Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 125585 June 8, 2005

HEIRS OF EDUARDO MANLAPAT, represented by GLORIA MANLAPAT-BANAAG and LEON

M. BANAAG, JR., Petitioners,
vs.
HON. COURT OF APPEALS, RURAL BANK OF SAN PASCUAL, INC., and JOSE B. SALAZAR,
CONSUELO CRUZ and ROSALINA CRUZ-BAUTISTA, and the REGISTER OF DEEDS of
Meycauayan, Bulacan, Respondents.

DECISION

Tinga, J.:

Before this Court is a Rule 45 petition assailing the D E C I S I O N1 dated 29 September 1994 of
the Court of Appeals that reversed the D E C I S I O N2 dated 30 April 1991 of the Regional Trial
Court (RTC) of Bulacan, Branch 6, Malolos. The trial court declared Transfer Certificates of Title
(TCTs) No. T-9326-P(M) and No. T-9327-P(M) as void ab initio and ordered the restoration of
Original Certificate of Title (OCT) No. P-153(M) in the name of Eduardo Manlapat (Eduardo),
petitioners’ predecessor-in-interest.

The controversy involves Lot No. 2204, a parcel of land with an area of 1,058 square meters,
located at Panghulo, Obando, Bulacan. The property had been originally in the possession of Jose
Alvarez, Eduardo’s grandfather, until his demise in 1916. It remained unregistered until 8 October
1976 when OCT No. P-153(M) was issued in the name of Eduardo pursuant to a free patent issued
in Eduardo’s name3 that was entered in the Registry of Deeds of Meycauayan, Bulacan.4 The
subject lot is adjacent to a fishpond owned by one

Ricardo Cruz (Ricardo), predecessor-in-interest of respondents Consuelo Cruz and Rosalina Cruz-
Bautista (Cruzes).5

On 19 December 1954, before the subject lot was titled, Eduardo sold a portion thereof with an
area of 553 square meters to Ricardo. The sale is evidenced by a deed of sale entitled "Kasulatan
ng Bilihang Tuluyan ng Lupang Walang Titulo (Kasulatan)"6 which was signed by Eduardo himself
as vendor and his wife Engracia Aniceto with a certain Santiago Enriquez signing as witness. The
deed was notarized by Notary Public Manolo Cruz.7 On 4 April 1963, the Kasulatan was registered
with the Register of Deeds of Bulacan.8

On 18 March 1981, another Deed of Sale9 conveying another portion of the subject lot consisting of
50 square meters as right of way was executed by Eduardo in favor of Ricardo in order to reach
the portion covered by the first sale executed in 1954 and to have access to his fishpond from the
provincial road.10 The deed was signed by Eduardo himself and his wife Engracia Aniceto, together
with Eduardo Manlapat, Jr. and Patricio Manlapat. The same was also duly notarized on 18 July
1981 by Notary Public Arsenio Guevarra.11
In December 1981, Leon Banaag, Jr. (Banaag), as attorney-in-fact of his father-in-law Eduardo,
executed a mortgage with the Rural Bank of San Pascual, Obando Branch (RBSP),
for P100,000.00 with the subject lot as collateral. Banaag deposited the owner’s duplicate
certificate of OCT No. P-153(M) with the bank.

On 31 August 1986, Ricardo died without learning of the prior issuance of OCT No. P-153(M) in the
name of Eduardo.12 His heirs, the Cruzes, were not immediately aware of the consummated sale
between Eduardo and Ricardo.

Eduardo himself died on 4 April 1987. He was survived by his heirs, Engracia Aniceto, his spouse;
and children, Patricio, Bonifacio, Eduardo, Corazon, Anselmo, Teresita and Gloria, all surnamed
Manlapat.13 Neither did the heirs of Eduardo (petitioners) inform the Cruzes of the prior sale in
favor of their predecessor-in-interest, Ricardo. Yet subsequently, the Cruzes came to learn about
the sale and the issuance of the OCT in the name of Eduardo.

Upon learning of their right to the subject lot, the Cruzes immediately tried to confront petitioners on
the mortgage and obtain the surrender of the OCT. The Cruzes, however, were thwarted in their
bid to see the heirs. On the advice of the Bureau of Lands, NCR Office, they brought the matter to
the barangay captain of Barangay Panghulo, Obando, Bulacan. During the hearing, petitioners
were informed that the Cruzes had a legal right to the property covered by OCT and needed the
OCT for the purpose of securing a separate title to cover the interest of Ricardo. Petitioners,
however, were unwilling to surrender the OCT.14

Having failed to physically obtain the title from petitioners, in July 1989, the Cruzes instead went to
RBSP which had custody of the owner’s duplicate certificate of the OCT, earlier surrendered as a
consequence of the mortgage. Transacting with RBSP’s manager, Jose Salazar (Salazar), the
Cruzes sought to borrow the owner’s duplicate certificate for the purpose of photocopying the same
and thereafter showing a copy thereof to the Register of Deeds. Salazar allowed the Cruzes to
bring the owner’s duplicate certificate outside the bank premises when the latter showed
the Kasulatan.15 The Cruzes returned the owner’s duplicate certificate on the same day after
having copied the same. They then brought the copy of the OCT to Register of Deeds Jose Flores
(Flores) of Meycauayan and showed the same to him to secure his legal opinion as to how the
Cruzes could legally protect their interest in the property and register the same.16 Flores suggested
the preparation of a subdivision plan to be able to segregate the area purchased by Ricardo from
Eduardo and have the same covered by a separate title.17

Thereafter, the Cruzes solicited the opinion of Ricardo Arandilla (Arandilla), Land Registration
Officer, Director III, Legal Affairs Department, Land Registration Authority at Quezon City, who
agreed with the advice given by Flores.18 Relying on the suggestions of Flores and Arandilla, the
Cruzes hired two geodetic engineers to prepare the corresponding subdivision plan. The
subdivision plan was presented to the Land Management Bureau, Region III, and there it was
approved by a certain Mr. Pambid of said office on 21 July 1989.

After securing the approval of the subdivision plan, the Cruzes went back to RBSP and again
asked for the owner’s duplicate certificate from Salazar. The Cruzes informed him that the
presentation of the owner’s duplicate certificate was necessary, per advise of the Register of
Deeds, for the cancellation of the OCT and the issuance in lieu thereof of two separate titles in the
names of Ricardo and Eduardo in accordance with the approved subdivision plan. 19Before giving
the owner’s duplicate certificate, Salazar required the Cruzes to see Atty. Renato Santiago (Atty.
Santiago), legal counsel of RBSP, to secure from the latter a clearance to borrow the title. Atty.
Santiago would give the clearance on the condition that only Cruzes put up a substitute collateral,
which they did.20 As a result, the Cruzes got hold again of the owner’s duplicate certificate.

After the Cruzes presented the owner’s duplicate certificate, along with the deeds of sale and the
subdivision plan, the Register of Deeds cancelled the OCT and issued in lieu thereof TCT No. T-
9326-P(M) covering 603 square meters of Lot No. 2204 in the name of Ricardo and TCT No. T-
9327-P(M) covering the remaining 455 square meters in the name of Eduardo.21

On 9 August 1989, the Cruzes went back to the bank and surrendered to Salazar TCT No. 9327-
P(M) in the name of Eduardo and retrieved the title they had earlier given as substitute collateral.
After securing the new separate titles, the Cruzes furnished petitioners with a copy of TCT No.
9327-P(M) through the barangay captain and paid the real property tax for 1989.22

The Cruzes also sent a formal letter to Guillermo Reyes, Jr., Director, Supervision Sector,
Department III of the Central Bank of the Philippines, inquiring whether they committed any
violation of existing bank laws under the circumstances. A certain Zosimo Topacio, Jr. of the
Supervision Sector sent a reply letter advising the Cruzes, since the matter is between them and
the bank, to get in touch with the bank for the final settlement of the case.23

In October of 1989, Banaag went to RBSP, intending to tender full payment of the mortgage
obligation. It was only then that he learned of the dealings of the Cruzes with the bank which
eventually led to the subdivision of the subject lot and the issuance of two separate titles thereon.
In exchange for the full payment of the loan, RBSP tried to persuade petitioners to accept TCT No.
T-9327-P(M) in the name of Eduardo.24

As a result, three (3) cases were lodged, later consolidated, with the trial court, all involving the
issuance of the TCTs, to wit:

(1) Civil Case No. 650-M-89, for reconveyance with damages filed by the heirs of Eduardo
Manlapat against Consuelo Cruz, Rosalina Cruz-Bautista, Rural Bank of San Pascual, Jose
Salazar and Jose Flores, in his capacity as Deputy Registrar, Meycauayan Branch of the
Registry of Deeds of Bulacan;

(2) Civil Case No. 141-M-90 for damages filed by Jose Salazar against Consuelo Cruz, et.
[sic] al.; and

(3) Civil Case No. 644-M-89, for declaration of nullity of title with damages filed by Rural
Bank of San Pascual, Inc. against the spouses Ricardo Cruz and Consuelo Cruz, et al. 25

After trial of the consolidated cases, the RTC of Malolos rendered a decision in favor of the heirs of
Eduardo, the dispositive portion of which reads:

WHEREFORE, premised from the foregoing, judgment is hereby rendered:

1.–Declaring Transfer Certificates of Title Nos. T-9326-P(M) and T-9327-P(M) as void ab

initio and ordering the Register of Deeds, Meycauayan Branch to cancel said titles and to
restore Original Certificate of Title No. P-153(M) in the name of plaintiffs’ predecessor-in-
interest Eduardo Manlapat;
 2.-Ordering the defendants Rural Bank of San Pascual, Jose Salazar, Consuelo Cruz and
Rosalina Cruz-Bautista, to pay the plaintiffs Heirs of Eduardo Manlapat, jointly and severally,
the following:

a)P200,000.00 as moral damages;

b)P50,000.00 as exemplary damages;

c)P20,000.00 as attorney’s fees; and

d)the costs of the suit.

3.–Dismissing the counterclaims.

SO ORDERED."26

The trial court found that petitioners were entitled to the reliefs of reconveyance and damages. On
this matter, it ruled that petitioners were bona fide mortgagors of an unclouded title bearing no
annotation of any lien and/or encumbrance. This fact, according to the trial court, was confirmed by
the bank when it accepted the mortgage unconditionally on 25 November 1981. It found that
petitioners were complacent and unperturbed, believing that the title to their property, while serving
as security for a loan, was safely vaulted in the impermeable confines of RBSP. To their surprise
and prejudice, said title was subdivided into two portions, leaving them a portion of 455 square
meters from the original total area of 1,058 square meters, all because of the fraudulent and
negligent acts of respondents and RBSP. The trial court ratiocinated that even assuming that a
portion of the subject lot was sold by Eduardo to Ricardo, petitioners were still not privy to the
transaction between the bank and the Cruzes which eventually led to the subdivision of the OCT
into TCTs No. T-9326-P(M) and No. T-9327-P(M), clearly to the damage and prejudice of
petitioners.27

Concerning the claims for damages, the trial court found the same to be bereft of merit. It ruled that
although the act of the Cruzes could be deemed fraudulent, still it would not constitute intrinsic
fraud. Salazar, nonetheless, was clearly guilty of negligence in letting the Cruzes borrow the
owner’s duplicate certificate of the OCT. Neither the bank nor its manager had business entrusting
to strangers titles mortgaged to it by other persons for whatever reason. It was a clear violation of
the mortgage and banking laws, the trial court concluded.

The trial court also ruled that although Salazar was personally responsible for allowing the title to
be borrowed, the bank could not escape liability for it was guilty of contributory negligence. The
evidence showed that RBSP’s legal counsel was sought for advice regarding respondents’ request.
This could only mean that RBSP through its lawyer if not through its manager had known in
advance of the Cruzes’ intention and still it did nothing to prevent the eventuality. Salazar was not
even summarily dismissed by the bank if he was indeed the sole person to blame. Hence, the
bank’s claim for damages must necessarily fail.28

The trial court granted the prayer for the annulment of the TCTs as a necessary consequence of its
declaration that reconveyance was in order. As to Flores, his work being ministerial as Deputy
Register of the Bulacan Registry of Deeds, the trial court absolved him of any liability with a stern
warning that he should deal with his future transactions more carefully and in the strictest sense as
a responsible government official.29

Aggrieved by the decision of the trial court, RBSP, Salazar and the Cruzes appealed to the Court
of Appeals. The appellate court, however, reversed the decision of the RTC. The decretal text of
the decision reads:

THE FOREGOING CONSIDERED, the appealed decision is hereby reversed and set aside, with
costs against the appellees.

SO ORDERED.30

The appellate court ruled that petitioners were not bona fide mortgagors since as early as 1954 or
before the 1981 mortgage, Eduardo already sold to Ricardo a portion of the subject lot with an area
of 553 square meters. This fact, the Court of Appeals noted, is even supported by a document of
sale signed by Eduardo Jr. and Engracia Aniceto, the surviving spouse of Eduardo, and registered
with the Register of Deeds of Bulacan. The appellate court also found that on 18 March 1981, for
the second time, Eduardo sold to Ricardo a separate area containing 50 square meters, as a road
right-of-way.31 Clearly, the OCT was issued only after the first sale. It also noted that the title was
given to the Cruzes by RBSP voluntarily, with knowledge even of the bank’s counsel. 32 Hence, the
imposition of damages cannot be justified, the Cruzes themselves being the owners of the
property. Certainly, Eduardo misled the bank into accepting the entire area as a collateral since the
603-square meter portion did not anymore belong to him. The appellate court, however, concluded
that there was no conspiracy between the bank and Salazar.33

Hence, this petition for review on certiorari.

Petitioners ascribe errors to the appellate court by asking the following questions, to wit: (a) can a
mortgagor be compelled to receive from the mortgagee a smaller portion of the originally
encumbered title partitioned during the subsistence of the mortgage, without the knowledge of, or
authority derived from, the registered owner; (b) can the mortgagee question the veracity of the
registered title of the mortgagor, as noted in the owner’s duplicate certificate, and thus, deliver the
certificate to such third persons, invoking an adverse, prior, and unregistered claim against the
registered title of the mortgagor; (c) can an adverse prior claim against a registered title be noted,
registered and entered without a competent court order; and (d) can belief of ownership justify the
taking of property without due process of law?34

The kernel of the controversy boils down to the issue of whether the cancellation of the OCT in the
name of the petitioners’ predecessor-in-interest and its splitting into two separate titles, one for the
petitioners and the other for the Cruzes, may be accorded legal recognition given the peculiar
factual backdrop of the case. We rule in the affirmative.

Private respondents (Cruzes) own

the portion titled in their names

Consonant with law and justice, the ultimate denouement of the property dispute lies in the
determination of the respective bases of the warring claims. Here, as in other legal disputes, what
is written generally deserves credence.
A careful perusal of the evidence on record reveals that the Cruzes have sufficiently proven their
claim of ownership over the portion of Lot No. 2204 with an area of 553 square meters. The duly
notarized instrument of conveyance was executed in 1954 to which no less than Eduardo was a
signatory. The execution of the deed of sale was rendered beyond doubt by Eduardo’s admission
in his Sinumpaang Salaysay dated 24 April 1963.35 These documents make the affirmance of the
right of the Cruzes ineluctable. The apparent irregularity, however, in the obtention of the owner’s
duplicate certificate from the bank, later to be presented to the Register of Deeds to secure the
issuance of two new TCTs in place of the OCT, is another matter.

Petitioners argue that the 1954 deed of sale was not annotated on the OCT which was issued in
1976 in favor of Eduardo; thus, the Cruzes’ claim of ownership based on the sale would not hold
water. The Court is not persuaded.

Registration is not a requirement for validity of the contract as between the parties, for the effect of
registration serves chiefly to bind third persons.36 The principal purpose of registration is merely to
notify other persons not parties to a contract that a transaction involving the property had been
entered into. 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.37

Further, the heirs of Eduardo cannot be considered third persons for purposes of applying the rule.
The conveyance shall not be valid against any person unless registered, except (1) the grantor, (2)
his heirs and devisees, and (3) third persons having actual notice or knowledge thereof. 38 Not only
are petitioners the heirs of Eduardo, some of them were actually parties to the Kasulatan executed
in favor of Ricardo. Thus, the annotation of the adverse claim of the Cruzes on the OCT is no
longer required to bind the heirs of Eduardo, petitioners herein.

Petitioners had no right to constitute

mortgage over disputed portion

The requirements of a valid mortgage are clearly laid down in Article 2085 of the New Civil
Code, viz:

ART. 2085. The following requisites are essential to the contracts of pledge and mortgage:

(1) That they be constituted to secure the fulfillment of a principal obligation;

(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or
mortgaged;

(3) That the persons constituting the pledge or mortgage have the free disposal of their
property, and in the absence thereof, that they be legally authorized for the purpose.

Third persons who are not parties to the principal obligation may secure the latter by pledging or
mortgaging their own property. (emphasis supplied)

For a person to validly constitute a valid mortgage on real estate, he must be the absolute owner
thereof as required by Article 2085 of the New Civil Code.39 The mortgagor must be the owner,
otherwise the mortgage is void.40 In a contract of mortgage, the mortgagor remains to be the owner
of the property although the property is subjected to a lien.41 A mortgage is regarded as nothing
more than a mere lien, encumbrance, or security for a debt, and passes no title or estate to the
mortgagee and gives him no right or claim to the possession of the property.42 In this kind of
contract, the property mortgaged is merely delivered to the mortgagee to secure the fulfillment of
the principal obligation.43 Such delivery does not empower the mortgagee to convey any portion
thereof in favor of another person as the right to dispose is an attribute of ownership.44 The right to
dispose includes the right to donate, to sell, to pledge or mortgage. Thus, the mortgagee, not being
the owner of the property, cannot dispose of the whole or part thereof nor cause the impairment of
the security in any manner without violating the foregoing rule.45 The mortgagee only owns the
mortgage credit, not the property itself.46

Petitioners submit as an issue whether a mortgagor may be compelled to receive from the
mortgagee a smaller portion of the lot covered by the originally encumbered title, which lot was
partitioned during the subsistence of the mortgage without the knowledge or authority of the
mortgagor as registered owner. This formulation is disingenuous, baselessly assuming, as it does,
as an admitted fact that the mortgagor is the owner of the mortgaged property in its entirety.
Indeed, it has not become a salient issue in this case since the mortgagor was not the owner of the
entire mortgaged property in the first place.

Issuance of OCT No. P-153(M), improper

It is a glaring fact that OCT No. P-153(M) covering the property mortgaged was in the name of
Eduardo, without any annotation of any prior disposition or encumbrance. However, the property
was sufficiently shown to be not entirely owned by Eduardo as evidenced by
the Kasulatan. Readily apparent upon perusal of the records is that the OCT was issued in 1976,
long after the Kasulatan was executed way back in 1954. Thus, a portion of the property registered
in Eduardo’s name arising from the grant of free patent did not actually belong to him. The
utilization of the Torrens system to perpetrate fraud cannot be accorded judicial sanction.

Time and again, this Court has ruled that the principle of indefeasibility of a Torrens title does not
apply where fraud attended the issuance of the title, as was conclusively established in this case.
The Torrens title does not furnish a shied for fraud.47 Registration does not vest title. It is not a
mode of acquiring ownership but is merely evidence of such title over a particular property. It does
not give the holder any better right than what he actually has, especially if the registration was
done in bad faith. The effect is that it is as if no registration was made at all.48 In fact, this Court has
ruled that a decree of registration cut off or extinguished a right acquired by a person when such
right refers to a lien or encumbrance on the land¾not to the right of ownership thereof¾which was
not annotated on the certificate of title issued thereon.49

Issuance of TCT Nos. T-9326-P(M)

and T-9327-P(M), Valid

The validity of the issuance of two TCTs, one for the portion sold to the predecessor-in-interest of
the Cruzes and the other for the portion retained by petitioners, is readily apparent from Section 53
of the Presidential Decree (P.D.) No. 1529 or the Property Registration Decree. It provides:

SEC 53. Presentation of owner’s duplicate upon entry of new certificate. – No voluntary instrument
shall be registered by the Register of Deeds, unless the owner’s duplicate certificate is presented
with such instrument, except in cases expressly provided for in this Decree or upon order of the
court, for cause shown.

The production of the owner’s duplicate certificate, whenever any voluntary instrument is
presented for registration, shall be conclusive authority from the registered owner to the
Register of Deeds to enter a new certificate or to make a memorandum of registration in
accordance with such instrument, and the new certificate or memorandum shall be binding upon
the registered owner and upon all persons claiming under him, in favor of every purchaser for value
and in good faith.

In all cases of registration procured by fraud, the owner may pursue all his legal and equitable
remedies against the parties to such fraud without prejudice, however, to the rights of any innocent
holder of the decree of registration on the original petition or application, any subsequent
registration procured by the presentation of a forged duplicate certificate of title, or a forged deed or
instrument, shall be null and void. (emphasis supplied)

Petitioners argue that the issuance of the TCTs violated the third paragraph of Section 53 of P.D.
No. 1529. The argument is baseless. It must be noted that the provision speaks of forged duplicate
certificate of title and forged deed or instrument. Neither instance obtains in this case. What the
Cruzes presented before the Register of Deeds was the very genuine owner’s duplicate certificate
earlier deposited by Banaag, Eduardo’s attorney-in-fact, with RBSP. Likewise, the instruments of
conveyance are authentic, not forged. Section 53 has never been clearer on the point that as long
as the owner’s duplicate certificate is presented to the Register of Deeds together with the
instrument of conveyance, such presentation serves as conclusive authority to the Register of
Deeds to issue a transfer certificate or make a memorandum of registration in accordance with the
instrument.

The records of the case show that despite the efforts made by the Cruzes in persuading the heirs
of Eduardo to allow them to secure a separate TCT on the claimed portion, their ownership being
amply evidenced by the Kasulatan and Sinumpaang Salaysay where Eduardo himself
acknowledged the sales in favor of Ricardo, the heirs adamantly rejected the notion of separate
titling. This prompted the Cruzes to approach the bank manager of RBSP for the purpose of
protecting their property right. They succeeded in persuading the latter to lend the owner’s
duplicate certificate. Despite the apparent irregularity in allowing the Cruzes to get hold of the
owner’s duplicate certificate, the bank officers consented to the Cruzes’ plan to register the deeds
of sale and secure two new separate titles, without notifying the heirs of Eduardo about it.

Further, the law on the matter, specifically P.D. No. 1529, has no explicit requirement as to the
manner of acquiring the owner’s duplicate for purposes of issuing a TCT. This led the Register of
Deeds of Meycauayan as well as the Central Bank officer, in rendering an opinion on the legal
feasibility of the process resorted to by the Cruzes. Section 53 of P.D. No. 1529 simply requires the
production of the owner’s duplicate certificate, whenever any voluntary instrument is presented for
registration, and the same shall be conclusive authority from the registered owner to the Register
of Deeds to enter a new certificate or to make a memorandum of registration in accordance with
such instrument, and the new certificate or memorandum shall be binding upon the registered
owner and upon all persons claiming under him, in favor of every purchaser for value and in good
faith.
Quite interesting, however, is the contention of the heirs of Eduardo that the surreptitious lending of
the owner’s duplicate certificate constitutes fraud within the ambit of the third paragraph of Section
53 which could nullify the eventual issuance of the TCTs. Yet we cannot subscribe to their position.

Impelled by the inaction of the heirs of Eduardo as to their claim, the Cruzes went to the bank
where the property was mortgaged. Through its manager and legal officer, they were assured of
recovery of the claimed parcel of land since they are the successors-in-interest of the real owner
thereof. Relying on the bank officers’ opinion as to the legality of the means sought to be employed
by them and the suggestion of the Central Bank officer that the matter could be best settled
between them and the bank, the Cruzes pursued the titling of the claimed portion in the name of
Ricardo. The Register of Deeds eventually issued the disputed TCTs.

The Cruzes resorted to such means to protect their interest in the property that rightfully belongs to
them only because of the bank officers’ acquiescence thereto. The Cruzes could not have secured
a separate TCT in the name of Ricardo without the bank’s approval. Banks, their business being
impressed with public interest, are expected to exercise more care and prudence than private
individuals in their dealings, even those involving registered lands.50 The highest degree of
diligence is expected, and high standards of integrity and performance are even required of it. 51

Indeed, petitioners contend that the mortgagee cannot question the veracity of the registered title
of the mortgagor as noted in the owner’s duplicate certificate, and, thus, he cannot deliver the
certificate to such third persons invoking an adverse, prior, and unregistered claim against the
registered title of the mortgagor. The strength of this argument is diluted by the peculiar factual
milieu of the case.

A mortgagee can rely on what appears on the certificate of title presented by the mortgagor and an
innocent mortgagee is not expected to conduct an exhaustive investigation on the history of the
mortgagor’s title. This rule is strictly applied to banking institutions. A mortgagee-bank must
exercise due diligence before entering into said contract. Judicial notice is taken of the standard
practice for banks, before approving a loan, to send representatives to the premises of the land
offered as collateral and to investigate who the real owners thereof are.52

Banks, indeed, should exercise more care and prudence in dealing even with registered lands,
than private individuals, as their business is one affected with public interest. Banks keep in trust
money belonging to their depositors, which they should guard against loss by not committing any
act of negligence that amounts to lack of good faith. Absent good faith, banks would be denied the
protective mantle of the land registration statute, Act 496, which extends only to purchasers for
value and good faith, as well as to mortgagees of the same character and description.53 Thus, this
Court clarified that the rule that persons dealing with registered lands can rely solely on the
certificate of title does not apply to banks.54

Bank Liable for Nominal Damages

Of deep concern to this Court, however, is the fact that the bank lent the owner’s duplicate of the
OCT to the Cruzes when the latter presented the instruments of conveyance as basis of their claim
of ownership over a portion of land covered by the title. Simple rationalization would dictate that a
mortgagee-bank has no right to deliver to any stranger any property entrusted to it other than to
those contractually and legally entitled to its possession. Although we cannot dismiss the bank’s
acknowledgment of the Cruzes’ claim as legitimized by instruments of conveyance in their
possession, we nonetheless cannot sanction how the bank was inveigled to do the bidding of
virtual strangers. Undoubtedly, the bank’s cooperative stance facilitated the issuance of the TCTs.
To make matters worse, the bank did not even notify the heirs of Eduardo. The conduct of the bank
is as dangerous as it is unthinkably negligent. However, the aspect does not impair the right of the
Cruzes to be recognized as legitimate owners of their portion of the property.

Undoubtedly, in the absence of the bank’s participation, the Register of Deeds could not have
issued the disputed TCTs. We cannot find fault on the part of the Register of Deeds in issuing the
TCTs as his authority to issue the same is clearly sanctioned by law. It is thus ministerial on the
part of the Register of Deeds to issue TCT if the deed of conveyance and the original owner’s
duplicate are presented to him as there appears on theface of the instruments no badge of
irregularity or nullity.55 If there is someone to blame for the shortcut resorted to by the Cruzes, it
would be the bank itself whose manager and legal officer helped the Cruzes to facilitate the
issuance of the TCTs.1avvphi1

The bank should not have allowed complete strangers to take possession of the owner’s duplicate
certificate even if the purpose is merely for photocopying for a danger of losing the same is more
than imminent. They should be aware of the conclusive presumption in

Section 53. Such act constitutes manifest negligence on the part of the bank which would
necessarily hold it liable for damages under Article 1170 and other relevant provisions of the Civil
Code.56

In the absence of evidence, the damages that may be awarded may be in the form of nominal
damages. Nominal damages are adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.57This award rests on the mortgagor’s right to
rely on the bank’s observance of the highest diligence in the conduct of its business. The act of
RBSP of entrusting to respondents the owner’s duplicate certificate entrusted to it by the mortgagor
without even notifying the mortgagor and absent any prior investigation on the veracity of
respondents’ claim and

character is a patent failure to foresee the risk created by the act in view of the provisions of
Section 53 of P.D. No. 1529. This act runs afoul of every bank’s mandate to observe the highest
degree of diligence in dealing with its clients. Moreover, a mortgagor has also the right to be
afforded due process before deprivation or diminution of his property is effected as the OCT was
still in the name of Eduardo. Notice and hearing are indispensable elements of this right which the
bank miserably ignored.

Under the circumstances, the Court believes the award of P50,000.00 as nominal damages is
appropriate.

Five-Year Prohibition against alienation

or encumbrance under the Public Land Act

One vital point. Apparently glossed over by the courts below and the parties is an aspect which is
essential, spread as it is all over the record and intertwined with the crux of the controversy,
relating as it does to the validity of the dispositions of the subject property and the mortgage
thereon. Eduardo was issued a title in 1976 on the basis of his free patent application. Such
application implies the recognition of the public dominion character of the land and, hence, the five
(5)-year prohibition imposed by the Public Land Act against alienation or encumbrance of the land
covered by a free patent or homestead58 should have been considered.

The deed of sale covering the fifty (50)-square meter right of way executed by Eduardo on 18
March 1981 is obviously covered by the proscription, the free patent having been issued on 8
October 1976. However, petitioners may recover the portion sold since the prohibition was
imposed in favor of the free patent holder. In Philippine National Bank v. De los Reyes,59 this Court
ruled squarely on the point, thus:

While the law bars recovery in a case where the object of the contract is contrary to law and one or
both parties acted in bad faith, we cannot here apply the doctrine of in pari delicto which admits of
an exception, namely, that when the contract is merely prohibited by law, not illegal per se, and the
prohibition is designed for the protection of the party seeking to recover, he is entitled to the relief
prayed for whenever public policy is enhanced thereby. Under the Public Land Act, the prohibition
to alienate is predicated on the fundamental policy of the State to preserve and keep in the family
of the homesteader that portion of public land which the State has gratuitously given to him, and
recovery is allowed even where the land acquired under the Public Land Act was sold and not
merely encumbered, within the prohibited period.60

The sale of the 553 square meter portion is a different story. It was executed in 1954, twenty-two
(22) years before the issuance of the patent in 1976. Apparently, Eduardo disposed of the portion
even before he thought of applying for a free patent. Where the sale or transfer took place before
the filing of the free patent application, whether by the vendor or the vendee, the prohibition should
not be applied. In such situation, neither the prohibition nor the rationale therefor which is to keep
in the family of the patentee that portion of the public land which the government has gratuitously
given him, by shielding him from the temptation to dispose of his landholding, could be relevant.
Precisely, he had disposed of his rights to the lot even before the government could give the title to
him.

The mortgage executed in favor of RBSP is also beyond the pale of the prohibition, as it was
forged in December 1981 a few months past the period of prohibition.

WHEREFORE, the Decision of the Court of Appeals is AFFIRMED, subject to the modifications
herein. Respondent Rural Bank of San Pascual is hereby ORDERED to PAY petitioners Fifty
Thousand Pesos (P50,000.00) by way of nominal damages. Respondents Consuelo Cruz and
Rosalina Cruz-Bautista are hereby DIVESTED of title to, and respondent Register of Deeds of
Meycauayan, Bulacan is accordingly ORDERED to segregate, the portion of fifty (50) square
meters of the subject Lot No. 2204, as depicted in the approved plan covering the lot, marked as
Exhibit "A", and to issue a new title covering the said portion in the name of the petitioners at the
expense of the petitioners. No costs.

SO ORDERED.

DANTE O. TINGA Associate Justice

WE CONCUR:
 (On Official Leave)
REYNATO S. PUNO*
Associate Justice
Chairman

MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice
Acting Chairman

MINITA V. CHICO-NAZARIO
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice
Acting Chairman, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairman’s Attestation, it is
hereby certified that the conclusions in the above Decision were reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.

HILARIO G. DAVIDE, JR.

Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 161136 November 16, 2006

WILFREDO T. VAGILIDAD and LOLITA A. VAGILIDAD, Petitioners,

vs.
GABINO VAGILIDAD, Jr. and DOROTHY VAGILIDAD, Respondents.

DECISION

PUNO, J.:

This is a Petition for Review on Certiorari of the Decision 1 and Resolution2 of the Court of Appeals
in CA-G.R. No. CV-68318 dated March 19, 2003 and November 13, 2003, respectively, reversing
and setting aside the decision of the Regional Trial Court of Antique, Sixth Judicial Region, Branch
II, in Civil Case No. 2825 dated January 26, 1999.

The facts are stated in the assailed Decision3 of the appellate court, viz.:

A parcel of land, Lot No. 1253, situated in Atabay, San Jose, Antique, measuring 4,280 square
meters, was owned by Zoilo [Labiao] (hereafter ZOILO) as per Original Certificate of Title No. RO-
2301 issued on March 3, 1931. Sometime in 1931, ZOILO died. Subsequently, on May 12, 1986,
Loreto Labiao (hereafter LORETO), son of ZOILO, sold to Gabino Vagilidad Jr. (hereafter GABINO
JR.) a portion of Lot No. 1253 (hereafter Lot 1253-B), measuring 1,604 square meters as
evidenced by the Deed of Absolute Sale executed by LORETO.

In view of the death of ZOILO, his children, LORETO, Efren Labiao (hereafter EFREN) and Priscilla
Espanueva (hereafter PRISCILLA) executed an Extrajudicial x x x Settlement of Estate dated
January 20, 1987, adjudicating the entire Lot No. 1253, covering 4,280 square meters, to
LORETO. On January 29, 1987, Transfer Certificate of Title (TCT) No. T-16693 was issued in favor
of LORETO, EFREN and PRISCILLA, but on even date, TCT No. T-16693 was cancelled and TCT
No. T-16694, covering the said property, was issued in the name of LORETO alone.

On July 31, 1987, GABINO JR., as petitioner, filed a Petition for the Surrender of TCT No. T-
16694, covering Lot No. 1253, with the Regional Trial Court of San Jose City, Sixth Judicial
Region, against LORETO, docketed as Cadastral Case No. 87-731-A. The plaintiff alleged that,
being the owner of x x x Lot No. 1253-B, under TCT No. T-16694, by virtue of the sale that took
place on May 12, 1986, he is entitled to ask for the surrender of the owner’s copy of TCT No. T-
16694 to the Register of Deeds of Antique in order to effect the transfer of title to the name of the
petitioner. However, as per motion of both counsels[,] since the parties seemed to have already
reached an amicable settlement without the knowledge of their counsels, the trial court issued an
Order dated March 21, 1994 sending the case to the archives.

On September 21, 1988, [GABINO JR.] paid real estate taxes on the land he bought from LORETO
as per Tax Declaration No. 1038 where the property was specified as Lot No. 1253-B. GABINO JR.
thereafter sold the same lot to Wilfredo Vagilidad (hereafter WILFREDO) as per Deed of Absolute
Sale dated December 7, 1989. On even date, Deed of Absolute Sale of a Portion of Land involving
the opt-described property was also executed by LORETO in favor of WILFREDO. The
aforementioned deeds, which were both executed on December 7, 1989 [and] notarized by Atty.
Warloo Cardenal[,] [appear] to have been given the same entry number in his notarial books as
both contained the designation "Document No. 236, Page No. 49, Book No. XI, Series of 1989[."]

Corollarily, on February 14, 1990, the sale of Lot No. 1253-B to WILFREDO was registered with
the Registry of Deeds of the Province of Antique under Entry No. 180425. Consequently, TCT No.
T-18023, cancelling TCT No. 16694, was issued in favor of WILFREDO pursuant to the Deed of
Absolute Sale dated December 7, 1989.

On October 24, 1991, spouses WILFREDO and LOLITA obtained a loan from the Philippine
National Bank (PNB for brevity) in the amount of P150,000.00 and mortgaged Lot No. 1253-B as
collateral of the said loan and the transaction was inscribed at the back of TCT No. 18023 as Entry
No. 186876. Subsequently, the xxx real estate mortgage was cancelled under Entry No. 191053 as
per inscription dated November 17, 1992 in xxx TCT No. 18023.

Subsequently, WILFREDO obtained another loan from Development Bank of the Philippines (DBP
for brevity) in the amount of P200,000.00 and mortgaged Lot No. 1253-B as collateral of the xxx
loan and the transaction was inscribed at the back of TCT No. 18023 as Entry No. 196268. The
said loan was paid and, consequently, the mortgage was cancelled as Entry No. 202500.

On September 29, 1995, spouses GABINO and Ma. Dorothy Vagilidad (hereafter DOROTHY), as
plaintiffs, filed a Complaint for Annulment of Document, Reconveyance and Damages, with the
Regional Trial Court of Antique, Sixth Judicial Region, Branch 11, against spouses WILFREDO
and Lolita Vagilidad (hereafter LOLITA), docketed as Civil Case No. 2825. The plaintiffs claimed
that they are the lawful owners of Lot No. 1253-B which was sold to him by LORETO in 1986. They
alleged that [GABINO JR.] is a nephew of defendant WILFREDO. They likewise raised that when
GABINO SR. died, defendant WILFREDO requested GABINO JR. to transfer the ownership of Lot
No. 1253-B in defendant WILFREDO’s name for loaning purposes with the agreement that the land
will be returned when the plaintiffs need the same. They added that, pursuant to the mentioned
agreement, plaintiff GABINO JR., without the knowledge and consent of his spouse, DOROTHY,
executed the Deed of Sale dated December 7, 1989 in favor of defendant WILFREDO receiving
nothing as payment therefor. They pointed out that after defendant WILFREDO was able to
mortgage the property, plaintiffs demanded the return of the property but the defendants refused to
return the same. The plaintiffs claimed that the same document is null and void for want of
consideration and the same does not bind the non-consenting spouse. They likewise prayed that
the defendant be ordered to pay the plaintiffs not less than P100,000.00 as actual and moral
damages, P10,000.00 as attorney’s fees and P5,000.00 as litigation expenses.

For their part, the defendants, on January 15, 1996, filed their Answer, denying the material
allegations of the plaintiffs. Defendants claimed that they are the lawful owners of Lot No. 1253-B.
They alleged that LORETO, with conformity of his wife, sold to them Lot No. 1253 on December 7,
1989 for P5,000.00 and the transaction was registered with the Register of Deeds of the Province
of Antique under Entry No. 180425. They added that, subsequently, TCT No. T-18023, covering
Lot No. 1253-B, was issued in favor of the defendants. Hence, they claimed that the plaintiffs be
directed to pay the defendants P200,000.00 as moral damages, P50,000.00 as exemplary
damages, P20,000.00 as attorney’s fees and P30,000.00 for litigation expenses.4
The trial court ruled in favor of petitioners WILFREDO and LOLITA and held that LORETO did not
validly convey Lot No. 1253-B to GABINO, JR. on May 12, 1986 since at that time, the heirs of
ZOILO had not partitioned Lot No. 1253.5 It ruled that LORETO could only sell at that time his
aliquot share in the inheritance. He could not have sold a divided part thereof designated by metes
and bounds. Thus, it held that LORETO remained the owner of the subject lot when he sold it to
WILFREDO on December 7, 1989. It further found that there was no proof that WILFREDO knew
of the sale that took place between LORETO and GABINO, JR. on May 12, 1986. The dispositive
portion of the decision states:

WHEREFORE, in view of the foregoing pronouncements and a preponderance of evidence,

judgment is hereby rendered:

1. FINDING the defendants WILFREDO VAGILIDAD and LOLITA VAGILIDAD to have duly
acquired ownership of Lot No. 1253-B containing an area of 1,604 square meters, more or
less, situated in San Jose, Antique;

2. SUSTAINING the validity of Transfer Certificate of Title No. T-18023 covering the subject
Lot No. 1253-B and issued in the name of the defendant WILFREDO VAGILIDAD, married
to the defendant LOLITA VAGILIDAD;

3. DISMISSING the complaint of the plaintiffs GABINO VAGILIDAD, JR. and MA.
DOROTHY VAGILIDAD, as well as the counterclaims of the defendants WILFREDO
VAGILIDAD and LOLITA VAGILIDAD and of the defendants LORETO LABIAO and
FRANCISCA LABIAO; and

4. PRONOUNCING no cost.6

GABINO, JR. and DOROTHY filed an appeal with the Court of Appeals. The appellate court
reversed and set aside the decision of the court a quo, viz.:

WHEREFORE, premises considered, the Decision dated January 26, 1999 of the Regional Trial
Court of Antique, Sixth Judicial Region, Branch 11, in Civil Case No. 2825, is hereby REVERSED
and SET ASIDE and a new one is entered: (1) declaring the Deed of Absolute Sale [of Portion of
Land] dated December 7, 1989 executed by appellee LORETO in favor of appellee WILFREDO
null and void; (2) ordering the defendants-appellees WILFREDO and LOLITA to reconvey Lot No.
1253-B to plaintiffs-appellants GABINO, JR. and DOROTHY; and (3) ordering the defendants-
appellees to pay the plaintiffs-appellants P100,000.00 as moral damages, P10,000.00 as attorney’s
fees and P5,000.00 as litigation expenses.7

The appellate court ruled that the sale made by LORETO in favor of GABINO, JR. on May 12,
1986 is valid. The rights of LORETO to succession are transmitted from the moment of ZOILO’s
death in 1931. Thus, when LORETO sold the 1,604-square meter portion of Lot No. 1253 to
GABINO JR., he already had the right as co-owner to his share to Lot No. 1253, even if at that time
the property had not yet been partitioned. Consequently, the sale made by LORETO in favor of
WILFREDO on December 7, 1989 is void because LORETO and FRANCISCA were no longer the
owners of Lot No. 1253-B as of that time. The appellate court also held WILFREDO and LOLITA
liable for moral damages for falsifying the fictitious deeds of sale on December 7, 1989.
WILFREDO and LOLITA moved for reconsideration but the motion was denied in the questioned
Resolution dated November 13, 2003. Hence, this petition for review on certiorari raising the
following errors:

THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING ARTICLE 1349

AND ARTICLE 1460 OF THE NEW CIVIL CODE IN THE CASE AT BAR.

II

THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE PROVISION

OF ARTICLE 1544 OF THE NEW CIVIL CODE AND THE DOCTRINE OF DOUBLE SALE
THAT THE BUYER WHO IS IN POSSESSION OF THE TORRENS TITLE AND HAD THE
DEED OF SALE REGISTERED MUST PREVAIL.

III

THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING ARTICLE 1391 OF

THE NEW CIVIL CODE AND THE DOCTRINE THAT IN CASE OF FRAUD, ACTION FOR
RECONVEYANCE MUST BE BROUGHT WITHIN FOUR (4) YEARS FROM THE
DISCOVERY OF THE FRAUD.

IV

THE HONORABLE COURT OF APPEALS ERRED IN AWARDING PRIVATE

RESPONDENT MORAL DAMAGES, ATTORNEY’S FEES AND LITIGATION EXPENSES.8

We deny the petition.

First, petitioners contend that the Deed of Absolute Sale between LORETO and GABINO, JR. does
not have a determinate object. They anchor their claim on the following discrepancies: (1) the
object of the Deed of Absolute Sale between LORETO and GABINO, JR. is Lot No. 1253 with an
area of 1,604 square meters; (2) the object of the Deed of Absolute Sale of Portion of Land
between LORETO and WILFREDO is a portion of Lot No. 1253, known as Lot No. 1253-B, also
with an area of 1,604 square meters;9 (3) the Deed of Absolute Sale between LORETO and
GABINO, JR. shows that its object, Lot No. 1253, is not registered under the Land Registration
Act nor under the Spanish Mortgage Law; and (4) the property subject of this action, Lot No. 1253-
B, was taken from Lot No. 1253 containing an area of 4,280 square meters
previously registered in the name of ZOILO under Original Certificate of Title (OCT) No. RO-
2301.10 With these discrepancies, petitioners contend that either the Deed of Absolute Sale
between LORETO and GABINO, JR. does not have a determinate object or that Lot No. 1253-B,
the subject parcel, is not the object thereof. Hence, absent a determinate object, the contract is
void. They rely on Articles 1349 and 1460 of the Civil Code, viz.:
Art. 1349. The object of every contract must be determinate, as to its kind. The fact that the
quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is
possible to determine the same, without the need of a new contract between the parties.

Art. 1460. A thing is determinate when it is particularly designated or physically segregated from all
others of the same class.

The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the
thing is capable of being made determinate without the necessity of a new or further agreement
between the parties.

Petitioners err. The evidence on record shows that Lot No. 1253-B, the subject parcel, and the lot
described as Lot No. 1253 in the Deed of Absolute Sale of May 12, 1986 between LORETO and
GABINO, JR., are the same. In the Deed of Absolute Sale, Lot No. 1253 is described, viz.:

A parcel of land (Lot No. 1253 of the Cadastral Survey of San Jose), with the improvements
thereon. Bounded on the North [by] 1254 and 1255; on the South by road; on the East by 1253 and
road on the West by 1240-Angel Salazar; containing an area of 1,604 square meters more or less
declared under Tax Declaration No. 4159.11

In the Deed of Absolute Sale of Portion of Land of December 7, 1989 between LORETO and
WILFREDO, the subject parcel is described, viz.:

A parcel of land (Lot No. 1253. Ap-06-00271) of the Cadastral Survey of San Jose, LRC Cad. Rec.
No. 936), situated at Atabay, San Jose, Antique. Bounded on the N. and E. along lines 1-2-3 by lot
1255; San Jose Cadastre; on the S. along line 3-4 by Road; on the W. along line 4-5 by Lot 1240;
San Jose Cadastre; and on the N. along line 5-1 by Lot 1254, San Jose Cadastre containing an
area of [Four] Thousand Two Hundred Eighty (4,280) square meters, more or less.

of which a portion of land subject of this sale is hereinbelow (sic) particularly described as follows,
to wit:

A portion of Lot No. 1253-B of the Cadastral Survey of San Jose, situated at Atabay, San Jose,
Antique. Bounded on the North by Lot No. 1254; South by Road; West by Lot 1253-A; and on the
East by Lot No. 1253-C; containing an area of 1,604 square meters, more or less.12

The description of Lot No. 1253, the object of the Deed of Absolute Sale, as "not registered under
Act No. 196[,] otherwise known as the Land Registration Act, nor under the Spanish Mortgage
Law"13 is a stray description of the subject parcel. It is uncorroborated by any evidence in the
records. This description solely appears on the Deed of Absolute Sale and the discrepancy was
not explained by LORETO who signed the Deed of Absolute Sale as vendor. LORETO does not, in
fact, deny the existence of the Deed of Absolute Sale. He merely counters that the Deed of
Absolute Sale was purportedly a mortgage. However, LORETO’s claim that it was one of mortgage
is clearly negated by a Certification14 issued by the Bureau of Internal Revenue dated May 12,
1986. It certified that LORETO was not required to pay the capital gains tax on the transfer of Lot
No. 1253 to GABINO, JR. because the property was classified as an ordinary asset.

To be sure, petitioners could have easily shown that LORETO owned properties other than Lot No.
1253 to bolster their claim that the object of the Deed of Absolute Sale was different from Lot No.
1253-B which is the object described in the Deed of Absolute Sale of Portion of Land. They did not
proffer any evidence.

The trial court itself comprehensively traced the origin of Lot No. 1253-B. It clearly demonstrated
that the subject parcel was originally part of the registered lot of ZOILO. It also showed how the
subject parcel was eventually bounded by Lot No. 1253-A on the West and by Lot No. 1253-C on
the East, as the lot would be later described in the Deed of Absolute Sale of Portion of Land.

The trial court found that ZOILO previously owned Lot No. 1253 under OCT No. RO-2301 issued
on March 3, 1931. On November 14, 1986, Entry No. 167922 was inscribed in the certificate of
title, per Order dated March 30, 1978 of Judge Noli Ma. Cortes of the then Court of First Instance
of Antique, stating that it was a reconstituted certificate of title.15 Lot No. 1253 was subdivided by
virtue of a subdivision plan dated June 19, 1987. On January 20, 1987, an Extrajudicial Settlement
of Estate executed by LORETO, EFREN and PRISCILLA was entered as Entry No. 170722. The
OCT of ZOILO was cancelled by TCT No. T-16693 in the names of LORETO, EFREN and
PRISCILLA on January 29, 1987. TCT No. T-16693 was cancelled on the same day by TCT No. T-
16694 in the name of LORETO alone. The TCT was partially cancelled by the issuance of TCTs
covering Lot Nos. 1253-A, 1253-C and 1253-D. The TCT of Lot No. 1253-B was issued in the
name of WILFREDO married to LOLITA on February 15, 1990. WILFREDO’s TCT No. T-18023
appears to be a transfer from LORETO’s TCT No. T-16694.

II

Next, petitioners contend that the appellate court should have upheld the title of WILFREDO under
Article 1544 of the Civil Code and the doctrine of double sale where the buyer who is in possession
of the Torrens Title must prevail.16 First, petitioners’ title was issued pursuant to the purported
Deed of Absolute Sale of Portion of Land dated December 7, 1989. Second, WILFREDO did not
see any encumbrance at the back of the title of the subject lot when he purchased it from LORETO
on December 7, 1989. Thus, since he is not bound to go beyond the certificate of title, he has
acquired the subject property in due course and in good faith.

We disagree. Article 1544 of the Civil Code states, viz.:

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 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.

Petitioners’ reliance on Article 1544 is misplaced. While title to the property was issued in
WILFREDO’s name on February 15, 1990, the following circumstances show that he registered the
subject parcel with evident bad faith.
First, the Deed of Absolute Sale of Portion of Land dated December 7, 1989 between LORETO
and WILFREDO is tainted with blatant irregularities. It is a fact that the Deed of Absolute Sale of
Portion of Land and the Deed of Absolute Sale between GABINO, JR. and WILFREDO are of even
date. Both Deeds had the same object – Lot No. 1253-B. Both deeds were notarized by Atty.
Warloo Cardenal and bear the same entry in his notarial register: Document No. 236, Page No. 49,
Book No. XI, Series of 1989.

Second, the testimony of a disinterested witness, Febe Mabuhay, established the irregularity.
Mabuhay used to work as secretary for Atty. Cardenal and co-signed as witness in both Deeds.
She stated that Atty. Cardenal instructed her to prepare the two documents in the last week of
November 1989. She was present when GABINO, JR. signed the Deed of Absolute Sale. She
testified that after GABINO, JR. left, LORETO and his wife FRANCISCA arrived and signed the
Deed of Absolute Sale of Portion of Land.17 The Decision of the court a quo further states, viz.:

[Mabuhay testified that when she prepared the two documents, she] noticed the similarity of Lot
No. 1253 as technically described in both documents but she did not call the attention of Atty.
Warlo[o] Cardenal. [She likewise stated that Atty. Cardenal] specifically instructed her to assign the
same document number to the two documents notarized on December 7, 1989.18

Third, the testimony of Atty. Ernesto Estoya, then Clerk of Court of the Regional Trial Court of
Antique, supports the claim that there was bad faith in the execution of the Deed of Absolute Sale
of Portion of Land. Atty. Estoya brought the notarial record of Atty. Cardenal for the year 1989
pursuant to a subpoena. He stated that he had not brought both Deeds as required in the
subpoena because "Doc. No. 236; Page No. 49; Book No. XI; Series of 1989" as entered in the
notarial register of Atty. Cardenal could not be found in the files. He further explained that the last
document on page 48 of the notarial register of Atty. Cardenal is Document No. 235, while the first
document on page 49 is Document No. 239, leaving three unexplained gaps for document
numbers 236, 237 and 238. Atty. Estoya stated that he was not the one who received the 1989
notarial register of Atty. Cardenal when the latter surrendered it since he assumed office only in
1994.19

Fourth, we give credence to the testimony of GABINO, JR. that LORETO and WILFREDO had
employed the scheme to deprive him and his wife of their lawful title to the subject property. The
facts speak for themselves. WILFREDO knew that he could not use the Deed of Absolute Sale
executed in his favor by GABINO, JR. because the latter had no title to transfer. Without a title,
WILFREDO could not use the subject property as collateral for a bank loan. Hence, LORETO, who
had refused to surrender the title to GABINO, JR. and in whose name the land remained
registered, had to execute the Deed of Absolute Sale of Portion of Land in favor of WILFREDO.
Hence, it was convenient for WILFREDO to deny the existence of the Deed of Absolute Sale of
December 7, 1989 between him and GABINO, JR. But the evidence on record shows that after he
was able to register the subject property in his name on February 15, 1990, WILFREDO used the
title as collateral in the loans that he contracted with the Philippine National Bank on October 24,
1991 and the Development Bank of the Philippines on December 1, 1993. This supports the claim
of GABINO, JR. that WILFREDO needed the lot for loaning purposes.

With these corroborating circumstances and the following irrefragable documents on record, the
evidence preponderates in favor of GABINO, JR. One, he acquired Lot No.1253-B from LORETO
on May 12, 198620 by virtue of the Deed of Absolute Sale. Two, the Bureau of Internal Revenue
issued a Certification, also on May 12, 1986, for the exemption from the payment of capital gains
tax when LORETO sold to him the subject parcel. Three, GABINO, JR. paid the real estate tax on
the subject parcel in 1987. Four, he filed a Petition for the Surrender of LORETO’s title on July 31,
1987 so he could transfer the title of the property in his name.

Petitioners likewise err in their argument that the contract of sale between LORETO and GABINO,
JR. is void on the ground that at the time of the sale on May 12, 1986, LORETO had a right to
dispose only an aliquot part of the yet undivided property of ZOILO. The subject parcel, being an
inherited property, is subject to the rules of co-ownership under the Civil Code.

Co-ownership is the right of common dominion which two or more persons have in a spiritual part
of a thing, not materially or physically divided.21 Before the partition of the property held in
common, no individual or co-owner can claim title to any definite portion thereof. All that the co-
owner has is an ideal or abstract quota or proportionate share in the entire property. 22

LORETO sold the subject property to GABINO, JR. on May 12, 1986 as a co-owner. LORETO had
a right, even before the partition of the property on January 19, 1987,23 to transfer in whole or in
part his undivided interest in the lot even without the consent of his co-heirs. This right is absolute
in accordance with the well-settled doctrine that a co-owner has full ownership of his pro-indiviso
share and has the right to alienate, assign or mortgage it, and substitute another person for its
enjoyment.24 Thus, what GABINO, JR. obtained by virtue of the sale on May 12, 1986 were the
same rights as the vendor LORETO had as co-owner, in an ideal share equivalent to the
consideration given under their transaction.25

LORETO sold some 1,604 square meters of Lot No. 1253 to GABINO, JR. Consequently, when
LORETO purportedly sold to WILFREDO on December 7, 1989 the same portion of the lot, he was
no longer the owner of Lot No. 1253-B. Based on the principle that "no one can give what he does
not have,"26 LORETO could not have validly sold to WILFREDO on December 7, 1989 what he no
longer had. As correctly pointed out by the appellate court, the sale made by LORETO in favor of
WILFREDO is void as LORETO did not have the right to transfer the ownership of the subject
property at the time of sale.

III

Petitioners contend that since the subdivision plan of Lot No. 1253 was only approved on January
19, 1987, the appellate court can not presume

that the aliquot part of LORETO was the parcel designated as Lot 1253-B.27

Petitioners err. The mere fact that LORETO sold a definite portion of the co-owned lot by metes
and bounds before partition does not, per se, render the sale a nullity. We held in Lopez v. Vda.
De Cuaycong28 that the fact that an agreement purported to sell a concrete portion of a co-owned
property does not render the sale void, for it is well-established that the binding force of a contract
must be recognized as far as it is legally possible to do so.29

In the case at bar, the contract of sale between LORETO and GABINO, JR. on May 12, 1986 could
be legally recognized.1âwphi1 At the time of sale, LORETO had an aliquot share of one-third of the
4,280-square meter property or some 1,42630 square meters but sold some 1,604 square meters to
GABINO, JR. We have ruled that if a co-owner sells more than his aliquot share in the property, the
sale will affect only his share but not those of the other co-owners who did not consent to the
sale.31 Be that as it may, the co-heirs of LORETO waived all their rights and interests over Lot No.
1253 in favor of LORETO in an Extrajudicial Settlement of Estate dated January 20, 1987. They
declared that they have previously received their respective shares from the other estate of their
parents ZOILO and PURIFICACION.32 The rights of GABINO, JR. as owner over Lot No. 1253-B
are thus preserved. These rights were not effectively transferred by LORETO to WILFREDO in the
Deed of Absolute Sale of Portion of Land. Nor were these rights alienated from GABINO, JR. upon
the issuance of the title to the subject property in the name of WILFREDO. Registration of property
is not a means of acquiring ownership.33 Its alleged incontrovertibility cannot be successfully
invoked by WILFREDO because certificates of title cannot be used to protect a usurper from the
true owner or be used as a shield for the commission of fraud.34

IV

On the issue of prescription, petitioners contend that the appellate court failed to apply the rule that
an action for reconveyance based on fraud prescribes after the lapse of four years.35 They cite
Article 139136 of the Civil Code and the case of Gerona v. De Guzman.37

We disagree. This Court explained in Salvatierra v. Court of Appeals,38 viz.:

An action for reconveyance based on an implied or constructive trust must perforce prescribe
in ten years and not otherwise. A long line of decisions of this Court, and of very recent vintage at
that, illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance based
on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title
over the property. The only discordant note, it seems, is Balbin v. Medalla, which states that
the prescriptive period for a reconveyance action is four years. However, this variance can
be explained by the erroneous reliance on Gerona v. de Guzman. But in Gerona, the fraud
was discovered on June 25, 1948, hence Section 43(3) of Act No. 190 was applied, the New
Civil Code not coming into effect until August 30, 1950 xxx. It must be stressed, at this
juncture, that Article 1144 and Article 1456 are new provisions. They have no counterparts
in the old Civil Code or in the old Code of Civil Procedure, the latter being then resorted to
as legal basis of the four-year prescriptive period for an action for reconveyance of title of
real property acquired under false pretenses.39

[Thus,] under the present Civil Code, xxx just as an implied or constructive trust is an offspring of
xxx Art. 1456, xxx so is the corresponding obligation to reconvey the property and the title thereto
in favor of the true owner. In this context, and vis-á-vis prescription, Article 1144 of the Civil Code is
applicable[, viz.:]

Art. 1144. The following actions must be brought within ten years from the time the right of action
accrues:

1) Upon a written contract;

2) Upon an obligation created by law;

3) Upon a judgment.40 (emphases supplied)

Thus, in the case at bar, although the TCT of WILFREDO became indefeasible after the lapse of
one year from the date of registration, the attendance of fraud in its issuance created an implied
trust in favor of GABINO, JR. under Article 145641 of the Civil Code. Being an implied trust, the
action for reconveyance of the subject property therefore prescribes within a period of ten years
from February 15, 1990. Thus, when respondents filed the instant case with the court a quo on
September 26, 1995, it was well within the prescriptive period.

On the issue of damages, petitioners contend that the grant is erroneous and the alleged
connivance between Atty. Cardenal and WILFREDO lacks basis.

We disagree. The evidence on record is clear that petitioners committed bad faith in the execution
of the purported Deed of Absolute Sale of Portion of Land dated December 7, 1989 between
LORETO and WILFREDO. As stated by the appellate court, viz.:

xxxx From the series of events, it can be reasonably inferred that appellees WILFREDO, LORETO
and Atty. Cardenal connived in attempting to deprive appellants of Lot No. 1253-B, hence, the
appellants’ entitlement to moral damages. Further, it is a well-settled rule that attorney’s fees are
allowed to be awarded if the claimant is compelled to litigate with third persons or to incur
expenses to protect his interest by reason of an unjustified act or omission of the party for whom it
is sought. xxxx To protect themselves, the appellants engaged the services of counsel and
incurred expenses in the course of litigation. Hence, we deem it equitable to award attorney’s fees
to the appellant xxx.42

IN VIEW WHEREOF, the petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. No. CV-68318 dated March 19, 2003 and November 13, 2003, respectively,
are AFFIRMED in toto. Costs against petitioners.

SO ORDERED.

REYNATO S. PUNO
Associate Justice

WE CONCUR:

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

RENATO C. CORONA ADOLFO S. AZCUNA

Associate Justice Associate Justice

CANCIO C. GARCIA
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I
certify that the conclusions in the above decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

ARTEMIO V. PANGANIBAN
Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 74470 March 8, 1989

NATIONAL GRAINS AUTHORITY and WILLLAM CABAL, petitioners

vs.
THE INTERMEDIATE APPELLATE COURT and LEON SORIANO, respondents.

Cordoba, Zapanta, Rola & Garcia for petitioner National Grains Authority.

Plaridel Mar Israel for respondent Leon Soriano.

MEDIALDEA, J.:

This is a petition for review of the decision (pp. 9-21, Rollo) of the Intermediate Appellate Court
(now Court of Appeals) dated December 23, 1985 in A.C. G.R. CV No. 03812 entitled, "Leon
Soriano, Plaintiff- Appellee versus National Grains Authority and William Cabal, Defendants
Appellants", which affirmed the decision of the Court of First Instance of Cagayan, in Civil Case No.
2754 and its resolution (p. 28, Rollo) dated April 17, 1986 which denied the Motion for
Reconsideration filed therein.

The antecedent facts of the instant case are as follows:

Petitioner National Grains Authority (now National Food Authority, NFA for short) is a government
agency created under Presidential Decree No. 4. One of its incidental functions is the buying of
palay grains from qualified farmers.

On August 23, 1979, private respondent Leon Soriano offered to sell palay grains to the NFA,
through William Cabal, the Provincial Manager of NFA stationed at Tuguegarao, Cagayan. He
submitted the documents required by the NFA for pre-qualifying as a seller, namely: (1) Farmer's
Information Sheet accomplished by Soriano and certified by a Bureau of Agricultural Extension
(BAEX) technician, Napoleon Callangan, (2) Xerox copies of four (4) tax declarations of the
riceland leased to him and copies of the lease contract between him and Judge Concepcion Salud,
and (3) his Residence Tax Certificate. Private respondent Soriano's documents were processed
and accordingly, he was given a quota of 2,640 cavans of palay. The quota noted in the Farmer's
Information Sheet represented the maximum number of cavans of palay that Soriano may sell to
the NFA.

In the afternoon of August 23, 1979 and on the following day, August 24, 1979, Soriano delivered
630 cavans of palay. The palay delivered during these two days were not rebagged, classified and
weighed. when Soriano demanded payment of the 630 cavans of palay, he was informed that its
payment will be held in abeyance since Mr. Cabal was still investigating on an information he
received that Soriano was not a bona tide farmer and the palay delivered by him was not produced
from his farmland but was taken from the warehouse of a rice trader, Ben de Guzman. On August
28, 1979, Cabal wrote Soriano advising him to withdraw from the NFA warehouse the 630 cavans
Soriano delivered stating that NFA cannot legally accept the said delivery on the basis of the
subsequent certification of the BAEX technician, Napoleon Callangan that Soriano is not a bona
fide farmer.

Instead of withdrawing the 630 cavans of palay, private respondent Soriano insisted that the palay
grains delivered be paid. He then filed a complaint for specific performance and/or collection of
money with damages on November 2, 1979, against the National Food Authority and Mr. William
Cabal, Provincial Manager of NFA with the Court of First Instance of Tuguegarao, and docketed as
Civil Case No. 2754.

Meanwhile, by agreement of the parties and upon order of the trial court, the 630 cavans of palay
in question were withdrawn from the warehouse of NFA. An inventory was made by the sheriff as
representative of the Court, a representative of Soriano and a representative of NFA (p. 13, Rollo).

On September 30, 1982, the trial court rendered judgment ordering petitioner National Food
Authority, its officers and agents to pay respondent Soriano (as plaintiff in Civil Case No. 2754) the
amount of P 47,250.00 representing the unpaid price of the 630 cavans of palay plus legal interest
thereof (p. 1-2, CA Decision). The dispositive portion reads as follows:

WHEREFORE, the Court renders judgment in favor of the plaintiff and against the
defendants National Grains Authority, and William Cabal and hereby orders:

1. The National Grains Authority, now the National Food Authority, its officers and
agents, and Mr. William Cabal, the Provincial Manager of the National Grains
Authority at the time of the filing of this case, assigned at Tuguegarao, Cagayan,
whomsoever is his successors, to pay to the plaintiff Leon T. Soriano, the amount of
P47,250.00, representing the unpaid price of the palay deliveries made by the plaintiff
to the defendants consisting of 630 cavans at the rate Pl.50 per kilo of 50 kilos per
cavan of palay;

2. That the defendants National Grains Authority, now National Food Authority, its
officer and/or agents, and Mr. William Cabal, the Provincial Manager of the National
Grains Authority, at the time of the filing of this case assigned at Tuguegarao,
Cagayan or whomsoever is his successors, are likewise ordered to pay the plaintiff
Leon T. Soriano, the legal interest at the rate of TWELVE (12%) percent per annum,
of the amount of P 47,250.00 from the filing of the complaint on November 20, 1979,
up to the final payment of the price of P 47,250.00;

3. That the defendants National Grains Authority, now National Food Authority, or
their agents and duly authorized representatives can now withdraw the total number
of bags (630 bags with an excess of 13 bags) now on deposit in the bonded
warehouse of Eng. Ben de Guzman at Tuguegarao, Cagayan pursuant to the order of
this court, and as appearing in the written inventory dated October 10, 1980, (Exhibit
F for the plaintiff and Exhibit 20 for the defendants) upon payment of the price of P
47,250.00 and TWELVE PERCENT (12%) legal interest to the plaintiff,

4. That the counterclaim of the defendants is hereby dismissed;

 5. That there is no pronouncement as to the award of moral and exemplary damages
and attorney's fees; and

6. That there is no pronouncement as to costs.

SO ORDERED (pp. 9-10, Rollo)

Petitioners' motion for reconsideration of the decision was denied on December 6, 1982.

Petitioners' appealed the trial court's decision to the Intermediate Appellate Court. In a decision
promulgated on December 23, 1986 (pp. 9-21, Rollo) the then Intermediate Appellate Court upheld
the findings of the trial court and affirmed the decision ordering NFA and its officers to pay Soriano
the price of the 630 cavans of rice plus interest. Petitioners' motion for reconsideration of the
appellate court's decision was denied in a resolution dated April 17, 1986 (p. 28, Rollo).

Hence, this petition for review filed by the National Food Authority and Mr. William Cabal on May
15, 1986 assailing the decision of the Intermediate Appellate Court on the sole issue of whether or
not there was a contract of sale in the case at bar.

Petitioners contend that the 630 cavans of palay delivered by Soriano on August 23, 1979 was
made only for purposes of having it offered for sale. Further, petitioners stated that the procedure
then prevailing in matters of palay procurement from qualified farmers were: firstly, there is a
rebagging wherein the palay is transferred from a private sack of a farmer to the NFA sack;
secondly, after the rebagging has been undertaken, classification of the palay is made to determine
its variety; thirdly, after the determination of its variety and convinced that it passed the quality
standard, the same will be weighed to determine the number of kilos; and finally, it will be piled
inside the warehouse after the preparation of the Warehouse Stock Receipt (WSP) indicating
therein the number of kilos, the variety and the number of bags. Under this procedure, rebagging is
the initial operative act signifying acceptance, and acceptance will be considered complete only
after the preparation of the Warehouse Stock Receipt (WSR). When the 630 cavans of palay were
brought by Soriano to the Carig warehouse of NFA they were only offered for sale. Since the same
were not rebagged, classified and weighed in accordance with the palay procurement program of
NFA, there was no acceptance of the offer which, to petitioners' mind is a clear case of solicitation
or an unaccepted offer to sell.

The petition is not impressed with merit.

Article 1458 of the Civil Code of the Philippines defines sale as a contract whereby one of the
contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing,
and the other party to pay therefore a price certain in money or its equivalent. A contract, on the
other hand, is a meeting of minds between two (2) persons whereby one binds himself, with
respect to the other, to give something or to render some service (Art. 1305, Civil Code of the
Philippines). The essential requisites of contracts are: (1) consent of the contracting parties, (2)
object certain which is the subject matter of the contract, and (3) cause of the obligation which is
established (Art. 1318, Civil Code of the Philippines.

In the case at bar, Soriano initially offered to sell palay grains produced in his farmland to NFA.
When the latter accepted the offer by noting in Soriano's Farmer's Information Sheet a quota of
2,640 cavans, there was already a meeting of the minds between the parties. The object of the
contract, being the palay grains produced in Soriano's farmland and the NFA was to pay the same
depending upon its quality. The fact that the exact number of cavans of palay to be delivered has
not been determined does not affect the perfection of the contract. Article 1349 of the New Civil
Code provides: ". . .. The fact that the quantity is not determinate shall not be an obstacle to the
existence of the contract, provided it is possible to determine the same, without the need of a new
contract between the parties." In this case, there was no need for NFA and Soriano to enter into a
new contract to determine the exact number of cavans of palay to be sold. Soriano can deliver so
much of his produce as long as it does not exceed 2,640 cavans.

In its memorandum (pp. 66-71, Rollo) dated December 4, 1986, petitioners further contend that
there was no contract of sale because of the absence of an essential requisite in contracts,
namely, consent. It cited Section 1319 of the Civil Code which states: "Consent is manifested by
the meeting of the offer and the acceptance of the thing and the cause which are to constitute the
contract. ... " Following this line, petitioners contend that there was no consent because there was
no acceptance of the 630 cavans of palay in question.

The above contention of petitioner is not correct Sale is a consensual contract, " ... , there is
perfection when there is consent upon the subject matter and price, even if neither is delivered."
(Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA 557, 560) This is provided by Article 1475
of the Civil Code which states:

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.

xxx

The acceptance referred to which determines consent is the acceptance of the offer of one party by
the other and not of the goods delivered as contended by petitioners.

From the moment the contract of sale is perfected, it is incumbent upon the parties to comply with
their mutual obligations or "the parties may reciprocally demand performance" thereof. (Article
1475, Civil Code, 2nd par.).

The reason why NFA initially refused acceptance of the 630 cavans of palay delivered by Soriano
is that it (NFA) cannot legally accept the said delivery because Soriano is allegedly not a bona fide
farmer. The trial court and the appellate court found that Soriano was a bona fide farmer and
therefore, he was qualified to sell palay grains to NFA.

Both courts likewise agree that NFA's refusal to accept was without just cause. The above factual
findings which are supported by the record should not be disturbed on appeal.

ACCORDINGLY, the instant petition for review is DISMISSED. The assailed decision of the then
Intermediate Appellate Court (now Court of Appeals) is affirmed. No costs.

SO ORDERED.

Narvasa, Cruz, Gancayco and Griño-Aquino, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 104482 January 22, 1996

BELINDA TAÑEDO, for herself and in representation of her brothers and sisters, and
TEOFILA CORPUZ TAÑEDO, representing her minor daughter VERNA TAÑEDO, petitioners,
vs.
THE COURT OF APPEALS, SPOUSES RICARDO M. TAÑEDO AND TERESITA BARERA
TAÑEDO, respondents.

DECISION

PANGANIBAN, J.:

Is a sale of future inheritance valid? In multiple sales of the same real property, who has
preference in ownership? What is the probative value of the lower court's finding of good faith in
registration of such sales in the registry of property? These are the main questions raised in this
Petition for review on certiorari under Rule 45 of the Rules of Court to set aside and reverse the
Decision1 of the Court of Appeals2 in CA-G.R. CV NO. 24987 promulgated on September 26, 1991
affirming the decision of the Regional Trial Court, Branch 63, Third Judicial Region, Tarlac, Tarlac
in Civil Case No. 6328, and its Resolution denying reconsideration thereof, promulgated on May
27, 1992.

By the Court's Resolution on October 25, 1995, this case (along with several others) was
transferred from the First to the Third Division and after due deliberation, the Court assigned it to
the undersigned ponente for the writing of this Decision.

The Facts

On October 20, 1962, Lazardo Tañedo executed a notarized deed of absolute sale in favor of his
eldest brother, Ricardo Tañedo, and the latter's wife, Teresita Barera, private respondents herein,
whereby he conveyed to the latter in consideration of P1,500.00, "one hectare of whatever share I
shall have over Lot No. 191 of the cadastral survey of Gerona, Province of Tarlac and covered by
Title T-13829 of the Register of Deeds of Tarlac", the said property being his "future inheritance"
from his parents (Exh. 1). Upon the death of his father Matias, Lazaro executed an "Affidavit of
Conformity" dated February 28, 1980 (Exh. 3) to "re-affirm, respect, acknowledge and validate the
sale I made in 1962." On January 13, 1981, Lazaro executed another notarized deed of sale in
favor of private respondents covering his "undivided ONE TWELVE (1/12) of a parcel of land
known as Lot 191 . . . " (Exh. 4). He acknowledged therein his receipt of P10,000.00 as
consideration therefor. In February 1981, Ricardo learned that Lazaro sold the same property to his
children, petitioners herein, through a deed of sale dated December 29, 1980 (Exh. E). On June 7,
1982, private respondents recorded the Deed of Sale (Exh. 4) in their favor in the Registry of
Deeds and the corresponding entry was made in Transfer Certificate of Title No. 166451 (Exh. 5).
Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of the deeds of sale
executed by Lazaro in favor of private respondents covering the property inherited by Lazaro from
his father.

Petitioners claimed that their father, Lazaro, executed an "Absolute Deed of Sale" dated December
29, 1980 (Exit. E). Conveying to his ten children his allotted portion tinder the extrajudicial partition
executed by the heirs of Matias, which deed included the land in litigation (Lot 191).

Petitioners also presented in evidence: (1) a private writing purportedly prepared and signed by
Matias dated December 28, 1978, stating that it was his desire that whatever inheritance Lazaro
would receive from him should be given to his (Lazaro's) children (Exh. A); (2) a typewritten
document dated March 10, 1979 signed by Lazaro in the presence of two witnesses, wherein he
confirmed that he would voluntarily abide by the wishes of his father, Matias, to give to his
(Lazaro's) children all the property he would inherit from the latter (Exh. B); and (3) a letter dated
January 1, 1980 of Lazaro to his daughter, Carmela, stating that his share in the extrajudicial
settlement of the estate of his father was intended for his children, petitioners herein (Exh. C).

Private respondents, however presented in evidence a "Deed of Revocation of a Deed of Sale"

dated March 12, 1981 (Exh. 6), wherein Lazaro revoked the sale in favor of petitioners for the
reason that it was "simulated or fictitious without any consideration whatsoever".

Shortly after the case a quo was filed, Lazaro executed a sworn statement (Exh. G) which virtually
repudiated the contents of the Deed of Revocation of a Deed of Sale (Exh. 6) and the Deed of Sale
(Exh. 4) in favor of private respondents. However, Lazaro testified that he sold the property to
Ricardo, and that it was a lawyer who induced him to execute a deed of sale in favor of his children
after giving him five pesos (P5.00) to buy a "drink" (TSN September 18, 1985, pp. 204-205).

The trial court decided in favor of private respondents, holding that petitioners failed "to adduce a
proponderance of evidence to support (their) claim." On appeal, the Court of Appeals affirmed the
decision of the trial court, ruling that the Deed of Sale dated January 13, 1981 (Exh. 9) was valid
and that its registration in good faith vested title in said respondents.

The Issues

Petitioners raised the following "errors" in the respondent Court, which they also now allege in the
instant Petition:

I. The trial court erred in concluding that the Contract of Sale of October 20, 1962 (Exhibit 7,
Answer) is merely voidable or annulable and not void ab initio pursuant to paragraph 2 of
Article 1347 of the New Civil Code involving as it does a "future inheritance".

II. The trial court erred in holding that defendants-appellees acted in good faith in registering
the deed of sale of January 13, 1981 (Exhibit 9) with the Register of Deeds of Tarlac and
therefore ownership of the land in question passed on to defendants-appellees.

III. The trial court erred in ignoring and failing to consider the testimonial and documentary
evidence of plaintiffs-appellants which clearly established by preponderance of evidence
that they are indeed the legitimate and lawful owners of the property in question.
 IV. The decision is contrary to law and the facts of the case and the conclusions drawn from
the established facts are illogical and off-tangent.

From the foregoing, the issues may be restated as follows:

1. Is the sale of a future inheritance valid?

2. Was the subsequent execution on January 13, 1981 (and registration with the Registry of
Property) of a deed of sale covering the same property to the same buyers valid?

3. May this Court review the findings of the respondent Court (a) holding that the buyers
acted in good faith in registering the said subsequent deed of sale and (b) in "failing to
consider petitioners' evidence"? Are the conclusions of the respondent Court "illogical and
off-tangent"?

The Court's Ruling

At the outset, let it be clear that the "errors" which are reviewable by this Court in this petition for
review on certiorari are only those allegedly committed by the respondent Court of Appeals and not
directly those of the trial court, which is not a party here. The "assignment of errors" in the petition
quoted above are therefore totally misplaced, and for that reason, the petition should be dismissed.
But in order to give the parties substantial justice we have decided to delve into the issues as
above re-stated. The errors attributed by petitioners to the latter (trial) court will be discussed only
insofar as they are relevant to the appellate court's assailed Decision and Resolution.

The sale made in 1962 involving future inheritance is not really at issue here. In context, the
assailed Decision conceded "it may be legally correct that a contract of sale of anticipated future
inheritance is null and void."3

But to remove all doubts, we hereby categorically rule that, pursuant to Article 1347 of the Civil
Code, "(n)o contract may be entered into upon a future inheritance except in cases expressly
authorized by law."

Consequently, said contract made in 1962 is not valid and cannot be the source of any right nor the
creator of any obligation between the parties.

Hence, the "affidavit of conformity" dated February 28, 1980, insofar as it sought to validate or ratify
the 1962 sale, is also useless and, in the words of the respondent Court, "suffers from the same
infirmity." Even private respondents in their memorandum4 concede this.

However, the documents that are critical to the resolution of this case are: (a) the deed of sale of
January 13, 1981 in favor of private respondents covering Lazaro's undivided inheritance of one-
twelfth (1/12) share in Lot No. 191, which was subsequently registered on June 7, 1982; and (b)
the deed of sale dated December 29, 1980 in favor of petitioners covering the same property.
These two documents were executed after the death of Matias (and his spouse) and after a deed
of extra-judicial settlement of his (Matias') estate was executed, thus vesting in Lazaro actual title
over said property. In other words, these dispositions, though conflicting, were no longer infected
with the infirmities of the 1962 sale.
Petitioners contend that what was sold on January 13, 1981 was only one-half hectare out of Lot
No. 191, citing as authority the trial court's decision. As earlier pointed out, what is on review in
these proceedings by this Court is the Court of Appeals' decision — which correctly identified the
subject matter of the January 13, 1981 sale to be the entire undivided 1/12 share of Lazaro in Lot
No. 191 and which is the same property disposed of on December 29, 1980 in favor of petitioners.

Critical in determining which of these two deeds should be given effect is the registration of the
sale in favor of private respondents with the register of deeds on June 7, 1982.

Article 1544 of the Civil Code governs the preferential rights of vendees in cases of multiple sales,
as follows:

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall
be transferred to the person who may have first taken possession thereof in good faith, if it
should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.

The property in question is land, an immovable, and following the above-quoted law, ownership
shall belong to the buyer who in good faith registers it first in the registry of property. Thus,
although the deed of sale in favor of private respondents was later than the one in favor of
petitioners, ownership would vest in the former because of the undisputed fact of registration. On
the other hand, petitioners have not registered the sale to them at all.

Petitioners contend that they were in possession of the property and that private respondents
never took possession thereof. As between two purchasers, the one who registered the sale in his
favor has a preferred right over the other who has not registered his title, even if the latter is in
actual possession of the immovable property.5

As to third issue, while petitioners conceded the fact of registration, they nevertheless contended
that it was done in bad faith. On this issue, the respondent Court ruled;

Under the second assignment of error, plaintiffs-appellants contend that defendants-

appellees acted in bad faith when they registered the Deed of Sale in their favor as appellee
Ricardo already knew of the execution of the deed of sale in favor of the plaintiffs; appellants
cite the testimony of plaintiff Belinda Tañedo to the effect that defendant Ricardo Tañedo
called her up on January 4 or 5, 1981 to tell her that he was already the owner of the land in
question "but the contract of sale between our father and us were (sic) already consumated"
(pp. 9-10, tsn, January 6, 1984). This testimony is obviously self-serving, and because it
was a telephone conversation, the deed of sale dated December 29, 1980 was not shown;
Belinda merely told her uncle that there was already a document showing that plaintiffs are
the owners (p. 80). Ricardo Tañedo controverted this and testified that he learned for the
first time of the deed of sale executed by Lazaro in favor of his children "about a month or
sometime in February 1981" (p. 111, tsn, Nov. 28, 1984). . . .6
The respondent Court, reviewing the trial court's findings, refused to overturn the latter's
assessment of the testimonial evidence, as follows;

We are not prepared to set aside the finding of the lower court upholding Ricardo Tañedo's
testimony, as it involves a matter of credibility of witnesses which the trial judge, who
presided at the hearing, was in a better position to resolve. (Court of Appeals' Decision, p.
6.)

In this connection, we note the tenacious allegations made by petitioners, both in their basic
petition and in their memorandum, as follows:

1. The respondent Court allegedly ignored the claimed fact that respondent Ricardo "by
fraud and deceit and with foreknowledge" that the property in question had already been
sold to petitioners, made Lazaro execute the deed of January 13, 1981;

2. There is allegedly adequate evidence to show that only 1/2 of the purchase price of
P10,000.00 was paid at the time of the execution of the deed of sale, contrary to the written
acknowledgment, thus showing bad faith;

3. There is allegedly sufficient evidence showing that the deed of revocation of the sale in
favor of petitioners "was tainted with fraud or deceit."

4. There is allegedly enough evidence to show that private respondents "took undue
advantage over the weakness and unschooled and pitiful situation of Lazaro Tañedo . . ."
and that respondent Ricardo Tañedo "exercised moral ascendancy over his younger brother
he being the eldest brother and who reached fourth year college of law and at one time a
former Vice-Governor of Tarlac, while his younger brother only attained first year high school
...;

5. The respondent Court erred in not giving credence to petitioners' evidence, especially
Lazaro Tañedo's Sinumpaang Salaysay dated July 27, 1982 stating that Ricardo Tañedo
deceived the former in executing the deed of sale in favor of private respondents.

To be sure, there are indeed many conflicting documents and testimonies as well as arguments
over their probative value and significance. Suffice it to say, however, that all the above
contentions involve questions of fact, appreciation of evidence and credibility of witnesses, which
are not proper in this review. It is well-settled that the Supreme Court is not a trier of facts. In
petitions for review under Rule 45 of the Revised Rules of Court, only questions of law may be
raised and passed upon. Absent any whimsical or capricious exercise of judgment, and unless the
lack of any basis for the conclusions made by the lower courts be amply demonstrated, the
Supreme Court will not disturb their findings. At most, it appears that petitioners have shown that
their evidence was not believed by both the trial and the appellate courts, and that the said courts
tended to give more credence to the evidence presented by private respondents. But this in itself is
not a reason for setting aside such findings. We are far from convinced that both courts gravely
abused their respective authorities and judicial prerogatives.

As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and
Development Corp.7
The Court has consistently held that the factual findings of the trial court, as well as the Court of
Appeals, are final and conclusive and may not be reviewed on appeal. Among the exceptional
circumstances where a reassessment of facts found by the lower courts is allowed are when the
conclusion is a finding grounded entirely on speculation, surmises or conjectures; when the
inference made is manifestly absurd, mistaken or impossible; when there is grave abuse of
discretion in the appreciation of facts; when the judgment is premised on a misapprehension of
facts; when the findings went beyond the issues of the case and the same are contrary to the
admissions of both appellant and appellee. After a careful study of the case at bench, we find none
of the above grounds present to justify the re-evaluation of the findings of fact made by the courts
below.

In the same vein, the ruling in the recent case of South Sea Surety and Insurance Company,
Inc. vs. Hon. Court of Appeals, et al.8 is equally applicable to the present case:

We see no valid reason to discard the factual conclusions of the appellate court. . . . (I)t is
not the function of this Court to assess and evaluate all over again the evidence, testimonial
and documentary, adduced by the parties, particularly where, such as here, the findings of
both the trial court and the appellate court on the matter coincide. (emphasis supplied)

WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals is
AFFIRMED. No Costs.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 131679 February 1, 2000

CAVITE DEVELOPMENT BANK and FAR EAST BANK AND TRUST COMPANY, petitioners,
vs.
SPOUSES CYRUS LIM and LOLITA CHAN LIM and COURT OF APPEALS, respondents.

MENDOZA, J.:

This is a petition for review on certiorari of the decision1 of the Court of Appeals in C.A. GR CV No.
42315 and the order dated December 9, 1997 denying petitioners' motion for reconsideration.

The following facts are not in dispute.

Petitioners Cavite Development Bank (CDB) and Far East Bank and Trust Company (FEBTC) are
banking institutions duly organized and existing under Philippine laws. On or about June 15, 1983,
a certain Rodolfo Guansing obtained a loan in the amount of P90,000.00 from CDB, to secure
which he mortgaged a parcel of land situated at No. 63 Calavite Street, La Loma, Quezon City and
covered by TCT No. 300809 registered in his name. As Guansing defaulted in the payment of his
loan, CDB foreclosed the mortgage. At the foreclosure sale held on March 15, 1984, the
mortgaged property was sold to CDB as the highest bidder. Guansing failed to redeem, and on
March 2, 1987, CDB consolidated title to the property in its name. TCT No. 300809 in the name of
Guansing was cancelled and, in lieu thereof, TCT No. 355588 was issued in the name of
CDB.1âwphi1.nêt

On June 16, 1988, private respondent Lolita Chan Lim, assisted by a broker named Remedios
Gatpandan, offered to purchase the property from CDB. The written Offer to Purchase, signed by
Lim and Gatpandan, states in part:

We hereby offer to purchase your property at #63 Calavite and Retiro Sts., La Loma,
Quezon City for P300,000.00 under the following terms and conditions:

(1) 10% Option Money;

(2) Balance payable in cash;

(3) Provided that the property shall be cleared of illegal occupants or tenants.

Pursuant to the foregoing terms and conditions of the offer, Lim paid CDB P30,000.00 as Option
Money, for which she was issued Official Receipt No. 3160, dated June 17, 1988, by CDB.
However, after some time following up the sale, Lim discovered that the subject property was
originally registered in the name of Perfecto Guansing, father of mortgagor Rodolfo Guansing,
under TCT No. 91148. Rodolfo succeeded in having the property registered in his name under TCT
No. 300809, the same title he mortgaged to CDB and from which the latter's title (TCT No. 355588)
was derived. It appears, however, that the father, Perfecto, instituted Civil Case No. Q-39732 in the
Regional Trial Court, Branch 83, Quezon City, for the cancellation of his son's title. On March 23,
1984, the trial court rendered a decision2 restoring Perfecto's previous title (TCT No. 91148) and
cancelling TCT No. 300809 on the ground that the latter was fraudulently secured by Rodolfo. This
decision has since become final and executory.

Aggrieved by what she considered a serious misrepresentation by CDB and its mother-company,
FEBTC, on their ability to sell the subject property, Lim, joined by her husband, filed on August 29,
1989 an action for specific performance and damages against petitioners in the Regional Trial
Court, Branch 96, Quezon City, where it was docketed as Civil Case No. Q-89-2863. On April 20,
1990, the complaint was amended by impleading the Register of Deeds of Quezon City as an
additional defendant.

On March 10, 1993, the trial court rendered a decision in favor of the Lim spouses. It ruled that: (1)
there was a perfected contract of sale between Lim and CDB, contrary to the latter's contention
that the written offer to purchase and the payment of P30,000.00 were merely pre-conditions to the
sale and still subject to the approval of FEBTC; (2) performance by CDB of its obligation under the
perfected contract of sale had become impossible on account of the 1984 decision in Civil Case
No. Q-39732 cancelling the title in the name of mortgagor Rodolfo Guansing; (3) CDB and FEBTC
were not exempt from liability despite the impossibility of performance, because they could not
credibly disclaim knowledge of the cancellation of Rodolfo Guansing's title without the admitting
their failure to discharge their duties to the public as reputable banking institutions; and (4) CDB
and FEBTC are liable for damages for the prejudice caused against the Lims.3 Based on the
foregoing findings, the trial court ordered CDB and FEBTC to pay private respondents, jointly and
severally, the amount of P30,000.00 plus interest at the legal rate computed from June 17, 1988
until full payment. It also ordered petitioners to pay private respondents, jointly and severally, the
amounts of P250,000.00 as moral damages, P50,000.00 as exemplary damages, P30,000.00 as
attorney's fees, and the costs of the suit.4

Petitioners brought the matter to the Court of Appeals, which, on October 14, 1997, affirmed in
toto the decision of the Regional Trial Court. Petitioners moved for reconsideration, but their motion
was denied by the appellate court on December 9, 1997. Hence, this petition. Petitioners contend
that —

1. The Honorable Court of Appeals erred when it held that petitioners CDB and FEBTC were
aware of the decision dated March 23, 1984 of the Regional Trial Court of Quezon City in
Civil Case No. Q-39732.

2. The Honorable Court of Appeals erred in ordering petitioners to pay interest on the
deposit of THIRTY THOUSAND PESOS (P30,000.00) by applying Article 2209 of the New
Civil Code.

3. The Honorable Court of Appeals erred in ordering petitioners to pay moral damages,
exemplary damages, attorney's fees and costs of suit.

I.

At the outset, it is necessary to determine the legal relation, if any, of the parties.
Petitioners deny that a contract of sale was ever perfected between them and private respondent
Lolita Chan Lim. They contend that Lim's letter-offer clearly states that the sum of P30,000,00 was
given as option money, not as earnest money.5 They thus conclude that the contract between CDB
and Lim was merely an option contract, not a contract of sale.

The contention has no merit. Contracts are not defined by the parries thereto but by principles of
law.6 In determining the nature of a contract, the courts are not bound by the name or title given to
it by the contracting parties.7 In the case at bar, the sum of P30,000.00, although denominated in
the offer to purchase as "option money," is actually in the nature of earnest money or down
payment when considered with the other terms of the offer. In Carceler v. Court of Appeals,8 we
explained the nature of an option contract, viz. —

An option contract is a preparatory contract in which one party grants to the other, for a fixed
period and under specified conditions, the power to decide, whether or not to enter into a
principal contract, it binds the party who has given the option not to enter into the principal
contract with any other person during the period; designated, and within that period, to enter
into such contract with the one to whom the option was granted, if the latter should decide to
use the option. It is a separate agreement distinct from the contract to which the parties may
enter upon the consummation of the option.

An option contract is therefore a contract separate from and preparatory to a contract of sale
which, if perfected, does not result in the perfection or consummation of the sale. Only when the
option is exercised may a sale be perfected.

In this case, however, after the payment of the 10% option money, the Offer to Purchase provides
for the payment only of the balance of the purchase price, implying that the "option money" forms
part of the purchase price. This is precisely the result of paying earnest money under Art. 1482 of
the Civil Code. It is clear then that the parties in this case actually entered into a contract of sale,
partially consummated as to the payment of the price. Moreover, the following findings of the trial
court based on the testimony of the witnesses establish that CDB accepted Lim's offer to purchase:

It is further to be noted that CDB and FEBTC already considered plaintiffs' offer as good and
no longer subject to a final approval. In his testimony for the defendants on February 13,
1992, FEBTC's Leomar Guzman stated that he was then in the Acquired Assets Department
of FEBTC wherein plaintiffs' offer to purchase was endorsed thereto by Myoresco Abadilla,
CDB's senior vice-president, with a recommendation that the necessary petition for writ of
possession be filed in the proper court; that the recommendation was in accord with one of
the conditions of the offer, i.e., the clearing of the property of illegal occupants or tenants
(tsn, p. 12); that, in compliance with the request, a petition for writ of possession was
thereafter filed on July 22, 1988 (Exhs. 1 and 1-A); that the offer met the requirements of the
banks; and that no rejection of the offer was thereafter relayed to the plaintiffs (p. 17); which
was not a normal procedure, and neither did the banks return the amount of P30,000.00 to
the plaintiffs.9

Given CDB's acceptance of Lim's offer to purchase, it appears that a contract of sale was perfected
and, indeed, partially executed because of the partial payment of the purchase price. There is,
however, a serious legal obstacle to such sale, rendering it impossible for CDB to perform its
obligation as seller to deliver and transfer ownership of the property.
Nemo dat quod non habet, as an ancient Latin maxim says. One cannot give what one does not
have. In applying this precept to a contract of sale, a distinction must be kept in mind between the
"perfection" and "consummation" stages of the contract.

A 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.10 It is, therefore, not required that, at the perfection
stage, the seller be the owner of the thing sold or even that such subject matter of the sale exists at
that point in time.11 Thus, under Art. 1434 of the Civil Code, when a person sells or alienates a
thing which, at that time, was not his, but later acquires title thereto, such title passes by operation
of law to the buyer or grantee. This is the same principle behind the sale of "future goods" under
Art. 1462 of the Civil Code. However, under Art. 1459, at the time of delivery or consummation
stage of the sale, it is required that the seller be the owner of the thing sold. Otherwise, he will not
be able to comply with his obligation to transfer ownership to the buyer. It is at the consummation
stage where the principle of nemo dat quod non habet applies.

In Dignos v. Court of Appeals,12 the subject contract of sale was held void as the sellers of the
subject land were no longer the owners of the same because of a prior sale.13 Again, in Nool
v. Court of Appeals,14 we ruled that a contract of repurchase, in which the seller does not have any
title to the property sold, is invalid:

We cannot sustain petitioners' view. Article 1370 of the Civil Code is applicable only to valid
and enforceable contracts. The Regional Trial Court and the Court of Appeals rules that the
principal contract of sale contained in Exhibit C and the auxiliary contract of repurchase in
Exhibit D are both void. This conclusion of the two lower courts appears to find support
in Dignos v. Court of Appeals, where the Court held:

Be that as it may, it is evident that when petitioners sold said land to the Cabigas
spouses, they were no longer owners of the same and the sale is null and void.

In the present case, it is clear that the sellers no longer had any title to the parcels of land at
the time of sale. Since Exhibit D, the alleged contract of repurchase, was dependent on the
validity of Exhibit C, it is itself void. A void contract cannot give rise to a valid one. Verily,
Article 1422 of the Civil Code provides that (a) contract which is the direct result of a
previous illegal contract, is also void and inexistent.

We should however add that Dignos did not cite its basis for ruling that a "sale is null and
void" where the sellers "were no longer the owners" of the property. Such a situation (where
the sellers were no longer owners) does not appear to be one of the void contracts
enumerated in Article 1409 of the Civil Code. Moreover, the Civil Code itself recognizes a
sale where the goods are to be acquired . . . by the seller after the perfection of the contract
of sale, clearly implying that a sale is possible even if the seller was not the owner at the
time of sale, provided he acquires title to the property later on.

In the present case, however, it is likewise clear that the sellers can no longer deliver the
object of the sale to the buyers, as the buyers themselves have already acquired title and
delivery thereof from the rightful owner, the DBP. Thus, such contract may be deemed to be
inoperative and may thus fall, by analogy, under item No. 5 of Article 1409 of the Civil Code:
Those which contemplate an impossible service. Article 1459 of the Civil Code provides that
"the vendor must have a right to transfer the ownership thereof [subject of the sale] at the
 time it is delivered." Here, delivery of ownership is no longer possible. It has become
impossible.15

In this case, the sale by CDB to Lim of the property mortgaged in 1983 by Rodolfo Guansing must,
therefore, be deemed a nullity for CDB did not have a valid title to the said property. To be sure,
CDB never acquired a valid title to the property because the foreclosure sale, by virtue of which,
the property had been awarded to CDB as highest bidder, is likewise void since the mortgagor was
not the owner of the property foreclosed.

A foreclosure sale, though essentially a "forced sale," is still a sale in accordance with Art. 1458 of
the Civil Code, under which the mortgagor in default, the forced seller, becomes obliged to transfer
the ownership of the thing sold to the highest bidder who, in turn, is obliged to pay therefor the bid
price in money or its equivalent. Being a sale, the rule that the seller must be the owner of the thing
sold also applies in a foreclosure sale. This is the reason Art. 208516 of the Civil Code, in providing
for the essential requisites of the contract of mortgage and pledge, requires, among other things,
that the mortgagor or pledgor be the absolute owner of the thing pledged or mortgaged, in
anticipation of a possible foreclosure sale should the mortgagor default in the payment of the loan.

There is, however, a situation where, despite the fact that the mortgagor is not the owner of the
mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale
arising therefrom are given effect by reason of public policy. This is the doctrine of "the mortgagee
in good faith" based on the rule that all persons dealing with property covered by a Torrens
Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the
face of the title.17 The public interest in upholding the indefeasibility of a certificate of title, as
evidence of the lawful ownership of the land or of any encumbrance thereon, protects a buyer or
mortgagee who, in good faith, relied upon what appears on the face of the certificate of title.

This principle is cited by petitioners in claiming that, as a mortgagee bank, it is not required to
make a detailed investigation of the history of the title of the property given as security before
accepting a mortgage.

We are not convinced, however, that under the circumstances of this case, CDB can be considered
a mortgagee in good faith. While petitioners are not expected to conduct an exhaustive
investigation on the history of the mortgagor's title, they cannot be excused from the duty of
exercising the due diligence required of banking institutions. In Tomas v. Tomas,18 we noted that it
is standard practice for banks, before approving a loan, to send representatives to the premises of
the land offered as collateral and to investigate who are real owners thereof, noting that banks are
expected to exercise more care and prudence than private individuals in their dealings, even those
involving registered lands, for their business is affected with public interest. We held thus:

We, indeed, find more weight and vigor in a doctrine which recognizes a better right for the
innocent original registered owner who obtained his certificate of title through perfectly legal
and regular proceedings, than one who obtains his certificate from a totally void one, as to
prevail over judicial pronouncements to the effect that one dealing with a registered land,
such as a purchaser, is under no obligation to look beyond the certificate of title of the
vendor, for in the latter case, good faith has yet to be established by the vendee or
transferee, being the most essential condition, coupled with valuable consideration, to entitle
him to respect for his newly acquired title even as against the holder of an earlier and
perfectly valid title. There might be circumstances apparent on the face of the certificate of
 title which could excite suspicion as to prompt inquiry, such as when the transfer is not by
virtue of a voluntary act of the original registered owner, as in the instant case, where it was
by means of a self-executed deed of extra-judicial settlement, a fact which should be noted
on the face of Eusebia Tomas certificate of title. Failing to make such inquiry would hardly
be consistent with any pretense of good faith, which the appellant bank invokes to claim the
right to be protected as a mortgagee, and for the reversal of the judgment rendered against
it by the lower court.19

In this case, there is no evidence that CDB observed its duty of diligence in ascertaining the validity
of Rodolfo Guansing's title. It appears that Rodolfo Guansing obtained his fraudulent title by
executing an Extra-Judicial Settlement of the Estate With Waiver where he made it appear that he
and Perfecto Guansing were the only surviving heirs entitled to the property, and that Perfecto had
waived all his rights thereto. This self-executed deed should have placed CDB on guard against
any possible defect in or question as to the mortgagor's title. Moreover, the alleged ocular
inspection report20 by CDB's representative was never formally offered in evidence. Indeed,
petitioners admit that they are aware that the subject land was being occupied by persons other
than Rodolfo Guansing and that said persons, who are the heirs of Perfecto Guansing, contest the
title of Rodolfo.21

II.

The sale by CDB to Lim being void, the question now arises as to who, if any, among the parties
was at fault for the nullity of the contract. Both the trial court and the appellate court found
petitioners guilty of fraud, because on June 16, 1988, when Lim was asked by CDB to pay the 10%
option money, CDB already knew that it was no longer the owner of the said property, its title
having been cancelled.22 Petitioners contend that: (1) such finding of the appellate court is founded
entirely on speculation and conjecture; (2) neither CDB nor FEBTC was a party in the case where
the mortgagor's title was cancelled; (3) CDB is not privy to any problem among the Guansings; and
(4) the final decision cancelling the mortgagor's title was not annotated in the latter's title.

As a rule, only questions of law may be raised in a petition for review, except in circumstances
where questions of fact may be properly raised.23 Here, while petitioners raise these factual issues,
they have not sufficiently shown that the instant case falls under any of the exceptions to the above
rule. We are thus bound by the findings of fact of the appellate court. In any case, we are
convinced of petitioners' negligence in approving the mortgage application of Rodolfo Guansing.

III.

We now come to the civil effects of the void contract of sale between the parties. Article 1412(2) of
the Civil Code provides:

If the act in which the unlawful or forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed:

xxx xxx xxx

(2) When only one of the contracting parties is at fault, he cannot recover what he has given
by reason of the contract, or ask for the fulfillment of what has been promised him. The
 other, who is not at fault, may demand the return of what he has given without any obligation
to comply with his promise.

Private respondents are thus entitled to recover the P30,000,00 option money paid by them.
Moreover, since the filing of the action for damages against petitioners amounted to a demand by
respondents for the return of their money, interest thereon at the legal rate should be computed
from August 29, 1989, the date of filing of Civil Case No. Q-89-2863, not June 17, 1988, when
petitioners accepted the payment. This is in accord with our ruling in Castillo v. Abalayan24 that in
case of avoid sale, the seller has no right whatsoever to keep the money paid by virtue thereof and
should refund it, with interest at the legal rate, computed from the date of filing of the complaint
until fully paid. Indeed, Art. 1412(2) which provides that the non-guilty party "may demand the
return of what he has given" clearly implies that without such prior demand, the obligation to return
what was given does not become legally demandable.

Considering CDB's negligence, we sustain the award of moral damages on the basis of Arts. 21
and 2219 of the Civil Code and our ruling in Tan v. Court of Appeals25 that moral damages may be
recovered even if a bank's negligence is not attended with malice and bad faith. We find, however,
that the sum of P250,000.00 awarded by the trial court is excessive. Moral damages are only
intended to alleviate the moral suffering undergone by private respondent, not to enrich them at the
expenses of the petitioners.26 Accordingly, the award of moral damages must be reduced to
P50,000.00.

Likewise, the award of P50,000.00 as exemplary damages, although justified under Art. 2232 of
the Civil Code, is excessive and should be reduced to P30,000.00. The award of P30,000.00
attorney's fees based on Art. 2208, pars. 1, 2, 5 and 11 of the Civil Code should similarly be
reduced to P20,000.00.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION as to
the award of damages as above stated.1âwphi1.nêt

SO ORDERED.

Bellosillo, Quisumbing, Buena and De Leon, Jr., JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 167320 January 30, 2007

HEIRS OF SALVADOR HERMOSILLA, namely: ADELAIDA H. DOLLETON, RUBEN

HERMOSILLA, LOLITA H. DE LA VEGA, ERLINDA H. INOVIO, CELIA H. VIVIT, ZENAIDA H.
ACHOY, PRECILLA H. LIMPIAHOY, and EDGARDO HERMOSILLA, Petitioners,
vs.
Spouses JAIME REMOQUILLO and LUZ REMOQUILLO, Respondents.

DECISION

CARPIO MORALES, J.:

Petitioners Heirs of Salvador Hermosilla, namely: Adelaida H. Dolleton, Ruben Hermosilla, Lolita H.
de la Vega, Erlinda H. Inovio,1 Celia2 H. Vivit, Zenaida H. Achoy, Precilla3 H. Limpiahoy, and
Edgardo Hermosilla, assail the Court of Appeals’ Decision 4 dated September 29, 2004 which
reversed the trial court’s decision in their favor and accordingly dismissed their complaint.

Subject of the controversy is a 65-square meter portion of a lot located in Poblacion, San Pedro,
Laguna.

On August 31, 1931, the Republic of the Philippines acquired through purchase the San Pedro
Tunasan Homesite.

Apolinario Hermosilla (Apolinario), who was occupying a lot in San Pedro Tunasan Homesite until
his death in 1964, caused the subdivision of the lot into two, Lot 12 with an area of 341 square
meters, and Lot 19 with an area of 341 square meters of which the 65 square meters subject of this
controversy form part.

On April 30, 1962, Apolinario executed a Deed of Assignment transferring possession of Lot 19 in
favor of his grandson, herein respondent Jaime Remoquillo (Jaime). As the Land Tenure
Administration (LTA) later found that Lot 19 was still available for disposition to qualified applicants,
Jaime, being its actual occupant, applied for its acquisition before the LTA on May 10, 1963.

On July 8, 1963, Apolinario conveyed Lot 12 to his son Salvador Hermosilla (Salvador), Jaime’s
uncle.

Salvador later filed an application to purchase Lot 12 which was awarded to him by the defunct
Land Authority on December 16, 1971.

On February 10, 1972, Jaime and his uncle Salvador forged a "Kasunduan ng Paglipat Ng
Karapatan sa Isang Lagay na Lupang Solar" (Kasunduan) whereby Jaime transferred ownership of
the 65 square meters (the questioned property) in favor of Salvador.
After Apolinario died, his daughter Angela Hermosilla filed a protest before the Land Authority,
which became the National Housing Authority (NHA),5 contending that as an heir of the deceased,
she is also entitled to Lots 12 and 19. By Resolution of June 10, 1981, the NHA dismissed the
protest.

The NHA later awarded on March 16, 1986 Lot 19 to Jaime for which he and his wife were issued a
title, Transfer Certificate of Title No. T-156296, on September 15, 1987.6

On May 25, 1992, petitioners filed an action for Annulment of Title on the ground of fraud with
damages against Jaime and his spouse, together with the Register of Deeds, before the Regional
Trial Court (RTC) of Biñan, Laguna, alleging that by virtue of the Kasunduan executed in 1972,
Jaime had conveyed to his uncle Salvador the questioned property–part of Lot 19 covered by TCT
No. T-156296 which was issued in 1987.

By Decision7 of May 11, 1999, the RTC of Biñan, Laguna, Branch 25, found the Kasunduan a
perfected contract of sale, there being a meeting of the minds upon an identified object and upon a
specific price, and that ownership over the questioned property had already been transferred and
delivered to Salvador.

On the alleged failure of consideration of the Kasunduan, the trial court held that the same did not
render the contract void, but merely allowed an action for specific performance. The dispositive
portion of the trial court’s Decision reads:

WHEREFORE, judgment is hereby rendered declaring plaintiffs as co-owners of the 65 square

meters of the 341 square meters covered by TCT T-156296, registered in the name of defendants.
The Court hereby directs the Register of Deeds of Laguna, Calamba Branch, to cancel said
Transfer Certificate of Title, and in lieu thereof, to issue another [to] plaintiffs [as] co-owners of the
above portion.

No pronouncement as to costs.

SO ORDERED.8 (Underscoring supplied)

The Court of Appeals, reversing the decision of the trial court, held that the Kasunduan was void
because at the time of its execution in 1972, the Republic of the Philippines was still the owner of
Lot 19, hence, no right thereover was transmitted by Jaime who was awarded the Lot in 1986, and
consequently no right was transmitted by Salvador through succession to petitioners. And it found
no evidence of fraud in Jaime’s act of having Lot 19, including the questioned property, registered
in his and his wife’s name in 1987.

At all events, the appellate court held that the action had prescribed, it having been filed in 1992,
more than four years from the issuance to Jaime and his wife of the Transfer Certificate of Title.

Hence, the present petition for review on certiorari.

Petitioners argue that the application of the law on prescription would perpetrate fraud and spawn
injustice, they citing Cometa v. Court of Appeals;9 and that at any rate, prescription does not lie
against a co-owner. Cometa involves a different factual milieu concerning the right of redemption,
however. And petitioners’ contention that prescription does not lie against a co-owner fails because
only the title covering the questioned property, which petitioners claim to solely own, is being
assailed.

While this Court finds that the action is, contrary to the appellate court’s ruling, not barred by the
statute of limitations, it is still dismissible as discussed below.

Albeit captioned as one for Annulment of Title, the Complaint ultimately seeks the reconveyance of
the property.

From the allegations of the Complaint, petitioners seek the reconveyance of the property based on
implied trust. The prescriptive period for the reconveyance of fraudulently registered real property
is 10 years, reckoned from the date of the issuance of the certificate of title,10 if the plaintiff is not in
possession, but imprescriptible if he is in possession of the property.

An action for reconveyance based on an implied trust prescribes in ten years. The ten-year
prescriptive period applies only if there is an actual need to reconvey the property as when
the plaintiff is not in possession of the property. However, if the plaintiff, as the real owner of
the property also remains in possession of the property, the prescriptive period to recover the title
and possession of the property does not run against him. In such a case, an action for
reconveyance, if nonetheless filed, would be in the nature of a suit for quieting of title, an action
that is imprescriptible.11 (Emphasis and underscoring supplied)

It is undisputed that petitioners’ houses occupy the questioned property and that respondents have
not been in possession thereof.12 Since there was no actual need to reconvey the property as
petitioners remained in possession thereof, the action took the nature of a suit for quieting of title, it
having been filed to enforce an alleged implied trust after Jaime refused to segregate title over Lot
19. One who is in actual possession of a piece of land claiming to be the owner thereof may
wait until his possession is disturbed or his title is attacked before taking steps to vindicate his
right.13 From the body of the complaint, this type of action denotes imprescriptibility.

As priorly stated, however, when the Kasunduan was executed in 1972 by Jaime in favor of
Salvador – petitioners’ predecessor-in-interest – Lot 19, of which the questioned property forms
part, was still owned by the Republic. Nemo dat quod non habet.14 Nobody can give what he does
not possess. Jaime could not thus have transferred anything to Salvador via the Kasunduan.

Claiming exception to the rule, petitioners posit that at the time the Kasunduan was executed by
Jaime in 1972, his application which was filed in 1963 for the award to him of Lot 19 was still
pending, hence, the Kasunduan transferred to Salvador Jaime’s vested right to purchase the same,
in support of which they cite a law on estoppel, Art. 1434 of the Civil Code, which provides that
"[w]hen a person who is not the owner of a thing sells or alienates and delivers it and later, the
seller or grantor acquires title thereto, such title passes by operation of law to the buyer or
grantee."15

Petitioners’ reliance on Article 1434 of the Civil Code does not lie. The principles of estoppel apply
insofar as they are not in conflict with the provisions of the Civil Code, the Code of Commerce, the
Rules of Court and speciallaws.161avvphi1.net

Land Authority Administrative Order No. 4 (1967), "Rules and Regulations governing Disposition of
the Laguna Settlement Project in San Pedro, Laguna," proscribes the conveyance of the privilege
or preference to purchase a land from the San Pedro Tunasan project before it is awarded to a
tenant or bona fide occupant, thus:

SEC. 6. Privilege of Preference to Purchase Intransferable; Waiver or Forfeiture Thereof. – From

the date of acquisition of the estate by the Government and before issuance of the Order of
Award, no tenant or bona fide occupant in whose favor the land may be sold shall transfer or
encumber the privilege or preference to purchase the land, and any transfer or encumbrance
made in violation hereof shall be null and void: Provided, however, That such privilege or
preference may be waived or forfeited only in favor of the Land Authority . . .17 (Italics in the
original, emphasis and underscoring supplied)

Petitioners’ insistence on any right to the property under the Kasunduan thus fails.

[T]he transfer "became one in violation of law (the rules of the PHHC being promulgated in
pursuance of law have the force of law) and therefore void ab initio." Hence, appellant acquired no
right over the lot from a contract void ab initio, no rights are created. Estoppel, as postulated by
petitioner, will not apply for it cannot be predicated on an illegal act. It is generally considered that
as between the parties to a contract, validity cannot be given to it by estoppel if it is prohibited by
law or is against public policy.18 (Emphasis and underscoring supplied)

Petitioners go on to postulate that if the Kasunduan is void, it follows that the 1962 Deed of
Assignment executed by Apolinario in favor of Jaime is likewise void to thus deprive the latter of
any legal basis for his occupation and acquisition of Lot 19.

Petitioners’ position fails. Petitioners lose sight of the fact that, as reflected above, Jaime acquired
Lot 19 in his own right, independently of the Deed of Assignment.

In another vein, since the property was previously a public land, petitioners have no personality to
impute fraud or misrepresentation against the State or violation of the law.19 If the title was in fact
fraudulently obtained, it is the State which should file the suit to recover the property through the
Office of the Solicitor General. The title originated from a grant by the government, hence, its
cancellation is a matter between the grantor and the grantee.20

At all events, for an action for reconveyance based on fraud to prosper, the plaintiff must prove by
clear and convincing evidence not only his title to the property but also the fact of fraud. Fraud is
never presumed. Intentional acts to deceive and deprive another of his right, or in some manner
injure him must be specifically alleged and proved by the plaintiff by clear and convincing
evidence.21 Petitioners failed to discharge this burden, however.

WHEREFORE, the petition is, in light of the foregoing ratiocination, DENIED.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:
 LEONARDO A. QUISUMBING
Associate Justice
Chairperson

ANTONIO T. CARPIO DANTE O. TINGA

Associate Justice Asscociate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson’s Attestation, it
is hereby certified that the conclusions in the above Decision were reached in consultation before
the case was assigned to the writer of the Court’s Division.

REYNATO S. PUNO
Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 176474 November 27, 2008

HEIRS OF ARTURO REYES, represented by Evelyn R. San Buenaventura, petitioners,

vs.
ELENA SOCCO-BELTRAN, respondent.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Decision1dated 31 January 2006 rendered by the Court of Appeals in CA-G.R. SP No. 87066,
which affirmed the Decision2 dated 30 June 2003 of the Office of the President, in O.P. Case No.
02-A-007, approving the application of respondent Elena Socco-Beltran to purchase the subject
property.

The subject property in this case is a parcel of land originally identified as Lot No. 6-B, situated in
Zamora Street, Dinalupihan, Bataan, with a total area of 360 square meters. It was originally part of
a larger parcel of land, measuring 1,022 square meters, allocated to the Spouses Marcelo Laquian
and Constancia Socco (Spouses Laquian), who paid for the same with Japanese money. When
Marcelo died, the property was left to his wife Constancia. Upon Constancia’s subsequent death,
she left the original parcel of land, along with her other property, with her heirs – her siblings,
namely: Filomena Eliza Socco, Isabel Socco de Hipolito, Miguel R. Socco, and Elena Socco-
Beltran.3 Pursuant to an unnotarized document entitled "Extrajudicial Settlement of the Estate of
the Deceased Constancia R. Socco," executed by Constancia’s heirs sometime in 1965, the parcel
of land was partitioned into three lots–Lot No. 6-A, Lot No. 6-B, and Lot No. 6-C.4 The subject
property, Lot No. 6-B, was adjudicated to respondent, but no title had been issued in her name.

On 25 June 1998, respondent Elena Socco-Beltran filed an application for the purchase of Lot No.
6-B before the Department of Agrarian Reform (DAR), alleging that it was adjudicated in her favor
in the extra-judicial settlement of Constancia Socco’s estate.5

Petitioners herein, the heirs of the late Arturo Reyes, filed their protest to respondent’s petition
before the DAR on the ground that the subject property was sold by respondent’s brother, Miguel
R. Socco, in favor of their father, Arturo Reyes, as evidenced by the Contract to Sell, dated 5
September 1954, stipulating that:6

That I am one of the co-heirs of the Estate of the deceased Constancia Socco; and that I am
to inherit as such a portion of her lot consisting of Four Hundred Square Meters (400) more
or less located on the (sic) Zamora St., Municipality of Dinalupihan, Province of Bataan,
bounded as follows:

xxxx
 That for or in consideration of the sum of FIVE PESOS (P5.00) per square meter, hereby
sell, convey and transfer by way of this conditional sale the said 400 sq.m. more or less
unto Atty. Arturo C. Reyes, his heirs, administrator and assigns x x x. (Emphasis supplied.)

Petitioners averred that they took physical possession of the subject property in 1954 and had
been uninterrupted in their possession of the said property since then.

Legal Officer Brigida Pinlac of the DAR Bataan Provincial Agrarian Reform Office conducted an
investigation, the results of which were contained in her Report/ Recommendation dated 15 April
1999. Other than recounting the afore-mentioned facts, Legal Officer Pinlac also made the
following findings in her Report/Recommendation:7

Further investigation was conducted by the undersigned and based on the documentary
evidence presented by both parties, the following facts were gathered: that the house of
[the] Reyes family is adjacent to the landholding in question and portion of the subject
property consisting of about 15 meters [were] occupied by the heirs of Arturo Reyes were a
kitchen and bathroom [were] constructed therein; on the remaining portion a skeletal form
made of hollow block[s] is erected and according to the heirs of late Arturo Reyes, this was
constructed since the year (sic) 70’s at their expense; that construction of the said skeletal
building was not continued and left unfinished which according to the affidavit of Patricia
Hipolito the Reyes family where (sic) prevented by Elena Socco in their attempt of
occupancy of the subject landholding; (affidavit of Patricia Hipolito is hereto attached as
Annex "F"); that Elena Socco cannot physically and personally occupy the subject property
because of the skeletal building made by the Reyes family who have been requesting that
they be paid for the cost of the construction and the same be demolished at the expense of
Elena Socco; that according to Elena Socco, [she] is willing to waive her right on the portion
where [the] kitchen and bathroom is (sic) constructed but not the whole of Lot [No.] 6-B
adjudicated to her; that the Reyes family included the subject property to the sworn
statement of value of real properties filed before the municipality of Dinalupihan, Bataan,
copies of the documents are hereto attached as Annexes "G" and "H"; that likewise Elena
Socco has been continuously and religiously paying the realty tax due on the said property.

In the end, Legal Officer Pinlac recommended the approval of respondent’s petition for issuance of
title over the subject property, ruling that respondent was qualified to own the subject property
pursuant to Article 1091 of the New Civil Code.8 Provincial Agrarian Reform Officer (PARO) Raynor
Taroy concurred in the said recommendation in his Indorsement dated 22 April 1999.9

In an Order dated 15 September 1999, DAR Regional Director Nestor R. Acosta, however,
dismissed respondent’s petition for issuance of title over the subject property on the ground that
respondent was not an actual tiller and had abandoned the said property for 40 years; hence, she
had already renounced her right to recover the same.10 The dispositive part of the Order reads:

1. DISMISSING the claims of Elena Socco-Beltran, duly represented by Myrna Socco for
lack of merit;

2. ALLOCATING Lot No. 6-B under Psd-003-008565 with an area of 360 square meters,
more or less, situated Zamora Street, Dinalupihan, Bataan, in favor of the heirs of Arturo
Reyes.
 3. ORDERING the complainant to refrain from any act tending to disturb the peaceful
possession of herein respondents.

4. DIRECTING the MARO of Dinalupihan, Bataan to process the pertinent documents for
the issuance of CLOA in favor of the heirs of Arturo Reyes.11

Respondent filed a Motion for Reconsideration of the foregoing Order, which was denied by DAR
Regional Director Acosta in another Order dated 15 September 1999.12

Respondent then appealed to the Office of the DAR Secretary. In an Order, dated 9 November
2001, the DAR Secretary reversed the Decision of DAR Regional Director Acosta after finding that
neither petitioners’ predecessor-in-interest, Arturo Reyes, nor respondent was an actual occupant
of the subject property. However, since it was respondent who applied to purchase the subject
property, she was better qualified to own said property as opposed to petitioners, who did not at all
apply to purchase the same. Petitioners were further disqualified from purchasing the subject
property because they were not landless. Finally, during the investigation of Legal Officer Pinlac,
petitioners requested that respondent pay them the cost of the construction of the skeletal house
they built on the subject property. This was construed by the DAR Secretary as a waiver by
petitioners of their right over the subject property.13 In the said Order, the DAR Secretary ordered
that:

WHEREFORE, premises considered, the September 15, 1999 Order is hereby SET ASIDE
and a new Order is hereby issued APPROVING the application to purchase Lot [No.] 6-B of
Elena Socco-Beltran.14

Petitioners sought remedy from the Office of the President by appealing the 9 November 2001
Decision of the DAR Secretary. Their appeal was docketed as O.P. Case No. 02-A-007. On 30
June 2003, the Office of the President rendered its Decision denying petitioners’ appeal and
affirming the DAR Secretary’s Decision.15 The fallo of the Decision reads:

WHEREFORE, premises considered, judgment appealed from is AFFIRMED and the instant
appeal DISMISSED.16

Petitioners’ Motion for Reconsideration was likewise denied by the Office of the President in a
Resolution dated 30 September 2004.17 In the said Resolution, the Office of the President noted
that petitioners failed to allege in their motion the date when they received the Decision dated 30
June 2003. Such date was material considering that the petitioners’ Motion for Reconsideration
was filed only on 14 April 2004, or almost nine months after the promulgation of the decision
sought to be reconsidered. Thus, it ruled that petitioners’ Motion for Reconsideration, filed beyond
fifteen days from receipt of the decision to be reconsidered, rendered the said decision final and
executory.

Consequently, petitioners filed an appeal before the Court of Appeals, docketed as CA-G.R. SP
No. 87066. Pending the resolution of this case, the DAR already issued on 8 July 2005 a
Certificate of Land Ownership Award (CLOA) over the subject property in favor of the respondent’s
niece and representative, Myrna Socco-Beltran.18 Respondent passed away on 21 March
2001,19 but the records do not ascertain the identity of her legal heirs and her legatees.
Acting on CA-G.R. SP No. 87066, the Court of Appeals subsequently promulgated its Decision,
dated 31 January 2006, affirming the Decision dated 30 June 2003 of the Office of the President. It
held that petitioners could not have been actual occupants of the subject property, since actual
occupancy requires the positive act of occupying and tilling the land, not just the introduction of an
unfinished skeletal structure thereon. The Contract to Sell on which petitioners based their claim
over the subject property was executed by Miguel Socco, who was not the owner of the said
property and, therefore, had no right to transfer the same. Accordingly, the Court of Appeals
affirmed respondent’s right over the subject property, which was derived form the original
allocatees thereof.20 The fallo of the said Decision reads:

WHEREFORE, premises considered, the instant PETITION FOR REVIEW is DISMISSED.

Accordingly, the Decision dated 30 June 2003 and the Resolution dated 30 December 2004
both issued by the Office of the President are hereby AFFIRMED in toto.21

The Court of Appeals denied petitioners’ Motion for Reconsideration of its Decision in a Resolution
dated 16 August 2006.22

Hence, the present Petition, wherein petitioners raise the following issues:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING

THE FINDINGS OF THE OFFICE OF THE PRESIDENT THAT THE SUBJECT LOT IS
VACANT AND THAT PETITIONERS ARE NOT ACTUAL OCCUPANTS THEREOF BY
DENYING THE LATTER’S CLAIM THAT THEY HAVE BEEN IN OPEN, CONTINUOUS,
EXCLUSIVE, NOTORIOUS AND AVDERSE POSSESSION THEREOF SINCE 1954 OR
FOR MORE THAN THIRTY (30) YEARS.

II

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD THAT

PETITIONERS "CANNOT LEGALLY ACQUIRE THE SUBJECT PROPERTY AS THEY ARE
NOT CONSIDERED LANDLESS AS EVIDENCED BY A TAX DECLARATION."

III

WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT

"…WHATEVER RESERVATION WE HAVE OVER THE RIGHT OF MYRNA SOCCO TO
SUCCEED WAS ALREADY SETTLED WHEN NO LESS THAN MIGUEL SOCCO
(PREDECESSOR-IN INTEREST OF HEREIN PETITIONERS) EXECUTED HIS WAIVER
OF RIGHT DATED APRIL 19, 2005 OVER THE SUBJECT PROPERTY IN FAVOR OF
MYRNA SOCCO.

IV

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DENIED

PETITIONERS MOTION FOR NEW TRIAL THEREBY BRUSHING ASIDE THE FACT
THAT MYRNA V. SOCCO-ARIZO GROSSLY MISREPRESENTED IN HER INFORMATION
SHEET OF BENEFICIARIES AND APPLICATION TO PURCHASE LOT IN LANDED
 ESTATES THAT SHE IS A FILIPINO CITIZEN, WHEN IN TRUTH AND IN FACT, SHE IS
ALREADY AN AMERICAN NATIONAL.23

The main issue in this case is whether or not petitioners have a better right to the subject property
over the respondent. Petitioner’s claim over the subject property is anchored on the Contract to
Sell executed between Miguel Socco and Arturo Reyes on 5 September 1954. Petitioners
additionally allege that they and their predecessor-in-interest, Arturo Reyes, have been in
possession of the subject lot since 1954 for an uninterrupted period of more than 40 years.

The Court is unconvinced.

Petitioners cannot derive title to the subject property by virtue of the Contract to Sell. It was
unmistakably stated in the Contract and made clear to both parties thereto that the vendor, Miguel
R. Socco, was not yet the owner of the subject property and was merely expecting to inherit the
same as his share as a co-heir of Constancia’s estate.24 It was also declared in the Contract itself
that Miguel R. Socco’s conveyance of the subject to the buyer, Arturo Reyes, was a conditional
sale. It is, therefore, apparent that the sale of the subject property in favor of Arturo Reyes was
conditioned upon the event that Miguel Socco would actually inherit and become the owner of the
said property. Absent such occurrence, Miguel R. Socco never acquired ownership of the subject
property which he could validly transfer to Arturo Reyes.

Under Article 1459 of the Civil Code on contracts of sale, "The thing must be licit and the vendor
must have a right to transfer ownership thereof at the time it is delivered." The law specifically
requires that the vendor must have ownership of the property at the time it is delivered. Petitioners
claim that the property was constructively delivered to them in 1954 by virtue of the Contract to
Sell. However, as already pointed out by this Court, it was explicit in the Contract itself that, at the
time it was executed, Miguel R. Socco was not yet the owner of the property and was only
expecting to inherit it. Hence, there was no valid sale from which ownership of the subject property
could have transferred from Miguel Socco to Arturo Reyes. Without acquiring ownership of the
subject property, Arturo Reyes also could not have conveyed the same to his heirs, herein
petitioners.

Petitioners, nevertheless, insist that they physically occupied the subject lot for more than 30 years
and, thus, they gained ownership of the property through acquisitive prescription, citing Sandoval v.
Insular Government 25 and San Miguel Corporation v. Court of Appeals. 26

In Sandoval, petitioners therein sought the enforcement of Section 54, paragraph 6 of Act No. 926,
otherwise known as the Land Registration Act, which required -- for the issuance of a certificate of
title to agricultural public lands -- the open, continuous, exclusive, and notorious possession and
occupation of the same in good faith and under claim of ownership for more than ten years. After
evaluating the evidence presented, consisting of the testimonies of several witnesses and proof
that fences were constructed around the property, the Court in the afore-stated case denied the
petition on the ground that petitioners failed to prove that they exercised acts of ownership or were
in open, continuous, and peaceful possession of the whole land, and had caused it to be enclosed
to the exclusion of other persons. It further decreed that whoever claims such possession shall
exercise acts of dominion and ownership which cannot be mistaken for the momentary and
accidental enjoyment of the property. 27
In San Miguel Corporation, the Court reiterated the rule that the open, exclusive, and undisputed
possession of alienable public land for the period prescribed by law creates the legal fiction
whereby land ceases to be public land and is, therefore, private property. It stressed, however, that
the occupation of the land for 30 years must be conclusively established. Thus, the evidence
offered by petitioner therein – tax declarations, receipts, and the sole testimony of the applicant for
registration, petitioner’s predecessor-in-interest who claimed to have occupied the land before
selling it to the petitioner – were considered insufficient to satisfy the quantum of proof required to
establish the claim of possession required for acquiring alienable public land.28

As in the two aforecited cases, petitioners herein were unable to prove actual possession of the
subject property for the period required by law. It was underscored in San Miguel Corporation that
the open, continuous, exclusive, and notorious occupation of property for more than 30 years must
be no less than conclusive, such quantum of proof being necessary to avoid the erroneous
validation of actual fictitious claims of possession over the property that is being claimed.29

In the present case, the evidence presented by the petitioners falls short of being conclusive. Apart
from their self-serving statement that they took possession of the subject property, the only proof
offered to support their claim was a general statement made in the letter 30 dated 4 February 2002
of Barangay Captain Carlos Gapero, certifying that Arturo Reyes was the occupant of the subject
property "since peace time and at present." The statement is rendered doubtful by the fact that as
early as 1997, when respondent filed her petition for issuance of title before the DAR, Arturo Reyes
had already died and was already represented by his heirs, petitioners herein.

Moreover, the certification given by Barangay Captain Gapero that Arturo Reyes occupied the
premises for an unspecified period of time, i.e., since peace time until the present, cannot prevail
over Legal Officer Pinlac’s more particular findings in her Report/Recommendation. Legal Officer
Pinlac reported that petitioners admitted that it was only in the 1970s that they built the skeletal
structure found on the subject property. She also referred to the averments made by Patricia
Hipolito in an Affidavit,31 dated 26 February 1999, that the structure was left unfinished because
respondent prevented petitioners from occupying the subject property. Such findings disprove
petitioners’ claims that their predecessor-in-interest, Arturo Reyes, had been in open, exclusive,
and continuous possession of the property since 1954. The adverted findings were the result of
Legal Officer Pinlac’s investigation in the course of her official duties, of matters within her
expertise which were later affirmed by the DAR Secretary, the Office of the President, and the
Court of Appeals. The factual findings of such administrative officer, if supported by evidence, are
entitled to great respect.32

In contrast, respondent’s claim over the subject property is backed by sufficient evidence. Her
predecessors-in-interest, the spouses Laquian, have been identified as the original allocatees who
have fully paid for the subject property. The subject property was allocated to respondent in the
extrajudicial settlement by the heirs of Constancia’s estate. The document entitled "Extra-judicial
Settlement of the Estate of the Deceased Constancia Socco" was not notarized and, as a private
document, can only bind the parties thereto. However, its authenticity was never put into question,
nor was its legality impugned. Moreover, executed in 1965 by the heirs of Constancia Socco, or
more than 30 years ago, it is an ancient document which appears to be genuine on its face and
therefore its authenticity must be upheld.33 Respondent has continuously paid for the realty tax due
on the subject property, a fact which, though not conclusive, served to strengthen her claim over
the property.34
From the foregoing, it is only proper that respondent’s claim over the subject property be upheld.
This Court must, however, note that the Order of the DAR Secretary, dated 9 November 2001,
which granted the petitioner’s right to purchase the property, is flawed and may be assailed in the
proper proceedings. Records show that the DAR affirmed that respondent’s predecessors-in-
interest, Marcelo Laquian and Constancia Socco, having been identified as the original allocatee,
have fully paid for the subject property as provided under an agreement to sell. By the nature of a
contract or agreement to sell, the title over the subject property is transferred to the vendee upon
the full payment of the stipulated consideration. Upon the full payment of the purchase price, and
absent any showing that the allocatee violated the conditions of the agreement, ownership of the
subject land should be conferred upon the allocatee.35 Since the extrajudicial partition transferring
Constancia Socco’s interest in the subject land to the respondent is valid, there is clearly no need
for the respondent to purchase the subject property, despite the application for the purchase of the
property erroneously filed by respondent. The only act which remains to be performed is the
issuance of a title in the name of her legal heirs, now that she is deceased.

Moreover, the Court notes that the records have not clearly established the right of respondent’s
representative, Myrna Socco-Arizo, over the subject property. Thus, it is not clear to this Court why
the DAR issued on 8 July 2005 a CLOA36 over the subject property in favor of Myrna Socco-Arizo.
Respondent’s death does not automatically transmit her rights to the property to Myrna Socco-
Beltran. Respondent only authorized Myrna Socco-Arizo, through a Special Power of
Attorney37dated 10 March 1999, to represent her in the present case and to administer the subject
property for her benefit. There is nothing in the Special Power of Attorney to the effect that Myrna
Socco-Arizo can take over the subject property as owner thereof upon respondent’s death. That
Miguel V. Socco, respondent’s only nephew, the son of the late Miguel R. Socco, and Myrna
Socco-Arizo’s brother, executed a waiver of his right to inherit from respondent, does not
automatically mean that the subject property will go to Myrna Socco-Arizo, absent any proof that
there is no other qualified heir to respondent’s estate. Thus, this Decision does not in any way
confirm the issuance of the CLOA in favor of Myrna Socco-Arizo, which may be assailed in
appropriate proceedings.

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of the Court
of Appeals in CA-G.R. SP No. 87066, promulgated on 31 January 2006,
is AFFIRMED with MODIFICATION. This Court withholds the confirmation of the validity of title
over the subject property in the name of Myrna Socco-Arizo pending determination of respondent’s
legal heirs in appropriate proceedings. No costs.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
 Chairperson

MA. ALICIA AUSTRIA-MARTINEZ ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice
Acting Chairperson

RUBEN T. REYES
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice