Smith, Bell & Co.

v Sotelo Matti (1992)

FACTS
Plaintiff Smith, Bell & Co and the
defendant Mr. Vicente Sotelo entered into
a contract. Plaintiff has to deliver (1) two
steel tanks shipped from New York to
Manila within three or four months ,
(2)two expellers shipped from San
Francisco in the month of September
1918 or as soon as possible, and (3) two
electric motors with approximate delivery
within
ninety
days.
This
is
not
guaranteed.
The tanks arrived at Manila on 27
April 1919; the expellers on 26 October
1918; and the motors on 27 February
1919. Upon notification from plaintiff,
defendant refused to receive any of the
goods or to pay for their price.
Plaintiff alleged that the expellers
and motors were in good condition.
Plaintiff filed a complaint against the
defendant. The defendant, Mr Sotelo and
intervenor, Manila Oil Refining and ByProducts Co., Inc., denied the plaintiffs
allegations.
They allege that due to plaintiffs
delay in the delivery of goods, the
intervenor suffered damages. The lower
court absolved the defendants from the
complaint insofar as the tanks and the
electric motors were concerned, but
rendered judgment against them ordering
them to receive expellers and pay the
sum of P50,000, with legal interest and
cost.
Both parties appealed to the Court.
ISSUE: What period was fixed for
the delivery of the goods? Did the
plaintiff incur delay in the delivery
of goods?
HELD
In all these contracts, there is a
final clause as follows:
The sellers are not responsible
for delays cause by fires, riots on land
or on the sea, strikes or other causes
known as force majeure,
entirely
beyond the control of the sellers or
their representatives.
Under these
stipulations, it cannot be said that any
definite date was fixed for the delivery
of the goods.
xxx. From the record it appears
that these contracts were executed at

the time of the world war when there

existed rigid restrictions on the export
from the United States xxx;
hence clauses were inserted in
the contracts, regarding Government
regulations, railroading embargoes,
lack of vessel space, the exigencies of
the requirements of the United States
Government xxx.
At the time of the execution of
the contracts, the parties were not
unmindful of the contingency of the
United
States
Government
not
allowing the export of the goods xxx.
We cannot but conclude that
the term which parties attempted to
fix is so uncertain that once cannot tell
just whether, as a matter of fact, those
articles could be brought to manila or
not.
The obligation must be regarded as
conditional.
The delivery was subject to a
condition
the
fulfillment
of
which
depended not only upon the effort of the
plaintiff, but upon the will of third persons
who could in no way be compelled to
fulfill the condition.
It is sufficiently
proven in the record that the plaintiff has
made all the efforts it could possibly be
expected
to
make
under
the
circumstances, to bring the goods in
question to Manila, as soon as possible.
Xxx
It is obvious that the plaintiff has
complied with its obligation. When the
time of delivery is not fixed in the
contract,
time
is
regarded
unessential. In such cases, the
delivery must be made within a
reasonable time.
Xxx Reasonable time for the delivery
of the goods by the seller is to be
determined by circumstances attending the
particular transactions. Whether of not the
delivery of the machinery in litigation was
offered to the defendant within a reasonable
time, is a question to be determined by the
court. Xxx The plaintiff has not been guilty of
any delay in the fulfillment of its obligation.

1 | Page

CARMEN
DEL
PRADO, Petitioner,
vs.
SPOUSES ANTONIO L. CABALLERO and
LEONARDA CABALLERO, Respondents.
G.R. No. 148225

March 3, 2010

NACHURA, J.:

Facts
Several parcels of land, including
Cadastral Lot No. 11909, were adjudicated in
favor of Spouses Antonio and Leonarda
Caballero in 1985; hence, the court ordered
for the issuance of the decree of registration
and the corresponding titles of the lots in
favor of the Caballeros.
On June 11, 1990, Spouses Caballero
sold to Carmen del Prado, Cadastral Lot No.
11909 on the basis of the tax declaration
covering the property. On March 20, 1991,
petitioner filed in the same cadastral
proceedings a "Petition for Registration of
Document Under PD 1529" in order that a
certificate of title be issued in her name,
covering the whole Lot No. 11909, which is in
excess of the allotted area to be sold. In the
petition, she alleged that the tenor of the
instrument of sale indicated that the sale
was for a lump sum, in which case, the
vendor was bound to deliver all that was
included within said boundaries even when it
exceeded the area specified in the contract.

Issue
WON the petitioners recourse, by
filing the petition for registration in the same
cadastral case, was proper.
Ruling
Petitioners recourse, by filing the
petition for registration in the same cadastral
case, was improper. It is a fundamental
principle in land registration that a certificate
of title serves as evidence of an indefeasible
and incontrovertible title to the property in
favor of the person whose name appears
therein. Such indefeasibility commences

after one year from the date of entry of the

decree of registration. Inasmuch as the
petition for registration of document did not
interrupt the running of the period to file the
appropriate
petition
for
review
and
considering that the prescribed one-year
period had long since expired, the decree of
registration, as well as the certificate of title
issued in favor of respondents, had become
incontrovertible.
In addition, what really defines a piece
of ground is not the area, calculated with
more or less certainty, mentioned in its
description, but the boundaries therein laid
down, as enclosing the land and indicating
its limits. However, numerical data are not
the sole gauge of unreasonableness of the
excess or deficiency in area. In the instant
case, the parties agreed on the purchase
price of P40,000.00 for a predetermined area
of 4,000 sq m, with the specified boundaries.
Clearly, the discrepancy of 10,475 sq m
cannot be considered a slight difference in
quantity. It is not a reasonable excess or
deficiency that should be deemed included in
the deed of sale.
Rules On Double Sale Of Immovables
In double sale of an immovable, the rules of
preference are as follows:
(a)
the first registrant in good faith;
(b)
should there be no entry, the first in
possession in good faith; and
(c)
in the absence thereof, the buyer
who presents the oldest title in good faith.
(Martinez vs. CA, 358 SCRA 38 (2001); Art.
1544, NCC).
Prior registration of the subject property does
not by itself confer ownership or a better
right over the property. Article 1544 requires
that before the second buyer can obtain
priority over the first, he must show that he
acted in good faith throughout (i.e., in
ignorance of the first sale and of the first
buyers rights) from the time of acquisition
until the title is transferred to him by
registration or failing registration, by delivery
of possession. (Uraca vs. CA, 344 Phil 253;
Consolidated Rural Bank (Cagayan Valley)
Inc. vs. CA, et al, G.R. No. 132161, January
17, 2005).
One who purchases real property which is in
actual possession of others should, at least,
make some inquiry concerning the rights of
2 | Page

those in possession. The actual possession

by people other than the vendor should, at
least, put the purchaser upon inquiry. He can
scarcely, in the absence of such inquiry, be
regarded as a bona fide purchaser as against
such possessions. (Rep. vs. CA, 102 SCRA
331; Conspecto vs. Fuerto, 31 Phil. 144). 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 vendors title takes all the risks and
losses consequent to such failure. (Caram vs.
Laureta, 103 SCRA 16 [1981]; Consolidated
Rural Bank (Cagayan Valley) Inc. vs. CA, et
al, G.R. No. 132161, January 17, 2005; see
also Sps. Mathay vs. Court of Appeals, 356
Phil. 870 [1998]).
Registration of the second buyer under Act
3344, providing for the registration of all
instruments on land neither covered by the
Spanish Mortgage Law nor the Torrens
System (Act 496), cannot improve the
standing of a party since Act 3344 itself
expresses that registration thereunder would
not prejudice prior rights in good faith (see
Carumba vs. Court of Appeals, 31 SCRA 558).
Registration, however, by the first buyer
under Act 3344 can have the effect of
constructive notice to the second buyer that
can defeat his right as such buyer in good
faith (see Arts. 708-709, Civil Code; see also
Revilla vs. Galindez, 107 Phil. 480; Taguba vs.
Peralta, 132 SCRA 700). Art. 1544 has been
held to be inapplicable to execution sales of
unregistered land, since the purchaser
merely steps into the shoes of the debtor
and acquires the latters interest as of the
time the property is sold. (Carumba vs. Court
of Appeals, 31 SCRA 558; see also Fabian vs.
Smith, Bell & Co., 8 Phil. 496), (Remalante
vs. Tibe, 158 SCRA 138; Sps. Noel & Julie
Abrigo vs. De Vera, G. R. No. 154409, June
21, 2004).

FRANCISCO
H.
vs. Spouses ORLANDO
MANIPON, respondents.

registrant in a double sale is always qualified

by good faith.

The Case
Before us is a Petition for Review
on Certiorari challenging the October 25,
2000 Decision and the February 9, 2001
Resolution of the Court of Appeals (CA) in CAGR CV No. 55149. The assailed Decision
disposed as follows:

"WHEREFORE, premises considered, the

appealed Decision is hereby AFFIRMED with
MODIFICATION in the sense that [petitioner]
is directed to convey Lot 5582-B-7-D covered
by TCT No. 171497 to [respondent] Rosita C.
Manipon without being entitled to any
payment from the latter."
The assailed Resolution denied the Motion for
Reconsideration.

The Facts
The facts of the case are summarized in the
assailed Decision as follows:

On May 9, 1981, Juan Peralta executed a

[D]eed of [S]ale by installment in favor of
spouses Orlando and Rosita Manipon [herein
respondents]. Therein, Juan Peralta agreed to
sell by installment to the said spouses 350
square meters of the 2,078 square-meter lot
he owned, covered by Transfer Certificate of
Title (TCT) No. 137911 and located at Barrio
Dilan, Urdaneta, Pangasinan. The said [D]eed
was not registered with the Registry of
Deeds.

LU, petitioner,
and
ROSITA
On June 10, 1981, Juan Peralta mortgaged
the aforesaid lot to Thrift Savings and Loan
Association, Inc. (TSLAI).

The registration of a sale of real estate will

not protect a buyer in bad faith, for the law
cannot be used as a shield for fraud. On the
other hand, the preferential right of a first
3 | Page

He however failed to pay the loan he

obtained for which the mortgage was
constituted and so the same was judicially
foreclosed and sold to TSLAI forP62,789.18
which was the highest bidder. The latter in
turn sold the same on July 15, 1988 in the
amount of P80,000.00 to the [petitioner].

In the Answer filed by [respondents], they

claim that [petitioner] is a buyer in bad faith
because even before he bought the 2,078
square-meter lot, he knew for a fact that
they already bought Lot 5582-B-7-D from the
original owner of the said lot and have been
residing therein since 1981.

Thereafter, on August 30, 1989, [petitioner]

caused the subdivision of the said lot into
five (5) lots, one of which is Lot 5582-B-7-D,
with an area of 339 square meters covering
the lot which was earlier sold by installment
to [respondents]. The said lot is now covered
by TCT No. 171497.

[Respondents] also asserted that [petitioner]

had knowledge of their claim over the said
property because when the whole lot was
foreclosed they shared the same problem as
[petitioner] also bought a lot with the 2,078
square-meter lot of Juan Peralta.

In the interim, or on July 30, 1983, Juan

Peralta executed a [D]eed of [S]ale in favor
of [respondents] after the couple paid a total
amount of P8,000.00 for the subject lot. The
aforesaid [D]eed was however also not
registered.

On January 22, 1990, [petitioner] through

counsel wrote the [respondents] regarding
the presence of the latters house, which was
also being occupied by them, on the lot in
question. Efforts were apparently made by
both parties to settle the brewing dispute but
to [no] avail.

Hence, on February 26, 1990, [petitioner]

filed the present action alleging therein that
he is the owner of the lot in question
including that which was being occupied by
[respondents. Petitioner] further claims that
his ownership was confirmed by the Regional
Trial Court of Urdaneta, Pangasinan, Branch
49, in Civil Case No. U-4399.

He also averred that for reasons unknown to

him, [respondents] were claiming ownership
of Lot 5582-B-7-D and have constructed a
house thereon on January 22, 1990.

Trial ensued and thereafter, the trial court

rendered the questioned judgment. x x
x.(Citations omitted)

Ruling of the Trial Court

The trial court ruled that petitioner was not a
buyer in good faith despite the fact that he
was able to register his ownership of the
disputed lot. He admitted knowing that
respondents had constructed a house on the
disputed lot in 1984, even before he
purchased the property from the loan
association in 1990. Indeed, he waited more
than ten (10) years before contesting
respondents occupation and possession of
the land.

The RTC disposed as follows:

WHEREFORE, IN THE LIGHT OF THE
FOREGOING, the Court renders judgment as
follows:

1). The [petitioner] is hereby ordered to

convey to the herein [respondent] Rosita
Manipon, (defendant Orlando Manipon is
already dead) the lot consisting of 339
square meters denominated as Lot 5582-B-7D and covered by Transfer Certificate of Title
No.
171497
after
paying
the
sum
of P13,051.50 plus legal interest to the
4 | Page

herein [petitioner] anytime after the finality

of this decision.

2). The third-party defendant, Juan Peralta,

is ordered to refund to the defendants
Manipons the amount of P18,000.00 paid by
the latter to him;

3). x x x no pronouncement as to damages

in favor [of] or against either of the parties.

3. Whether respondents are under estoppel

to question petitioners ownership over the
lot in question[.]

4. Whether petitioner was in bad faith in the

acquisition of the lot in question[.]

5. And even assuming without admitting

that petitioner is under obligation to convey
the lot in question in favor of respondents,
whether the consideration of the lot be paid
by respondent is P2,000.00 per square
meter[.]

Ruling of the Court of Appeals

The CA affirmed the Decision of the trial
court with the modification that respondents
would no longer be required to pay petitioner
the value of the disputed portion in a forced
sale.

These issues can be summed up into three

questions: (1) who has a better right to the
disputed property?
(2) was petitioner a purchaser in bad faith?
and

The appellate court said that petitioner

knew that Lot 5582-B-7-D had already been
sold by Juan Peralta to respondents before
the mother lot was mortgaged, foreclosed
and eventually purchased. He bought the
entire property from the foreclosing bank,
because he feared that he might lose what
he had earlier bought in 1981 -- a 350 square
meter lot which also formed part of the
mother lot.

(3) what should be the purchase price of the

disputed lot?

Hence, this Petition.

First Issue:

This Courts Ruling

The Petition is partly meritorious.

Better Right to the Disputed Lot

The Issues
In his Memorandum, petitioner raises the
following issues:
1. Who between petitioner and respondents
have a better right of ownership over the lot
in question, Lot 5582-B-7-D, with an area of
339 square meters?
2. Whether respondents claim over the lot
can rise [above that of] their predecessor in
interest Juan Peralta[.]

Petitioner claims to have a better right to the

disputed portion of the real property.

First, although respondents had bought it

first, he was the first to register his purchase
of the mother lot.

Second, respondents ownership follows that

of their vendor who mortgaged to the bank
5 | Page

his title to the mother lot and failed to

redeem it.

Petitioner avers that, although respondents

purchased the disputed lot by installment on
May 9, 1981 and fully paid for it on May 30,
1983, they failed to register their sale with
the Registry of Deeds. In the meantime, on
June 18, 1981, Juan Peralta mortgaged the
mother lot -- including the disputed portion -to the Thrift Savings and Loan Association,
Inc. (TSLAI). The mortgage was foreclosed
and the property sold on July 10, 1988.
Petitioner, on the other hand, bought the
whole lot from the bank for P80,000 on July
15, 1988 and registered it in his name on
September 23, 1988.

Third, petitioner claims that from the time

respondents fully paid for the lot until they
received a Notice to Vacate, they did not do
anything to perfect their title thereto; hence,
they are now estopped from questioning his
ownership of it.

We are not convinced. In estoppel, a person

who by deed or conduct induces another to
act in a particular manner is barred from
adopting an inconsistent position, attitude or
course of conduct that thereby causes loss or
injury to another. This equitable principle will
not apply to respondents, because they
exercised dominion over the property by
occupying and building their house on it.

On the other hand, it was petitioner who,

despite having knowledge of the existence of
respondents house on the disputed portion,
bought the whole lot. Before acquiring the
mother lot from the bank, he knew of
respondents claim of ownership and
occupation. He cannot now pretend to be an
innocent buyer in good faith.

Registration is not the equivalent of

title. Under the Torrens system, registration
only gives validity to the transfer or creates a

lien upon the land. It was not established as

a means of acquiring title to private land
because it merely confirms, but does not
confer, ownership.

Moreover, the RTC and the CA have correctly

ruled that the preferential right of the first
registrant of a real property in a case
of double sale is always qualified by good
faith under Article 1544 of the Civil Code. A
holder in bad faith of a certificate of title is
not entitled to the protection of the law, for
the law cannot be used as a shield for fraud.

When the registration of a sale is not made

in good faith, a party cannot base his
preference of title thereon, because the law
will not protect anything done in bad faith.
Bad faith renders the registration futile.

Thus, if a vendee registers the sale in his

favor after he has acquired knowledge that
there was a previous sale of the same
property to a third party, or that

another person claims said property

under a previous sale,

or that the property is in the

possession of one who is not a vendor,

or that there were flaws and defects in

the vendors title,

or that this was in dispute,

the registration will constitute x x x bad faith,

and will not confer upon him any preferential
right.

The situation will be the same as if there had

been no registration, and the vendee who
first took possession of the real property in
good faith shall be preferred.

6 | Page

Equally important, under Section 44 of the

Property Registration Decree (Presidential
Decree No. 1529), every registered owner
receiving a certificate of title in pursuance of
a decree of registration and every
subsequent purchaser of registered land
taking such certificate for value and in good
faith shall hold the same free from all
encumbrances, except those noted on the
certificate and enumerated therein.

Petitioner is evidently not a subsequent

purchaser in good faith. Therefore, between
the parties, respondents have a better right
to the property based on the concurring
factual findings of both the trial and the
appellate courts.

Thus,
even
assuming arguendo that
[petitioner]
was
not
aware
of
the sale between Juan Peralta and the
[respondents], still he cannot be considered
as a purchaser in good faith because he had
personal
knowledge
of
[respondents]
occupation of the lot in question. This fact
alone should have put him on guard before
buying the land. But as he admitted during
the trial, he was not interested in the
[respondents] reason for occupying the said
lot[;] all that he was interested in was to buy
the entire lot. This devil-may-care attitude
of [petitioner] has placed him where he is
now. Consequently, he cannot be entitled to
the relief he is seeking before this [c]ourt.

True, the purchaser of a registered land is

not required to go behind the title to
determine the condition of the property.
We quote with approval the following ruling
of the CA:
x x x We are persuaded that [petitioner]
knew of the fact that Lot 5582-B-7-D was
sold by Juan Peralta to [respondents] before
Lot 5582-B-7, the mother lot of Lot 5582-B-7D, was mortgaged, foreclosed, sold and [its
ownership] transferred x x x to him. In fact,
[w]e are convinced that the main reason why
[petitioner] bought the entire lot from the
TSLAI was his fear of losing the 350 square
meter-lot he bought sometime in 1981 which
also forms part of Lot 5582-B-7. Having been
aware of the defects in the title of TSLAI as
far as Lot 5582-B-7-D is concerned, he
cannot now claim to be a purchaser in good
faith and for value even if he traces his
ownership [to] TSLAI which [w]e believe was
a purchaser in good faith - the latter not
being aware of the sale that transpired
between the [respondents] and Juan Peralta
before Lot 5582-B-7 was sold to it in a public
auction.

One who purchases real estate with

knowledge of a defect or lack of title in his
vendor cannot claim that he has acquired
title thereto in good faith as against the true
owner of the land or an interest therein.

However, a purchaser 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.

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 his
vendors title, will not make him an innocent
purchaser for value, if it afterwards develops
that the title was in fact defective, and it
appears that he had such notice of the
defect as would have led to its discovery had
he acted with that measure of precaution
which may reasonably be required of a
prudent man in a like situation.
All told, the right of a buyer to rely upon the
face of the title certificate and to dispense
with the need of inquiring further is upheld
only when the party concerned had no actual
knowledge of facts and circumstances that
should impel a reasonably cautious man to
conduct further inquiry.
Second Issue:
Bad Faith
7 | Page

Petitioner denies being a purchaser in bad

faith. He alleges that the only reason he
spoke to the respondents before he bought
the foreclosed land was to invite them to
share in the purchase price, but they turned
him down. This, he argues, was not an
indication of bad faith.

The registration contemplated under Art.

1544 has been held to refer to registration
under Act 496 Land Registration Act (now PD
1529) which considers the act of registration
as the operative act that binds the land
(see Mediante vs. Rosabal, 1 O.G. [12]
900, Garcia vs. Rosabal, 73 Phil 694).

Petitioners contention is untenable. He

might have had good intentions at heart, but
it is not the intention that makes one an
innocent buyer. A purchaser in good faith or
an innocent purchaser for value is one who
buys property and pays a full and fair price
for it, at the time of the purchase or before
any notice of some other persons claim on
or interest in it. One cannot close ones eyes
to facts that should put a reasonable person
on guard and still claim to have acted in
good faith. As aptly explained by Vitug:

On lands covered by the Torrens System, the

purchaser acquires such rights and interest
as they appear in the certificate of title,
unaffected by any prior lien or encumbrance
not noted therein. The purchaser is not
required to explore farther than what the
Torrens title, upon its face, indicates. The
only exception is where the purchaser has
actual knowledge of a flaw or defect in the
title of the seller or of such liens or
encumbrances which, as to him, is
equivalent to registration (see Sec. 39, Act
496; Bernales vs. IAC, G.R. 75336, 18
October 1988; Hernandez vs. Sales, 69 Phil
744; Tajonera vs. Court of Appeals, L-26677,
27 March 1981).

The governing principle is prius tempore,

potior jure (first in time, stronger in right).

Knowledge by the first buyer of the

second sale cannot defeat the first buyers
rights except when the second buyer first
registers
in
good
faith
the
second sale (Olivares
vs.
Gonzales, 159
SCRA 33.)

Conversely, knowledge gained by the second

buyer of the first sale defeats his rights even
if he is first to register, since such knowledge
taints his registration with bad faith (see
also Astorga vs. Court of Appeals, G.R. No.
58530, 26 December 1984).

In Cruz vs. Cabana (G.R. No. 56232, 22 June

1984; 129 SCRA 656), it was held that it is
essential, to merit the protection of Art.
1544, second paragraph, that the second
realty buyer must act in good faith in
registering his deed of sale (citing Carbonell
vs.
Court
of
Appeals, 69
SCRA
99, Crisostomo vs. CA, G.R. 95843, 02
September 1992).

By his own allegations, petitioner admits he

was not a purchaser in good faith. A buyer of
real property which is in the possession of
another must be wary and investigate the
rights of the latter. Otherwise, without such
inquiry, the buyer cannot be said to be in
good faith.

Basic is the rule that the factual findings of

the appellate court are given great weight,
even finality, when they affirm those of the
trial court, unless they fall under the
exceptions enumerated in Fuentes v. Court
of Appeals. Petitioner has not shown that this
case falls under any of those exceptions;
hence, we find no cogent reason to depart
from this general rule.
Third Issue:
Proper Purchase Price
Petitioner protests respondents exemption
from paying him P13,051.50 with legal
interest for the conveyance of the disputed
8 | Page

portion. Instead, he pleads that this Court

modify the price to P2,000 per square meter.
We are not persuaded. While neither party
appealed the issue of the purchase price,
petitioner did question the conveyance of Lot
5582-B-7-D to respondents upon payment of
the said price. Hence, the payment was also
effectively put in issue. It is well-settled that
appellate courts have ample authority to rule
on matters not specifically assigned as errors
in an appeal, if these are indispensable or
necessary to the just resolution of the
pleaded issues.

However, the CA modification exempting

respondents from paying petitioner is flawed,
because the RTC had ordered Juan Peralta to
refund the P18,000 paid to him by petitioner
as the purchase price of the disputed lot.
Thus, the trial court correctly ordered
(1) respondents to pay petitioner P13,051.50
plus legal interest for Lot 5582-B-7-D and
(2) the third-party defendant Peralta to
refund to respondents the P18,000 they had
paid for the lot. The CA ruling would unjustly
enrich
respondents,
who
would
receive double compensation.

In short, the RTC ruling should have been

affirmed in its entirety.
WHEREFORE,
the
Petition
is PARTLY
GRANTED. The
assailed
Decision
and
Resolution
are AFFIRMED without
the MODIFICATION ordered by the CA. No
pronouncement as to costs.

Gabriel vs Mabanta
FACTS:
On October 25, 1975 spouses Mabanta
mortgaged 2 parcels of land with the DBP as
collateral for a P14,000 loan.
In 1980, they sold the lots to Susana Soriano
with the right to repurchase the property
within 2 years. They failed to do repurchase.

In 1984, they convinced petitioner Alejandro

Gabriel to purchase the lot from Soriano as a
result, DBP had to restructure the loan
making Gabriel as the mortgagor.
In 1982 however, one lot was sold to
Zenaida Tan-Reyes by the spouses Mabanta
who in turn filed an intervention to the case
after not being a party in the instant case.
As a result, the petitioners filed for damages,
and specific performance which the trial
court ruled in their favor holding that the
sale between the spouses Mabanta and TanReyes null and void. On appeal, the CA
modified the trial courts decision holding
that the second sale was indeed valid.
ISSUE:
Whether or not the second sale in 1982 to
Tan-Reyes is valid.
HELD:
Article 1544 of the Civil Code provides that
should immovable property be sold to
different vendees, the ownership shall
belong to the first person in good faith to
record it in the registry of property.
Unfortunately, the registration made by
Zenaida Tan-Reyes of her deed of sale was
not in good faith, and for this reason in
accordance with the same Article 1544, the
land shall pertain to the person who in good
faith was first in possession. There is no
question that it is the Gabriels who are in
possession of the land.

TANGLAO vs PARUNGAO [October 5,

2007]
Sandoval-Gutierrez, J.
Petition for review on Certiorari seeking to
reverse the decision of the Court of Appeals
RATIO DECIDENDI
Under Article 1544, preferential rights shall
be accorded to: (1) the person acquiring it
who in good faith first recorded it in the
Registry of Property, (2) in default thereof to
the person who in good faith was first in
possession, and (3) in default thereof, to the
person who presents the oldest title,
provided there is good faith. In all of these
cases, good faith is essential, being the basic
premise of the preferential rights granted to
the person claiming ownership of the
immovable.
9 | Page

A buyer of real property in possession of

persons other than the seller must be wary
and should investigate the rights of those in
possession, for without such inquiry, the
buyer can hardly be regarded as a buyer in
good faith and cannot have any right over
the property.

QUICK FACTS

FACTS
Buyer 1: Lorenzo and Corazon Parungao
Buyer 2: Mariano and Corazon Tanglao
Seller: Spring Homes Subdivision

In 1992, spouses Lorenzo and Corazon

Parungao purchased several lots from
Spring Homes Subdivision for a total
price of P1,364,460.00. They made a
down payment of P536,000, leaving a
balance of P828,460.00, exclusive of
interest.
Sometime in November 1992, they
introduced improvements on the lots
consisting of a concrete perimeter
fence with cyclone wires on top, a
heavy steel gate, and two fish
breeding buildings. They also elevated
the ground level of the lots by filling
them with earth and adobe.
Under the terms of the Contracts to
Sell signed by spouses Parungao and
Spring Homes, the balance was to be
paid by them within one year from its
execution; and that should they apply
for a loan as payment for the balance,
they would continue to pay the
monthly
installment
until
their
obligation is fully paid.
Spouses Parungao failed to pay the
installments. They also failed to secure
a loan because Spring Homes refused
to deliver to them the TCTs required in
their application for a loan secured by
a real estate mortgage. Apparently,
spouses Parungao had requested
Spring Homes to furnish them copies
of the Contracts to Sell, the TCTs,
receipts of real estate taxes paid, tax
declarations, and the survey and
vicinity plans of the lots they
purchased. However, Roy Madamba,
salesman-representative
of
Spring
Homes, gave respondents only copies

of the Contracts to Sell. But

respondents returned these copies to
Spring Homes for correction of the lot
numbers and the names of the
vendees.
On April 1997, Spring Homes executed
two separate Deeds of Absolute Sale
in favor of Mariano and Corazon
Tanglao, wherein the former sold to
the latter two lots previously sold to
Spouses Parungao.
In a letter dated September 1997,
Spouses Parungao demanded that
Spring Homes deliver to them the
corrected Contracts to Sell, as well as
the TCTs covering the lots they
purchased.
Meanwhile, Spouses Tanglao took
possession of the two lots they
bought. They forcibly opened the steel
gate as well as the doors of the
buildings and entered the premises.
When informed of these events,
Spouses Parungao demanded an
explanation from Spring Homes.
Bertha Pasic, its treasurer, apologized
and promised she would settle the
matter with petitioners. However, the
controversy was not settled.
On July 15, 1999, Spouses Parungao
filed with the Housing and Land Use
Regulatory Board (HLURB) a complaint
for annulment of deed of sale and/or
return of investment for the seven lots
and costs of improvements.

HLURB Arbiter
Dismissed the complaint filed against
Spouses Tanglao for lack of merit
Ordered
Spring
Homes
to
pay
complainants the refund of payments,
among others

HLURB Board of Commissioners

Reversed HLURB Arbiters decision
Declared as valid and subsisting the
contract to sell between Spouses
Parungao and Spring Homes
Directed
Spouses
Parungao
to
immediately update their account and
directed Spring Homes to accept
payment and to deliver title to
complainants upon full payment of the
purchase price
10 | P a g e

Declared as invalid the deed of

absolute sale in favor of Spouses
Tanglao
HLURB Board of Commissioners found
that at the time of the sale of the two
lots, the contracts between Spouses
Parungao and Spring Homes were still
subsisting. Moreover, the fence and
existing structures erected on the
premises should have forewarned
Spouses Tanglao that there are
adverse claimants of the two lots.
Court of Appeals
Dismissed the appeal by Spouses
Tanglao
It held that there was a perfected
contract to sell between Spouses
Parungao and Spring Homes as early
as 1992. As this contract was
subsisting at the time of the second
sale, Spouses Parungao have a
superior right over the lots in question.
ISSUE: Who has a better right to the lots in
question?
DECISION: Spouses Parungao
Spouses Parungaos contention is the same
as
that
of
the
HLURB
Board
of
Commissioners and the Court of Appeals.
HELD
In double sales of immovable property, the
governing principle is prius tempore, prius
jure (first in time, stronger in right). Thus, in
Payongayong vs. Court of Appeals, the Court
held that under Article 1544, preferential
rights shall be accorded to: (1) the person
acquiring it who in good faith first recorded it
in the Registry of Property, (2) in default
thereof to the person who in good faith was
first in possession, and (3) in default thereof,
to the person who presents the oldest title,
provided there is good faith. In all of these
cases, good faith is essential, being the basic
premise of the preferential rights granted to
the person claiming ownership of the
immovable.
In Occena vs. Esponilla, the Court laid down
the following rules in the application of
Article 1544: (1) Knowledge by the first
buyer of the second sale cannot defeat the
first buyers rights except when the second
buyer first registers in good faith the second

sale; and (2) Knowledge gained by the

second buyer of the first sale defeats his
rights even if he is first to register, since
such knowledge taints his registration with
bad faith. Differently put, the act of
registration by the second buyer must be
coupled with good faith, meaning, the
registrant must have no knowledge of the
defect or lack of title of his vendor or must
not have been aware of facts which should
put him upon such inquiry and investigation
as might be necessary to acquaint him with
the defects in the title of his vendor.
Applying the foregoing doctrines, the pivotal
question before us is whether petitioners
Tanglao, the second buyers, are purchasers
in good faith. A purchaser in good faith or
innocent purchaser for value is one who buys
property and pays a full and fair price for it
at the time of the purchase or before any
notice of some other persons claim or
interest in it.
In the case at bar, the HLURB Arbiter, the
HLURB Commission, the Office of the
President, and the Court of Appeals found
that at the time of the second sale to
Spouses Tanglao by Spring Homes, there
were already occupants and improvements
on the two lots in question. These facts
should have put Spouses Tanglao on their
guard. Settled is the rule that a buyer of real
property in possession of persons other than
the seller must be wary and should
investigate the rights of those in possession,
for without such inquiry, the buyer can
hardly be regarded as a buyer in good faith
and cannot have any right over the property.
As Spouses Tanglao cannot be considered
buyers in good faith, they cannot rely upon
the indefeasibility of their TCTs in view of the
doctrine that the defense of indefeasibility of
a torrens title does not extend to transferres
who take the certificate of title in bad faith.
Considering that respondents Parungao who,
in good faith, were first in possession of the
subject lots, we rule that the ownership
thereof pertains to them.

CRB vs. CA and HEIRS OF DELA CRUZ

11 | P a g e

FACTS: The Madrid brothers

were the
registered owners of Lot A situated in
Isabela. Said lot was subdivided into several
lots.

As Marquez defaulted in the payment of his

loan, CRB caused the foreclosure of the
mortgages in its favor and the lots were sold
to it as the highest bidder.

Rizal Madrid sold part of his share identified

lot A-7 to Gamiao and Dayag by virtue of
a Deed of Sale, to which his brothers offered
no objection as evidenced by their Joint
Affidavit .The deed of sale was not registered
with the ORD of Isabela. However, Gamiao
and Dayag declared the property in their
names on a Tax Declaration.

The Heirs-now respondents filed a case for

reconveyance and damages for the southern
portion of Lot No. 7036-A (hereafter, the
subject property) against Marquez and CRB.

The RTC handed down a decision in favor of

Marquez. The Heirs interposed an appeal
with the CA, which upheld the claim of the
Heirs. Hence, the instant CRB petition.

Gamiao and Dayag sold the subject southern

half of lot to Teodoro dela Cruz, and the
northern half to Hernandez.
ISSUE: WON Art. 1544 of the Civil Code
(double sale) applicable in this case
Thereupon,
Teodoro
dela
Cruz
and
Hernandez took possession of and cultivated
the portions of the property respectively sold
to them (Later Restituto Hernandez donated
the northern half to his daughter. The
children of Teodoro dela Cruz continued
possession of the southern half after their
fathers death.)

In a Deed of Sale the Madrid brothers

conveyed all their rights and interests over
lot A-7 to Marquez which the former
confirmed. The deed of sale was registered
with the ORD of Isabela.

Subsequently, Marquez subdivided lot A-7

into eight (8) lots. On the same date,
Marquez and his spouse, Mercedita Mariana,
mortgaged 4 lots to the Consolidated Rural
Bank, Inc. of Cagayan Valley (hereafter, CRB)
to secure a loan.

HELD: NO.

The petition is denied, and the decision as

modified is affirmed. Like the lower court, the
appellate court resolved the present
controversy by applying the rule on double
sale provided in Article 1544 of the Civil
Code. They, however, arrived at different
conclusions. The RTC made CRB and the
other defendants win, while the Court of
Appeals decided the case in favor of the
Heirs.

Article 1544 of the Civil Code reads, thus:

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.

These deeds of real estate mortgage were

registered with the ORD.
Should it
ownership

be immovable property, the

shall belong to the person

12 | P a g e

acquiring it who in good faith first recorded it

in the Registry of Property.

property, there was still no sale to a second

vendee.

Should there be no inscription, the ownership

shall pertain to the person who in good faith
was first in possession; and, in the absence
thereof, to the person who presents the
oldest title, provided there is good faith.

In the instant case, the sale to the Heirs by

Gamiao and Dayag, who first bought it from
Rizal Madrid, was anterior to the sale by the
Madrid brothers to Marquez.

The provision is not applicable in the present

case. It contemplates a case of double or
multiple sales by a single vendor. It cannot
be invoked where the two different contracts
of sale are made by two different persons,
one of them not being the owner of the
property sold. And even if the sale was made
by the same person, if the second sale was
made when such person was no longer the
owner of the property, because it had been
acquired by the first purchaser in full
dominion, the second purchaser cannot
acquire any right.

In the case at bar, the subject property was

not transferred to several purchasers by a
single vendor. In the first deed of sale, the
vendors were Gamiao and Dayag whose right
to the subject property originated from their
acquisition thereof from Rizal Madrid with the
conformity of all the other Madrid brothers.
On the other hand, the vendors in the other
or later deed were the Madrid brothers but at
that time they were no longer the owners
since they had long before disposed of the
property in favor of Gamiao and Dayag.

In a situation where not all the requisites are

present which would warrant the application
of Art. 1544, the principle of prior tempore,
potior jure or simply he who is first in time
is preferred in right, should apply.

The only essential requisite of this rule is

priority in time; in other words, the only one
who can invoke this is the first vendee.
Undisputedly, he is a purchaser in good faith
because at the time he bought the real

The Heirs also had possessed the subject

property first in time. Thus, applying the
principle, the Heirs, without a scintilla of
doubt, have a superior right to the subject
property.

Moreover, it is an established principle that

no one can give what one does not have
nemo dat quod non habet. Accordingly,
one can sell only what one owns or is
authorized to sell, and the buyer can acquire
no more than what the seller can transfer
legally. In this case, since the Madrid
brothers were no longer the owners of the
subject property at the time of the sale to
Marquez, the latter did not acquire any right
to it.

NOTES:
In any event, assuming arguendo that Article
1544 applies to the present case, the claim
of Marquez still cannot prevail over the right
of the Heirs since according to the evidence
he was not a purchaser and registrant in
good faith.

In the instant case, the actions of Marquez

have not satisfied the requirement of good
faith from the time of the purchase of the
subject property to the time of registration.
Found by the Court of Appeals, Marquez
knew at the time of the sale that the subject
property was being claimed or taken by the
Heirs. This was a detail which could indicate
a defect in the vendors title which he failed
to inquire into. Marquez also admitted that
he did not take possession of the property
13 | P a g e

and at the time he testified he did not even

know who was in possession.

RADIOWEALTH FINANCE
COMPANY vs. PALILEO

FACTS:
Defendant spouses Castro sold to plaintiffappellee Palileo (private respondent herein),
a parcel of unregistered coconut land
situated in Surigao del Norte. The sale is
evidenced by a notarized Deed of Absolute
Sale (Exh. E).

The deed was not registered in the Registry

of Property for unregistered lands. Since the
execution of the deed of sale, appellee
Palileo exercised acts of ownership over the
land through his mother as administratrix or
overseer.

Appellee has continuously paid the real

estate taxes on said land from 1971 until the
present.

A judgment was rendered against defendant

Castro by the then CFI to pay herein
defendant-appellant Radiowealth Finance
Company (petitioner herein).

Upon the finality of the judgment, a writ of

execution was issued. Pursuant to said writ,
defendant provincial Sheriff levied upon and
finally sold at public auction the subject land
that defendant Enrique Castro had earlier
sold to appellee Palileo. A certificate of sale
was executed by the Provincial Sheriff in
favor of defendant- appellant Radiowealth
Finance Company, being the only bidder.

After the period of redemption has (sic)

expired, a deed of final sale was also

executed by the same Provincial Sheriff. Both

the certificate of sale and the deed of final
sale were registered with the RD.

Learning of what happened to the land,

private respondent Palileo filed an action for
quieting of title over the same. After a trial
on the merits, the courta quo rendered a
decision in his favor. On appeal, the decision
of the trial court was affirmed. Hence, this
petition for review on certiorari.

ISSUE: Who, as between two buyers of

unregistered land, is the rightful ownerthe
first buyer in a prior sale that was
unrecorded, or the second buyer who
purchased the land in an execution sale
whose transfer was registered in the RD

HELD: PALILEO HAS THE SUPERIOR RIGHT

OVER THE LAND
There is no doubt that had the property in
question been a registered land, this case
would have been decided in favor of
petitioner since it was petitioner that had its
claim first recorded in the RD.
It must be stressed however that this case
deals with a parcel of unregistered land and
a different set of rules applies. We affirm the
decision of the CA.
Under Act No. 3344, registration of
instruments affecting unregistered lands is
without prejudice to a third party with a
better right. The aforequoted phrase has
been held by this Court to mean that
the mere registration of a sale in ones
favor does not give him any right over
the land if the vendor was not anymore
the owner of the land having previously
sold the same to somebody else even if the
earlier sale was unrecorded.
Applying this principle, the CA correctly held
that the execution sale of the unregistered
land in favor of petitioner is of no effect
because the land no longer belonged to the
judgment debtor as of the time of the said
execution sale.
14 | P a g e

NOTES: Findings of fact of the CA are

conclusive on this Court and will not be
disturbed unless there is grave abuse of
discretion. The finding of the CA that the
property in question was already sold to
private respondent by its previous owner
before the execution sale is evidenced by a
deed of sale. Said deed of sale is notarized
and is presumed authentic. There is no
substantive proof to support petitioners
allegation that the document is fictitious or
simulated. With this in mind, We see no
reason to reject the conclusion of the CA that
private respondent was not a mere
administrator of the property. That he
exercised acts of ownership through his
mother also remains undisputed.

G.R. No. 170405 February 2, 2010

RAYMUNDO S. DE LEON, Petitioner,
vs.
BENITA T. ONG. Respondent.
Facts:
On March 10, 1993, Raymundo S. De Leon
(petitioner) sold 3 parcels of land to Benita T.
Ong(respondent).

locks, rendering the keys given to her

useless.
Respondent proceeded to RSLAI but she was
informed that the mortgage has been fully
paid and that the titles have been given to
the said person. Respondent then filed a
complaint for specific performance and
declaration of nullity of the second sale and
damages.
The petitioner contended that respondent
does not have a cause of action against him
because the sale was subject to a condition
which requires the approval of RSLAI of the
mortgage. Petitioner reiterated that they
only entered into a contract to sell. The RTC
dismissed the case. On appeal, the CA
upheld the sale to respondent and nullified
the
sale to
Viloria.
Petitioner
moved
for reconsideration to the SC.
Issue:
Whether the parties entered into a contract
of sale or a contract to sell?

The parties then executed a notarized deed

of absolute sale with assumption of
mortgage. As indicated in the deed of
mortgage, the parties stipulated that
the petitioner (de Leon) shall execute a
deed of assumption of mortgage in favor of
Ong (respondent) after full payment of
the P415,000.

Held:
In a contract of sale, the seller conveys
ownership of the property to the buyer upon
the perfection of the contract. The nonpayment of the price is a negative resolutory
condition. Contract to sell is subject to
a positive suspensive condition. The buyer
does not acquire ownership of the property
until he fully pays the purchase price. In the
present
case, the
deed
executed
by
the parties did not show that the owner
intends to reserve ownership of the
properties. The terms and conditions affected
only the manner of payment and not the
immediate transfer of ownership.

They also agreed that the respondent (Ong)

shall assume the mortgage. The respondent
then subsequently gave petitioner P415,000
as partial payment.

It was clear that the owner intended a

sale because he unqualifiedly delivered and
transferred ownership of the properties to
the respondent

On the other hand, de Leon handed the keys

to Ong and de Leon wrote a letter to inform
RSLAI that the mortgage will be assumed by
Ong. Thereafter, the respondent took repairs
and made improvements in the properties.

LORENZO
BERICO
and
VISITACION
SANCHEZ, petitioners
vs.
THE
HONORABLE COURT OF APPEALS

The said properties were mortgaged to

a financial institution; Real Savings & Loan
Association Inc. (RSLAI).

Subsequently, respondent learned that the

same properties were sold to a certain
Viloria after March 10, 1993 and changed the

Facts:
A certain Jose de los Santos owned a 98,254
square-meter parcel of land designated as
Lot No. 785, PLs-32 located at Balo-Andang,
San Ramon, San Pascual (now Claveria),
15 | P a g e

Masbate;
the
property
is
specifically
described in Original Certificate of Title (OCT)
No. P-671 issued on 31 May 1956. On 31
October 1961, Jose sold, in a private
document, a 2 1/4 hectare portion thereof to
the private respondents. On 26 November
1963, however, he executed another deed of
sale which he acknowledged before a notary
public. Private respondents took possession
of the portion sold to them immediately after
the 1961 sale and declared the same for
taxation purposes in the name of private
respondent
Ciriaco
Flores;
private
respondents likewise paid the taxes thereon.
On 3 January 1963, Jose de los Santos sold
one-half of Lot No. 785 to petitioner Lorenzo
Berico. Thereafter, or on 30 March 1963,
Jose's minor children sold to the same
petitioner the remaining half. Jose de los
Santos represented his children in this
transaction.
Petitioner Berico was aware of the 1961 sale
of a portion of the lot to the private
respondents and of the latter's possession
thereof.
Despite such knowledge and recognition of
the sale in favor of and the possession of the
property by the private respondents,
petitioner Berico registered on 5 June 1968
the two deeds of sale in his favor and caused
the cancellation of OCT No. P-671; the latter
also secured the issuance in his name of
Transfer Certificate of Title (TCT) No. T-1346.
He paid the appropriate taxes thereon only
from 1973 to 1986. It appears, however, that
he declared the property for taxation
purposes in his wife's name in 1968.
On the other hand, it was only on 8
November 1978 that the private respondents
registered the deed of sale in their favor
after discovering the cancellation of OCT No.
P-671 and issuance in favor of petitioner
Berico of TCT No. T-1346.
On 14 December 1978, private respondents
filed against the petitioners a complaint for
"Annulment of Title" with the then Court of
First Instance (now Regional Trial Court) of
Masbate.
Issue:
In the double sale of an immovable property
under Article 1544 of the Civil Code, does

prescription bar an action by the first

vendees, who are in possession of the said
property, against the second vendee for the
annulment of a transfer certificate of title
over the property procured by the latter who
has knowledge of the first sale and who
recognizes the first vendees' possession?
Held:
Lorenzo Berico's act in causing the
cancellation of Original Certificate of Title No.
P-671 and securing a new Transfer Certificate
of Title No. T-1346, knowing that his transfer
certificate included a property not his but
belonging to plaintiff Flores makes him a
holder in bad faith of a certificate and is not
to be accorded the protection of the law.
WHEREFORE, judgment is hereby rendered
annulling Transfer Certificate of Title No. T1346 in the name of Lorenzo Berico, and
ordering the Register of Deeds for the
Province of Masbate to cancel said transfer
certificate of title and in lieu thereof, issue a
new transfer certificate of title in the name of
Lorenzo Berico et. al.
In a more real sense, and insofar as
prescription is concerned, petitioners may
only acquire ownership of the questioned
property assuming that they did not
register the deed of sale in their favor
through
extraordinary
acquisitive
prescription under Article 1137 of the Civil
Code, and not by ordinary acquisitive
prescription since they cannot claim just title
or good faith.
Finally, the complaint for annulment of title
filed by the private respondents is
substantially one for the quieting of title to
quiet their title against a cloud cast by the
claim of the petitioners. It is settled that an
action to quiet title does not prescribe.
WHEREFORE, for lack of merit, the instant
petition is DENIED, with costs against the
petitioners.
IGNACIO CARDENTE
VS. THE INTERMEDIATE APPELLATE
COURT AND SPOUSES RUPERTO RUBIN
AND
PRIMITIVA
C.
RUBIN,
RESPONDENTS.
DECISION
This is a simple case of a double sale of an
immovable property. The
trial
court
[1]
decided in
favor
of
the
first vendee
16 | P a g e

although the sale was

by a private
document. The then Intermediate Appellate
Court
reversed
and
set
aside
[2]
the decision of the lower court. The public
respondent appellate court ruled in favor of
the second buyers, who registered their deed
of sale. Hence, the present petition for
review by certiorari.
The facts of the case are as simple as the
central issue.
Sometime in 1956, Francisca Cardente, for
and on behalf of her grandson, petitioner
Ignacio Cardente, who was then a minor, and
now married to his co-petitioner, purchased
from Isidro Palanay one hectare of land.
The property purchased is a part of a 9.2656hectare parcel of land covered by Original
Certificate of Title (O.C.T., for short) No. P1380 in Palanay's name.
Immediately after the purchase, the
Cardentes took possession of the land and
planted various crops and trees thereon.
They have been in continuous possession
ever
since,
adverse
to
the
whole
world. Unfortunately, however, the private
document evidencing the sale of the onehectare lot to petitioner Ignacio Cardente
was lost and never found despite diligent
efforts exerted to locate the same.
Some four years later, on August 18, 1960,
Isidro Palanay sold the entire property
covered by O.C.T. No. P-1380, including the
one-hectare portion already sold to Cardente,
this time to the private respondents, Ruperto
Rubin and his wife.
The deed of sale was registered and a new
title, Transfer Certificate of Title (T.C.T., for
short) No. 1173, was issued in favor of the
Rubin spouses.
Notwithstanding the second sale, or because
of
it,
Isidro
Palanay,
with
the
written conforme of his wife, Josepha de
Palanay, on December 9, 1972, executed a
public document in favor of petitioner Ignacio
Cardente
confirming
the
sale to
him
(Cardente) in 1956 of the one hectare
portion.
The deed of confirmation likewise states that
the subsequent vendee, respondent Ruperto
Rubin, was informed by Palanay of the

first sale of
Cardente.

the

one-hectare

portion

to

On February 18, 1977, the house of the

petitioners was burned. As a consequence
thereof, they lodged a complaint for arson
with the P.C.-Integrated National Police at
Malaybalay, Bukidnon, against Ruperto
Rubin, whom they suspected of having
committed the crime.
Apparently, in retaliation, on March 31, 1977,
seventeen long years after their purchase,
the private respondents filed a complaint
with the then Court of First Instance of
Bukidnon for quieting of title with damages,
against the petitioners, claiming ownership
over the whole property previously covered
by O.C.T. No. P-1380, now registered in their
names under T.C.T. No. 1173.
On July 9, 1979, the trial court dismissed the
complaint of the Rubins and ordered them to
"reconvey the one hectare in question to
defendant (Cardente) at the expense of the
latter."[3]
The Rubin spouses appealed to the
respondent
court, which rendered
the
decision under review. The assailed decision
decreed:
xxx
xxx
xxx
WHEREFORE, the decision appealed from is
hereby set aside and judgment is rendered
(1) declaring plaintiffs the absolute owners of
subject property covered by Transfer
Certificate of Title No. 1173; (2) ordering the
defendants to vacate the one-hectare portion
in controversy, and to restore plaintiffs in
possession thereof; (3) quieting the title of
plaintiffs over the one (1) hectare portion of
land in controversy; and (4) ordering the
defendants to pay the costs.
SO ORDERED.[4]
xxx
xxx
xxx
Now before us, the petitioners impute bad
faith on the private respondents when the
latter purchased the entire property and
when they subsequently registered their title
thereto. By reason of such bad faith, the
petitioners' claim that insofar as the
controverted one-hectare parcel of land is
concerned the private respondents' title
thereto is null and void.[5]
We agree with the petitioners. We grant the
petition.
17 | P a g e

Admittedly,
this
case
involves
a double sale. While the private respondents
allegedly bought from Isidro Palanay on
August 18, 1960 the entire property
comprising 9.2656 hectares and covered by
O.C.T. No. P-1380, the petitioners, on the
other hand, lay claim to one hectare thereof
which they undeniably purchased from the
same vendor earlier, in 1956. The conflict,
therefore, falls under, and can be resolved
by, Article 1544 of the CivilCode which sets
the rules on double sales.
ART. 1544. If the same thing should have
been sold to different vendees, the
ownership shall be transferred to the person
who may have first taken possession thereof
in good faith, if it should be movable
property.
Should it be immovable property, the
ownership shall belong to the person
acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the
ownership shall pertain to the person
who in good faith was first in the
possession; and, in the absence thereof,
to the person who presents the oldest
title, provided there is good faith.
It is undisputed that the private respondents,
the second vendees, registered the sale in
their favor whereas the petitioners, the first
buyers, did not. But mere registration of
thesale is not enough. Good faith must
concur with the registration. Bad faith
renders theregistration nothing but an
exercise
in
futility. The
law
and
jurisprudence are very clear on this score. [6]
The heart of the problem is whether or not
the private respondents acted in good faith
when they registered the deed of sale dated
August
18,
1960
more
than six months later,on
March
7,
1961. Inextricably, the inquiry must be
directed on the knowledge, or lack of it, of
the previous sale of the one-hectare portion
on the part of the second buyers at the time
of registration. The trial court found that the
second vendees had such knowledge.
It is true that good faith is always presumed
while bad faith must be proven by the party
alleging it.[7] In this case, however, viewed in
the light of the circumstances obtaining, we
have no doubt that the private respondents'
presumed good faith has been sufficiently

overcome and their bad faith amply

established.
The
"Confirmation
Of
A
Deed
Of
Absolute Sale Of A Portion Of A Registered
Agricultural Land" executed by the late
Ignacio Palanay on December 9, 1972 and
which was exhibited in the trial court below,
admitted the sale of the one hectare portion
to the petitioners sometime in 1956. The
same deed likewise explicitly stated that the
"fact of the previoussale, was well known
and acknowledged by Mr. Ruperto Rubin (the
private respondent)."[8]These recitals were
further buttressed by Concepcion Salubo, a
daughter of Isidro Palanay, who testified that
she knew of the previous sale of the onehectare
portion
to
petitioner
Ignacio
Cardente and that private respondent
Ruperto Rubin was properly informed of the
said sale.[9] On this regard, no ill-motive had
been attributed to the vendor Isidro Palanay
and to his daughter Concepcion Salubo for
testifying the way they did -- against the
private
respondents. They
were
disinterested persons who stood to gain
nothing except, perhaps, the satisfaction of
setting the record straight, or, in the words of
the seller, "for the purpose of giving efficacy
to the Deed of Sale I made to Ignacio
Cardente which was made in a private
document x x x."[10]
Further, the notorious and continuous
possession and full enjoyment by petitioners
of the disputed one-hectare property long
(four years) before the private respondents
purchased the same from Palanay bolsters
the
petitioners'
position. That
possession would have been enough to
arouse the suspicion of the private
respondents as to the ownership of the entire
area
which
they
were
about
to
purchase. Their failure to inquire and to
investigate the basis of the petitioners'
actual occupation of the land forming a
substantial part of what they were buying
militates against their posited lack of
knowledge of the first sale. "A purchaser
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."[11] We have warned time and
again that a buyer of real property which is
in the possession of persons other than the
seller must be wary and should investigate
the rights of those in possession. Otherwise,
18 | P a g e

without such inquiry, the buyer can hardly be

regarded as a buyer in good faith.[12]
The private respondents' avowals that they
had never known of the prior sale until the
issues were joined at the trial court, for,
before that, they merely tolerated the
continued
presence
of
the
original
occupants, Francisca and Eugenia Cardente,
and Ignacio, in the premises, out of simple
pity for the two old women,[13] is too pat to
be believed. For if these were so, the reason
why the private respondents' continued to
tolerate the occupation by the petitioners of
the contested property even after the demise
of the two old women escapes us. Rubin's
allegation that this was because they were
still in good terms with the petitioners[14] is
too lame an excuse to deserve even a scant
consideration. The private respondents' total
lack of action against the actual occupants of
a good portion of the land described in their
torrens title can only be construed as
acceptance on their part of the existence
of the prior sale and their resignation to the
fact that they did not own the one-hectare
portion occupied by the petitioners. Present
these facts, the foisted ignorance of the
respondents as to the first sale is an empty
pretense. Their seventeen years of inaction
and silence eloquently depict a realization of
lack of right.
WHEREFORE, the Decision dated November
19, 1985 and the Resolution dated January
10, 1986 of the former Intermediate
Appellate Court are hereby REVERSED and
SET ASIDE and the Decision dated July 9,
1979 of the Court of First Instance of
Bukidnon in Civil Case No. 860, is hereby
REINSTATED. Costs against the private
respondents.
SO ORDERED.

REV. FR. DANTE MARTINEZ, petitioner,

vs.
HONORABLE COURT OF APPEALS
This is a petition for review on certiorari of
the decision, dated September 7, 1995, and
resolution, dated January 31, 1996, of the
Court of Appeals, which affirmed the
decisions of the Regional Trial Court,
Branches 25[1] and 28,[2] Cabanatuan City,
finding
private
respondents
spouses
Reynaldo and Susan Veneracion owners of

the land in dispute, subject to petitioners

rights as a builder in good faith.
The facts are as follows:
Sometime in February 1981, private
respondents Godofredo De la Paz and his
sister Manuela De la Paz, married to
MaximoHipolito, entered into an oral contract
with petitioner Rev. Fr. Dante Martinez, then
Assistant parish priest of Cabanatuan City,
for the sale of Lot No. 1337-A-3 at the Villa Fe
Subdivision in Cabanatuan City for the sum
of P15,000.00. The lot is located along
Maharlika Road near the Municipal Hall of
Cabanatuan City. At the time of the sale, the
lot was still registered in the name of Claudia
De la Paz, mother of private respondents,
although the latter had already sold it to
private respondent Manuela de la Paz by
virtue of a Deed of Absolute Sale dated May
26, 1976 (Exh. N/Exh.2-Veneracion). [3] Private
respondent Manuela subsequently registered
the sale in her name on October 22, 1981
and was issued TCT No. T-40496 (Exh. 9).
[4]
When the land was offered for sale to
petitioner, private respondents De la Paz
were accompanied by their mother, since
petitioner dealt with the De la Pazes as a
family and not individually. He was assured
by them that the lot belonged to Manuela De
la Paz. It was agreed that petitioner would
give a downpayment of P3,000.00 to private
respondents De la Paz and that the balance
would be payable by installment. After giving
the P3,000.00downpayment,
petitioner
started the construction of a house on the lot
after securing a building permit from the City
Engineers Office on April 23, 1981, with the
written consent of the then registered owner,
Claudia de la Paz (Exh. B/Exh, 1). [5] Petitioner
likewise began paying the real estate taxes
on said property (Exh. D, D-1, D-2).
[6]
Construction on the house was completed
on October 6, 1981 (Exh. V).[7] Since then,
petitioner and his family have maintained
their residence there.[8]
On
January
31,
1983,
petitioner
completed payment of the lot for which
private respondents De la Paz executed two
documents. The first document (Exh. A) read:
1-31-83
AnghalagangLupasa Villa Fe
Subdivision naipinagbilikay Fr.
Dante
Martinez
ay
P15,000.00napinangangakonam
innaibibigayang Deed of Sale sa
ika-25 ngFebrero 1983.
19 | P a g e

[
SGD.] METRINGHIPOLITO
[
SGD.] JOSE GODOFREDO DE LA
PAZ[9]
The second writing (Exh. O) read:
Cabanatuan City
March 19, 1986
TO WHOM IT MAY CONCERN:
This is to certify that Freddie
dela Paz has agreed to sign
tomorrow
(March
20)
the
affidavit of sale of lot located at
Villa Fe Subdivision sold to Fr.
Dante Martinez.
[
Sgd.] Freddie dela Paz
F
REDDIE DELA PAZ[10]
However, private respondents De la Paz
never delivered the Deed of Sale they
promised to petitioner.
In the meantime, in a Deed of Absolute
Sale with Right to Repurchase dated October
28, 1981 (Exh. 10),[11] private respondents De
la Paz sold three lots with right to repurchase
the same within one year to private
respondents spouses Reynaldo and Susan
Veneracion for the sum of P150,000.00. One
of the lots sold was the lot previously sold to
petitioner.[12]
Reynaldo Veneracion had been a resident
of Cabanatuan City since birth. He used to
pass along Maharlika Highway in going to the
Municipal Hall or in going to and from
Manila. Two of the lots subject of the sale
were located along Maharlika Highway, one
of which was the lot sold earlier by the De la
Pazes to petitioner. The third lot (hereinafter
referred to as the Melencio lot) was occupied
by private respondents De la Paz. Private
respondents Veneracion never took actual
possession of any of these lots during the
period of redemption, but all titles to the lots
were given to him.[13]
Before the expiration of the one year
period, private respondent Godofredo De la
Paz informed private respondent Reynaldo
Veneracion that he was selling the three lots
to another person for P200,000.00. Indeed,
private respondent Veneracion received a
call from a Mr. Tecson verifying if he had the
titles
to
the
properties,
as
private
respondents De la Paz were offering to sell
the two lots along Maharlika Highway to him
(Mr. Tecson) for P180,000.00 The offer
included the lot purchased by petitioner in

February,
1981. Private
respondent
Veneracion offered to purchase the same two
lots from the De la Pazes for the same
amount. The offer was accepted by private
respondents De la Paz. Accordingly, on June
2, 1983, a Deed of Absolute Sale was
executed over the two lots (Exh. I/Exh.5Veneracion).[14] Sometime in January, 1984,
private respondent Reynaldo Veneracion
asked a certain Renato Reyes, petitioners
neighbor, who the owner of the building
erected on the subject lot was. Reyes told
him that it was Feliza Martinez, petitioners
mother, who was in possession of the
property. Reynaldo Veneracion told private
respondent Godofredo about the matter and
was assured that Godofredo would talk to
Feliza. Based on that assurance, private
respondents Veneracion registered the lots
with the Register of Deeds of Cabanatuan on
March 5, 1984. The lot in dispute was
registered under TCT No. T-44612 (Exh.
L/Exh.4-Veneracion).[15]
Petitioner discovered that the lot he was
occupying with his family had been sold to
the spouses Veneracion after receiving a
letter (Exh. P/Exh. 6-Veneracion) from private
respondent Reynaldo Veneracion on March
19, 1986, claiming ownership of the land and
demanding that they vacate the property
and remove their improvements thereon.
[16]
Petitioner, in turn, demanded through
counsel the execution of the deed of sale
from private respondents De la Paz and
informed Reynaldo Veneracion that he was
the owner of the property as he had
previously purchased the same from private
respondents De la Paz.[17]
The matter was then referred to the
KatarungangPambarangay of San Juan,
Cabanatuan City for conciliation, but the
parties failed to reach an agreement (Exh.
M/Exh. 13).[18] As a consequence, on May 12,
1986,
private
respondent
Reynaldo
Veneracion brought an action for ejectment
in the Municipal Trial Court, Branch III,
Cabanatuan City against petitioner and his
mother (Exh. 14).[19]
On the other hand, on June 10, 1986,
petitioner caused a notice of lispendens to
be recorded on TCT No. T-44612 with the
Register of Deeds of Cabanatuan City (Exh.
U).[20]
During the pre-trial conference, the
parties agreed to have the case decided
under the Rules on Summary Procedure and
defined the issues as follows:
20 | P a g e

1. Whether or not defendant (now

petitioner)
may
be
judicially
ejected.
2. Whether or not the main issue in
this case is ownership.
3. Whether or not damages may be
awarded.[21]
On January 29, 1987, the trial court
rendered its decision, pertinent portions of
which are quoted as follows:
With the foregoing findings of the Court,
defendants [petitioner Rev. Fr. Dante
Martinez and his mother] are the rightful
possessors and in good faith and in concept
of owner, thus cannot be ejected from the
land in question. Since the main issue is
ownership, the better remedy of the plaintiff
[herein private respondents Veneracion] is
AccionPubliciana in the Regional Trial Court,
having
jurisdiction
to
adjudicate
on
ownership.
Defendants counterclaim will not be acted
upon it being more than P20,000.00 is
beyond this Courts power to adjudge.
WHEREFORE, judgment is hereby rendered,
dismissing plaintiffs complaint and ordering
plaintiff to pay Attorneys fee of P5,000.00
and cost of suit.
SO ORDERED.[22]
On March 3, 1987, private respondents
Veneracion filed a notice of appeal with the
Regional Trial Court, but failed to pay the
docket fee. On June 6, 1989, or over two
years after the filing of the notice of appeal,
petitioner filed a Motion for Execution of the
Judgment, alleging finality of judgment for
failure of private respondents Veneracion to
perfect their appeal and failure to prosecute
the appeal for an unreasonable length of
time.
Upon objection of private respondents
Veneracion, the trial court denied on June 28,
1989 the motion for execution and ordered
the records of the case to be forwarded to
the appropriate Regional Trial Court. On July
11, 1989, petitioner appealed from this
order. The appeal of private respondents
Veneracion from the decision of the MTC and
the appeal of petitioner from the order
denying petitioners motion for execution
were forwarded to the Regional Trial Court,
Branch 28, Cabanatuan City. The cases were
thereafter consolidated under Civil Case No.
670-AF.
On February 20, 1991, the Regional Trial
Court rendered its decision finding private
respondents Veneracion as the true owners

of the lot in dispute by virtue of their prior

registration with the Register of Deeds,
subject to petitioners rights as builder in
good faith, and ordering petitioner and his
privies to vacate the lot after receipt of the
cost of the construction of the house, as well
as to pay the sum of P5,000.00 as attorneys
fees and the costs of the suit. It, however,
failed to rule on petitioners appeal of the
Municipal Trial Courts order denying their
Motion for Execution of Judgment.
Meanwhile, on May 30, 1986, while the
ejectment case was pending before the
Municipal Trial Court, petitioner Martinez filed
a complaint for annulment of sale with
damages against the Veneracions and De la
Pazes with the Regional Trial Court, Branch
25, Cabanatuan City. On March 5, 1990, the
trial court rendered its decision finding
private respondents Veneracion owners of
the land in dispute, subject to the rights of
petitioner as a builder in good faith, and
ordering private respondents De la Paz to
pay petitioner the sum of P50,000.00 as
moral damages and P10,000.00 as attorneys
fees, and for private respondents to pay the
costs of the suit.
On March 20, 1991, petitioner then filed
a petition for review with the Court of
Appeals of the RTCs decision in Civil Case
No. 670-AF (for ejectment). Likewise, on
April 2, 1991, petitioner appealed the trial
courts decision in Civil Case No. 44-[AF]8642-R (for annulment of sale and damages)
to the Court of Appeals. The cases were
designated as CA G.R. SP. No. 24477 and CA
G.R. CV No. 27791, respectively, and were
subsequently consolidated. The Court of
Appeals affirmed the trial courts decisions,
without ruling on petitioners appeal from the
Municipal Trial Courts order denying his
Motion for Execution of Judgment. It
declared the Veneracions to be owners of the
lot in dispute as they were the first
registrants in good faith, in accordance with
Art. 1544 of the Civil Code. Petitioner
Martinez failed to overcome the presumption
of good faith for the following reasons:
1. when
private
respondent
Veneracion
discovered
the
construction on the lot, he
immediately
informed
private
respondent Godofredo about it and
relied on the latters assurance
that he will take care of the
matter.
21 | P a g e

2. the
sale
between
petitioner
Martinez and private respondents
De la Paz was not notarized, as
required by Arts. 1357 and 1358 of
the Civil Code, thus it cannot be
said that the private respondents
Veneracion had knowledge of the
first sale.[23]
Petitioners motion for reconsideration
was likewise denied in a resolution dated
January 31, 1996.[24] Hence this petition for
review. Petitioner
raises
the
following
assignment of errors:
I THE
PUBLIC
RESPONDENTS
HONORABLE COURT OF APPEALS
AND REGIONAL TRIAL COURT
JUDGES JOHNSON BALLUTAY AND
ADRIANO TUAZON ERRED IN
HOLDING
THAT
PRIVATE
RESPONDENTS
REYNALDO
VENERACION AND WIFE ARE
BUYERS AND REGISTRANTS IN
GOOD FAITH IN RESOLVING THE
ISSUE
OF
OWNERSHIP
AND
POSSESSION OF THE LAND IN
DISPUTE.
II THAT
PUBLIC
RESPONDENTS
ERRED IN NOT RESOLVING AND
DECIDING THE APPLICABILITY OF
THE
DECISION
OF
THIS
HONORABLE COURT IN THE CASES
OF SALVORO VS. TANEGA, ET AL.,
G.R. NO.L 32988 AND IN ARCENAS
VS.DEL ROSARIO, 67 PHIL 238, BY
TOTALLY IGNORING THE SAID
DECISIONS OF THIS HONORABLE
COURT
IN
THE
ASSAILED
DECISIONS
OF
THE
PUBLIC
RESPONDENTS.
III THAT THE HONORABLE COURT OF
APPEALS ERRED IN NOT GIVING
DUE COURSE TO THE PETITION
FOR REVIEW IN CA G.R. SP. NO.
24477.
IV THAT THE HONORABLE COURT OF
APPEALS
IN
DENYING
PETITIONERS
PETITION
FOR
REVIEW AFORECITED INEVITABLY
SANCTIONED
AND/OR
WOULD
ALLOW A VIOLATION OF LAW AND
DEPARTURE FROM THE USUAL
COURSE
OF
JUDICIAL
PROCEEDINGS
BY
PUBLIC
RESPONDENT HONORABLE JUDGE
ADRIANO TUAZON WHEN THE
LATTER RENDERED A DECISION IN
CIVIL CASE NO. 670-AF [ANNEX

D] REVERSING THE DECISION OF

THE
MUNICIPAL
TRIAL
COURT JUDGESENDONDELIZO IN
CIVIL CASE NO. 9523 [ANNEX C]
AND IN NOT RESOLVING IN THE
SAME
CASE
THE
APPEAL
INTERPOSED BY DEFENDANTS ON
THE ORDER OF THE SAME COURT
DENYING
THE
MOTION
FOR
EXECUTION.
V THAT THE RESOLUTION [ANNEX
B] (OF THE COURT OF APPEALS)
DENYING PETITIONERS MOTION
FOR RECONSIDERATION [ANNEX
I] WITHOUT STATING CLEARLY
THE FACTS AND THE LAW ON
WHICH SAID RESOLUTION WAS
BASED, (IS ERRONEOUS).
These assignment of errors raise the
following issues:
1.
Whether
or
not
private
respondents
Veneracion
are
buyers in good faith of the lot in
dispute as to make them the
absolute
owners
thereof
in
accordance with Art. 1544 of the
Civil Code on double sale of
immovable property.
2. Whether or not payment of the
appellate docket fee within the
period to appeal is not necessary
for the perfection of the appeal
after a notice of appeal has been
filed within such period.
3. Whether or not the resolution of
the Court of Appeals denying
petitioners
motion
for
reconsideration is contrary to the
constitutional requirement that a
denial
of
a
motion
for
reconsideration must state the
legal reasons on which it is based.
First. It is apparent from the first and
second assignment of errors that petitioner is
assailing the findings of fact and the
appreciation of the evidence made by the
trial courts and later affirmed by the
respondent court. While, as a general rule,
only questions of law may be raised in a
petition for review under Rule 45 of the Rules
of Court, review may nevertheless be
granted under certain exceptions, namely:
(a) when the conclusion is a finding
grounded entirely on speculation, surmises,
or conjectures; (b) when the inference made
is
manifestly
mistaken,
absurd,
or
impossible; (c) where there is a grave abuse
22 | P a g e

of discretion; (d) when the judgment is based

on a misapprehension of facts; (e) when the
findings of fact are conflicting; (f) when the
Court of Appeals, in making its findings, went
beyond the issue of the case and the same is
contrary to the admissions of both appellant
and appellee; (g) when the findings of the
Court of Appeals are contrary to those of the
trial court; (h) when the findings of fact are
conclusions without citation of specific
evidence on which they are based; (i) when
the facts set forth in the petition as well as in
the petitioners main and reply briefs are not
disputed by the respondents; (j) when the
finding of fact of the Court of Appeals is
premised on the supposed absence of
evidence but is contradicted by the evidence
on record; and (k) when the Court of Appeals
manifestly overlooked certain relevant facts
not disputed by the parties and which, if
properly considered, would justify a different
conclusion.[25]
In this case, the Court of Appeals based
its
ruling
that
private
respondents
Veneracion are the owners of the disputed lot
on their reliance on private respondent
Godofredo De la Pazs assurance that he
would take care of the matter concerning
petitioners occupancy of the disputed lot as
constituting good faith. This case, however,
involves double sale and, on this matter, Art.
1544 of the Civil Code provides that where
immovable property is the subject of a
double sale, ownership shall be transferred
(1) to the person acquiring it who in good
faith first recorded it to the Registry of
Property; (2) in default thereof, to the person
who in good faith was first in possession; and
(3) in default thereof, to the person who
presents the oldest title.[26] The requirement
of the law, where title to the property is
recorded in the Register of Deeds, is twofold: acquisition in good faith and recording
in good faith. To be entitled to priority, the
second purchaser must not only prove prior
recording of his title but that he acted in
good faith, i.e., without knowledge or notice
of a prior sale to another. The presence of
good faith should be ascertained from the
circumstances surrounding the purchase of
the land.[27]
1. With regard to the first sale to private
respondents Veneracion, private respondent
Reynaldo Veneracion testified that on
October 10, 1981, 18 days before the
execution of the first Deed of Sale with Right
to Repurchase, he inspected the premises

and found it vacant.[28] However, this is

belied by the testimony of Engr. Felix D.
Minor, then building inspector of the
Department of Public Works and Highways,
that he conducted on October 6, 1981 an
ocular inspection of the lot in dispute in the
performance of his duties as a building
inspector to monitor the progress of the
construction of the building subject of the
building permit issued in favor of petitioner
on April 23, 1981, and that he found it 100 %
completed (Exh. V).[29] In the absence of
contrary evidence, he is to be presumed to
have regularly performed his official duty.
[30]
Thus, as early as October, 1981, private
respondents Veneracion already knew that
there was construction being made on the
property they purchased.
2. The Court of Appeals failed to
determine the nature of the first contract of
sale between the private respondents by
considering their contemporaneous and
subsequent acts.[31] More specifically, it
overlooked the fact that the first contract of
sale between the private respondents shows
that it is in fact an equitable mortgage.
The requisites for considering a contract
of sale with a right of repurchase as an
equitable mortgage are (1) that the parties
entered into a contract denominated as a
contract of sale and (2) that their intention
was to secure an existing debt by way of
mortgage.[32] A contract of sale with right to
repurchase gives rise to the presumption
that it is an equitable mortgage in any of the
following cases: (1) when the price of a sale
with a right to repurchase is unusually
inadequate; (2) when the vendor remains in
possession as lessee or otherwise; (3) when,
upon or after the expiration of the right to
repurchase, another instrument extending
the period of redemption or granting a new
period is executed; (4) when the purchaser
retains for himself a part of the purchase
price; (5) when the vendor binds himself to
pay the taxes on the thing sold; (6) in any
other case where it may be fairly inferred
that the real intention of the parties is that
the transaction shall secure the payment of a
debt or the performance of any other
obligation.[33] In case of doubt, a contract
purporting to be a sale with right to
repurchase shall be construed as an
equitable mortgage.[34]
In this case, the following circumstances
indicate that the private respondents
intended the transaction to be an equitable
23 | P a g e

mortgage and not a contract of sale: (1)

Private respondents Veneracion never took
actual possession of the three lots; (2)
Private respondents De la Paz remained in
possession of the Melencio lot which was coowned by them and where they resided; (3)
During the period between the first sale and
the second sale to private respondents
Veneracion, they never made any effort to
take possession of the properties; and (4)
when the period of redemption had expired
and private respondents Veneracion were
informed by the De la Pazes that they are
offering the lots for sale to another person
for P200,000.00, they never objected. To the
contrary, they offered to purchase the two
lots for P180,000.00 when they found that a
certain Mr. Tecson was prepared to purchase
it for the same amount. Thus, it is clear from
these circumstances that both private
respondents never intended the first sale to
be a contract of sale, but merely that of
mortgage to secure a debt of P150,000.00.
With regard to the second sale, which is
the true contract of sale between the parties,
it should be noted that this Court in several
cases,[35] has ruled that a purchaser who is
aware of facts which should put a reasonable
man upon his guard cannot turn a blind eye
and later claim that he acted in good faith.
Private
respondent
Reynaldo
himself
admitted during the pre-trial conference in
the MTC in Civil Case No. 9523 (for
ejectment) that petitioner was already in
possession of the property in dispute at the
time the second Deed of Sale was executed
on June 1, 1983 and registered on March 4,
1984. He, therefore, knew that there were
already occupants on the property as early
as 1981. The fact that there are persons,
other than the vendors, in actual possession
of the disputed lot should have put private
respondents on inquiry as to the nature of
petitioners right over the property. But he
never talked to petitioner to verify the nature
of his right. He merely relied on the
assurance of private respondent Godofredo
De la Paz, who was not even the owner of
the lot in question, that he would take care of
the matter. This does not meet the standard
of good faith.
3. The appellate courts reliance on Arts.
1357 and 1358 of the Civil Code to
determine private respondents Veneracions
lack of knowledge of petitioners ownership
of the disputed lot is erroneous.

Art. 1357[36] and Art. 1358,[37] in relation

to Art. 1403(2)[38] of the Civil Code, requires
that the sale of real property must be in
writing for it to be enforceable. It need not
be notarized. If the sale has not been put in
writing, either of the contracting parties can
compel
the
other
to
observe
such
[39]
requirement.
This is what petitioner did
when he repeatedly demanded that a Deed
of Absolute Sale be executed in his favor by
private respondents De la Paz. There is
nothing in the above provisions which require
that a contract of sale of realty must be
executed in a public document. In any event,
it has been shown that private respondents
Veneracion had knowledge of facts which
would put them on inquiry as to the nature of
petitioners occupancy of the disputed lot.
Second. Petitioner contends that the
MTC in Civil Case No. 9523 (for ejectment)
erred in denying petitioners Motion for
Execution of the Judgment, which the latter
filed on June 6, 1989, two years after private
respondents Veneracion filed a notice of
appeal with the MTC on March 3, 1987
without paying the appellate docket fee. He
avers that the trial courts denial of his
motion is contrary to this Courts ruling in the
cases of Republic v. Director of Lands,
[40]
and Aranas v. Endona[41] in which it was
held that where the appellate docket fee is
not paid in full within the reglementary
period, the decision of the MTC becomes final
and unappealable as the payment of docket
fee is not only a mandatory but also a
jurisdictional requirement.
Petitioners contention has no merit. The
case of Republic v. Director of Lands deals
with the requirement for appeals from the
Courts of First Instance, the Social Security
Commission, and the Court of Agrarian
Relations to the Court of Appeals. The case
of Aranas v. Endona, on the other hand, was
decided under the 1964 Rules of Court and
prior to the enactment of the Judiciary
Reorganization Act of 1981 (B.P. Blg. 129)
and the issuance of its Interim Rules and
Guidelines by this Court on January 11,
1983. Hence, these cases are not applicable
to the matter at issue.
On the other hand, in Santos v. Court of
Appeals,[42] it was held that although an
appeal fee is required to be paid in case of
an appeal taken from the municipal trial
court to the regional trial court, it is not a
prerequisite for the perfection of an appeal
under 20[43] and 23[44] of the Interim Rules
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and Guidelines issued by this Court on

January 11, 1983 implementing the Judiciary
Reorganization Act of 1981 (B.P. Blg.
129). Under these sections, there are only
two requirements for the perfection of an
appeal, to wit: (a) the filing of a notice of
appeal within the reglementary period; and
(b) the expiration of the last day to appeal by
any party. Even in the procedure for appeal
to the regional trial courts, [45] nothing is
mentioned about the payment of appellate
docket fees.
Indeed, this Court has ruled that, in
appealed cases, the failure to pay the
appellate docket fee does not automatically
result in the dismissal of the appeal, the
dismissal being discretionary on the part of
the
appellate
court.[46] Thus,
private
respondents Veneracions failure to pay the
appellate docket fee is not fatal to their
appeal.
Third. Petitioner contends that the
resolution of the Court of Appeals denying
his motion for reconsideration was rendered
in violation of the Constitution because it
does not state the legal basis thereof.
This contention is likewise without merit.
Art. VIII, Sec. 14 of the Constitution
provides that No petition for review or
motion for reconsideration of a decision of
the court shall be refused due course or
denied without stating the basis therefor.
This requirement was fully complied with
when the Court of Appeals, in denying
reconsideration of its decision, stated in its
resolution that it found no reason to change
its ruling because petitioner had not raised
anything new.[47] Thus, its resolution denying
petitioners
motion
for
reconsideration
states:
For
resolution
is
the
Motion
for
Reconsideration of Our Decision filed by the
petitioners.

Evidently,
the
motion
poses
nothing
new. The points and arguments raised by
the movants have been considered and
passed upon in the Decision sought to be
reconsidered. Thus, We find no reason to
disturb the same.
WHEREFORE, the motion is hereby DENIED.
SO ORDERED.[48]
Attorneys fees should be awarded as
petitioner was compelled to litigate to
protect
his
interest
due
to
private
respondents act or omission.[49]
WHEREFORE, the decision of the Court
of Appeals is REVERSED and a new one is
RENDERED:
(1) declaring as null and void the deed of
sale executed by private respondents
Godofredo and Manuela De la Paz in favor of
private respondents spouses Reynaldo and
Susan Veneracion;
(2) ordering private respondents Godofredo
and Manuela De la Paz to execute a deed of
absolute sale in favor of petitioner Rev. Fr.
Dante Martinez;
(3) ordering private respondents Godofredo
and Manuela De la Paz to reimburse private
respondents spouses Veneracion the amount
the latter may have paid to the former;
(4) ordering the Register of Deeds of
Cabanatuan City to cancel TCT No. T-44612
and issue a new one in the name of
petitioner Rev. Fr. Dante Martinez; and
(5) ordering private respondents to pay
petitioner jointly and severally the sum
of P20,000.00 as attorneys fees and to pay
the costs of the suit.
SO ORDERED.

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