Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

73913 January 31, 1989 JERRY T. MOLES, petitioner, vs. INTERMEDIATE APPELLATE COURT and MARIANO M. DIOLOSA, respondents. Zoilo V. De la Cruz, Jr., Kenneth Barredo, Romeo Sabig and Natalio V. Sitjao for petitioners. Rolando N. Medalla and Jose G. Guinez, Jr., for private respondents. REGALADO, J.: This petition for review on certiorari assails the decision of the then Intermediate Appellate Court 1 dismissing the complaint filed by herein petitioner against the herein private respondent in the former Court of First Instance of Negros Occidental in Civil Case No. 13821 thereof. 2 The factual backdrop of this controversy, as culled from the records, 3 shows that on May 17, 1978, petitioner Jerry T. Moles commenced a suit against private respondent Mariano M. Diolosa in the aforesaid trial court, Branch IV in Bacolod City, for rescission of contract with damages. Private respondent moved to dismiss on the ground of improper venue, invoking therefor Sales Invoice No. 075A executed between petitioner and private respondent on April 23, 1977 which provides that all judicial actions arising from this contract shall be instituted in the City of Iloilo. 4 This was opposed by petitioner who averred that there is no formal document evidencing the sale which is substantially verbal in character. In an order dated June 23, 1978, the trial court denied the motion to dismiss, holding that the question of venue could not be resolved at said stage of the case. The subsequent motion for reconsideration was likewise denied. Consequently, private respondent, invoking the aforesaid venue stipulation, preceeded to this Court on a petition for prohibition with preliminary injunction in G.R. No. 49078, questioning the validity of the order denying his aforesaid two motions and seeking to enjoin the trial court from further proceeding with the case. This petition was dismissed for lack of merit in a resolution of the Court, dated February 7, 1979, and which became final on March 15, 1979. Thereafter, private respondent filed his answer and proceeded to trial. The aforecited records establish that sometime in 1977, petitioner needed a linotype printing machine for his printing business, The LM Press at Bacolod City, and applied for an industrial loan with the Development Bank of the Philippines. (hereinafter, DBP) for the purchase thereof. An agent of Smith, Bell and Co. who is a friend of petitioner introduced the latter to private respondent, owner of the Diolosa Publishing House in Iloilo City, who had two available machines. Thereafter, petitioner went to Iloilo City to inspect the two machines offered for sale and was informed that the same were secondhand but functional. On his second visit to the Diolosa Publishing House, petitioner together with Rogelio Yusay, a letter press machine operator, decided to buy the linotype machine, Model 14. The transaction was basically verbal in nature but to facilitate the loan application with the DBP, a pro forma invoice, dated April 23, 1977 and reflecting the amount of P50,000.00 as

the consideration of the sale, was signed by petitioner with an addendum that payment had not yet been made but that he promised to pay the full amount upon the release of his loan from the aforementioned bank on or before the end of the month. 5 Although the agreed selling price was only P40,000.00, the amount on the invoice was increased by P10,000.00, said increase being intended for the purchase of new matrices for said machine. Sometime between April and May, 1977, the machine was delivered to petitioner's publishing house at Tangub, Bacolod City where it was installed by one Crispino Escurido, an employee of respondent Diolosa. Another employee of the Diolosa Publishing House, Tomas Plondaya, stayed at petitioners house for almost a month to train the latter's cousin in operating the machine. 6 Under date of August 29, 1977, private respondent issued a certification wherein he warranted that the machine sold was in A-1 condition, together with other express warranties. 7 Prior to the release of the loan, a representative from the DBP, Bacolod, supposedly inspected the machine but he merely looked at it to see that it was there . 8 The inspector's recommendation was favorable and, thereafter, petitioner's loan of P50,000.00 was granted and released. However, before payment was made to private respondent, petitioner required the former, in a letter dated September 30, 1977, to accomplish the following, with the explanations indicated by him: 1.) Crossed check for P15,407.10 representing. a) P 10,000.00-Overprice in the machine: b) P203.00-Freight and handling of the machine; c) P203.00-Share in the electric repair; and d) P5,000.00- Insurance that Crispin will come back and repair the linotype machine at seller's account as provided in the contract; after Crispin has put everything in order when he goes home on Sunday he will return the check of P15,000.00. 2) Official receipt in the amount of P 50,000.00 as full payment of the linotype machine. These were immediately complied with by private respondent and on the same day, September 30,1977, he received the DBP check for P50,000.00. 9 It is to be noted that the aforesaid official receipt No. 0451, dated September 30, 1977 and prepared and signed by private respondent, expressly states that he received from the petitioner the DBP check for P50,000.00 issued in our favor in full payment of one (1) Unit Model 14 Linotype Machine as per Pro forma Invoice dated April 23, 1977. 10 On November 29, 1977, petitioner wrote private respondent that the machine was not functioning properly as it needed a new distributor bar. In the same letter, petitioner unburdened himself of his grievances and sentiments in this wise.
We bought this machine in good faith because we trusted you very much being our elder brother in printing and publishing business. We did not hire anybody to look over the machine, much more ask for a rebate in your price of P40,000.00 and believed what your trusted two men, Tomas and Crispin, said although they were hiding the real and actual condition of the machine for your business protection. Until last week, we found out the worst ever to happen to us. We have been cheated because the expert of the Linotype machine from Manila says, that the most he will buy your

machine is at P5,000.00 only. ... 11

Private respondent made no reply to said letter, so petitioner engaged the services of other technicians. Later, after several telephone calls regarding the defects in the machine, private respondent sent two technicians to make the necessary repairs but they failed to put the machine in running condition. In fact, since then petitioner was never able to use the machine. 12 On February 18, 1978, not having received from private respondent the action requested in his preceding letter as herein before stated, petitioner again wrote private respondent, this time with the warning that he would be forced to seek legal remedies to protect his interest. 13 Obviously in response to the foregoing letter, private respondent decided to purchase a new distributor bar and, on March 16, 1978, private respondent delivered this spare part to petitioner through one Pedro Candido. However, when thereafter petitioner asked private respondent to pay for the price of the distributor bar, the latter asked petitioner to share the cost with him. Petitioner thus finally decided to indorse the matter to his lawyer. An expert witness for the petitioner, one Gil Legaspina, declared that he inspected the linotype machine involved in this case at the instance of petitioner. In his inspection thereof, he found the following defects: (1) the vertical automatic stop lever in the casting division was worn out; (2) the justification lever had a slight breach (balana in the dialect); (3) the distributor bar was worn out; (4) the partition at the entrance channel had a tear; (5) there was no "pie stacker" tube entrance; and (6) the slouch arm lever in the driving division was worn out. It turned out that the said linotype machine was the same machine that witness Legaspina had previously inspected for Sy Brothers, a firm which also wanted to buy a linotype machine for their printing establishment. Having found defects in said machine, the witness informed Sy Brother about his findings, hence the purchase was aborted. In his opinion, major repairs were needed to put the machine back in good running condition. 14 After trial, the court a quo rendered a decision the dispositive portion of which reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered as follows: (1) Decreeing the rescission of the contract of sale involving one linotype machine No. 14 between the defendant as seller and the plaintiff as buyer; (2) Ordering the plaintiff to return to the defendant at the latter's place of business in Iloilo City the linotype machine aforementioned together with all accessories that originally were delivered to the plaintiff; (3) Ordering the defendant to return to the plaintiff the sum of Forty Thousand Pesos (P40,000.00) representing the price of the linotype machine, plus interest at the legal rate counted from May 17, 1978 when this action was instituted, until fully paid; (4) Ordering the defendant to indemnify the plaintiff the sum of Four Thousand Five Hundred Pesos (P4,500.00) representing unearned income or actual damages; (5) Ordering the defendant to pay the plaintiff the sum of One Thousand Pesos (Pl,000.00) for attorney's fees. Costs against the defendant. 15

From this decision, private respondent appealed to the Intermediate Appellate Court which reversed the judgment of the lower court and dismissed petitioner's complaint, hence the present petition. We find merit in petitioner's cause.

On the matter of venue, private respondent relies on the aforementioned Sales Invoice No. 076A which allegedly requires that the proper venue should be Iloilo City and not Bacolod City. We agree with petitioner that said document is not the contract evidencing the sale of the linotype machine, it being merely a preliminary memorandum of a proposal to buy one linotype machine, using for such purpose a printed form used for printing job orders in private respondent's printing business. As hereinbefore explained, this issue on venue was brought to Us by private respondent in a special civil action for prohibition with preliminary injunction in G.R. No. 49078. After considering the allegations contained, the issues raised and the arguments adduced in said petition, as well as the comments thereto, the Court dismissed the petition for lack of merit. Respondent court erred in reopening the same issue on appeal, with a contrary ruling. Furthermore, it was error for the respondent court, after adopting the factual findings of the lower court, to reverse the latter's holding that the sales invoice is merely a pro forma memorandum. The records do not show that this finding is grounded entirely on speculation, surmises or conjectures as to warrant a reversal thereof. 16 In fact, as hereinbefore stated, private respondent expressly admitted in his official receipt No. 0451, dated September 30, 1977, that the said sales invoice was merely a pro forma invoice. Consequently, the printed provisions therein, especially since the printed form used was for purposes of other types of transactions, could not have been intended by the parties to govern their transaction on the printing machine. It is obvious that a venue stipulation, in order to bind the parties, must have been intelligently and deliberately intended by them to exclude their case from the reglementary rules on venue. Yet, even such intended variance may not necessarily be given judicial approval, as, for instance, where there are no restrictive or qualifying words in the agreement indicating that venue cannot be laid in any place other than that agreed upon by the parties, 17 and in contracts of adhesion. 18 Now, when an article is sold as a secondhand item, a question arises as to whether there is an implied warranty of its quality or fitness. It is generally held that in the sale of a designated and specific article sold as secondhand, there is no implied warranty as to its quality or fitness for the purpose intended, at least where it is subject to inspection at the time of the sale. On the other hand, there is also authority to the effect that in a sale of a secondhand articles there may be, under some circumstances, an implied warranty of fitness for the ordinary purpose of the article sold or for the particular purpose of the buyer.
19

In a line of decisions rendered by the United States Supreme Court, it had theretofore been held that there is no implied warranty as to the condition, adaptation, fitness, or suitability for the purpose for which made, or the quality, of an article sold as and for a secondhand article. 20 Thus, in finding for private respondent, the respondent court cited the ruling in Sison vs. Ago, et al. 21 to the effect that unless goods are sold as to raise an implied warranty, as a general rule there is no implied warranty in the sale of secondhand articles. 22 Said general rule, however, is not without exceptions. Article 1562 of our Civil Code, which was taken from the Uniform Sales Act, provides:
Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows: (1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose; xxx

In Drumar Mining Co. vs. Morris Ravine Mining Co., 23 the District Court of Appeals, 3rd District, California, in applying a similar provision of law, ruled:
'There is nothing in the Uniform Sales Act declaring there is no implied warranty in the sale of secondhand goods. Section 1735 of the Civil Code declares there is no implied warranty or condition as to the quality or fitness for any particular purpose, of goods supplied under a contract to sell or a sale, except (this general statement is followed by an enumeration of several exceptions). It would seem that the legislature intended this section to apply to all sales of goods, whether new or secondhand. In subdivision 1 of this section, this language is used: where the buyer ... makes known to the seller the particular purpose for which the goods are required, and it appears that the buyer relies on the seller's skill or judgment ... there is an implied warranty that the goods shall be reasonably fit for such purpose.'

Furthermore, and of a more determinative role in this case, a perusal of past American decisions 24 likewise reveals a uniform pattern of rulings to the effect that an express warranty can be made by and also be binding on the seller even in the sale of a secondhand article. In the aforecited case of Markman vs. Hallbeck, while holding that there was an express warranty in the sale of a secondhand engine, the court said that it was not error to refuse an instruction that upon the sale of secondhand goods no warranty was implied, since secondhand goods might be sold under such circumstances as to raise an implied warranty. To repeat, in the case before Us, a certification to the effect that the linotype machine bought by petitioner was in A-1 condition was issued by private respondent in favor of the former. This cannot but be considered as an express warranty. However, it is private respondent's submission, that the same is not binding on him, not being a part of the contract of sale between them. This contention is bereft of substance. It must be remembered that the certification was a condition sine qua non for the release of petitioner's loan which was to be used as payment for the purchase price of the machine. Private respondent failed to refute this material fact. Neither does he explain why he made that express warranty on the condition of the machine if he had not intended to be bound by it. In fact, the respondent court, in declaring that petitioner should have availed of the remedy of requiring repairs as provided for in said certification, thereby considered the same as part and parcel of the verbal contract between the parties. On the basis of the foregoing circumstances, the inescapable conclusion is that private respondent is indeed bound by the express warranty he executed in favor of herein petitioner. We disagree with respondent court that private respondents express warranty as to the A1 condition of the machine was merely dealer's talk. Private respondent was not a dealer of printing or linotype machines to whom could be ascribed the supposed resort to the usual exaggerations of trade in said items. His certification as to the condition of the machine was not made to induce petitioner to purchase it but to confirm in writing for purposes of the financing aspect of the transaction his representations thereon. Ordinarily, what does not appear on the face of the written instrument should be regarded as dealer's or trader's talk; 25 conversely, what is specifically represented as true in said document, as in the instant case, cannot be considered as mere dealer's talk. On the question as to whether the hidden defects in the machine is sufficient to warrant a rescission of the contract between the parties, we have to consider the rule on redhibitory defects contemplated in Article 1561 of the Civil Code. A redhibitory defect must be an imperfection or defect of such nature as to engender a certain degree of importance. An imperfection or defect of little consequence does not come within the category of being redhibitory. 26

As already narrated, an expert witness for the petitioner categorically established that the machine required major repairs before it could be used. This, plus the fact that petitioner never made appropriate use of the machine from the time of purchase until an action was filed, attest to the major defects in said machine, by reason of which the rescission of the contract of sale is sought. The factual finding, therefore, of the trial court that the machine is not reasonably fit for the particular purpose for which it was intended must be upheld, there being ample evidence to sustain the same. At a belated stage of this appeal, private respondent came up for the first time with the contention that the action for rescission is barred by prescription. While it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action a cursory reading of the ten preceding articles to which it refers will reveal that said rule may be applied only in case of implied warranties. The present case involves one with and express warranty. Consequently, the general rule on rescission of contract, which is four years 27 shall apply. Considering that the original case for rescission was filed only one year after the delivery of the subject machine, the same is well within the prescriptive period. This is aside from the doctrinal rule that the defense of prescription is waived and cannot be considered on appeal if not raised in the trial court, 28 and this case does not have the features for an exception to said rule. WHEREFORE, the judgment of dismissal of the respondent court is hereby REVERSED and SET ASIDE, and the decision of the court a quo is hereby REINSTATED. SO ORDERED

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-42636 August 1, 1985 MARIA LUISA DE LEON ESCALER and ERNESTO ESCALER, CECILIA J. ROXAS and PEDRO ROXAS, petitioners, vs. COURT OF APPEALS, JOSE L. REYNOSO, now deceased, to be substituted by his heirs or legal representatives and AFRICA V. REYNOSO, respondents. Avancea Law Office for petitioners. Bauza, Ampil, Suarez, and Paredes Law Office for respondent Africa V. Reynoso. CUEVAS, J.: This is a Petition for Review on certiorari of the Decision of the then Court of Appeals (now the Intermediate Appellate Court) and of its Resolution denying petitioners' Motion for Reconsideration, in CA G.R. No. 41953-R, which was an appeal from the judgment of the Court of First Instance of Rizal in Civil Case No. 9014 entitled " Maria Luisa de Leon Escaler, et al vs. Jose L. Reynoso and Africa Reynoso ." The following are the pertinent background facts: On March 7, 1958, the spouses Africa V. Reynoso and Jose L, Reynoso sold to petitioners several others, a parcel of land, situated in Antipolo, Rizal with an area of 239,479 square meters and covered by TCT No. 57400 of the Register of Deeds of the Province of Rizal. The Deed of Sale 1 contained the following covenant against eviction, to wit:
That the VENDOR is the absolute owner of a parcel of land ... the ownership thereof being evidenced by an absolute deed of sale executed in her favor by registered owner ANGELINA C. REYNOSO, ...; That the VENDOR warrants valid title to and ownership of said parcel of land and further, warrant to defend the property herein sold and conveyed, unto the VENDEES, their heirs, and assignees, from any and all claims of any persons whatsoever.

On April 21, 1961, the Register of Deeds of Rizal and A. Doronilla Resources Development, Inc. filed Case No. 4252 before the Court of First Instance of Rizal for the cancellation of OCT No. 1526 issued in the name of Angelina C. Reynoso (predecessor-ininterest of private respondents-vendors) on February 26, 1958 under Decree No. 62373, LRC Record No. N-13783, on the ground that the property covered by said title is already previously registered under Transfer Certificate of Title No. 42999 issued in the name of A. Doronilla Development, Inc. Petitioners as vendees filed their opposition to the said petition. On June 10, 1964, an Order 2 was issued in the said case, the dispositive portion of which reads:
IN VIEW OF THE ABOVE CONSIDERATIONS, this Court is constrained to set aside Decree No. 62373 issued in LRC. Rec. No. N-13783 and the Register of Deeds of Rizal is directed to cancel OCT No. 1526 of his office and all Transfer Certificates of Title issued subsequently

thereafter to purchaser of said property or portions thereof, the same being null and void, the expenses for such cancellation to be charged to spouses Angelina Reynoso and Floro Reynoso. The owner's duplicates in the possession of the transferees of the property covered by OCT No. 1526 are declared null and void and said transferees are directed to surrender to the Register of Deeds of Rizal, said owner's duplicates for cancellation. The other reliefs sought for by the party oppositors are denied the same not falling within the jurisdiction of this Court under this proceeding. SO ORDERED.

On August 31, 1965, herein petitioners, spouses Maria de Leon Escaler and Ernesto Escaler and spouses Cecilia J. Roxas and Pedro Roxas, filed Civil Case No. 9014 before the Court of First Instance of Rizal against their vendors, herein private respondents, spouses Jose L. Reynoso and Africa Reynoso for the recovery of the value of the property sold to them plus damages on the ground that the latter have violated the vendors' "warranty against eviction." The complaint among others, alleged that the Order issued in Case No. 4252 which cancelled the title of Angelina C. Reynoso and all subsequent Transfer Certificates of Title derived and/or emanating therefrom and which includes the titles of petitioners, is now final, and by reason thereof petitioners lost their right over the property sold; and that in said Case No. 4252, the respondents were summoned and/or given their day in court at the instance of the petitioners. 3 The respondents, as defendants, filed their answer alleging, among others, by way of affirmative defenses that "the cause of action, if any, of plaintiffs against defendants have been fully adjudicated in Case No. 4252 when plaintiffs failed to file a third-party complaint against defendants." 4 On August 18, 1967, petitioners, as plaintiffs, filed a Motion for Summary Judgment, alleging the facts already averred in the complaint, and further alleging that the defendants were summoned and were given their day in court at the instance of plaintiffs in Case No. 4252. In support of their said motion, the plaintiffs attached the affidavit of Atty. Alberto R. Avancea who had represented the plaintiffs in Case No. 4252 and had filed a joint opposition in behalf of all the vendees. The pertinent portion of that affidavit, states
4. That he has furnished a copy of said joint opposition to Africa Reynoso, wife of Jose L. Reynoso, at her given address at c/o Antipolo Enterprises, Antipolo, Rizal and the latter had received the same, as evidenced by the photostatic copy of the Registry Return Receipt thereto affixed as Annex "C-l"; xxx xxx xxx 6. That he hereby executed this Affidavit to prove that said defendants Africa Reynoso and Jose L. Reynoso were given their day in Court and/or were afforded their opportunity to be heard in Case No. 4252 aforecited.

On September 27, 1967, judgment was rendered by the trial court, the pertinent portion of which reads
Considering the foregoing motion for summary judgment and it appearing that the defendants under a Deed of Absolute Sale (Annex "C") have expressly warranted their valid title and ownership of the said parcel of land and further warranted to defend said property from any and all claims of any persons whomever in favor of plaintiffs; that the said warranties were violated when on June 10, 1964, an Order was promulgated by the Court of First Instance of Rizal in Case No. 4252 (Related to LRC Case No. 1559, LRC Record No. N13293). In Re: Petition for Cancellation of Original Registration, etc., covering the parcel of land in question; that said order of June 10, 1964 has become final and executory there being no appeal interposed thereto and defendants were summoned and were given a day in court at the instance of the plaintiffs in Case No. 4252, the Court hereby grants the motion for summary judgment, and hereby orders the defendants to jointly and severally return to the plaintiffs Maria Luisa de Leon Escaler and Ernesto Escaler, Cecilia J. Roxas and Pedro

Roxas, the value of the property sold to them at the time of eviction which is not to be less than P5,500.00 to reimburse to each one of the plaintiffs the expenses of contract and litigation and the amount of P2,250.00 to pay the attorney's fees of P1,000.00 plus the costs of suit. SO ORDERED.

Private respondents appealed the aforesaid decision to the then Court of Appeals 5 assigning as sole errorthat the lower court erred in finding that they were summoned and were given their day in court at the instance of petitioners-plaintiffs in Case No. 4252. In reversing the decision of the trial court and dismissing the case, the then Court of Appeals found and so ruled that petitioners as vendees had not given private respondentsvendors, formal notice of the eviction case as mandated by Arts. 1558 and 1559 of the New Civil Code. Hence, the instant recourse, petitioners contending 1) that the Court of Appeals erred in applying strictly to the instant case the provisions of Articles 1558 and 1559 of the new Civil Code; and 2) that the decision of the Court of First Instance of Rizal should have been affirmed by the Court of Appeals or at least, the, Court of Appeals should have remanded the case to the trial court, for hearing on the merits. The petition is devoid of merit. Consequently, it must be dismissed. Article 1548, in relation to Articles 1558. and 1559 of the New Civil Code reads as follows:
Art. 1548, Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased. The vendor shall answer for the eviction even though nothing has been said in the contract on the subject. The contracting parties, however, may increase, diminish, or suppress this legal obligation of the vendor. Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the suit for eviction at the instance of the vendee . (emphasis supplied) Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for answering the complaint that the vendor be made as co-defendant.

In order that a vendor's liability for eviction may be enforced, the following requisites must concura) there must be a final judgment; b) the purchaser has been deprived of the whole or part of the thing sold; c) said deprivation was by virtue of a right prior to the sale made by the vendor; and d) the vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee. 6 In the case at bar, the fourth requisitethat of being summoned in the suit for eviction (Case No. 4252) at the instance of the vendeeis not present. All that the petitioners did, per their very admission, was to furnish respondents, by registered mail, with a copy of the opposition they (petitioners filed in the eviction suit. Decidedly, this is not the kind of notice prescribed by the aforequoted Articles 1558 and 1559 of the New Civil Code. The term "unless he is summoned in the suit for eviction at the instance of the vendee" means that the respondents as vendor/s should be made parties to the suit at the instance of petitioners-vendees, either by way of asking that the former be made a co-defendant or by the filing of a third-party complaint against said vendors. Nothing of that sort appeared to have been done by the petitioners in the instant case. IN VIEW OF THE FOREGOING CONSIDERATIONS, the petition is DISMISSED and the appealed decision of the then Court of Appeals is AFFIRMED.

No pronouncement as to costs. SO ORDERED Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 85240 July 12, 1991 HEIRS OF CECILIO (also known as BASILIO) CLAUDEL, namely, MODESTA CLAUDEL, LORETA HERRERA, JOSE CLAUDEL, BENJAMIN CLAUDEL, PACITA CLAUDEL, CARMELITA CLAUDEL, MARIO CLAUDEL, ROBERTO CLAUDEL, LEONARDO CLAUDEL, ARSENIA VILLALON, PERPETUA CLAUDEL and FELISA CLAUDEL, petitioners, vs. HON. COURT OF APPEALS, HEIRS OF MACARIO, ESPERIDIONA, RAYMUNDA and CELESTINA, all surnamed CLAUDEL, respondents. Ricardo L. Moldez for petitioners. Juan T. Aquino for private respondents SARMIENTO, J.:p This petition for review on certiorari seeks the reversal of the decision rendered by the Court of Appeals in CA-G.R. CV No. 04429 1 and the reinstatement of the decision of the then Court of First Instance (CFI) of Rizal, Branch CXI, in Civil Case No. M-5276-P, entitled. "Heirs of Macario Claudel, et al. v. Heirs of Cecilio Claudel, et al.," which dismissed the complaint of the private respondents against the petitioners for cancellation of titles and reconveyance with damages. 2 As early as December 28, 1922, Basilio also known as "Cecilio" Claudel, acquired from the Bureau of Lands, Lot No. 1230 of the Muntinlupa Estate Subdivision, located in the poblacion of Muntinlupa, Rizal, with an area of 10,107 square meters; he secured Transfer Certificate of Title (TCT) No. 7471 issued by the Registry of Deeds for the Province of Rizal in 1923; he also declared the lot in his name, the latest Tax Declaration being No. 5795. He dutifully paid the real estate taxes thereon until his death in 1937. 3 Thereafter, his widow "Basilia" and later, her son Jose, one of the herein petitioners, paid the taxes. The same piece of land purchased by Cecilio would, however, become the subject of protracted litigation thirty-nine years after his death. Two branches of Cecilio's family contested the ownership over the land-on one hand the children of Cecilio, namely, Modesto, Loreta, Jose, Benjamin, Pacita, Carmelita, Roberto, Mario, Leonardo, Nenita, Arsenia Villalon, and Felisa Claudel, and their children and descendants, now the herein petitioners (hereinafter referred to as HEIRS OF CECILIO), and on the other, the brother and sisters of Cecilio, namely, Macario, Esperidiona, Raymunda, and Celestina and their children and descendants, now the herein private respondents (hereinafter referred to as SIBLINGS OF CECILIO). In 1972, the HEIRS OF CECILIO partitioned this lot among themselves and obtained the corresponding Transfer Certificates of Title on their shares, as follows:
TCT No. 395391 1,997 sq. m. Jose Claudel

TCT No. 395392 1,997 sq. m. Modesta Claudel and children TCT No. 395393 1,997 sq. m. Armenia C. Villalon TCT No. 395394 1,997 sq. m. Felisa Claudel 4

Four years later, on December 7, 1976, private respondents SIBLINGS OF CECILIO, filed Civil Case No. 5276-P as already adverted to at the outset, with the then Court of First Instance of Rizal, a "Complaint for Cancellation of Titles and Reconveyance with Damages," alleging that 46 years earlier, or sometime in 1930, their parents had purchased from the late Cecilio Claudel several portions of Lot No. 1230 for the sum of P30.00. They admitted that the transaction was verbal. However, as proof of the sale, the SIBLINGS OF CECILIO presented a subdivision plan of the said land, dated March 25, 1930, indicating the portions allegedly sold to the SIBLINGS OF CECILIO. As already mentioned, the then Court of First Instance of Rizal, Branch CXI, dismissed the complaint, disregarding the above sole evidence (subdivision plan) presented by the SIBLINGS OF CECILIO, thus:
Examining the pleadings as well as the evidence presented in this case by the parties, the Court can not but notice that the present complaint was filed in the name of the Heirs of Macario, Espiridiona, Raymunda and Celestina, all surnamed Claudel, without naming the different heirs particularly involved, and who wish to recover the lots from the defendants. The Court tried to find this out from the evidence presented by the plaintiffs but to no avail. On this point alone, the Court would not be able to apportion the property to the real party in interest if ever they are entitled to it as the persons indicated therein is in generic term (Section 2, Rule 3). The Court has noticed also that with the exception of plaintiff Lampitoc and (sic) the heirs of Raymunda Claudel are no longer residing in the property as they have (sic) left the same in 1967. But most important of all the plaintiffs failed to present any document evidencing the alleged sale of the property to their predecessors in interest by the father of the defendants. Considering that the subject matter of the supposed sale is a real property the absence of any document evidencing the sale would preclude the admission of oral testimony (Statute of Frauds). Moreover, considering also that the alleged sale took place in 1930, the action filed by the plaintiffs herein for the recovery of the same more than thirty years after the cause of action has accrued has already prescribed. WHEREFORE, the Court pronouncement as to costs. SO ORDERED. 5 renders judgment dismissing the complaint, without

On appeal, the following errors 6 were assigned by the SIBLINGS OF CECILIO:

1. THE TRIAL COURT ERRED IN DISMISSING PLAINTIFFS' COMPLAINT DESPITE CONCLUSIVE EVIDENCE SHOWING THE PORTION SOLD TO EACH OF PLAINTIFFS' PREDECESSORS. 2. THE TRIAL COURT ERRED IN HOLDING THAT PLAINTIFFS FAILED TO PROVE ANY DOCUMENT EVIDENCING THE ALLEGED SALE. 3. THE TRIAL COURT ERRED IN NOT GIVING CREDIT TO THE PLAN, EXHIBIT A, SHOWING THE PORTIONS SOLD TO EACH OF THE PLAINTIFFS' PREDECESSORS-ININTEREST. 4. THE TRIAL COURT ERRED IN NOT DECLARING PLAINTIFFS AS OWNERS OF THE PORTION COVERED BY THE PLAN, EXHIBIT A. 5. THE TRIAL COURT ERRED IN NOT DECLARING TRANSFER CERTIFICATES OF TITLE NOS. 395391, 395392, 395393 AND 395394 OF THE REGISTER OF DEEDS OF RIZAL AS NULL AND VOID.

The Court of Appeals reversed the decision of the trial court on the following grounds: 1. The failure to bring and prosecute the action in the name of the real party in interest, namely the parties themselves, was not a fatal omission since the court a quo could have adjudicated the lots to the SIBLINGS OF CECILIO, the parents of the herein respondents,

leaving it to them to adjudicate the property among themselves. 2. The fact of residence in the disputed properties by the herein respondents had been made possible by the toleration of the deceased Cecilio. 3. The Statute of Frauds applies only to executory contracts and not to consummated sales as in the case at bar where oral evidence may be admitted as cited in Iigo v. Estate of Magtoto 7 and Diana, et al. v. Macalibo. 8 In addition,
. . . Given the nature of their relationship with one another it is not unusual that no document to evidence the sale was executed, . . ., in their blind faith in friends and relatives, in their lack of experience and foresight, and in their ignorance, men, in spite of laws, will make and continue to make verbal contracts. . . . 9

4. The defense of prescription cannot be set up against the herein petitioners despite the lapse of over forty years from the time of the alleged sale in 1930 up to the filing of the "Complaint for Cancellation of Titles and Reconveyance . . ." in 1976. According to the Court of Appeals, the action was not for the recovery of possession of real property but for the cancellation of titles issued to the HEIRS OF CECILIO in 1973. Since the SIBLINGS OF CECILIO commenced their complaint for cancellation of titles and reconveyance with damages on December 7, 1976, only four years after the HEIRS OF CECILIO partitioned this lot among themselves and obtained the corresponding Transfer Certificates of Titles, then there is no prescription of action yet. Thus the respondent court ordered the cancellation of the Transfer Certificates of Title Nos. 395391, 395392, 395393, and 395394 of the Register of Deeds of Rizal issued in the names of the HEIRS OF CECILIO and corollarily ordered the execution of the following deeds of reconveyance:
To Celestina Claudel, Lot 1230-A with an area of 705 sq. m. To Raymunda Claudel, Lot 1230-B with an area of 599 sq. m. To Esperidiona Claudel, Lot 1230-C with an area of 597 sq. m. To Macario Claudel, Lot 1230-D, with an area of 596 sq. m. 10

The respondent court also enjoined that this disposition is without prejudice to the private respondents, as heirs of their deceased parents, the SIBLINGS OF CECILIO, partitioning among themselves in accordance with law the respective portions sold to and herein adjudicated to their parents. The rest of the land, lots 1230-E and 1230-F, with an area of 598 and 6,927 square meters, respectively would go to Cecilio or his heirs, the herein petitioners. Beyond these apportionments, the HEIRS OF CECILIO would not receive anything else. The crux of the entire litigation is whether or not the Court of Appeals committed a reversible error in disposing the question of the true ownership of the lots. And the real issues are: 1. Whether or not a contract of sale of land may be proven orally: 2. Whether or not the prescriptive period for filing an action for cancellation of titles and reconveyance with damages (the action filed by the SIBLINGS OF CECILIO) should be counted from the alleged sale upon which they claim their ownership (1930) or from the date of the issuance of the titles sought to be cancelled in favor of the HEIRS OF CECILIO (1976). The rule of thumb is that a sale of land, once consummated, is valid regardless of the form

it may have been entered into. 11 For nowhere does law or jurisprudence prescribe that the contract of sale be put in writing before such contract can validly cede or transmit rights over a certain real property between the parties themselves. However, in the event that a third party, as in this case, disputes the ownership of the property, the person against whom that claim is brought can not present any proof of such sale and hence has no means to enforce the contract. Thus the Statute of Frauds was precisely devised to protect the parties in a contract of sale of real property so that no such contract is enforceable unless certain requisites, for purposes of proof, are met. The provisions of the Statute of Frauds pertinent to the present controversy, state:
Art. 1403 (Civil Code). The following contracts are unenforceable, unless they are ratified: xxx xxx xxx 2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases, an agreement hereafter made shall be unenforceable by action unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: xxx xxx xxx e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein; xxx xxx xxx (Emphasis supplied.)

The purpose of the Statute of Frauds is to prevent fraud and perjury in the enforcement of obligations depending for their evidence upon the unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be evidenced in Writing. 12 The provisions of the Statute of Frauds originally appeared under the old Rules of Evidence. However when the Civil Code was re-written in 1949 (to take effect in 1950), the provisions of the Statute of Frauds were taken out of the Rules of Evidence in order to be included under the title on Unenforceable Contracts in the Civil Code. The transfer was not only a matter of style but to show that the Statute of Frauds is also a substantive law. Therefore, except under the conditions provided by the Statute of Frauds, the existence of the contract of sale made by Cecilio with his siblings 13 can not be proved. On the second issue, the belated claim of the SIBLINGS OF CECILIO who filed a complaint in court only in 1976 to enforce a light acquired allegedly as early as 1930, is difficult to comprehend. The Civil Code states:
Art. 1145. The following actions must be commenced within six years: (1) Upon an oral contract . . . (Emphasis supplied).

If the parties SIBLINGS OF CECILIO had allegedly derived their right of action from the oral purchase made by their parents in 1930, then the action filed in 1976 would have clearly prescribed. More than six years had lapsed. We do not agree with the parties SIBLINGS OF CECILIO when they reason that an implied trust in favor of the SIBLINGS OF CECILIO was established in 1972, when the HEIRS OF CECILIO executed a contract of partition over the said properties. But as we had pointed out, the law recognizes the superiority of the torrens title. Above all, the torrens title in the possession of the HEIRS OF CECILIO carries more

weight as proof of ownership than the survey or subdivision plan of a parcel of land in the name of SIBLINGS OF CECILIO. The Court has invariably upheld the indefeasibility of the torrens title. No possession by any person of any portion of the land could defeat the title of the registered owners thereof.
14 A torrens title, once registered, cannot be defeated, even by adverse, open and notorious possession. A registered title under the torrens system cannot be defeated by prescription. The title, once registered, is notice to the world. All persons must take notice. No one can plead ignorance of the registration. 15 xxx xxx xxx Furthermore, a private individual may not bring an action for reversion or any action which would have the effect of cancelling a free patent and the corresponding certificate of title issued on the basis thereof, with the result that the land covered thereby will again form part of the public domain, as only the Solicitor General or the officer acting in his stead may do so. 16

It is true that in some instances, the Court did away with the irrevocability of the torrens title, but the circumstances in the case at bar varied significantly from these cases. In Bornales v. IAC, 17 the defense of indefeasibility of a certificate of title was disregarded when the transferee who took it had notice of the flaws in the transferor's title. No right passed to a transferee from a vendor who did not have any in the first place. The transferees bought the land registered under the torrens system from vendors who procured title thereto by means of fraud. With this knowledge, they can not invoke the indefeasibility of a certificate of title against the private respondent to the extent of her interest. This is because the torrens system of land registration, though indefeasible, should not be used as a means to perpetrate fraud against the rightful owner of real property. Mere registration of the sale is not good enough, good faith must concur with registration. Otherwise registration becomes an exercise in futility. 18 In Amerol v. Bagumbaran, 19 we reversed the decision of the trial court. In this case, the title was wrongfully registered in another person's name. An implied trust was therefore created. This trustee was compelled by law to reconvey property fraudulently acquired notwithstanding the irrevocability of the torrens title. 20 In the present case, however, the facts belie the claim of ownership. For several years, when the SIBLINGS OF CECILIO, namely, Macario, Esperidiona Raymunda, and Celestina were living on the contested premises, they regularly paid a sum of money, designated as "taxes" at first, to the widow of Cecilio, and later, to his heirs. 21 Why their payments were never directly made to the Municipal Government of Muntinlupa when they were intended as payments for "taxes" is difficult to square with their claim of ownership. We are rather inclined to consider this fact as an admission of non-ownership. And when we consider also that the petitioners HEIRS OF CECILIO had individually paid to the municipal treasury the taxes corresponding to the particular portions they were occupying, 22 we can readily see the superiority of the petitioners' position. Renato Solema and Decimina Calvez, two of the respondents who derive their right from the SIBLINGS OF CLAUDEL, bought a portion of the lot from Felisa Claudel, one of the HEIRS OF CLAUDEL. 23 The Calvezes should not be paying for a lot that they already owned and if they did not acknowledge Felisa as its owner.

In addition, before any of the SIBLINGS OF CECILIO could stay on any of the portions of the property, they had to ask first the permission of Jose Claudel again, one of the HEIRS OF CECILIO. 24 In fact the only reason why any of the heirs of SIBLINGS OF CECILIO could stay on the lot was because they were allowed to do so by the HEIRS OF CECILIO.
25

In view of the foregoing, we find that the appellate court committed a reversible error in denigrating the transfer certificates of title of the petitioners to the survey or subdivision plan proffered by the private respondents. The Court generally recognizes the profundity of conclusions and findings of facts reached by the trial court and hence sustains them on appeal except for strong and cogent reasons inasmuch as the trial court is in a better position to examine real evidence and observe the demeanor of witnesses in a case. No clear specific contrary evidence was cited by the respondent appellate court to justify the reversal of the lower court's findings. Thus, in this case, between the factual findings of the trial court and the appellate court, those of the trial court must prevail over that of the latter. 26 WHEREFORE, the petition is GRANTED We REVERSE and SET ASIDE the decision rendered in CA-G.R. CV No. 04429, and we hereby REINSTATE the decision of the then Court of First Instance of Rizal (Branch 28, Pasay City) in Civil Case No. M-5276-P which ruled for the dismissal of the Complaint for Cancellation of Titles and Reconveyance with Damages filed by the Heirs of Macario, Esperidiona Raymunda, and Celestina, all surnamed CLAUDEL. Costs against the private respondents. SO ORDERED

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. L-51377 June 27, 1988 INVESTMENT & DEVELOPMENT, INC., petitioner, vs. COURT OF APPEALS, RAYMUNDO GATPAYAT, AGENCIA DE EMPENOS DE AGUIRRE, and AGUIRRE INCORPORATED, respondents. Carlos J. Paras and Aloysius E. Dichoso for petitioner. Jose M. Macahasa for respondent Raymundo Gatpayat. Angelito M. Chua for respondent Aguirre, Inc. GUTIERREZ, JR., J.: This petition seeks a modification of the decision of the Court of Appeals which affirmed in toto that of the Court of Agrarian Relations, Seventh Regional District, Branch I, Pasig, Rizal insofar as the complaint against Raymundo Gatpayat was ordered dismissed. The facts of the case are not disputed. On January 14,1965, private respondent Raymundo Gatpayat sold the land subject matter of this case to petitioner Investment and Development, Inc. (IDI) for P122,769.50 payable in three installments of P36,830.85, P24,533.90 and P61,384.75, the last amount to be paid within one year from and after the date of issuance of the Original Certificate of Title over the property which respondent Gatpayat obligated himself to secure. On February 20, 1966, Original Certificate of Title No. 5019 was issued in the name of respondent Gatpayat. On January 30,1967, Transfer Certificate of Title No. 180376 was issued in Investment and Development, Inc.'s name. The subject land is agricultural with an area of three-and-a-half hectares, more or less, located in Talon, Las Pias Rizal. Originally, the land was owned by one Francisca Tolentino. It had Sotero Domingo Ramirez as tenant. When old age ensued, Sotero asked for his replacement in the person of his son, Jose Ramirez. In 1964, respondent Gatpayat bought the land from the original owner on the condition that the annual rental of ten cavans of palay given by tenant Ramirez would pertain to Gatpayat only after full payment of the purchase price. Subsequently, respondent Gatpayat completed his payments for the land and entered into an agreement with tenant Ramirez that the latter shall sell the ten cavans of palay and give the proceeds to him. On March 8, 1971, the petitioner sold the land to respondent Agencia de Empenos de A. Aguirre, Inc. for the amount of P456,001.60. As a result thereof, Transfer Certificate of Title

No. 317815 was issued in the vendee's name. On April 6,1973, Transfer Certificate of Title No. 403109 was issued in the name of the present owner, respondent A. Aguirre, Inc. In April 1972, tenant Ramirez was forced to stop cultivating the land in question because of the bulldozing caused by respondent A. Aguirre, Inc. In a complaint filed by tenant Ramirez against the petitioner and the private respondent, payment for disturbance compensation was prayed for as a consequence of the bulldozing of the land. The petitioner, in turn filed a crossclaim against respondent Gatpayat in case of a judgment adverse to it while respondents Agencia and Aguirre, Inc. filed a cross-claim against the petitioner. After the case was submitted for decision, the agrarian court rendered a decision in favor of tenant Ramirez with the following dispositive portion, to wit:
FOR ALL THE FOREGOING CONSIDERATIONS judgment is hereby rendered in the tenor the disposition herein below provided: 1. Declaring plaintiff Jose Ramirez as the true and lawful agricultural tenant of Raymundo Gatpayat over the landholding in question with an approximate area of 35,077 square meters situated at Talon, Las Pias Metro Manila and presently owned by defendant A. Aguirre, Inc.; 2. Ordering defendant A. Aguirre, Inc. to pay and deliver plaintiff the amount of P24,500.00 as payment for disturbance compensation; 3. Ordering A. Aguirre, Inc. to pay plaintiff P2,000.00 as attorney's fees; 4. Ordering Investment and Development Inc. to pay A. Aguirre, Inc. the amount of P24,000.00 as damages; 5. Ordering Investment and Development Inc. to pay A. Aguirre, Inc. P2,000.00 as attorney's fees; 6. Dismissing the complaint against defendant Raymundo Gatpayat; 7. Dismissing plaintiffs claim for moral and exemplary damages for insufficiency of evidence; and 8. Dismissing the claim of A. Aguirre, Inc. for moral and exemplary damages against Investment and Development, Inc. IT IS SO ORDERED. (pp. 11-12, Rollo)

From the above decision, only the petitioner appealed to the Court of Appeals alleging, among others, that respondent Gatpayat should have been liable to it considering that he violated his warranty "that the land is free from all liens and encumbrances;" that the agrarian court erred in declaring that tenant Ramirez was an agricultural lessee of petitioner; and that the court's ruling was contrary to law, equity and fair play in that it caused unjust enrichment on the part of respondent Gatpayat by ordering the payment of disturbance compensation at petitioner's expense. On June 14, 1979, the Court of Appeals promulgated a decision affirming the agrarian court in all respects based on the following grounds:
The warranty made by IDI in the "Deed of Absolute Sale" in favor of Agencia dated March 8, 1971, it provides among others that the property is "free from all liens, adverse claim, encumbrances, claims of any tenant and/or agricultural workers, either arising as compensation for disturbance or from improvements" including compliance 'with all the requirements for the provisions of the Tenancy Law, the Land Reform Code and other pertinent laws of the Republic of the Philippines ..." With the findings that plaintiff is a true and lawful tenant and under the above-mentioned warranties, IDI should, therefore, be held liable for the same. Hence, the counterclaim of Agencia and Aguirre against IDI is proper and compensable." (pp. 15-16, Rollo) The warranty made by Gatpayat in favor of the IdI, as contained in the "Deed of Absolute Sale" duly executed on January 30, 1967 (Exhibit "2," IDI; Exhibit "2," Gatpayat and Exhibit "5," Aguirre) states that the property was 'free from all liens and encumbrances." In Civil law

and as used and understood in ordinary legal parlance, a lien and/or encumbrance is synonymous to 'gravamen, "carga, "hypoteca" or 'Privilegium' and does not cover tenancy. In other words, unless so specifically stated, tenancy cannot be considered a lien or encumbrance. In the absence of such a showing, and inasmuch as Gatpayat did not warrant the existence of tenancy, he cannot be held liable for violation of his warranty. (p. 16, Rollo) Since the leasehold relationship between the plaintiff and Gatpayat has been established on the land in question, the same cannot be terminated by the sale of the land to the appellant (IDI). ... This is the underlying principle of security of tenure of the leaseholder enshrined in our agrarian laws." (p. 18-19, Rollo)

The petitioner appealed to this Court by way of certiorari with a lone assignment of error that reads:
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT RAYMUNDO GATPAYAT WAS LIABLE TO PETITIONER FOR BREACH OF SELLER'S WARRANTY UNDER ARTICLE 1547 (2) IN RELATION TO ARTICLE 18 OF THE CIVIL CODE. (p. 1, Petitioner's Brief)

The only issue presented in this petition is whether or not respondent Gatpayat as seller of the land in question violated his warranty to the petitioner which bought the land "free from all liens and encumbrances." The petitioner no longer questions the finding of the appellate court that tenant Ramirez is entitled to a disturbance compensation. It only maintains that reimbursement by respondent Gatpayat of said compensation in its favor should be ordered because the tenancy relationship between respondent Gatpayat and tenant Ramirez falls under the term "hidden faults or defects" which respondent Gatpayat warranted against in the sale of the land to the petitioner by virtue of Article 1547, sub-paragraph (2) of the Civil Code. We find no merit in the petitioner's position. It is axiomatic that factual findings of the Court of Appeals are conclusive on the parties and reviewable by us only when the case falls within any of the recognized exceptions which is not the situation obtaining in this petition (See Chua Giok Ong v. Court of Appeals, 149 SCRA 115; Dulos Realty and Development Corporation v. Court of Appeals, et al., G.R. No. 76668 promulgated on January 28, 1988). The appellate court in affirming the lower court's decision, has clearly dissected the facts and analyzed the phraseologies of the warranties contained in the contract between respondent Gatpayat and petitioner petitioner, on the one hand, and petitioner and respondent Agencia de Empenos de Aguirre, on the other. We agree with the disparity in the terms used and its consequent effects as pointed out in the questioned decision. The petitioner does not dispute the fact that the Deed of Absolute Sale which it executed with Gatpayat simply warranted that the subject land was "free from all liens and encumbrances." Neither does the petitioner deny that to its buyer, respondent Agencia de Empenos de Aquirre, it warranted that the land was "free from all liens, adverse claims, encumbrances, claims of any tenant and/or agricultural workers, either arising as compensation for disturbance or from improvements." The distinction in the phraseology is not an idle one. We have held in the case of Pilar Development Corporation v. Intermediate Appellate Court (146 SCRA 215), that:
When the facts are undisputed, the question of whether or not the conclusion drawn therefrom by the Court of Appeals is correct, is a question of law cognizable by the Supreme Court (Comments on the Rules of Court, Moran 1979 Edition, Vol. II, p. 474 citing the case of Commissioner of Immigration v. Garcia, L-28082, June 28, 1974). However, all doubts, as to the correctness of such conclusions will be resolved in favor of the Court of Appeals (Id.), citing the case of Luna v. Linatoc, 74 Phil. 15.

The reimbursement of the payment for disturbance compensation by the petitioner to respondent Agencia de Empenos de Aguirre is clearly based on an express warranty as can be gleaned from the specific wordings of the contract between them. The petitioner cannot claim reimbursement from its seller, respondent Gatpayat, on the basis of an implied warranty against hidden faults or defects under Article 1547, sub-paragraph (2) inasmuch as the term "hidden faults or defects" pertains only to those that make the object of the sale unfit for the use for which it was intended at the time of the sale. In the case at bar, since the object of the sale by Gatpayat to the petitioner is an agricultural land, the existing tenancy relationship with respect to the land cannot be a "hidden fault or defect." It is not a lien or encumbrance that the vendor warranted did not exist at the time of the sale. It is a relation-ship which any buyer of agricultural land should reasonably expect to be present and which it is its duty to specifically look into and provide for. Agenda saw to it that the warranty was specific when it, in turn, purchased the land. WHEREFORE, PREMISES CONSIDERED, the instant petition is DENIED for lack of merit. The decision appealed from is hereby AFFIRMED. Costs against the petitioner. SO ORDERED

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. Nos. 91383-84 May 31, 1991 SOCORRO COSTA CRISOSTOMO, petitioner, vs. COURT OF APPEALS and NORMA SAN JOSE, DIANA J. TORRES, respondents. Quiason, Makalintal, Barot, Torres, Ibarra & Sison for petitioner. Augusto J. Salas for Diana J. Torres. PARAS, J.:p This is a petition for review on certiorari of the: (1) decision * of the Court of Appeals dated July 31, 1989 in CA-G.R. CV Nos. 11816 and 11817, entitled "Socorro Costa Crisostomo vs. Norma San Jose and Diana Torres", which modified the decision of the Regional Trial Court, Branch 154, Pasig, Metro Manila, and (2) resolution dated December 11, 1989, which denied the motion for reconsideration. As gathered from the records, the facts of the case are as follows: Socorro Costa Crisostomo (Crisostomo for short) was the registered owner of a residential house and lot known as Lot No. 6, Block 60, located in Mandaluyong, Metro Manila and covered by Transfer Certificate of Title No. 39286 of the Register of Deeds of Pasig. Crisostomo has occupied the property ever since she had the house built and has introduced other improvements thereon like fruit bearing trees and ornamental plants (Rollo, Petition, p. 9). Sometime in 1978, Norma San Jose (San Jose for short) offered to buy the abovementioned parcel of land including the house thereon for the sum of P300,000.00 which amount was agreed upon to be paid from the proceeds of a loan that was to be obtained by said respondent San Jose from a bank using petitioner Crisostomo's title as collateral. As payment, San Jose issued three (3) post dated Far East Bank and Trust Company checks in the total amount of P300,000.00 (Ibid., p. 4). Crisostomo accepted the offer, lent her title to San Jose and on May 17, 1978 executed a Deed of Absolute Sale in favor of San Jose ( Rollo, Petitioner's Memorandum, p. 106). On May 22, 1978, Crisostomo, upon San Jose's request, executed another deed of sale over the same property with the understanding that said document was for the purpose of reducing San Jose's registration fees and tax liabilities ( Ibid.). On May 26, 1978, San Jose registered the second deed of absolute sale with the Registry of Deeds of Pasig. At the same time, Transfer Certificate of Title No. 39286 was cancelled, and in its place, Transfer Certificate of Title No. 11835 was issued ( Rollo, Petition, pp. 1011).

After Crisostomo got tired of San Jose's unfulfilled promises to make good the postdated checks, the former decided to encash the postdated checks after their maturity dates with Far East Bank and Trust Company. Unfortunately, the same were all dishonored and returned to Crisostomo with the notation of the Bank as "Account Closed." ( Ibid.). Upon inquiry by Crisostomo, San Jose replied that when her application for a loan with a second bank, the Philippine Commercial and Industrial Bank, was not approved, she shifted to Security Bank and Trust Company. Soon enough, Crisostomo discovered that San Jose's loan application was disapproved because the collateral was insufficient for the amount of the loan she was borrowing (Ibid.). For Crisostomo's protection, San Jose signed a written undertaking for the forfeiture of the earnest money in the amount of P20,000.00 in favor of herein petitioner with a certification that the title to the property will be returned within one (1) month after non-effectivity of its sale, duly registered in petitioner's name. The aforementioned amount of P20,000.00 was the only payment Crisostomo ever received from San Jose ( Ibid.). Upon Crisostomo's insistence for the return of the title, San Jose informed Crisostomo that the title was in the possession of Diana J. Torres, the mortgagee ( Rollo, Memorandum for Petitioner, p. 108). San Jose never returned the said title as she had promised nor did she ever make any payment to the petitioner (Ibid.). Crisostomo made a written demand to Diana J. Torres (Torres for short) to reconvey the subject property to her. This demand was not satisfied ( Ibid.). Petitioner was thus compelled to file Civil Case No. 34356 on September 3, 1979 against San Jose but this was later amended to include Torres ( Ibid.). On the other hand, San Jose filed in an apparent attempt to forestall the extra-judicial foreclosure and public auction sale scheduled on September 18, 1979, Civil Case No. 34489 on September 17, 1979 against respondent Torres. On January 9, 1980 both actions were consolidated on motion of the parties and were jointly tried thereafter ( Ibid.). In a decision dated March 31, 1986, the Regional Trial Court of Pasig, Branch CLIV (154) decided in favor of the petitioner, the dispositive portion of which decision reads:
WHEREFORE, judgment is hereby rendered against the defendants in favor of the plaintiff as follows: In Civil Case No. 34356 1) The Deed of Absolute Sale executed by plaintiff over the property covered by Transfer Certificate of Title No. 39286 of the Register of Deeds of Pasig, Metro Manila, is hereby ordered rescinded; 2) Transfer Certificate of Title No. 11835 of the Register of Deeds of Pasig, Metro Manila, in the name of defendant Norma San Jose is hereby ordered cancelled; 3) Defendant Norma San Jose is hereby ordered to reconvey the title covering subject property within twenty (20) days from the finality of this judgment; 4) Defendants are also hereby ordered, jointly and severally, to pay plaintiff (a) the amount of P100,000.00 representing moral damages, (b) P20,000.00 as attorney's fees, and (c) the costs; 5) As a consequence of the rescission of the sale, plaintiff is ordered to return the amount of P20,000.00 which she received as earnest money. However, this amount shall be off-set against the amount of damages assessed against defendants; 6) The Deed of Real Estate Mortgage executed by defendant Norma San Jose in favor of defendant Diana Torres is hereby order (sic) nullified. The Register of Deeds of Pasig, Metro Manila is authorized to cancel the annotation of said mortgage on the title to be issued in favor of plaintiff.

In Civil Case No. 34489 1) Defendant Norma San Jose is hereby ordered to pay defendant Diana Torres the amount of P100,000.00. SO ORDERED. (Rollo, Annex "A", pp. 37-38).

Torres appealed the above-stated decision to the Court of Appeals which modified the judgment of the trial court in a decision, the dispositive portion of which reads as follows:
WHEREFORE, the decision appealed from is hereby MODIFIED in that the Deed of Real Estate Mortgage in favor of appellant Diana Torres be noted on the Certificate of Title which is to be re-issued to the appellee, and, appellant Diana Torres is hereby excluded from indemnifying the appellee the amounts representing moral damages, attorney's fees, and costs, but is AFFIRMED in all other respects. SO ORDERED. (Rollo, Annex "A", p. 41).

Petitioner filed a motion for partial reconsideration of the appellate court's decision but the same was denied in a Resolution dated December 11, 1989 ( Rollo, Annex "B", p. 45). Hence, the petition. The Court in its resolution dated June 27, 1990 gave due course to the petition and required both parties to submit their respective memoranda ( Rollo, Resolution, p. 78). The only issue to be resolved in the instant case is whether or not private respondent Diana Torres is a mortgagee in good faith. The petition is impressed with merit. While it is settled that the jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing and revising errors of law imputed to the latter, the findings of fact of the Court of Appeals may be set aside, among others, on the following grounds: ". . . (2) the inference made is manifestly mistaken; . . . (6) the findings of fact of the Court of Appeals are contrary to those of the trial court; . . .," (Tolentino vs. De Jesus, 56 SCRA 167 [1974]; Villamor vs. Court of Appeals, 162 SCRA 574 [1988]; Layugan vs. Intermediate Appellate Court, 167 SCRA 363 [1988]). A careful study of the records shows that the Court of Appeals erred in finding that private respondent Diana Torres is a mortgagee in good faith on the basis of the evidence. There are strong indications that Atty. Flor Martinez, the lawyer of Diana J. Torres, the mortgagee, knew of the defect of San Jose's title. Atty. Martinez is a close acquaintance of Norma San Jose, their long relationship dating back to 1974 (Rollo, p. 60). When the subject property was offered by San Jose as collateral for a loan, Atty. Martinez referred her to a client, Diana Torres. For her part, Torres instructed and authorized Atty. Martinez to view and inspect the property as well as to ascertain the genuineness and authenticity of San Jose's title (Hearing of October 6, 1989, TSN, p. 6; Rollo, p. 113). While feigning ignorance of the owner of subject property, she admitted later on crossexamination that Socorro Crisostomo was the owner from whom San Jose allegedly bought the property (Hearing of April 20, 1983, TSN, pp. 6-11). Even more persuasive is the fact that when Atty. Martinez personally inspected the property with San Jose for her client Torres, she allowed herself to be introduced to Socorro Crisostomo who was then actually occupying the house, as a Bank Inspector of the Development Bank of Meycauayan, Bulacan from whom the loan was being obtained, obviously to convince Crisostomo that the procedure is in accordance with her agreement with San Jose. Thus, petitioner Crisostomo and Atty. Flor Martinez testified as follows in the trial court:

TESTIMONY OF PETITIONER SOCORRO COSTA CRISOSTOMO: Atty. Beltran Q Do you know Atty. Martinez here, have you ever met Atty. Martinez? A I met her June 17, 1978. Q Where did you meet Atty. Martinez? A She came at home that evening with Norma San Jose. Q Where were you when Atty. Martinez and Norma San Jose came to your house? A I was at home. Q Did you have any companion there? A I was with my maid. Q Before that date, did you have occasion to meet Atty. Martinez? A Yes. (sic) That was my first time to meet her. Q Was there any introduction made to you? A She was introduced as a Bank Inspector of Private Development Bank of Meycauayan, Bulacan. (Emphasis supplied) Q Who introduced her to you? A Norma San Jose. Q You mean she was introduced to you to inspect that property in question? A Yes. Q Why was that supposed inspection to be made on behalf of the Meycauayan Bank? A She claimed that that was the bank wherein she was borrowing her loan. Q In connection with that inspection supposed to be made, what was the purpose, if you know? A To facilitate to (sic) processing, according to them." (T.S.N., pp. 16-17, Feb. 5, 1981) xxx xxx xxx

On cross-examination of Atty. Flor Martinez by Atty. Beltran, she stated:

xxx xxx xxx Q But your visit of the premises was purposely for the benefit of this Diana Torres, am I right? A Of course, because she is my client. Q And so in that visit of yours, you saw the plaintiff here personally? A Yes, I saw her then. Q And you had a conversation with her? A I had. xxx xxx xxx Q Will you please tell the Honorable Court what was the main purpose of your visit at the premises? A As the lawyer of the prospective mortgagee, I was duty bound to make a fair assessment as to whether the proposed collateral ( sic) commensurate to the amount applied for. In other words, it was in connection with the mortgage. xxx xxx xxx

Q And did you inquire from the plaintiff why was she there at the moment? A She was introduced to me as the Tia Coring. Q And from your conversation, did you come to know that the plaintiff here, Socorro Crisostomo, is the same Tia Coring whom she mentioned to you she bought the property from? (Emphasis supplied) A Yes, the same Tia Coring who sold the property to her . (Emphasis supplied) xxx xxx xxx Q And under these circumstances, you never inquired from the plaintiff whom you personally saw why she was there in the property or until when she would remain in that place? (Emphasis supplied) A No, because it would be unethical to ask that question , she being the Tia Coring of (sic) the owner. (Emphasis supplied) (T.S.N., pp. 81-85, April 28, 1983) xxx xxx xxx

Finally, when Torres herself visited the property she carefully evaded seeing Crisostomo personally, the actual occupant thereof, who could have easily enlightened her as to the true owner (Rollo, p. 116). Such unnatural behavior points more convincingly to the fact that she was aware that San Jose was not its real owner. In Philippine National Bank vs. Court of Appeals (153 SCRA 435 [1987]), the Supreme Court had the occasion to rule that a person dealing with registered land has a right to rely upon the fact of the Torrens Certificate of Title and to dispense with the need of inquiring further, except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make further inquiries (Gonzales vs. Intermediate Appellate Court, 157 SCRA 587 [1988]). Even assuming that Torres does not in fact know the circumstances of the sale, she is bound by the knowledge of Atty. Martinez or by the latter's negligence in her haphazard investigation because the negligence of her agents is her own negligence (PCIB vs. Villalva, 48 SCRA 37 [1972]). It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor or mortgagor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in the vendor's or mortgagor's title, will not make him an innocent purchaser or mortgagee for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defects as would have led to its discovery had he acted with the measure of precaution which may be required of a prudent man in a like situation (Leung Yee vs. Strong Machinery Co., 37 Phil. 644; RFC vs. Javillonar, 57 O.G. 39, September 25, 1961; C.N. Hodges vs. Dy Buncio and Co., Inc., 116 Phil. 595; Manacop vs. Cansino, 61 O.G. 21, August 2, 1965, 1 SCRA 527; Gaticana vs. Gaffud, 27 SCRA 706 [1969]). The appellate court, therefore, gravely erred in the appreciation of evidence on the good faith of private respondent Diana Torres. Consequently, because respondent Torres was not a mortgagee in good faith, there is no sufficient basis for the appellate court to order the notation of the Deed of Real Estate Mortgage in favor of private respondent Diana Torres on the Certificate of title which is to be re-issued to herein petitioner. PREMISES CONSIDERED, the decision of the respondent appellate court is REVERSED and SET ASIDE, and the decision of the trial court is REINSTATED. SO ORDERED

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 62650 June 27, 1991 SPOUSES MARIANO CASTILLO AND PILAR CASTILLO in their own behalf and in representation of HEIRS OF EDUARDO CASTILLO, petitioners, vs. HEIRS OF VICENTE MADRIGAL AND/OR SUSANA REALTY, INC. AND THE REGISTER OF DEEDS OF THE CITY OF MANILA, respondents. D. T. Reyes & Associates and Bernardo D. Calderon for petitioners. Ramon A. Barcelona for private respondents. MEDIALDEA, J.:p This is a petition for review on certiorari seeking reversal of the decision of the Court of Appeals dated August 5, 1982 in CA-G.R. No. 66849-R entitled "Spouses Mariano Castillo, et al., Plaintiffs-Appellants v. Heirs of Vicente Madrigal, et al., DefendantsAppellees." The antecedent facts are as follows: On December 17, 1979, petitioners spouses Mariano Castillo and Pilar Castillo, in their own behalf and in representation of the heirs of Eduardo Castillo, filed a verified complaint before the Court of First Instance (now Regional Trial Court) of Manila for annulment of contract and transfer certificate of title and/or reconveyance with damages against private respondents heirs of Vicente Madrigal and/or Susana Realty, Inc. and public respondent Register of Deeds of the City of Manila. The complaint contained the following pertinent allegations (pp. 105-108, Rollo):
xxx xxx xxx 4. That plaintiff spouses and their brother, Eduardo Castillo (herein represented by his legal heirs Paula Castillo and Antonio Castillo), are registered co-owners of a parcel of land situated in Ermita, Manila, which property is more particularly described and bounded as follows: Lot 20 of Block 362 of the Cadastral Survey of the City of Manila Cadastral Case No. 53 G.L.R.C. Cadastral Record No. 515 with a chalet of strong materials existing thereon, situated on the NE line of Calle M.H. del Pilar, District of Ermita. Bounded on the NE by Lots Nos. 18 and 8 of Block No. 12; on the SE by Lots Nos. 3, 4 and 7 of Block No. 362; on the SW by Lots Nos. 7 and 19 of Block 362 and Calle M.H. del Pilar; and on the NW by Lots Nos. 19, 17 and 12 of Block No. 362 containing an area of SEVEN HUNDRED AND TWENTY EIGHT (728) SQUARE METERS, more or less, Date of Survey, December 18, 1925 (Full technical description appear on tct no. 29454) That the plaintiffs' ownership over the property above-described is evidenced by Transfer Certificate of Title No. 623597 issued in their name and that of their brother Eduardo Castillo on August 11, 1941, . . .; 5. That the immediate origin of the above property is Transfer Certificate of Title No. 28454 in

the name of Petronila Vda. de Castillo, plaintiffs' mother, and from whom they acquired the realty by way of inheritance in equal share with Eduardo Castillo entered in the Registration Book in 1927 yet, . . . 6. That plaintiffs' mother aforesaid as predessor-in-interest ( sic) declared the property for taxation purposes for the year 1940 under Tax Dec. No. 531 and paid taxes thereon in 1941 under official receipt No. 571689, . . . 7. That after the transfer of the property in their own name and their brother aforesaid, the property was mortgaged by plaintiffs in favor of the Agricultural and Industrial Bank and due to the existing war conditions at the time, the possession, management and supervision of the land was entrusted to Eduardo Castillo reposing in him the ( sic) full trust and confidence; 8. That beginning the year 1941 up to the year 1977, plaintiff spouses left Manila and engaged in several business ventures in the provinces and stayed for so long a time in Cagayan Valley in northern Luzon and often times ( sic) traveled to far-away places thereby allowing his (sic) brother Eduardo Castillo herein to manage the same and collect the rentals due upon the understanding that once accumulated said amount be utilized to redeem the mortgaged property from the Bank which their brother did; 9. That during and after the effectivity of the mortgage with the aforesaid Bank, plaintiffs herein never gave their brother Eduardo Castillo authority to sell their undivided property neither were there transactions entered into by plaintiffs with any person or persons, natural or juridical with respect to their undivided halfportion ; 10. That after plaintiffs have returned from the provinces and upon arrival from abroad later in 1977, they decided to get their share from their brother Eduardo Castillo as he was entrusted but the latter being sickly then could not give the explanation and after conference with his wife, Paula Castillo, the latter told the plaintiffs that she and her husband Castillo (Eduardo) did not know the mysterious transactions that transpired in the transfer or registration of the above property to Vicente Madrigal (under Transfer Certificate of Title No. 72066) and upon verification thereof, an alleged deed of sale executed by plaintiffs and Eduardo Castillo appears on the back of the title but in truth and in fact, plaintiffs had never signed any document in favor of Vicente Madrigal contrary to what appears thereon ; . . . and subsequently transferred by Vicente Madrigal to Susana Realty Inc., under TCT No. 36280, . . .; 11. That plaintiffs exerted serious efforts in recovering his property (Mariano Castillo) in his capacity as a registered co-owner peacefully but of ( sic) no avail for the defendant Susana Realty Inc. refused to heed to the inquiry and hence this present action; 12. That the transfer of the property under litigation in favor of the late Vicente Madrigal was done thru fraud, simulation, illegality and serious irregularity equivalent to nullity and inexistence of contract and follows that the Transfer Certificate of Title No . 36280 under the name of defendant Susana Realty Inc . is null and void and without any effect whatsoever either under the Civil Code or under the Land Registration Act especially so that the transactions entered on the title took place during war time and without supporting papers or documents available up to the present time; xxx xxx xxx 14. That under the aforesaid facts and circumstances, the remedy of reconveyance is feasible considering that the falidity (sic) of the title from plaintiffs' mother to them is not affected and without flaw; xxx xxx xxx 16. That the plaintiffs herein suffered damages for the reason that they were deprived of the possession, ownership and fruits or income of the property in question and to which they demand from the herein defendant heirs of Vicente Madrigal and/or Susana Realty Inc. in such amount as may be proved during the trial. (Emphasis supplied)

On February 4, 1980, private respondents filed a motion to dismiss on the ground that: (a) the complaint states no cause of action; and (b) the cause of action is barred by the statute of limitations. On March 25, 1980, the trial court dismissed the complaint (pp. 120-126, Rollo). On appeal to the Court of Appeals, the decision was affirmed in toto on August 5, 1982 (pp. 44-52,

Rollo). Hence, the present petition. The issues raised by petitioners may be grouped into: whether or not (1) petitioners' action for annulment of contract and transfer certificate of title and/or reconveyance with damages is subject to prescription; and (2) the complaint states a cause of action against private respondents. Petitioners allege that a reading of paragraphs 9 and 10 of their complaint reveals that they impugn the existence and validity of the alleged deed of sale. As contained therein, petitioners never entered into any transaction with any person conveying the subject property. They did not sign any document in favor of any one neither did they give any one authorization for that purpose. Therefore, consent and cause did not exist in the execution of the deed of sale, invoking Articles 1318 1, 1352 2 and 1409 (3), 3 of the Civil Code. And, pursuant to Article 1410 of the Civil Code, an action for the declaration of the inexistence of a contract does not prescribe. In dismissing petitioners' complaint on the ground of prescription, the trial court opined (p. 123, Rollo):
. . ., any action for annulment of the deed and TCT 72066 should have been instituted within ten (10) years from the accrual of the cause of action, that, ( sic) is, ten years from 1943 when the deed was executed at the earliest, or ten years from 1944 at the latest. This action was filed on December 17, 1979, or after more than 30 years from 1943 and 1944. The action, therefore, has long prescribed. . . .

The Court of Appeals expressed the same opinion (p. 51, Rollo):
. . . , even as We consider that there was fraud in the registration and the issuance of title in favor of defendant Madrigal creating thereby a constructive trust in favor of the plaintiffs, the remedy of the plaintiffs is an action for reconveyance within ten (10) years from the registration of the property in the name of defendant Madrigal (Alzona v. Capunitan, 4 SCRA 450; Gonzales v. Jimenez 13 SCRA, 80), Again, the filing of the complaint was way beyond the ten-year period of limitation.

Both courts ruled incorrectly. It is evident in paragraphs 9, 10 and 12 of the complaint, supra, that petitioners sought the declaration of the inexistence of the deed of sale because of the absence of their consent. Thus, following the provision of Article 1410 of the Civil Code, this kind of action is imprescriptible. The action for reconveyance is likewise imprescriptible because its basis is the alleged void contract of sale. This pronouncement is certainly far from novel. We have encountered similar situations in the past which We resolved in the same manner. One of these is the case of Baranda, et al., v. Baranda, et al., G.R. No. 73275, May 20, 1987, 150 SCRA 59, 73:
. . . In the instant case, however, we are dealing not with a voidable contract tainted with fraud, mistake, undue influence, violence or intimidation that can justify its nullification, but with a contract that is null and void ab initio. Paulina Baranda declared under oath in her complaint that she signed the deeds of sale without knowing what they were, which means that her consent was not merely marred by the above-stated vices, so as to make the contracts voidable, but that she had not given her consent at all. . . . Lack of consent . . . made the deeds of sale void altogether [Salonga vs. Females, 105 SCRA 359] and rendered them subject to attack at any time, conformably to the rule in Article 1410 that an action to declare the inexistence of void contracts 'does not prescribe. . . . We have consistently ruled that when there is a showing of such illegality, the property registered is deemed to be simply held in trust for the real owner by the person in whose name it is registered, and the former then has the right to sue for the reconveyance of the property. The action for the purpose is also imprescriptible.

However, there should be no debate that the action for damages against private respondents has already prescribed. In accordance with Article 1144 of the Civil Code 4 it

should have been brought within ten (10) years from the date of the sale to Vicente Madrigal and the issuance of Transfer Certificate of Title No. 72066 in his name on July 12, 1943, if against the heirs of Vicente Madrigal; or within ten (10) years from the date of the issuance of Transfer Certificate of Title No. 36280 in the name of Susana Realty, Inc. on May 12, 1954, if against the firm. Notwithstanding the discussion on the imprescriptibility of petitioners' action for annulment of contract and transfer certificate of title and/or reconveyance, the dismissal of their complaint by the trial court and the Court of Appeals on the ground of failure to state a cause of action was correct. It was also Our ruling in the Baranda case, supra, (and in other previous cases) that only as long as the property is still in the name of the person who caused the wrongful registration and has not passed to an innocent third person for value will an action lie to compel that person to reconvey the property to the real owner. In this regard, We are in conformity with the Court of Appeals that (p. 52, Rollo):
. . . the property subject of the alleged fraudulent registration had already been conveyed to an innocent party for value which is defendant Susana Realty, Inc. The claim of plaintiffs that said defendant is not an innocent purchaser for value is not borne by the allegations of the complaint. . . .

Where the complaint for recovery of ownership and possession of a parcel of land alleges that some of the defendants bought said land from their co-defendants who had a defective title thereto but does not allege that the purchasers were purchasers in bad faith or with notice of the defect in the title of their vendors, there is a failure to state a cause of action (Galvez, et al. v. Tuazon y de la Paz, et al., 119 Phil. 612). By reason of this failure, private respondent Susana Realty, Inc. is presumed to be an innocent purchaser for value and in good faith, entitled to protection under the law (see Tiburcio, et al. v. People's Homesite and Housing Corporation, et al., 106 Phil. 477). ACCORDINGLY, the petition is hereby DENIED. The decision of the Court of Appeals dated August 5, 1982 is AFFIRMED, subject to the modification regarding the issue on prescription. SO ORDERED

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-67888 October 8, 1985 IMELDA ONG, ET AL., petitioners, vs. ALFREDO ONG, ET AL., respondents. Faustino Y Bautista and Fernando M. Mangubat for private respondent. RELOVA, J.: This is a petition for review on certiorari of the decision, dated June 20, 1984, of the Intermediate Appellate Court, in AC-G.R. No. CV-01748, affirming the judgment of the Regional Trial Court of Makati, Metro Manila. Petitioner Imelda Ong assails the interpretation given by respondent Appellate Court to the questioned Quitclaim Deed. Records show that on February 25, 1976 Imelda Ong, for and in consideration of One (P1.00) Peso and other valuable considerations, executed in favor of private respondent Sandra Maruzzo, then a minor, a Quitclaim Deed whereby she transferred, released, assigned and forever quit-claimed to Sandra Maruzzo, her heirs and assigns, all her rights, title, interest and participation in the ONE-HALF () undivided portion of the parcel of land, particularly described as follows:
A parcel of land (Lot 10-B of the subdivision plan (LRC) Psd 157841, being a portion of Lot 10, Block 18, Psd-13288, LRC (GLRC) Record No. 2029, situated in the Municipality of Makati, Province of Rizal, Island of Luzon ... containing an area of ONE HUNDRED AND TWENTY FIVE (125) SQUARE METERS, more or less.

On November 19, 1980, Imelda Ong revoked the aforesaid Deed of Quitclaim and, thereafter, on January 20, 1982 donated the whole property described above to her son, Rex Ong-Jimenez. On June 20, 1983, Sandra Maruzzo, through her guardian ( ad litem) Alfredo Ong, filed with the Regional Trial Court of Makati, Metro Manila an action against petitioners, for the recovery of ownership/possession and nullification of the Deed of Donation over the portion belonging to her and for Accounting. In their responsive pleading, petitioners claimed that the Quitclaim Deed is null and void inasmuch as it is equivalent to a Deed of Donation, acceptance of which by the donee is necessary to give it validity. Further, it is averred that the donee, Sandra Maruzzo, being a minor, had no legal personality and therefore incapable of accepting the donation. Upon admission of the documents involved, the parties filed their responsive memoranda and submitted the case for decision. On December 12, 1983, the trial court rendered judgment in favor of respondent Maruzzo and held that the Quitclaim Deed is equivalent to a Deed of Sale and, hence, there was a valid conveyance in favor of the latter. Petitioners appealed to the respondent Intermediate Appellate Court. They reiterated their argument below and, in addition, contended that the One (P1.00) Peso consideration is

not a consideration at all to sustain the ruling that the Deed of Quitclaim is equivalent to a sale. On June 20, 1984, respondent Intermediate Appellate Court promulgated its Decision affirming the appealed judgment and held that the Quitclaim Deed is a conveyance of property with a valid cause or consideration; that the consideration is the One (P1.00) Peso which is clearly stated in the deed itself; that the apparent inadequacy is of no moment since it is the usual practice in deeds of conveyance to place a nominal amount although there is a more valuable consideration given. Not satisfied with the decision of the respondent Intermediate Appellate Court, petitioners came to Us questioning the interpretation given by the former to this particular document. On March 15, 1985, respondent Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed an Omnibus Motion informing this Court that she has reached the age of majority as evidenced by her Birth Certificate and she prays that she be substituted as private respondent in place of her guardian ad litem Alfredo Ong. On April 15, 1985, the Court issued a resolution granting the same. A careful perusal of the subject deed reveals that the conveyance of the one- half () undivided portion of the above-described property was for and in consideration of the One (P 1.00) Peso and the other valuable considerations (emphasis supplied) paid by private respondent Sandra Maruzzo through her representative, Alfredo Ong, to petitioner Imelda Ong. Stated differently, the cause or consideration is not the One (P1.00) Peso alone but also the other valuable considerations. As aptly stated by the Appellate Court... although the cause is not stated in the contract it is presumed that it is existing unless the debtor proves the contrary (Article 1354 of the Civil Code). One of the disputable presumptions is that there is a sufficient cause of the contract (Section 5, (r), Rule 131, Rules of Court). It is a legal presumption of sufficient cause or consideration supporting a contract even if such cause is not stated therein (Article 1354, New Civil Code of the Philippines.) This presumption cannot be overcome by a simple assertion of lack of consideration especially when the contract itself states that consideration was given, and the same has been reduced into a public instrument with all due formalities and solemnities. To overcome the presumption of consideration the alleged lack of consideration must be shown by preponderance of evidence in a proper action. (Samanilla vs, Cajucom, et al., 107 Phil. 432).

The execution of a deed purporting to convey ownership of a realty is in itself prima facie evidence of the existence of a valuable consideration, the party alleging lack of consideration has the burden of proving such allegation. (Caballero, et al. vs. Caballero, et al., (CA), 45 O.G. 2536). Moreover, even granting that the Quitclaim deed in question is a donation, Article 741 of the Civil Code provides that the requirement of the acceptance of the donation in favor of minor by parents of legal representatives applies only to onerous and conditional donations where the donation may have to assume certain charges or burdens (Article 726, Civil Code). The acceptance by a legal guardian of a simple or pure donation does not seem to be necessary (Perez vs. Calingo, CA-40 O.G. 53). Thus, Supreme Court ruled in Kapunan vs. Casilan and Court of Appeals, (109 Phil. 889) that the donation to an incapacitated donee does not need the acceptance by the lawful representative if said donation does not contain any condition. In simple and pure donation, the formal acceptance is not important for the donor requires no right to be protected and the donee neither undertakes to do anything nor assumes any obligation. The Quitclaim now in question does not impose any condition. The above pronouncement of respondent Appellate Court finds support in the ruling of this Court in Morales Development Co., Inc. vs. CA, 27 SCRA 484, which states that "the major premise thereof is based upon the fact that the consideration stated in the deeds of sale in

favor of Reyes and the Abellas is P1.00. It is not unusual, however, in deeds of conveyance adhering to the Anglo-Saxon practice of stating that the consideration given is the sum of P1.00, although the actual consideration may have been much more. Moreover, assuming that said consideration of P1.00 is suspicious, this circumstance, alone, does not necessarily justify the inference that Reyes and the Abellas were not purchasers in good faith and for value. Neither does this inference warrant the conclusion that the sales were null and void ab initio. Indeed, bad faith and inadequacy of the monetary consideration do not render a conveyance inexistent, for the assignor's liberality may be sufficient cause for a valid contract (Article 1350, Civil Code), whereas fraud or bad faith may render either rescissible or voidable, although valid until annulled, a contract concerning an object certain entered into with a cause and with the consent of the contracting parties, as in the case at bar." WHEREFORE. the appealed decision of the Intermediate Appellate Court should be, as it is hereby AFFIRMED, with costs against herein petitioners. SO ORDERED

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-36359 January 31, 1974 FELIX BUCTON AND NICANORA GABAR BUCTON, petitioners, vs. ZOSIMO GABAR, JOSEFINA LLAMOSO GABAR AND THE HONORABLE COURT OF APPEALS, respondents. Rizalindo V. Diaz for petitioners. Alfredo Ber. Pallarca for respondents. ANTONIO, J.:1wph1.t Appeal from the decision of the Court of Appeals in CA-G.R. No. 49091-R, dated January 10, 1973, reversing the judgment of the trial court and dismissing the complaint filed by herein petitioners, and from said appellate court's resolution, dated February 5, 1973, denying petitioners' motion for reconsideration. The facts of the case, as found by the trial court, which have not been disturbed by respondent Court of Appeals, are as follows:
Plaintiff Nicanora Gabar Bucton (wife of her co-plaintiff Felix Bucton) is the sister of defendant Zosimo Gabar, husband of his co-defendant Josefina Llamoso Gabar. This action for specific performance prays, inter-alia, that defendants-spouses be ordered to execute in favor of plaintiffs a deed of sale of the western half of a parcel of land having an area of 728 sq. m. covered by TCT No. II (from OCT No. 6337) of the office of the Register of Deeds of Misamis Oriental. Plaintiffs' evidence tends to show that sometime in 1946 defendant Josefina Llamoso Gabar bought the above-mentioned land from the spouses Villarin on installment basis, to wit, P500 down, the balance payable in installments. Josefina entered into a verbal agreement with her sister-in-law, plaintiff Nicanora Gabar Bucton, that the latter would pay one-half of the price (P3,000) and would then own one-half of the land. Pursuant to this understanding Nicanora on January 19, 1946 gave her sister-in-law Josefina the initial amount of P1,000, for which the latter signed a receipt marked as Exhibit A. Subsequently, on May 2, 1948 Nicanora gave Josefina P400. She later signed a receipt marked as Exhibit B. On July 30, 1951 plaintiffs gave defendants P1,000 in concept of loan, for which defendant Zosimo Gabar signed a receipt marked as Exhibit E. Meanwhile, after Josefina had received in January, 1946 the initial amount of P1,000 as above stated, plaintiffs took possession of the portion of the land indicated to them by defendants and built a modest nipa house therein. About two years later plaintiffs built behind the nipa house another house for rent. And, subsequently, plaintiffs demolished the nipa house and in its place constructed a house of strong materials, with three apartments in the lower portion for rental purposes. Plaintiffs occupied the upper portion of this house as their residence, until July, 1969 when they moved to another house, converting and leasing the upper portion as a dormitory.

In January, 1947 the spouses Villarin executed the deed of sale of the land abovementioned in favor of defendant Josefina Llamoso Gabar, Exhibit I, to whom was issued on June 20, 1947 TCT No. II, cancelling OCT No. 6337. Exhibit D. Plaintiffs then sought to obtain a separate title for their portion of the land in question. Defendants repeatedly declined to accommodate plaintiffs. Their excuse: the entire land was still mortgaged with the Philippine National Bank as guarantee for defendants' loan of P3,500 contracted on June 16, 1947: Exhibit D-1. Plaintiffs continued enjoying their portion of the land, planting fruit trees and receiving the rentals of their buildings. In 1953, with the consent of defendants (who were living on their portion), plaintiffs had the entire land surveyed and subdivided preparatory to obtaining their separate title to their portion. After the survey and the planting of the concrete monuments defendants erected a fence from point 2 to point 4 of the plan, Exhibit I, which is the dividing line between the portion pertaining to defendants, Exhibit I-1, and that pertaining to plaintiffs, Exhibit I-2. In the meantime, plaintiffs continued to insist on obtaining their separate title. Defendants remained unmoved, giving the same excuse. Frustrated, plaintiffs were compelled to employ Atty. Bonifacio Regalado to intercede; counsel tried but failed. Plaintiffs persevered, this time employing Atty. Aquilino Pimentel, Jr. to persuade defendants to comply with their obligation to plaintiffs; this, too, failed. Hence, this case, which has cost plaintiffs P1,500 in attorney's fees. Defendants' evidence based only on the testimony of defendant Josefina Llamoso Gabar denies agreement to sell to plaintiffs one-half of the land in litigation. She declared that the amounts she had received from plaintiff Nicanora Gabar Bucton first, P1,000, then P400 were loans, not payment of one-half of the price of the land (which was P3,000). This defense is devoid of merit. When Josefina received the first amount of P1,000 the receipt she signed, Exhibit A, reads: Cagayan, Mis. Or. January 19, 1946 Received from Mrs. Nicanora Gabar the sum of one thousand (P1,000) pesos, victory currency, as part payment of the one thousand five hundred (P1,500.00) pesos, which sum is one-half of the purchase value of Lot No. 337, under Torrens Certificate of Title No. 6337, sold to me by Mrs. Carmen Roa Villarin. "(Sgd.) Josefina Ll. Gabar".

On the basis of the facts quoted above the trial court on February 14, 1970, rendered judgment the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered for plaintiffs: 1) Ordering defendants within thirty days from receipt hereof to execute a deed of conveyance in favor of plaintiffs of the portion of the land covered by OCT No. II, indicated as Lot 337-B in the Subdivision Plan, Exhibit I, and described in the Technical Description, Exhibit 1-2; should defendants for any reason fail to do so, the deed shall be executed in their behalf by the Provincial Sheriff of Misamis Oriental or his Deputy; 2) Ordering the Register of Deeds of Cagayan de Oro, upon presentation to him of the above-mentioned deed of conveyance, to cancel TCT No. II and in its stead to issue Transfer Certificates of Title, to wit, one to plaintiffs and another to defendants, based on the subdivision Plan and Technical Description above-mentioned; and ordering defendants to present and surrender to the Register of Deeds their TCT No. II so that the same may be cancelled; and 3) Ordering defendants to pay unto plaintiffs attorney's fees in the amount of P1,500 and to pay the costs. SO ORDERED.

Appeal was interposed by private respondents with the Court of Appeals, which reversed the judgment of the trial court and ordered petitioners' complaint

dismissed, on the following legal disquisition:

Appellees' alleged right of action was based on the receipt (Exh. A) which was executed way back on January 19, 1946. An action arising from a written contract does not prescribe until after the lapse of ten (10) years from the date of action accrued. This period of ten (10) years is expressly provided for in Article 1144 of the Civil Code. From January 19, 1946 to February 15, 1968, when the complaint was filed in this case, twenty-two (22) years and twenty-six (26) days had elapsed. Therefore, the plaintiffs' action to enforce the alleged written contract (Exh. A) was not brought within the prescriptive period of ten (10) years from the time the cause of action accrued. The land in question is admittedly covered by a torrens title in the name of Josefina Llamoso Gabar so that the alleged possession of the land by the plaintiffs since 1947 is immaterial because ownership over registered realty may not be acquired by prescription or adverse possession (Section 40 of Act 496). It is not without reluctance that in this case we are constrained to sustain the defense of prescription, for we think that plaintiffs really paid for a portion of the lot in question pursuant to their agreement with the defendants that they would then own one-half of the land. But we cannot apply ethical principles in lieu of express statutory provisions. It is by law provided that: "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." If eternal vigilance is the price of safety, one cannot sleep on one's right and expect it to be preserved in its pristine purity.

Petitioners' appeal is predicated on the proposition that owners of the property by purchase from private respondents, and being in actual, continuous and physical possession thereof since the date of its purchase, their action to compel the vendors to execute a formal deed of conveyance so that the fact of their ownership may be inscribed in the corresponding certificate of title, had not yet prescribed when they filed the present action. We hold that the present appeal is meritorious. 1. There is no question that petitioner Nicanora Gabar Bucton paid P1,500.00 to respondent Josefina Gabar as purchase price of one-half of the lot now covered by TCT No. II, for respondent Court of Appeals found as a fact "that plaintiffs really paid for a portion of the lot in question pursuant to their agreement with the defendants that they would own one-half (1/2) of the land." That sale, although not consigned in a public instrument or formal writing, is nevertheless valid and binding between petitioners and private respondents, for the time-honored rule is that even a verbal contract of sale or real estate produces legal effects between the parties. 1 Although at the time said petitioner paid P1,000.00 as part payment of the purchase price on January 19, 1946, private respondents were not yet the owners of the lot, they became such owners on January 24, 1947, when a deed of sale was executed in their favor by the Villarin spouses. In the premises, Article 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," is applicable. 2 Thus, the payment by petitioner by Nicanora Gabar Bucton of P1,000.00 on January 19, 1946, her second payment of P400.00 on May 2, 1948, and the compensation, up to the amount of P100.00 (out of the P1,000.00-loan obtained by private respondents from

petitioners on July 30, 1951), resulted in the full payment of the purchase price and the consequential acquisition by petitioners of ownership over one-half of the lot. Petitioners therefore became owners of the one-half portion of the lot in question by virtue of a sale which, though not evidenced by a formal deed, was nevertheless proved by both documentary and parole evidence. 2. The error of respondent Court of Appeals in holding that petitioners' right of action had already prescribed stems from its belief that the action of petitioners is based on the receipt Exh. "A" which was executed way back on January 19, 1946, and, therefore, in the view of said appellate court, since petitioners' action was filed on February 15, 1968, or after the lapse of twenty-two (22) years and twenty-six (26) days from, the date of said document, the same is already barred according to the provisions of Article 1144 of the New Civil Code. The aforecited document (Exh. "A"), as well as the other documents of similar import (Exh. "B" and Exh. "E"), are the receipts issued by private respondents to petitioners, evidencing payments by the latter of the purchase price of one-half of the lot. The real and ultimate basis of petitioners' action is their ownership of one-half of the lot coupled with their possession thereof, which entitles them to a conveyance of the property. In Sapto, et al. v. Fabiana , 3 this Court, speaking thru Mr. Justice J.B.L. Reyes, explained that, under the circumstances no enforcement of the contract is needed, since the delivery of possession of the land sold had consummated the sale and transferred title to the purchaser, and that, actually, the action for conveyance is one to quiet title, i.e., to remove the cloud upon the appellee's ownership by the refusal of the appellants to recognize the sale made by their predecessors. We held therein that "... it is an established rule of American jurisprudence (made applicable in this jurisdiction by Art. 480 of the New Civil Code) that actions to quiet title to property in the possession of the plaintiff are imprescriptible (44 Am. Jur. p. 47; Cooper vs. Rhea, 20 L.R.A. 930; Inland Empire Land Co. vs. Grant County, 138 Wash. 439, 245 Pac. 14).
The prevailing rule is that the right of a plaintiff to have his title to land quieted, as against one who is asserting some adverse claim or lien thereon, is not barred while the plaintiff or his grantors remain in actual possession of the land, claiming to be owners thereof, the reason for this rule being that while the owner in fee continues liable to an action, proceeding, or suit upon the adverse claim, he has a continuing right to the aid of a court of equity to ascertain and determine the nature of such claim and its effect on his title, or to assert any superior equity in his favor. He may wait until his possession is disturbed or his title in attacked before taking steps to vindicate his right. But the rule that the statute of limitations is not available as a defense to an action to remove a cloud from title can only be invoked by a complainant when he is in possession. One who claims property which is in the possession of another must, it seems, invoke remedy within the statutory period. (44 Am. Jur., p. 47)

The doctrine was reiterated recently in Gallar v. Husain, et al., 4 where We ruled that by the delivery of the possession of the land, the sale was consummated and title was transferred to the appellee, that the action is actually not for specific performance, since all it seeks is to quiet title, to remove the cloud cast upon appellee's ownership as a result of appellant's refusal to recognize the sale made by his predecessor, and that as plaintiff-appellee is in possession of the land, the action is imprescriptible. Considering that the foregoing circumstances obtain in the present case, We hold that petitioners' action has not prescribed. WHEREFORE, the decision and resolution of respondent Court of Appeals appealed from are hereby reversed, and the judgment of the Court of First Instance of Misamis Oriental, Branch IV, in its Civil Case No. 3004, is revived. Costs against

private respondents. Zaldivar (Chairman), Fernando, Barredo, Fernandez, Aquino, JJ., concur Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-40195 May 29, 1987 VICTORIA R. VALLARTA, petitioner, vs. THE HONORABLE COURT OF APPEALS and THE HONORABLE JUDGE FRANCISCO LLAMAS, Pasay City Court, respondents. Francisco G.H. Salva for petitioner. CORTES, J.: The petitioner seeks a reversal of the Court of Appeals decision dated December 13, 1974 affirming the Trial Court's judgment convicting her of estafa. We denied the petition initially but granted a motion for reconsideration and gave the petition due course. As found by the trial court and the Court of Appeals, Rosalinda Cruz, the private offended party, and accused Victoria Vallarta are long time friends and business acquaintances. On November 20, 1968, Cruz entrusted to Victoria Vallarta seven pieces of jewelry. In December of the same year, Vallarta decided to buy some items, exchanged one item with another, and issued a post-dated check in the amount of P5,000 dated January 30, 1969. Rosalinda Cruz deposited said check with the bank. However, upon presentment, the check was dishonored and Cruz was informed that Vallarta's account had been closed. Cruz apprised Vallarta of the dishonor and the latter promised to give another check. Later, Vallarta pleaded for more time. Still later, she started avoiding Cruz. Hence, this criminal action was instituted. Based on the foregoing facts, both the trial court and the Court of Appeals found Vallarta guilty beyond reasonable doubt of the crime of estafa. WE affirm. Petitioner is charged under Art. 315 (2) (d) as amended by Rep. Act No. 4885, of the Revised Penal Code, which penalizes any person who shall defraud another "(b)y postdating a check, or issuing a check in payment of an obligation when the offender had no funds in the bank, or his funds deposited therein were not sufficient to cover the amount of the check." By virtue of Rep. Act No. 4885, "(t)he failure of the drawer of the check to deposit the amount necessary to cover his check within three (3) days from receipt of notice from the bank and/or the payee or holder that said check has been dishonored for lack or insufficiency of funds" is deemed prima facie evidence of deceit constituting false pretense or fraudulent act. To constitute estafa under this provision the act of post-dating or issuing a check in payment of an obligation must be the efficient cause of defraudation, and as such it should be either prior to, or simultaneous with the act of fraud. The offender must be able to obtain money or property from the offended party because of the issuance of a check whether post-dated or not. That is, the latter would not have parted with his money or other property were it not for the issuance of the check. likewise, the check should not be,

issued in payment of a pre-existing obligation (People v. Lilius, 59 Phil. 339 [1933]). In seeking acquittal, petitioner stresses that the transaction between her and Cruz was a "sale or return," perfected and consummated on November 20, 1968 when the seven pieces of jewelry were delivered. The check issued in December 1968 was therefore in payment of a pre-existing obligation. Thus, even if it was dishonored, petitioner claims that she can only be held civilly liable, but not criminally liable under Art. 315 (2) (d), Revised Penal Code. She also argues that at any rate, what prompted Cruz to deliver the jewelry was the social standing of petitioner Vallarta and not the postdated check. She thus assigns as errors the finding of that Court a quo that the jewelries were entrusted on November 20, 1968, but the sale was perfected in December 1968, and the finding that there was deceit in the issuance of the postdated check. In order to arrive at the proper characterization of the transaction between Vallarta and Cruz, that is, whether it was a "sale or return" or some other transaction, it is necessary to determine the intention of the parties. The following excerpts from the transcript of stenographic notes are significant:
I. Direct Examination of Rosalinda Cruz
Q: Now, what happened with that business transaction of yours with Mrs. Vallarta? A: After that and after she finally agreed to buy two sets and changed the ruby ring with another ring, she gave me postdated check; I waited for January 30, 1969. 1 deposited the check in the Security Bank. And after that I knew (learned) that it was closed account (TSN, June 29, 1972, p. 9) (Emphasis supplied).

II. Cross-Examination of Rosalinda Cruz

Q: Now, you mentioned about certain jewelries in Exh. "A. Could you tell under your oath whether all the jewelries listed here (Exh. "A") were taken by Mrs. Vallarta at one single instance? A: Yes, Sir. It was on one (1) day when I entrusted them to her so she can select what she wants (Id at p. 22) (Emphasis supplied).

III. Cross-Examination of Rosalinda Cruz

COURT: But could you still recall or you cannot recall whether you agreed to reduce the cost to Five Thousand Eight Hundred ( P5,800.00) Pesos? A Yes, Sir. I agreed to reduce it to Five Thousand Eight Hundred (P5,800.00) Pesos, Sir, when I went to see her in her house to finalize what jewelries she wanted ( Id. at p. 26).

Note that Vallarta changed the ruby ring because it was not acceptable to her, and chose another ring. Likewise, the price to be paid for the jewelry was finally agreed upon only in December 1968. Thus, there was a meeting of the minds between the parties as to the object of the contract and the consideration therefore only in December 1968, the same time that the check was issued. The delivery made on November 20, 1968 was only for the purpose of enabling Vallarta to select what jewelry she wanted. Properly, then, the transaction entered into by Cruz and Vallarta was not a "sale or return." Rather, it was a "sale on approval " (also called " sale on acceptance, " "sale on trial." or "sale on satisfaction" [CIVIL CODE, art. 1502]). In a "sale or return," the ownership passes to the buyer on delivery (CIVIL CODE, art. 1502). (The subsequent return of the goods reverts ownership in the seller [CIVIL CODE, art. 1502]). Delivery, or tradition. as a mode of acquiring ownership must be in consequence of a contract (CIVIL CODE, art. 712), e.g. sale. If there was no meeting of the minds on November 20, 1968, then, as of that date, there was yet no contract of sale which could be the basis of delivery or tradition. Thus, the delivery made on November 20, 1968 was not a delivery for purposes of transferring ownership the prestation incumbent on the vendor. If ownership over the jewelry was not transmitted on that date, then it could have been transmitted only in December 1968, the date when the check was issued. In which case, it was a "sale on approval" since ownership passed to the buyer. Vallarta, only when she signified her approval or acceptance to the seller, Cruz, and the price was agreed upon.

Thus, when the check which later bounced was issued, it was not in payment of a preexisting obligation. Instead the issuance of the check was simultaneous with the transfer of ownership over the jewelry. But was the check issued simultaneously with the fraud? Republic Act No. 4885, amending Art. 315 (2) (d), Revised Penal Code, establishes a prima facie evidence of deceit upon proof that the drawer of the check failed to deposit the amount necessary to cover his check within three (3) days from receipt of notice of dishonor for lack or insufficiency of funds. Admittedly, (1) the check was dishonored as Vallarta's account had been earlier closed; (2) she was notified by Cruz of the dishonor: and, (3) Vallarta failed to make it good within three days. Deceit is therefore presumed. Petitioner lays stress on her being an alumna of a reputable school, on her having a husband who is a bank manager, and on the big land-holdings of her father, and argues that it was these qualifications and not the post-dated check which prompted Cruz to deliver the jewelry (Rollo, pp. 78-79: Motion for Reconsideration, pp. 10-11). Hence, there was no deceit. It is thus suggested that a person of petitioner's social standing cannot be guilty of deceit, at least in so far as issuing bouncing checks is concerned. This reasoning does not merit serious consideration. If accepted, it could result in a law that falls unequally on persons depending on their social position. Did Cruz part with the jewelry solely because she knew Vallarta to be rich, or did she do so because of the check issued to her? As the trial court and the Court of Appeals found, petitioner was able to obtain the jewelry because she issued the check. Her failure to deposit the necessary amount to cover it within three days from notice of dishonor created the prima facie presumption established by the amendatory law, Rep. Act No. 4885, which she failed to rebut. Petitioner, however, contends that Rep. Act No. 4885 is unconstitutional. She claims that even as the presumption of deceit established by Rep. Act No. 4885 is stated under the guise of being prima facie. It is in effect a conclusive presumption, because after the prosecution has proved that: (1) the check has been dishonored; (2) notice has been given to the drawer; and, (3) three days from notice, the check is not funded or the obligation is not paid, the accused is held guilty. Thus, it is alleged, the constitutional presumption of innocence is violated. Contrary to petitioner's assertion, the presumption of deceit under Rep. Act No. 4885 is not conclusive. It is rebuttable. For instance, We ruled in the case of People v. Villapando (56 Phil. 31 [1931]) that good faith is a defense to a charge of estafa by postdating a check, as when the drawer, foreseeing his inability to pay the check at maturity, made an arrangement with his creditor as to the manner of payment of the debt. * Moreover, it is now well settled that "there is no constitutional objection to the passage of a law providing that the presumption of innocence may be overcome by a contrary presumption founded upon the experience of human conduct, and enacting what evidence shall be sufficient to overcome such presumption of innocence" (People v. Mingoa, 92 Phil. 856 [1953] at 858-59, citing I COOLEY, A TREATISE ON THE CONSTITUTIONAL LIMITATIONS, 639-641). And the "legislature may enact that when certain facts have been proved they shall be prima facie evidence of the existence of the guilt of the accused and shift the burden of proof provided there be a rational connection between the facts proved and the ultimate fact presumed so that the inference of the one from proof of the others is not unreasonable and arbitrary because of lack of connection between the two in common experience" (People v. Mingoa, supra. See also US v. Luling, 34 Phil. 725 [1916]). There can be no doubt that the "postdating or issuing of a check in payment of an obligation when the offender had no funds in the bank, or his funds deposited therein were

not sufficient to cover the amount of the check," is a false pretense or a fraudulent act. It is so characterized by Art. 315 (2) (d), Revised Penal Code. Republic Act No. 4885 does nothing more than limit the period within which the drawer/issuer must pay the creditor. Petitioner also argues that Rep. Act No. 4885 violates the constitutional injunction against imprisonment for non-payment of debt. Ironically, she does not question the constitutionality of Art. 315 (2) (d), Revised Penal Code, which defines the crime she is being accused of, and provides for its punishment. In fact, she concedes the constitutionality of the latter statute. She further concedes that a person may be imprisoned for "criminal fraud" covered by Art. 315 (2) of the Revised Penal Code. In People v. Sabio (No. L-45490, November 20, 1978, 86 SCRA 568), this Court ruled that Rep. Act No. 4885 has not changed the rule established in Art. 315 (2) (d) prior to the amendment; that Republic Act No. 4885 merely established the prima facie evidence of deceit, and eliminated the requirement that the drawer inform the payee that he had no funds in the bank or the funds deposited by him were not sufficient to cover the amount of the check. Thus, even with the amendment introduced by Rep. Act No. 4885 it is still criminal fraud or deceit in the issuance of a check which is made punishable under the Revised Penal Code, and not the non-payment of the debt. Petitioner also assigns as error the denial by the trial court of her motion for reconsideration. Her motion was directed at the finding of the trial court that no payments were made. Alleging that a check drawn by one Sison was given by petitioner to Cruz in payment of the rubber check, petitioner claims that had her motion for reconsideration been granted, she would have called to the witness stand the Branch Manager of Security Bank and Trust Company, Pasay City, where the check was allegedly deposited by Cruz, for said bank manager to Identify the owner-holder of the savings account to which the amount in Sison's check had been credited (Brief for Petitioner, p. 46). Granting that the bank manager's testimony would have been as alleged by petitioner, Our decision would remain. As correctly observed by both the trial court and the Court of Appeals (Court of Appeals Decision, pp. 2-3), the payments petitioner allegedly made were not shown to have any relevance to the obligation in question. WHEREFORE, finding no error in the assailed decision of the Court of Appeals, the same is AFFIRMED. Costs against the petitioner. SO ORDERED

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-28740 February 24, 1981 FERMIN Z. CARAM, JR., petitioner, vs. CLARO L. LAURETA, respondent. FERNANDEZ, J.: This is a petition for certiorari to review the decision of the Court of Appeals promulgated on January 29, 1968 in CA-G. R. NO. 35721-R entitled "Claro L. Laureta, plaintiff-appellee versus Marcos Mata, Codidi Mata and Fermin Caram, Jr., defendants- appellants; Tampino (Mansaca), et al. Intervenors-appellants," affirming the decision of the Court of First Instance of Davao in Civil Case No. 3083. 1 On June 25, 1959, Claro L. Laureta filed in the Court of First Instance of Davao an action for nullity, recovery of ownership and/or reconveyance with damages and attorney's fees against Marcos Mata, Codidi Mata, Fermin Z. Caram, Jr. and the Register of Deeds of Davao City. 2 On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land covered by Original Certificate of Title No. 3019 in favor of Claro Laureta, plaintiff, the respondent herein. The deed of absolute sale in favor of the plaintiff was not registered because it was not acknowledged before a notary public or any other authorized officer. At the time the sale was executed, there was no authorized officer before whom the sale could be acknowledged inasmuch as the civil government in Tagum, Davao was not as yet organized. However, the defendant Marcos Mata delivered to Laureta the peaceful and lawful possession of the premises of the land together with the pertinent papers thereof such as the Owner's Duplicate Original Certificate of Title No. 3019, sketch plan, tax declaration, tax receipts and other papers related thereto. 3 Since June 10, 1945, the plaintiff Laureta had been and is stin in continuous, adverse and notorious occupation of said land, without being molested, disturbed or stopped by any of the defendants or their representatives. In fact, Laureta had been paying realty taxes due thereon and had introduced improvements worth not less than P20,000.00 at the time of the filing of the complaint. 4 On May 5, 1947, the same land covered by Original Certificate of Title No. 3019 was sold by Marcos Mata to defendant Fermin Z. Caram, Jr., petitioner herein. The deed of sale in favor of Caram was acknowledged before Atty. Abelardo Aportadera. On May 22, 1947, Marcos Mata, through Attys. Abelardo Aportadera and Gumercindo Arcilla, filed with the Court of First Instance of Davao a petition for the issuance of a new Owner's Duplicate of Original Certificate of Title No. 3019, alleging as ground therefor the loss of said title in the evacuation place of defendant Marcos Mata in Magugpo, Tagum, Davao. On June 5, 1947, the Court of First Instance of Davao issued an order directing the Register of Deeds of Davao to issue a new Owner's Duplicate Certificate of Title No. 3019 in favor of Marcos Mata and declaring the lost title as null and void. On December 9, 1947, the second sale between Marcos Mata and Fermin Caram, Jr. was registered with the Register of Deeds. On the same date, Transfer Certificate of Title No. 140 was issued in favor of Fermin

Caram Jr. 5 On August 29, 1959, the defendants Marcos Mata and Codidi Mata filed their answer with counterclaim admitting the existence of a private absolute deed of sale of his only property in favor of Claro L. Laureta but alleging that he signed the same as he was subjected to duress, threat and intimidation for the plaintiff was the commanding officer of the 10th division USFIP operating in the unoccupied areas of Northern Davao with its headquarters at Project No. 7 (Km. 60, Davao Agusan Highways), in the Municipality of Tagum, Province of Davao; that Laureta's words and requests were laws; that although the defendant Mata did not like to sell his property or sign the document without even understanding the same, he was ordered to accept P650.00 Mindanao Emergency notes; and that due to his fear of harm or danger that will happen to him or to his family, if he refused he had no other alternative but to sign the document. 6 The defendants Marcos Mata and Codidi Mata also admit the existence of a record in the Registry of Deeds regarding a document allegedly signed by him in favor of his codefendant Fermin Caram, Jr. but denies that he ever signed the document for he knew before hand that he had signed a deed of sale in favor of the plaintiff and that the plaintiff was in possession of the certificate of title; that if ever his thumb mark appeared in the document purportedly alienating the property to Fermin Caram, did his consent was obtained through fraud and misrepresentation for the defendant Mata is illiterate and ignorant and did not know what he was signing; and that he did not receive a consideration for the said sale. 7 The defendant Fermin Caram Jr. filed his answer on October 23, 1959 alleging that he has no knowledge or information about the previous encumbrances, transactions, and alienations in favor of plaintiff until the filing of the complaints. 8 The trial court rendered a decision dated February 29, 1964, the dispositive portion of which reads: 9
1. Declaring that the deed of sale, Exhibit A, executed by Marcos Mata in favor of Claro L. Laureta stands and prevails over the deed of sale, Exhibit F, in favor of Fermin Caram, Jr.; 2. Declaring as null and void the deed of sale Exhibit F, in favor of Fermin Caram, Jr.; 3. Directing Marcos Mata to acknowledge the deed of sale, Exhibit A, in favor of Claro L. Laureta; 4. Directing Claro L. Laureta to secure the approval of the Secretary of Agriculture and Natural Resources on the deed, Exhibit A, after Marcos Mata shall have acknowledged the same before a notary public; 5. Directing Claro L. Laureta to surrender to the Register of Deeds for the City and Province of Davao the Owner's Duplicate of Original Certificate of Title No. 3019 and the latter to cancel the same; 6. Ordering the Register of Deeds for the City and Province of Davao to cancel Transfer Certificate of Title No. T-140 in the name of Fermin Caram, Jr.; 7. Directing the Register of Deeds for the City and Province of Davao to issue a title in favor of Claro L. Laureta, Filipino, resident of Quezon City, upon presentation of the deed executed by Marcos Mata in his favor, Exhibit A, duly acknowledged by him and approved by the Secretary of Agriculture and Natural Resources, and 8. Dismissing the counterclaim and cross claim of Marcos Mata and Codidi Mata, the counterclaim of Caram, Jr., the answer in intervention, counterclaim and cross-claim of the Mansacas. The Court makes no pronouncement as to costs. SO ORDERED.

The defendants appealed from the judgment to the Court of Appeals. 10 The appeal was docketed as CA-G.R. NO. 35721- R. The Court of Appeals promulgated its decision on January 29, 1968 affirming the judgment of the trial court. In his brief, the petitioner assigns the following errors: 11
I THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT IRESPE AND APORTADERA WERE ATTORNEYS-IN-FACT OF PETITIONER CARAM FOR THE PURPOSE OF BUYING THE PROPERTY IN QUESTION. II THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT THE EVIDENCE ADDUCED IN THE TRIAL COURT CONSTITUTE LEGAL EVIDENCE OF FRAUD ON THE PART OF IRESPE AND APORTADERA AT TRIBUTABLE TO PETITIONER. III THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW IN HOLDING THAT KNOWLEDGE OF IRESPE AND APORTADERA OF A PRIOR UNREGISTERED SALE OF A TITLED PROPERTY ATTRIBUTABLE TO PETITIONER AND EQUIVALENT IN LAW OF REGISTRATION OF SAID SALE. IV THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT AN ACTION FOR RECONVEYANCE ON THE GROUND OF FRAUD PRESCRIBES WITHIN FOUR (4) YEARS.

The petitioner assails the finding of the trial court that the second sale of the property was made through his representatives, Pedro Irespe and Atty. Abelardo Aportadera. He argues that Pedro Irespe was acting merely as a broker or intermediary with the specific task and duty to pay Marcos Mata the sum of P1,000.00 for the latter's property and to see to it that the requisite deed of sale covering the purchase was properly executed by Marcos Mata; that the Identity of the property to be bought and the price of the purchase had already been agreed upon by the parties; and that the other alleged representative, Atty. Aportadera, merely acted as a notary public in the execution of the deed of sale. The contention of the petitioner has no merit. The facts of record show that Mata, the vendor, and Caram, the second vendee had never met. During the trial, Marcos Mata testified that he knows Atty. Aportadera but did not know Caram. 12 Thus, the sale of the property could have only been through Caram's representatives, Irespe and Aportadera. The petitioner, in his answer, admitted that Atty. Aportadera acted as his notary public and attorney-in-fact at the same time in the purchase of the property. 13 The petitioner contends that he cannot be considered to have acted in bad faith because there is no direct proof showing that Irespe and Aportadera, his alleged agents, had knowledge of the first sale to Laureta. This contention is also without merit. The Court of Appeals, in affirming the decision of the trial court, said: 14
The trial court, in holding that appellant Caram. Jr. was not a purchaser in good faith, at the time he bought the same property from appellant Mata, on May 5, 1947, entirely discredited the testimony of Aportadera. Thus it stated in its decision: The testimony of Atty. Aportadera quoted elsewhere in this decision is hollow. There is every reason to believe that Irespe and he had known of the sale of the property in question to Laureta on the day Mata and Irespe, accompanied by Leaning Mansaca, went to the office of Atty. Aportadera for the sale of the same property to Caram, Jr., represented by Irespe as attorney-in-fact. Ining Mansaca was with the two Irespe and Mata to engage the

services 6f Atty. Aportadera in the annulment of the sale of his land to Laureta. When Leaning Mansaca narrated to Atty. Aportadera the circumstances under which his property had been sold to Laureta, he must have included in the narration the sale of the land of Mata, for the two properties had been sold on the same occassion and under the same circumstances. Even as early as immediately after liberation, Irespe, who was the witness in most of the cases filed by Atty. Aportadera in his capacity as Provincial Fiscal of Davao against Laureta, must have known of the purchases of lands made by Laureta when he was regimental commander, one of which was the sale made by Mata. It was not a mere coincidence that Irespe was made guardian ad litem of Leaning Mansaca, at the suggestion of Atty. Aportadera and attorney-in-fact of Caram, Jr. The Court cannot help being convinced that Irespe, attorney-in-fact of Caram, Jr. had knowledge of the prior existing transaction, Exhibit A, between Mata and Laureta over the land, subject matter of this litigation, when the deed, Exhibit F, was executed by Mata in favor of Caram, Jr. And this knowledge has the effect of registration as to Caram, Jr. RA pp. 123124) We agree with His Honor's conclusion on this particular point, on two grounds the first, the same concerns matters affecting the credibility of a witness of which the findings of the trial court command great weight, and second, the same is borne out by the testimony of Atty. Aportadera himself. (t.s.n., pp. 187-190, 213-215, Restauro).

Even if Irespe and Aportadera did not have actual knowledge of the first sale, still their actions have not satisfied the requirement of good faith. Bad faith is not based solely on the fact that a vendee had knowledge of the defect or lack of title of his vendor. In the case of Leung Yee vs. F. L. Strong Machinery Co. and Williamson, this Court held: 15
One who purchases real estate with knowledge of a defect or lack of title in his vendor can not claim that he has acquired title thereto in good faith, as against the true owner of the land or of an interest therein, and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.

In the instant case, Irespe and Aportadera had knowledge of circumstances which ought to have put them an inquiry. Both of them knew that Mata's certificate of title together with other papers pertaining to the land was taken by soldiers under the command of Col. Claro L. Laureta. 16 Added to this is the fact that at the time of the second sale Laureta was already in possession of the land. Irespe and Aportadera should have investigated the nature of Laureta's possession. If they failed to exercise the ordinary care expected of a buyer of real estate they must suffer the consequences. The rule of caveat emptor requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendor's title takes all the risks and losses consequent to such failure. 17 The principle that a person dealing with the owner of the registered land is not bound to go behind the certificate and inquire into transactions the existence of which is not there intimated 18 should not apply in this case. It was of common knowledge that at the time the soldiers of Laureta took the documents from Mata, the civil government of Tagum was not yet established and that there were no officials to ratify contracts of sale and make them registerable. Obviously, Aportadera and Irespe knew that even if Mata previously had sold t he Disputed such sale could not have been registered. There is no doubt then that Irespe and Aportadera, acting as agents of Caram, purchased the property of Mata in bad faith. Applying the principle of agency, Caram as principal, should also be deemed to have acted in bad faith. Article 1544 of the New Civil Code provides that:
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 recordered it in the Registry of Property. Should there be no inscription, the ownership shag 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. (1473)

Since Caram was a registrant in bad faith, the situation is as if there was no registration at all. 19 The question to be determined now is, who was first in possession in good faith? A possessor in good faith is one who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it. 20 Laureta was first in possession of the property. He is also a possessor in good faith. It is true that Mata had alleged that the deed of sale in favor of Laureta was procured by force. 21 Such defect, however, was cured when, after the lapse of four years from the time the intimidation ceased, Marcos Mata lost both his rights to file an action for annulment or to set up nullity of the contract as a defense in an action to enforce the same. Anent the fourth error assigned, the petitioner contends that the second deed of sale, Exhibit "F", is a voidable contract. Being a voidable contract, the action for annulment of the same on the ground of fraud must be brought within four (4) years from the discovery of the fraud. In the case at bar, Laureta is deemed to have discovered that the land in question has been sold to Caram to his prejudice on December 9, 1947, when the Deed of Sale, Exhibit "F" was recorded and entered in the Original Certificate of Title by the Register of Deeds and a new Certificate of Title No. 140 was issued in the name of Caram. Therefore, when the present case was filed on June 29, 1959, plaintiff's cause of action had long prescribed. The petitioner's conclusion that the second deed of sale, "Exhibit F", is a voidable contract is not correct. I n order that fraud can be a ground for the annulment of a contract, it must be employed prior to or simultaneous to the, consent or creation of the contract. The fraud or dolo causante must be that which determines or is the essential cause of the contract. Dolo causante as a ground for the annulment of contract is specifically described in Article 1338 of the New Civil Code of the Philippines as "insidious words or machinations of one of the contracting parties" which induced the other to enter into a contract, and "without them, he would not have agreed to". The second deed of sale in favor of Caram is not a voidable contract. No evidence whatsoever was shown that through insidious words or machinations, the representatives of Caram, Irespe and Aportadera had induced Mata to enter into the contract. Since the second deed of sale is not a voidable contract, Article 1391, Civil Code of the Philippines which provides that the action for annulment shall be brought within four (4) years from the time of the discovery of fraud does not apply. Moreover, Laureta has been in continuous possession of the land since he bought it in June 1945. A more important reason why Laureta's action could not have prescribed is that the second contract of sale, having been registered in bad faith, is null and void. Article 1410 of the Civil Code of the Philippines provides that any action or defense for the declaration of the inexistence of a contract does not prescribe. In a Memorandum of Authorities 22 submitted to this Court on March 13, 1978, the petitioner insists that the action of Laureta against Caram has prescribed because the second contract of sale is not void under Article 1409 23 of the Civil Code of the Philippines which enumerates the kinds of contracts which are considered void. Moreover, Article 1544 of the New Civil Code of the Philippines does not declare void a second sale of

immovable registered in bad faith. The fact that the second contract is not considered void under Article 1409 and that Article 1544 does not declare void a deed of sale registered in bad faith does not mean that said contract is not void. Article 1544 specifically provides who shall be the owner in case of a double sale of an immovable property. To give full effect to this provision, the status of the two contracts must be declared valid so that one vendee may contract must be declared void to cut off all rights which may arise from said contract. Otherwise, Article 1544 win be meaningless. The first sale in favor of Laureta prevails over the sale in favor of Caram. WHEREFORE, the petition is hereby denied and the decision of the Court of Appeals sought to be reviewed is affirmed, without pronouncement as to costs. SO ORDERED