 while Pedro San Agustin died on September 14, 1991.
Both died intestate, survived by their eight (8) children: respondents Eufemia, Raul,
Ferdinand, Zenaida, Milagros, Minerva, Isabelita and Virgilio.
Sometime in 1992, Eufemia, Ferdinand and Raul executed a Deed of Absolute Sale of
Undivided Shares5conveying in favor of petitioners (the Pahuds, for brevity) their
respective shares from the lot they inherited from their deceased parents
for P525,000.00.6 Eufemia also signed the deed on behalf of her four (4) other co-heirs,
namely: Isabelita on the basis of a special power of attorney executed on September 28,
1991,7 and also for Milagros, Minerva, and Zenaida but without their apparent written
authority.8 The deed of sale was also not notarized.9
On July 21, 1992, the Pahuds paid P35,792.31 to the Los Baos Rural Bank where the
subject property was mortgaged.10 The bank issued a release of mortgage and turned
over the owners copy of the OCT to the Pahuds. 11 Over the following months, the
Pahuds made more payments to Eufemia and her siblings totaling
toP350,000.00.12 They agreed to use the remaining P87,500.0013 to defray the payment
for taxes and the expenses in transferring the title of the property. 14 When Eufemia and

AUGUST 2009 JURISPRUDENCE

her co-heirs drafted an extra-judicial settlement of estate to facilitate the transfer of the
title to the Pahuds, Virgilio refused to sign it.15
On July 8, 1993, Virgilios co-heirs filed a complaint 16 for judicial partition of the subject
property before the RTC of Calamba, Laguna. On November 28, 1994, in the course of
the proceedings for judicial partition, a Compromise Agreement 17 was signed with seven
(7) of the co-heirs agreeing to sell their undivided shares to Virgilio for P700,000.00.
The compromise agreement was, however, not approved by the trial court because Atty.
Dimetrio Hilbero, lawyer for Eufemia and her six (6) co-heirs, refused to sign the
agreement because he knew of the previous sale made to the Pahuds. 18lawphil.net
On December 1, 1994, Eufemia acknowledged having received P700,000.00 from
Virgilio.19 Virgilio then sold the entire property to spouses Isagani Belarmino and Leticia
Ocampo (Belarminos) sometime in 1994. The Belarminos immediately constructed a
building on the subject property.
Alarmed and bewildered by the ongoing construction on the lot they purchased, the
Pahuds immediately confronted Eufemia who confirmed to them that Virgilio had sold
the property to the Belarminos.20 Aggrieved, the Pahuds filed a complaint in
intervention21 in the pending case for judicial partition.1avvphil
After trial, the RTC upheld the validity of the sale to petitioners. The dispositive portion
of the decision reads:
WHEREFORE, the foregoing considered, the Court orders:
1. the sale of the 7/8 portion of the property covered by OCT No. O (1655) O-15 by
the plaintiffs as heirs of deceased Sps. Pedro San Agustin and Agatona Genil in
favor of the Intervenors-Third Party plaintiffs as valid and enforceable, but
obligating the Intervenors-Third Party plaintiffs to complete the payment of the
purchase price of P437,500.00 by paying the balance of P87,500.00 to defendant
Fe (sic) San Agustin Magsino. Upon receipt of the balance, the plaintiff shall
formalize the sale of the 7/8 portion in favor of the Intervenor[s]-Third Party
plaintiffs;
2. declaring the document entitled "Salaysay sa Pagsang-ayon sa Bilihan" (Exh.
"2-a") signed by plaintiff Eufemia San Agustin attached to the unapproved
Compromise Agreement (Exh. "2") as not a valid sale in favor of defendant
Virgilio San Agustin;
3. declaring the sale (Exh. "4") made by defendant Virgilio San Agustin of the
property covered by OCT No. O (1655)-O-15 registered in the names of Spouses
Pedro San Agustin and Agatona Genil in favor of Third-party defendant Spouses
Isagani and Leticia Belarmino as not a valid sale and as inexistent;

AUGUST 2009 JURISPRUDENCE

4. declaring the defendant Virgilio San Agustin and the Third-Party defendants
spouses Isagani and Leticia Belarmino as in bad faith in buying the portion of the
property already sold by the plaintiffs in favor of the Intervenors-Third Party
Plaintiffs and the Third-Party Defendant Sps. Isagani and Leticia Belarmino in
constructing the two-[storey] building in (sic) the property subject of this case;
and
5. declaring the parties as not entitled to any damages, with the parties
shouldering their respective responsibilities regarding the payment of
attorney[]s fees to their respective lawyers.
No pronouncement as to costs.
SO ORDERED.22
Not satisfied, respondents appealed the decision to the CA arguing, in the main, that the
sale made by Eufemia for and on behalf of her other co-heirs to the Pahuds should have
been declared void and inexistent for want of a written authority from her co-heirs. The
CA yielded and set aside the findings of the trial court. In disposing the issue, the CA
ruled:
WHEREFORE, in view of the foregoing, the Decision dated January 14, 1998, rendered
by the Regional Trial Court of Calamba, Laguna, Branch 92 in Civil Case No. 2011-93-C
for Judicial Partition is hereby REVERSED and SET ASIDE, and a new one entered, as
follows:
(1) The case for partition among the plaintiffs-appellees and appellant Virgilio is
now considered closed and terminated;
(2) Ordering plaintiffs-appellees to return to intervenors-appellees the total
amount they received from the latter, plus an interest of 12% per annum from the
time the complaint [in] intervention was filed on April 12, 1995 until actual
payment of the same;
(3) Declaring the sale of appellant Virgilio San Agustin to appellants spouses,
Isagani and Leticia Belarmino[,] as valid and binding;
(4) Declaring appellants-spouses as buyers in good faith and for value and are the
owners of the subject property.
No pronouncement as to costs.
SO ORDERED.23

AUGUST 2009 JURISPRUDENCE

Petitioners now come to this Court raising the following arguments:

I. The Court of Appeals committed grave and reversible error when it did not
apply the second paragraph of Article 1317 of the New Civil Code insofar as
ratification is concerned to the sale of the 4/8 portion of the subject property
executed by respondents San Agustin in favor of petitioners;
II. The Court of Appeals committed grave and reversible error in holding that
respondents spouses Belarminos are in good faith when they bought the subject
property from respondent Virgilio San Agustin despite the findings of fact by the
court a quo that they were in bad faith which clearly contravenes the presence of
long line of case laws upholding the task of giving utmost weight and value to the
factual findings of the trial court during appeals; [and]
III. The Court of Appeals committed grave and reversible error in holding that
respondents spouses Belarminos have superior rights over the property in
question than petitioners despite the fact that the latter were prior in possession
thereby misapplying the provisions of Article 1544 of the New Civil Code.24
The focal issue to be resolved is the status of the sale of the subject property by Eufemia
and her co-heirs to the Pahuds. We find the transaction to be valid and enforceable.
Article 1874 of the Civil Code plainly provides:
Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void.
Also, under Article 1878,25 a special power of attorney is necessary for an agent to enter
into a contract by which the ownership of an immovable property is transmitted or
acquired, either gratuitously or for a valuable consideration. Such stringent statutory
requirement has been explained in Cosmic Lumber Corporation v. Court of Appeals: 26
[T]he authority of an agent to execute a contract [of] sale of real estate must be
conferred in writing and must give him specific authority, either to conduct the general
business of the principal or to execute a binding contract containing terms and
conditions which are in the contract he did execute. A special power of attorney is
necessary to enter into any contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable consideration. The express
mandate required by law to enable an appointee of an agency (couched) in general terms
to sell must be one that expressly mentions a sale or that includes a sale as a necessary
ingredient of the act mentioned. For the principal to confer the right upon an agent to
sell real estate, a power of attorney must so express the powers of the agent in clear and
unmistakable language. When there is any reasonable doubt that the language so used
conveys such power, no such construction shall be given the document. 27

AUGUST 2009 JURISPRUDENCE

In several cases, we have repeatedly held that the absence of a written authority to sell a
piece of land is, ipso jure, void,28 precisely to protect the interest of an unsuspecting
owner from being prejudiced by the unwarranted act of another.
Based on the foregoing, it is not difficult to conclude, in principle, that the sale made by
Eufemia, Isabelita and her two brothers to the Pahuds sometime in 1992 should be valid
only with respect to the 4/8 portion of the subject property. The sale with respect to the
3/8 portion, representing the shares of Zenaida, Milagros, and Minerva, is void because
Eufemia could not dispose of the interest of her co-heirs in the said lot absent any
written authority from the latter, as explicitly required by law. This was, in fact, the
ruling of the CA.
Still, in their petition, the Pahuds argue that the sale with respect to the 3/8 portion of
the land should have been deemed ratified when the three co-heirs, namely: Milagros,
Minerva, and Zenaida, executed their respective special power of attorneys 29 authorizing
Eufemia to represent them in the sale of their shares in the subject property. 30
While the sale with respect to the 3/8 portion is void by express provision of law and not
susceptible to ratification,31 we nevertheless uphold its validity on the basis of the
common law principle of estoppel.
Article 1431 of the Civil Code provides:
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.
True, at the time of the sale to the Pahuds, Eufemia was not armed with the requisite
special power of attorney to dispose of the 3/8 portion of the property. Initially, in their
answer to the complaint in intervention, 32 Eufemia and her other co-heirs denied having
sold their shares to the Pahuds. During the pre-trial conference, however, they admitted
that they had indeed sold 7/8 of the property to the Pahuds sometime in 1992. 33 Thus,
the previous denial was superseded, if not accordingly amended, by their subsequent
admission.34 Moreover, in their Comment,35 the said co-heirs again admitted the sale
made to petitioners.36
Interestingly, in no instance did the three (3) heirs concerned assail the validity of the
transaction made by Eufemia to the Pahuds on the basis of want of written authority to
sell. They could have easily filed a case for annulment of the sale of their respective
shares against Eufemia and the Pahuds. Instead, they opted to remain silent and left the
task of raising the validity of the sale as an issue to their co-heir, Virgilio, who is not
privy to the said transaction. They cannot be allowed to rely on Eufemia, their attorneyin-fact, to impugn the validity of the first transaction because to allow them to do so
would be tantamount to giving premium to their sisters dishonest and fraudulent deed.

AUGUST 2009 JURISPRUDENCE

Undeniably, therefore, the silence and passivity of the three co-heirs on the issue bar
them from making a contrary claim.
It is a basic rule in the law of agency that a principal is subject to liability for loss caused
to another by the latters reliance upon a deceitful representation by an agent in the
course of his employment (1) if the representation is authorized; (2) if it is within the
implied authority of the agent to make for the principal; or (3) if it is apparently
authorized, regardless of whether the agent was authorized by him or not to make the
representation.37
By their continued silence, Zenaida, Milagros and Minerva have caused the Pahuds to
believe that they have indeed clothed Eufemia with the authority to transact on their
behalf. Clearly, the three co-heirs are now estopped from impugning the validity of the
sale from assailing the authority of Eufemia to enter into such transaction.
Accordingly, the subsequent sale made by the seven co-heirs to Virgilio was void
because they no longer had any interest over the subject property which they could
alienate at the time of the second transaction. 38 Nemo dat quod non habet. Virgilio,
however, could still alienate his 1/8 undivided share to the Belarminos.
The Belarminos, for their part, cannot argue that they purchased the property from
Virgilio in good faith. As a general rule, a purchaser of a real property is not required to
make any further inquiry beyond what the certificate of title indicates on its face. 39 But
the rule excludes those who purchase with knowledge of the defect in the title of the
vendor or of facts sufficient to induce a reasonable and prudent person to inquire into
the status of the property.40 Such purchaser cannot close his eyes to facts which should
put a reasonable man on guard, and later claim that he acted in good faith on the belief
that there was no defect in the title of the vendor. His mere refusal to believe that such
defect exists, or his obvious neglect by closing his eyes to the possibility of the existence
of a defect in the vendors title, will not make him an innocent purchaser for value, if
afterwards it turns out that the title was, in fact, defective. In such a case, he is deemed
to have bought the property at his own risk, and any injury or prejudice occasioned by
such transaction must be borne by him.41
In the case at bar, the Belarminos were fully aware that the property was registered not
in the name of the immediate transferor, Virgilio, but remained in the name of Pedro
San Agustin and Agatona Genil.42 This fact alone is sufficient impetus to make further
inquiry and, thus, negate their claim that they are purchasers for value in good
faith.43 They knew that the property was still subject of partition proceedings before the
trial court, and that the compromise agreement signed by the heirs was not approved by
the RTC following the opposition of the counsel for Eufemia and her six other coheirs.44 The Belarminos, being transferees pendente lite, are deemed buyers in mala
fide, and they stand exactly in the shoes of the transferor and are bound by any
judgment or decree which may be rendered for or against the transferor. 45 Furthermore,

AUGUST 2009 JURISPRUDENCE

had they verified the status of the property by asking the neighboring residents, they
would have been able to talk to the Pahuds who occupy an adjoining business
establishment46 and would have known that a portion of the property had already been
sold. All these existing and readily verifiable facts are sufficient to suggest that the
Belarminos knew that they were buying the property at their own risk.
WHEREFORE, premises considered, the April 23, 2003 Decision of the Court of
Appeals as well as its October 8, 2003 Resolution in CA-G.R. CV No. 59426, are
REVERSED and SET ASIDE. Accordingly, the January 14, 1998 Decision of Branch 92
of the Regional Trial Court of Calamba, Laguna is REINSTATED with the
MODIFICATION that the sale made by respondent Virgilio San Agustin to respondent
spouses Isagani Belarmino and Leticia Ocampo is valid only with respect to the 1/8
portion of the subject property. The trial court is ordered to proceed with the partition of
the property with dispatch.
SO ORDERED.

AUGUST 2009 JURISPRUDENCE

G.R. No. 157374

August 27, 2009

HEIRS OF CAYETANO PANGAN and CONSUELO PANGAN, * Petitioners,

vs.
SPOUSES ROGELIO PERRERAS and PRISCILLA PERRERAS, Respondents.
DECISION
BRION, J.:
The heirs1 of spouses Cayetano and Consuelo Pangan (petitioners-heirs) seek the
reversal of the Court of Appeals (CA) decision2 of June 26, 2002, as well its resolution of
February 20, 2003, in CA-G.R. CV Case No. 56590 through the present petition for
review on certiorari.3 The CA decision affirmed the Regional Trial Courts (RTC)
ruling4 which granted the complaint for specific performance filed by spouses Rogelio
and Priscilla Perreras (respondents) against the petitioners-heirs, and dismissed the
complaint for consignation instituted by Consuelo Pangan (Consuelo) against the
respondents.
THE FACTUAL ANTECEDENTS
The spouses Pangan were the owners of the lot and two-door apartment (subject
properties) located at 1142 Casaas St., Sampaloc, Manila. 5 On June 2, 1989, Consuelo
agreed to sell to the respondents the subject properties for the price of P540,000.00. On
the same day, Consuelo received P20,000.00 from the respondents as earnest money,
evidenced by a receipt (June 2, 1989 receipt)6 that also included the terms of the parties
agreement.
Three days later, or on June 5, 1989, the parties agreed to increase the purchase price
from P540,000.00 toP580,000.00.
In compliance with the agreement, the respondents issued two Far East Bank and Trust
Company checks payable to Consuelo in the amounts of P200,000.00
and P250,000.00 on June 15, 1989. Consuelo, however, refused to accept the checks.
She justified her refusal by saying that her children (the petitioners-heirs) co-owners
of the subject properties did not want to sell the subject properties. For the same
reason, Consuelo offered to return the P20,000.00 earnest money she received from the
respondents, but the latter rejected it. Thus, Consuelo filed a complaint for consignation
against the respondents on September 5, 1989, docketed as Civil Case No. 89-50258,
before the RTC of Manila, Branch 28.
The respondents, who insisted on enforcing the agreement, in turn instituted an action
for specific performance against Consuelo before the same court on September 26, 1989.
This case was docketed as Civil Case No. 89-50259. They sought to compel Consuelo

AUGUST 2009 JURISPRUDENCE

and the petitioners-heirs (who were subsequently impleaded as co-defendants) to

execute a Deed of Absolute Sale over the subject properties.
In her Answer, Consuelo claimed that she was justified in backing out from the
agreement on the ground that the sale was subject to the consent of the petitioners-heirs
who became co-owners of the property upon the death of her husband, Cayetano. Since
the petitioners-heirs disapproved of the sale, Consuelo claimed that the contract became
ineffective for lack of the requisite consent. She nevertheless expressed her willingness
to return theP20,000.00 earnest money she received from the respondents.
The RTC ruled in the respondents favor; it upheld the existence of a perfected contract
of sale, at least insofar as the sale involved Consuelos conjugal and hereditary shares in
the subject properties. The trial court found that Consuelos receipt of the P20,000.00
earnest money was an "eloquent manifestation of the perfection of the contract."
Moreover, nothing in the June 2, 1989 receipt showed that the agreement was
conditioned on the consent of the petitioners-heirs. Even so, the RTC declared that the
sale is valid and can be enforced against Consuelo; as a co-owner, she had fullownership of the part pertaining to her share which she can alienate, assign, or
mortgage. The petitioners-heirs, however, could not be compelled to transfer and deliver
their shares in the subject properties, as they were not parties to the agreement between
Consuelo and the respondents. Thus, the trial court ordered Consuelo to convey onehalf (representing Consuelos conjugal share) plus one-sixth (representing Consuelos
hereditary share) of the subject properties, and to pay P10,000.00 as attorneys fees to
the respondents. Corollarily, it dismissed Consuelos consignation complaint.
Consuelo and the petitioners-heirs appealed the RTC decision to the CA claiming that
the trial court erred in not finding that the agreement was subject to a suspensive
condition the consent of the petitioners-heirs to the agreement. The CA, however,
resolved to dismiss the appeal and, therefore, affirmed the RTC decision. As the RTC
did, the CA found that the payment and receipt of earnest money was the operative act
that gave rise to a perfected contract, and that there was nothing in the parties
agreement that would indicate that it was subject to a suspensive condition. It declared:
Nowhere in the agreement of the parties, as contained in the June 2, 1989 receipt issued
by [Consuelo] xxx, indicates that [Consuelo] reserved titled on [sic] the property, nor
does it contain any provision subjecting the sale to a positive suspensive condition.
Unconvinced by the correctness of both the RTC and the CA rulings, the petitionersheirs filed the present appeal by certiorari alleging reversible errors committed by the
appellate court.
THE PETITION

AUGUST 2009 JURISPRUDENCE

The petitioners-heirs primarily contest the finding that there was a perfected contract
executed by the parties. They allege that other than the finding that Consuelo
received P20,000.00 from the respondents as earnest money, no other evidence
supported the conclusion that there was a perfected contract between the parties; they
insist that Consuelo specifically informed the respondents that the sale still required the
petitioners-heirs consent as co-owners. The refusal of the petitioners-heirs to sell the
subject properties purportedly amounted to the absence of the requisite element of
consent.
Even assuming that the agreement amounted to a perfected contract, the petitionersheirs posed the question of the agreements proper characterization whether it is a
contract of sale or a contract to sell. The petitioners-heirs posit that the agreement
involves a contract to sell, and the respondents belated payment of part of the
purchase price, i.e., one day after the June 14, 1989 due date, amounted to the nonfulfillment of a positive suspensive condition that prevented the contract from acquiring
obligatory force. In support of this contention, the petitioners-heirs cite the Courts
ruling in the case of Adelfa Rivera, et al. v. Fidela del Rosario, et al.: 7
In a contract of sale, the title to the property passes to the vendee upon the delivery of
the thing sold; while in a contract to sell, ownership is, by agreement, reserved in the
vendor and is not to pass to the vendee until full payment of the purchase price. In a
contract to sell, the payment of the purchase price is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but a
situation that prevents the obligation of the vendor to convey title from
acquiring an obligatory force.
[Rivera], however, failed to complete payment of the second installment. The nonfulfillment of the condition rendered the contract to sell ineffective and without force
and effect. [Emphasis in the original.]
From these contentions, we simplify the basic issues for resolution to three questions:
1. Was there a perfected contract between the parties?
2. What is the nature of the contract between them? and
3. What is the effect of the respondents belated payment on their contract?
THE COURTS RULING
There was a perfected contract between the parties since all the essential
requisites of a contract were present

AUGUST 2009 JURISPRUDENCE

Article 1318 of the Civil Code declares that no contract exists unless the following
requisites concur: (1) consent of the contracting parties; (2) object certain which is the
subject matter of the contract; and (3) cause of the obligation established. Since the
object of the parties agreement involves properties co-owned by Consuelo and her
children, the petitioners-heirs insist that their approval of the sale initiated by their
mother, Consuelo, was essential to its perfection. Accordingly, their refusal amounted to
the absence of the required element of consent.
That a thing is sold without the consent of all the co-owners does not invalidate the sale
or render it void. Article 493 of the Civil Code 8 recognizes the absolute right of a coowner to freely dispose of his pro indiviso share as well as the fruits and other benefits
arising from that share, independently of the other co-owners. Thus, when Consuelo
agreed to sell to the respondents the subject properties, what she in fact sold was her
undivided interest that, as quantified by the RTC, consisted of one-half interest,
representing her conjugal share, and one-sixth interest, representing her hereditary
share.
The petitioners-heirs nevertheless argue that Consuelos consent was predicated on
their consent to the sale, and that their disapproval resulted in the withdrawal of
Consuelos consent. Yet, we find nothing in the parties agreement or even conduct
save Consuelos self-serving testimony that would indicate or from which we can infer
that Consuelos consent depended on her childrens approval of the sale. The explicit
terms of the June 8, 1989 receipt 9 provide no occasion for any reading that the
agreement is subject to the petitioners-heirs favorable consent to the sale.
The presence of Consuelos consent and, corollarily, the existence of a perfected contract
between the parties are further evidenced by the payment and receipt of P20,000.00, an
earnest money by the contracting parties common usage. The law on sales, specifically
Article 1482 of the Civil Code, provides that whenever earnest money is given in
a contract of sale, it shall be considered as part of the price and proof of
the perfection of the contract. Although the presumption is not conclusive, as the
parties may treat the earnest money differently, there is nothing alleged in the present
case that would give rise to a contrary presumption. In cases where the Court reached a
conclusion contrary to the presumption declared in Article 1482, we found that the
money initially paid was given to guarantee that the buyer would not back out from the
sale, considering that the parties to the sale have yet to arrive at a definite agreement
as to its terms that is, a situation where the contract has not yet been
perfected.10 These situations do not obtain in the present case, as neither of the parties
claimed that the P20,000.00 was given merely as guarantee by the respondents, as
vendees, that they would not back out from the sale. As we have pointed out, the terms
of the parties agreement are clear and explicit; indeed, all the essential elements of a
perfected contract are present in this case. While the respondents required that the
occupants vacate the subject properties prior to the payment of the second installment,
the stipulation does not affect the perfection of the contract, but only its execution.

AUGUST 2009 JURISPRUDENCE

In sum, the case contains no element, factual or legal, that negates the existence of a
perfected contract between the parties.
The characterization of the contract can be considered irrelevant in this
case in light of Article 1592 and the Maceda Law, and the petitioners-heirs
payment
The petitioners-heirs posit that the proper characterization of the contract entered into
by the parties is significant in order to determine the effect of the respondents breach of
the contract (which purportedly consisted of a one-day delay in the payment of part of
the purchase price) and the remedies to which they, as the non-defaulting party, are
entitled.
The question of characterization of the contract involved here would necessarily call for
a thorough analysis of the parties agreement as embodied in the June 2, 1989 receipt,
their contemporaneous acts, and the circumstances surrounding the contracts
perfection and execution. Unfortunately, the lower courts factual findings provide
insufficient detail for the purpose. A stipulation reserving ownership in the vendor until
full payment of the price is, under case law, typical in a contract to sell. 11 In this case, the
vendor made no reservation on the ownership of the subject properties. From this
perspective, the parties agreement may be considered a contract of sale. On the other
hand, jurisprudence has similarly established that the need to execute a deed of absolute
sale upon completion of payment of the price generally indicates that it is a contract to
sell, as it implies the reservation of title in the vendor until the vendee has completed the
payment of the price. When the respondents instituted the action for specific
performance before the RTC, they prayed that Consuelo be ordered to execute a Deed of
Absolute Sale; this act may be taken to conclude that the parties only entered into a
contract to sell.
Admittedly, the given facts, as found by the lower courts, and in the absence of
additional details, can be interpreted to support two conflicting conclusions. The failure
of the lower courts to pry into these matters may understandably be explained by the
issues raised before them, which did not require the additional details. Thus, they found
the question of the contracts characterization immaterial in their discussion of the facts
and the law of the case. Besides, the petitioners-heirs raised the question of the
contracts characterization and the effect of the breach for the first time through the
present Rule 45 petition.
Points of law, theories, issues and arguments not brought to the attention of the lower
court need not be, and ordinarily will not be, considered by the reviewing court, as they
cannot be raised for the first time at the appellate review stage. Basic considerations of
fairness and due process require this rule.12

AUGUST 2009 JURISPRUDENCE

At any rate, we do not find the question of characterization significant to fully pass upon
the question of default due to the respondents breach; ultimately, the breach was cured
and the contract revived by the respondents payment a day after the due date.
In cases of breach due to nonpayment, the vendor may avail of the remedy of rescission
in a contract of sale. Nevertheless, the defaulting vendee may defeat the vendors right
to rescind the contract of sale if he pays the amount due before he receives a demand for
rescission, either judicially or by a notarial act, from the vendor. This right is provided
under Article 1592 of the Civil Code:
Article 1592. In the sale of immovable property, even though it may have been stipulated
that upon failure to pay the price at the time agreed upon the rescission of the contract
shall of right take place, the vendee may pay, even after the expiration of the period, as
long as no demand for rescission of the contract has been made upon him either
judicially or by a notarial act. After the demand, the court may not grant him a new
term. [Emphasis supplied.]
Nonpayment of the purchase price in contracts to sell, however, does not constitute a
breach; rather, nonpayment is a condition that prevents the obligation from acquiring
obligatory force and results in its cancellation. We stated in Ong v. CA13 that:
In a contract to sell, the payment of the purchase price is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but a situation that
prevents the obligation of the vendor to convey title from acquiring obligatory force. The
non-fulfillment of the condition of full payment rendered the contract to sell ineffective
and without force and effect. [Emphasis supplied.]
As in the rescission of a contract of sale for nonpayment of the price, the defaulting
vendee in a contract to sell may defeat the vendors right to cancel by invoking the rights
granted to him under Republic Act No. 6552 or the Realty Installment Buyer Protection
Act (also known as the Maceda Law); this law provides for a 60-day grace period within
which the defaulting vendee (who has paid less than two years of installments) may still
pay the installments due. Only after the lapse of the grace period with continued
nonpayment of the amounts due can the actual cancellation of the contract take place.
The pertinent provisions of the Maceda Law provide:
xxxx
Section 2. It is hereby declared a public policy to protect buyers of real estate on
installment payments against onerous and oppressive conditions.
Sec. 3. In all transactions or contracts involving the sale or financing of real estate on
installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under Republic Act Numbered

AUGUST 2009 JURISPRUDENCE

Thirty-eight hundred forty-four as amended by Republic Act Numbered Sixty-three

hundred eighty-nine, where the buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he defaults in the payment of succeeding
installments:
xxxx
Section 4. In case where less than two years of installments were paid, the seller shall
give the buyer a grace period of not less than 60 days from the date the installment
became due. If the buyer fails to pay the installments due at the expiration of the grace
period, the seller may cancel the contract after thirty days from the receipt by the buyer
of the notice of cancellation or the demand for rescission of the contract by notarial act.
[Emphasis supplied.]
Significantly, the Court has consistently held that the Maceda Law covers not only sales
on installments of real estate, but also financing of such acquisition; its Section 3 is
comprehensive enough to include both contracts of sale and contracts to sell, provided
that the terms on payment of the price require at least two installments. The contract
entered into by the parties herein can very well fall under the Maceda Law.
Based on the above discussion, we conclude that the respondents payment on June 15,
1989 of the installment due on June 14, 1989 effectively defeated the petitioners-heirs
right to have the contract rescinded or cancelled. Whether the parties agreement is
characterized as one of sale or to sell is not relevant in light of the respondents payment
within the grace period provided under Article 1592 of the Civil Code and Section 4 of
the Maceda Law. The petitioners-heirs obligation to accept the payment of the price and
to convey Consuelos conjugal and hereditary shares in the subject properties subsists.
WHEREFORE, we DENY the petitioners-heirs petition for review on certiorari, and
AFFIRM the decision of the Court of Appeals dated June 24, 2002 and its resolution
dated February 20, 2003 in CA-G.R. CV Case No. 56590. Costs against the petitionersheirs.
SO ORDERED.